There are so many people who are jumping into the investment world that it can be a little confusing and overwhelming if you don’t jump in fully prepared – people often ask about franking credits calculation or finding the right stock screener, even platform to use!
While its heartwarming to see so many people jumping into the exciting world of investments and wise research into the once cordoned off world of high-stakes stock markets – there should always be a degree of consideration and logical reasoning behind the scenes. Possibly one of the most hotly contested concepts in Australia (if you recall the last election) was that of creative franking credits calculation on the part of politicians and large business leaders.
The notion it is derived from came from a good place, the idea that people being double taxed for a single investment seemed a little ludicrous, so franking credits calculation was adjusted to ensure that everyone who paid their dues were not tossed aside and punished for investing.
As we’ll get into however, there were some who were rigging their franking credits calculation, while not illegally, but not in the spirit of the investing game. This article will go over how franking credits calculation works, and why there was so much controversy surrounding it.
The Underlying Notion
When we talk about franking credits calculation, it helps to know what is being summarised – essentially investors may receive a payment from companies they have invested in if the company itself has seen a profit. This is at the behest of the company of course, but it is a good practice to keep people informed and involved in boosting share value.
If the company does choose to give a slice of the profits back to investors, the dividend payment is then taxable, for both the company as well as the investor receiving it. The company typically pays their tax on the profits before giving it out to investors, and the investors have to pay tax on the money they receive as well.
To combat being over-taxed, the government instigated a protocol that essentially allowed investors to have a credited voucher of sorts attached to their taxes which assumed the taxes had already been paid which allowed their money to not be taken away unduly. Franking credits calculation can be a little tricky, especially when it comes to large-scale entities – the system however, worked for a while, but like any good thing, there’s always a few bad apples.
Purely Political Players
This is where the issue of franking credits calculation came into the political sphere and threw spanners in the election cycle that hadn’t been seen for years. After all, franking credits calculation was not exactly a hot button topic in the everyday lives of Australians in the years beforehand, so what changed?
People weren’t playing fairly.
Well, according to one side of the political equation that is. Some people in the left camp began seeing that there was something awry with franking credits calculation for certain members of society who were receiving all the benefits of the system, but not paying any taxes in the first place. They coined it as a ‘welfare for the wealthy’, and the whole notion of fair and balanced franking credits calculation began being called into question.
While the discussion was certainly interesting and fascinating, there political upheaval as a result seemed to cloud the true conversation on the scheme and relegated it as a political football rather than being an interesting study into the taxation system.
For now, it’s good to see for yourself and make your own call.
