Company has a profit of $100, pays tax of $27.5, then pays a full dividend of $72.50 that reduces retained earnings to zero with franking credit of $27.5 being the franking credits made available from paid tax. (of course, the dividend must be paid after tax is paid and the dividend could be any value. I'm using these values to keep the numbers simple. The 27.50% tax rate is applicable only to Base Rate Entities)
The recipient of the dividend paid by the company is a trust.
The dividend is recorded into the tax return of the trust as follows -
Now the trust distributes 100% to a single company beneficiary - Client 2 Pty Ltd. (Note the franking credit is rounded.)
The income automatically reflects in the Client 2 Pty Ltd's tax return as follows -
Resulting in a taxable position of $2 payable. (Note that this company is NOT a Base Rate Entity and has a tax rate of 30%.)
