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As a result of the well-publicised franking credit issue proposed by Labor, some commentators suggest that investors load up with shares which pay unfranked dividends to “soak up” available franking credits.
Could one of your experts consider writing a piece in order to suggest what might currently be the 10 most attractive shares which pay unfranked dividends ?
A: Pretty silly advice. Clearly, these “commentators” don’t understand.
Franking credits don’t disappear, nor do they cease to act as tax offset. All that happens is that some investors wont be eligible for a cash refund if they have excess credits.
Institutional investors, offshore investors, many SMSFs in accumulation, most industry and retail funds, and most personal investors are not impacted by the ALP proposal.
Further, 0% taxpayers pay tax at 0% on an unfranked dividend and tax at 0% on a franked dividend.
Investment paying unfranked dividends, such as companies like CSL, Transurban or property trusts, might become a little more attractive and due to demand, reprice higher in the short term. This would be the only reason for the strategy to be recommended.
