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Benefits of franking credits in a SMSF

Dividend franking turns 30 in 2017. Despite this, many are unfamiliar with the benefits franking credits can bring, especially to SMSFs.

SMSF trustees who invest in Australian shares can benefit from franking credit refunds which can offset the fund’s expenses, such as tax payable or any lump sums. A franking credit, also known as an imputation credit, is the amount of tax paid by a company of the dividend to the SMSF.

Franking credits are particularly beneficial for SMSFs as the tax rate for the fund is 15 per cent, while franking credits can be equal to 30 per cent of the gross dividend – leaving a significant excess to offset any tax payable on the other taxable income earned by the fund.

When the fund is in pension phase, there are even more benefits as the tax rate is reduced to zero per cent. If the franking credits are larger than the SMSFs tax liabilities, the fund will receive a refund for the excess credits.

A company will only distribute franking credits if a SMSF satisfies the holding period rule, where the fund retains the shares “at risk” for at least 45 days, excluding the day your fund acquires or sells its shares. This is extended to at least 90 days for some preference shares.

Posted on 6 December '16 by , under Super.

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What to consider when consolidating your super

The ATO reported that 45% of working Australians were not aware that they had multiple super accounts in 2016. Having multiple super accounts is particularly common for individuals who have had more than one job. If this is you, it is important to identify and manage your super accounts because having more than one can be costly as a result of account fees from multiple funds.To combat this, you may want to consolidate your super, which moves all your super into one account. Not only does this save on fees, but it also makes your super easier to manage and keep track of.

Before consolidating your super, it is important to do the following:

Research your funds' policy
Compare your active super accounts so you can make the right choice about which one you should close. Things to assess include:

  • Exit fees
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  • Investment options
  • Ongoing service fees
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Check employer contributions
Changing funds may affect how much your employer contributes, as some employers contribute more to certain funds. Check your current accounts to see if changing funds will affect this. Once you have selected a super fund, regardless of whether you choose a new super fund or one of your existing ones, provide your employer with the details they need to pay super into your selected account.

Gather the relevant information
When consolidating your super, you will need to have the following details ready:

  • Your tax file number.
  • Proof of identity. This could include your driver's license, birth certificate or passport.
  • Your fund's superannuation product identification number (SPIN).
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  • Details of your previous fund.

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