A franked dividend yield is your cash yield plus the value of the attached franking credit, expressed as a percentage of the share price. To work it out, you calculate the franking credit, add it to the cash dividend to get the grossed-up dividend, then divide that figure by the share price.
The three formulas you need are:
- Franking credit = franked portion × (company tax rate ÷ (1 − company tax rate))
- Grossed-up dividend = cash dividend + franking credit
- Grossed-up yield = grossed-up dividend ÷ share price
Here's a quick example. Say a share trades at $20.00 and pays a fully franked dividend of $1.00, taxed at the standard 30% company rate. The franking credit formula gives you a credit of $1.00 × (0.30 ÷ 0.70) = $0.4286. Add that to the cash dividend and your grossed-up dividend is $1.4286. Divide by the $20.00 share price and your grossed-up yield is 7.14%, well above the 5% cash yield alone.
Before you run these numbers on your own portfolio, gather four inputs: the cash dividend per share, the franking percentage (fully, partially, or unfranked), the company tax rate that applies to the payer, and the current share price. Get those four right and the rest is arithmetic.
Key Takeaways
Grossed-up yield, not cash yield, is the only accurate way to compare franked income across different stocks and tax situations.
| Point | Details |
|---|---|
| Know the core formula | Franking credit equals the franked portion multiplied by the company tax rate divided by one minus that rate. |
| Grossing up changes the comparison | Grossed-up yield adds the franking credit to the cash dividend before dividing by share price. |
| Confirm the company tax rate | Base rate entities pay less than 30%, so using 30% by default overstates the credit. |
| Respect the holding period rule | You generally need to hold shares at risk for 45 days to claim the franking tax offset. |
| Use a calculator for portfolios | Tools like AlphaIQ's franking credit calculator aggregate mixed franking rates and model after-tax scenarios in one pass. |
Where to read more
For anyone wanting to go deeper into the tax mechanics or see additional worked examples, these are worth bookmarking:
- The ATO's franking tax offsets page covers the offset mechanism, holding period rule, and small-shareholder exemption in full detail.
- The ATO also publishes average dividend and franking credit yields for market indices, useful as a benchmark when judging whether a stock's grossed-up yield is unusually high or low.
- LegalClarity's franking credit formula guide walks through the algebra with additional worked examples for both full and partial franking.
- AlphaIQ's blog covers related topics including ASX dividend metrics and broader investment strategy examples for Australian investors building an income portfolio.
Table of Contents
- What is a franked dividend and a franking credit?
- What are the exact formulas for franking credits and gross-up?
- How do you calculate franked dividend yield for a single share?
- How do you calculate franked yield across a portfolio?
- How do personal tax rates affect the value of franking credits?
- What are the most common calculation mistakes?
- Why use a franking-credit calculator instead of manual maths?
- Three worked examples you can replicate
- Try AlphaIQ's franking credit calculator for your own portfolio
- Frequently asked questions
- Sources
What is a franked dividend and a franking credit?
A franked dividend is a company profit distribution that carries a credit for tax the company has already paid on that profit. A franking credit (also called an imputation credit) is the dollar value of that pre-paid tax, passed on to you as the shareholder so the same income isn't taxed twice.
Dividend imputation exists because Australian company profits are taxed once, either at the company or at the shareholder level, not both.
Payments fall into three categories:
- Fully franked dividends carry a franking credit for 100% of the company tax paid, meaning the whole payment is covered by the imputation system.
- Partially franked dividends carry a credit on only part of the payment. A company might frank 60% of a distribution and pay the remaining 40% as unfranked income with no attached credit.
- Unfranked dividends carry no franking credit at all, usually because the company paid no tax (common with some trusts, foreign income, or start-up losses).
Your dividend statement or annual tax statement will normally show the exact franking credit amount already calculated by the company's share registry. In practice, most of your calculation work is verification. You're checking that the number on the statement matches what the formula produces, rather than deriving it from a blank page.
What are the exact formulas for franking credits and gross-up?
The franking-credit formula scales with the company tax rate, and getting that rate wrong is the single biggest source of calculation errors. The formula is:
Franking credit = franked portion × (company tax rate ÷ (1 − company tax rate))
The "franked portion" is the dollar amount of the dividend that carries a credit, not necessarily the whole payment. The "company tax rate" is the rate the paying company applies, which is typically 30% for larger companies but can be lower for base rate entities. Divide the rate by one minus the rate to convert the after-tax dividend back into pre-tax profit terms.
Once you have the credit, grossing up is simple addition:
Grossed-up dividend = cash dividend + franking credit
Grossed-up yield = grossed-up dividend ÷ share price
For partial franking, apply the credit formula only to the franked slice of the payment, not the total dividend. If a $700 dividend is 60% franked at a 30% company tax rate, the franked portion is $420. The credit is $420 × (0.30 ÷ 0.70) = $180, and the grossed-up income is $700 + $180 = $880, not the $1,000 you'd get if you mistakenly franked the whole payment.
That $1.00 dividend franked at 60% at a 30% company rate produces a franking credit of roughly $0.257 and a grossed-up amount close to $1.257. Small rounding differences of a fraction of a cent are normal and don't indicate an error.
How do you calculate franked dividend yield for a single share?
Follow these steps for any individual holding, in order:
- Collect your inputs: the cash dividend per share, the franking percentage shown on the statement, the company tax rate, and the current share price.
- Calculate the cash yield: divide the cash dividend by the share price and multiply by 100 to get a percentage.
- Work out the franked portion: multiply the cash dividend by the franking percentage.
- Apply the franking-credit formula: franked portion × (company tax rate ÷ (1 − company tax rate)).
- Add the credit to the cash dividend to get the grossed-up dividend.
- Divide the grossed-up dividend by the share price and multiply by 100 for the grossed-up yield percentage.
A worked example: a share pays a fully franked dividend at the 30% company rate. You calculate cash yield, franking credit, grossed-up dividend, and grossed-up yield using the given formulas without specifying exact numbers.
How do you calculate franked yield across a portfolio?
Portfolio-level franking gets more interesting once you hold several stocks with different franking percentages and different company tax rates. The cleanest method is to calculate the grossed-up cash for each holding individually, sum those amounts, then divide by your total portfolio market value.
To build a weighted portfolio yield:
- List each holding with its cash dividend per share, franking percentage, company tax rate, and current market value (shares held × share price).
- Calculate the franking credit and grossed-up dividend for each holding using the formulas above.
- Multiply each holding's grossed-up dividend per share by the number of shares to get total grossed-up income per holding.
- Sum the grossed-up income across all holdings.
- Divide the total by your total portfolio market value to get a weighted grossed-up yield.
Here's a two-stock example.
For Holding A, the franking credit is $0.50 × (0.30 ÷ 0.70) = $0.214, giving a grossed-up dividend of $0.714 and total grossed-up income of $357.14 across 500 shares. For Holding B, the franked portion is $0.15, the credit is $0.15 × (0.30 ÷ 0.70) = $0.064, the grossed-up dividend is $0.364, and total grossed-up income across 300 shares is $109.29.
Combined grossed-up income is $466.43. Combined market value is $5,000 + $2,— = $7,—.
Their franking credits are smaller for the same cash dividend because the formula scales directly with the tax rate, so plugging in 30% for a lower-taxed company overstates the credit and inflates your grossed-up yield.
How do personal tax rates affect the value of franking credits?
The formulas above tell you the grossed-up yield, but what you actually keep depends on your own marginal tax rate. The ATO requires you to include both the cash dividend and the attached franking credit in your assessable income, then claim a franking tax offset equal to that credit. If your credits exceed your tax liability, you can receive the difference as a refund, subject to entitlement rules.
This creates very different outcomes depending on where you sit on the tax scale.
A quick comparator: a retiree on a 0% marginal rate who receives $1,000 in grossed-up franked income effectively gets the entire franking credit back as a cash refund. A mid-rate earner on 32.5% owes some tax but still nets a benefit above the cash dividend alone. A higher-rate earner on 45% pays additional tax on the grossed-up amount because their rate exceeds the 30% already paid by the company. Calculator examples confirm this pattern, showing zero net tax and a full credit refund for pension-phase SMSFs and other low-tax entities receiving fully franked income.
Two rules can affect whether you're entitled to the credit at all, regardless of how correctly you've calculated it. The 45-day holding period rule requires you to hold shares "at risk" for a minimum period around the ex-dividend date to claim the offset, though a small-shareholder exemption applies if your total franking credit entitlement for the year is under $5,000. There are also related-payment and dividend-washing integrity rules designed to stop investors from claiming credits on transactions structured purely to capture the benefit. Check the ATO's franking tax offset guidance for the current thresholds before relying on a large credit claim.
What are the most common calculation mistakes?
Most errors in franked-yield calculations trace back to a handful of repeat offenders.
- Using the wrong company tax rate. Applying the standard 30% rate to a base rate entity taxed lower overstates the credit and the grossed-up yield.
- Confusing cash and grossed-up figures. Comparing one stock's cash yield against another's grossed-up yield produces a misleading result, since grossed-up yield is the only genuine apples-to-apples comparator between franked and unfranked income.
- Franking the whole dividend instead of the franked portion. For partially franked payments, apply the credit formula only to the franked slice.
- Ignoring the holding period rule. A correctly calculated credit is worthless on your tax return if you didn't hold the shares long enough to qualify.
To verify your numbers, cross-check your calculated franking credit against the amount on your dividend statement and against the pre-filled figures in your ATO myTax return, which usually pull directly from the registry's reporting.
Pro Tip: If you hold ETFs or managed funds, don't assume the franking credit passes through in a simple per-unit figure like it does for direct shares. Fund distributions often bundle franking credits across the fund's entire underlying portfolio, so check the annual tax statement's attribution breakdown rather than trying to back-calculate it from the distribution rate alone.
Why use a franking-credit calculator instead of manual maths?
Manual calculation works fine for one or two holdings, but it gets tedious and error-prone once you're tracking a dozen stocks with different franking percentages, tax rates, and ex-dividend dates. A calculator, such as AlphaIQ's franking credit calculator, takes the same core inputs, cash dividend, franking percentage, company tax rate, share price, and number of shares held, and produces the franking credit, grossed-up income, estimated tax payable or refund, and after-tax yield in one pass.
The real advantage isn't speed alone. It's consistency across a whole portfolio and the ability to model scenarios: what happens to your after-tax income if you shift capital from a fully franked bank stock into a partially franked industrial, or if your marginal tax rate changes after retirement. AlphaIQ's tool for working out real dividend returns is built specifically for this kind of tax-aware modelling rather than a one-off calculation. Running the same holding through a calculator and your own formula is also a solid sanity check. If the two disagree by more than rounding error, you've likely used the wrong tax rate or franking percentage.
Three worked examples you can replicate
These three scenarios cover the situations you'll actually encounter: a simple fully franked share, a partially franked payment, and a small mixed portfolio.
Franking credit: $1.20 × (0.30 ÷ 0.70) = $0.514. Grossed-up dividend: $1.714.
Franked portion: $0.30. Franking credit: $0.30 × (0.30 ÷ 0.70) = $0.129. Grossed-up dividend: $0.729.
Example 3: Portfolio aggregate.
Total grossed-up income: $1,201.00.
To verify each of these, re-run the franking credit calculation independently and confirm it matches the figure on the dividend statement or on the output of a calculator such as the one from ExpressSheet's video tutorials, which walks through similar spreadsheet-based reconciliations step by step.
Why accurate franked-yield calculation matters for portfolio decisions
Comparing a fully franked bank stock against an unfranked property trust on cash yield alone is comparing two different things dressed up as one number. I've found the grossed-up figure is the only version worth using when you're deciding between income-generating holdings, because it puts every stock on the same after-imputation footing regardless of how much of its payment carries a credit.
This matters most in three situations: modelling expected retirement income where franking refunds materially change your spending capacity, comparing a franked dividend payer against an unfranked alternative with a superficially higher yield, and estimating your likely tax refund before your return is due rather than being surprised by it in July. None of that requires complex forecasting. It requires getting the formula right and applying it consistently across every holding, which is where a calculator earns its keep over a spreadsheet built from memory.
Try AlphaIQ's franking credit calculator for your own portfolio
Working through these formulas by hand is useful once, but running them across a real portfolio with a dozen holdings, mixed franking percentages, and changing share prices is where manual calculation breaks down. AlphaIQ gives you a tax-aware modelling platform built specifically for this, combining a franking credit calculator with broader scenario simulation across your investments, superannuation, and retirement income projections.
Run your own holdings through the AlphaIQ franking credit calculator and you'll get your grossed-up income, estimated tax payable or refund, and after-tax yield without rebuilding the formulas yourself each dividend season. It's a genuine way to reconcile your dividend statements, estimate your year-end tax position early, and model how a shift in your marginal rate after retirement would change your effective income from the same portfolio. Head to the calculator now and plug in your first holding to see where you stand.
Frequently asked questions
What is the formula to calculate franked dividend yield? Grossed-up yield equals the grossed-up dividend (cash dividend plus franking credit) divided by the share price, multiplied by 100. The franking credit itself equals the franked portion of the dividend multiplied by the company tax rate divided by one minus that rate.
What does fully franked mean for a dividend?
How do I gross up a partially franked dividend? Apply the franking-credit formula only to the franked portion of the payment, not the whole dividend, then add that credit to the full cash dividend to get the grossed-up figure.
Can I get a refund for franking credits I can't use? Yes, if your franking tax offset exceeds your tax payable, the ATO can refund the difference, provided you meet the holding period and other entitlement rules set out in its franking tax offset guidance.
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This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.
Sources
- How to Work Out Franking Credits: Formula and Examples - LegalClarity
- Fully Franked vs Partially Franked Dividends: What Australian Investors Need to Know
- Franking Credits Calculator 1 Free Australian Calculator | Calk-AU