Company’s dividends can have tax credits attached by franking them at either the 30% or 27.5% rate by tax law.
The dividend is franked by rate and the company’s tax rate for the year are determined separately of each other.
Accordingly, a company might pay tax at one rate for a year.
The franking rate for a dividend paid in any particular year is based on a hypothetical scenario. You take the company’s income from last year, assume for a moment that that is the current year’s income, and based on that, determine the hypothetical tax rate that would apply for the current year as per the rules set out above. That tax rate is the franking rate for a dividend paid that year.
Because company profits may be taxed at different rates from the rate at which dividends are franked or unfranked includes: