Fully Franked vs Partially Franked Dividends: What Australian Investors Need to Know

“Fully franked” is one of the most comforting phrases in Australian share investing. It signals that every cent of the dividend carries a corporate tax credit — maximum value for low-rate investors and SMSFs. But the ASX is full of partially franked and unfranked distributions too, and getting the mix right can quietly boost your after-tax return by 50–100 basis points a year.

This guide unpacks the three franking categories, the mechanics behind each, why certain companies — particularly globalised miners and property trusts — can’t always deliver 100% franking, and how to evaluate them on a grossed-up, after-tax basis. We’ll work through ASX examples (CBA, BHP, RIO, Woodside, Goodman, Transurban) and finish with the practical decision framework investors should apply in 2026.

1. The Three Franking Categories

“Franking percentage” refers to the proportion of the dividend that carries franking credits — not the rate at which it is franked. A 50% franked dividend of $1.00 means $0.50 carries credits and $0.50 is unfranked.

2. How Franking Percentage Is Calculated

The company determines a “franked amount” per share before each dividend. ATO rules require a “benchmark franking percentage” to be set for the first dividend of a franking period and maintained for subsequent dividends in that period (subject to tolerance rules). This prevents “streaming” more credits to preferred shareholders.

The formula for the franking credit on a partially franked dividend is:

Example: a $1.00 dividend franked at 60% at the 30% rate: Credit = $1.00 × 0.60 × 0.4286 = $0.257

Grossed-up amount = $1.00 + $0.257 = $1.257

3. Why Not All Dividends Are Fully Franked

Four main reasons:

1. Foreign earnings — profits earned offshore pay foreign tax, not Australian corporate tax, so no franking credits are generated. Miners (RIO, BHP at times), global financials (Macquarie, QBE), tech exports (ResMed, Cochlear) often partially franked.
2. Trust structure — REITs and infrastructure trusts distribute tax-paid income but don’t generate franking credits because trusts aren’t companies.
3. Tax losses — companies that have accumulated losses may have minimal franking balances.
4. Large dividends relative to franking account — after a big special dividend, credits can run low.

4. ASX Examples Across the Spectrum (illustrative, early 2025)

Franking percentages change year to year. Always check the dividend statement for the specific distribution.

5. Grossed-Up Yield: The Apples-to-Apples Comparison

You can’t compare a 6% unfranked yield to a 4% fully franked yield without grossing up. The grossed-up yield calculation is:

For a pension-phase SMSF, the grossed-up yield is essentially the cash income — because the fund receives credits as a refund.

6. Tax Impact by Investor Type

Note the $0.67 difference between fully franked and unfranked for a pension-phase investor holding the same $1.00 cash dividend.

7. When Partial or Unfranked Can Still Be Worth It

Partial or unfranked dividends can be attractive when:

• The business has a structural reason (e.g., Goodman’s global logistics) that delivers growth worth more than the foregone franking
• The cash yield is high enough to compensate — e.g., Transurban’s ~5% unfranked yield with inflation-linked toll increases
• The investor is in a higher tax bracket where franking’s benefit is smaller anyway
• The dividend is paid from “Conduit Foreign Income” (CFI) which is tax-free to non-residents and can reduce effective tax for certain structures
• There’s a capital gains angle — e.g., stapled securities with deferred tax on capital component

8. 45-Day Rule and Franking Percentage

The 45-day holding rule (covered in detail in our Franking Credits Explained guide) applies to any dividend with franking credits attached, regardless of percentage. If you hold a 10% franked dividend and fail the 45-day rule, you lose that 10% credit. The small-shareholder exemption under $5,000 of total credits still applies.

9. Dividend Statements: Reading Franking Info

A typical ASX dividend statement contains:

• Record date and payment date
• Cash dividend per share
• Franking percentage
• Franking credit per share
• Unfranked amount
• Conduit Foreign Income (CFI) portion, if any
• Withholding tax (relevant for non-residents)

Registries like Computershare and Link Market Services send annual tax statements that aggregate these for tax lodgement.

10. 2025–2026 Outlook

Several trends are shifting the franking landscape:

• Miners returning capital — BHP and RIO’s iron ore cycles drive big franked dividends but also big off-market buyback activity
• Financials — CBA, NAB, WBC, ANZ remain fully franked cash machines; Macquarie partial
• Energy — Woodside and Santos mostly partial due to global LNG operations
• Property — AREIT distributions stay unfranked
• Tech growth — most ASX tech (WiseTech, Xero, Altium) pay no or minimal dividends

Expect the overall “franking ratio” of the ASX 200 to remain around 70–80% franked.

11. Advanced Insights

Franking credit stockpile analysis: Sophisticated investors track disclosed franking account balances in annual reports. CBA, WES, RIO and BHP typically carry billions in credits — giving forward flexibility. Use this as a signal of dividend capacity.

Franking credit “leakage”: Partial franking from multinationals can result in credits being paid to tax-exempt foreign holders who can’t use them — a structural inefficiency.

Special dividends and off-market buybacks: These are mechanisms for distributing large franking credit balances. Legislation in 2023 restricted franking of capital raisings — expect ongoing reform around this.

The difference between fully franked and unfranked is not a quality signal — it’s a structural one. Understanding why a company can or can’t frank fully lets you make informed comparisons and avoid anchoring on headline yield. In 2026, Australian investors should focus on grossed-up, after-tax yield and consider franking status in the context of the business model, not as a blanket preference.