Question

if dividends are fully franked, how does it affect if the investor is a not for profit organisation that doesn't pay tax and may access imputation tax credits?

Answer 1

A fully franked dividend means one on which the company has already paid tax which means that the shareholders are entitled to a credit for the amount of tax the company has already paid. Now, if an investor is a non-profit organisation, it does not pay tax anyway. The tax paid amount of fully franked dividends are available as deduction to the income chargeable to tax of the company. Now if there is no taxable income, there can be no amount that will be deductible for tax purposes and taxation cannot be negative ( i.e. one cannot receive payments from the government on account of a negative cashflow as the case may be) thus the amount chargeable to tax remains the same , ie, 0.