A company can run out of franking credits

By Ryan Wimalasena · 9 September 2026 · 6 min read

Australians talk about franking as though it were a characteristic of a company, like its ticker or its sector. That one is fully franked. This one is not. It gets filed alongside the things that do not change.

Franking is not a characteristic. It is an account, with a balance, and the balance can run down. When it does, the dividend can stay exactly the same and be worth meaningfully less to you, with nothing whatsoever announced about a cut.

Where the credits come from

A franking credit is a receipt for Australian company tax that has actually been paid: tax paid here, on profit earned here, and recorded in an account the company keeps for the purpose.

Every franked dividend draws that account down. Every dollar of Australian tax paid tops it up. There is no other source. A company cannot decide to be generous with franking any more than it can decide to be generous with someone else's receipts.

Which makes franking a fact about where the money was earned

Here is the consequence nobody mentions. A successful Australian company that expands overseas pays foreign tax on its foreign profit. Foreign tax generates no Australian franking credits, because no Australian tax was paid.

So the more of its earnings that come from abroad, the fewer credits it generates per dollar of profit, and the harder it becomes to keep franking its dividend fully. Profits can be excellent. Growth can be exactly what you hoped for when you bought it. And the franking thins anyway, because success happened in the wrong currency, the same reason a foreign dividend carries no credit at all.

That is a slow structural drift rather than an event, which is why nobody covers it. There is no announcement headed "our earnings mix has moved offshore and your credits are going with it".

What the thinning actually costs

Put a number on it, because the headline yield will not move at all while this happens.

Going from fully franked to half franked costs about 1.07 percentage points of grossed up yield, which is roughly 15% of the value of the payment. The company did not cut anything. The cash is identical. Every screener in the country still reports 5%.

And the loss is largest for the people who most rely on the credits, because a franking credit is refundable and worth most to investors on low rates and in pension phase. A partial franking is a quiet pay cut aimed disproportionately at retirees.

The other direction, which is stranger

A company can also accumulate more credits than it can hand out, usually because it pays substantial Australian tax while returning cash by other means.

Australia used to have an elegant answer to this. Off market buybacks carried a franked dividend component, which let a company route credits to the holders who valued them most. Legislation in 2023 closed that for listed companies, so the mechanism older commentary describes no longer works. A large franking balance is now a thing companies have rather than a thing they can easily distribute.

Where the number is

On the dividend announcement, every time. Each declared dividend states the amount and the franked proportion, and the franking account balance appears in the annual report.

No yield screener carries either. Which means the entire subject is invisible to anybody sorting a list by percentage, and perfectly visible to anybody who opens the announcement for a company they already own, which takes about a minute twice a year.

What you are looking for is a change. Fully franked for a decade and then 70% is the sentence, and it is usually a sentence about where the profit is now being earned rather than about trouble.

Dividend Guardian provides information and estimates from public data, not personal financial advice, and nothing here is a recommendation to buy, hold or sell anything. The table is arithmetic on a round number at the 30% company rate; smaller companies frank at 25% and the figures differ. What franking is worth to you depends entirely on your own tax position, which belongs with the ATO or a registered tax agent. Guardian reports confirmed changes; it does not predict them.