If you hold shares on the ASX and haven’t heard of franking credits, chances are you’re entitled to some extra cash from the ATO. 
What are franking credits?
In Australia, each company is legally obligated to pay a tax rate of 30%. The dividends received by Australian shareholders are taxed under a system called “imputation”. 
This means that once companies have paid the 30% tax on their profit, the after-tax profit is distributed to shareholders through dividends. The idea behind the imputation system is to prevent shareholders from paying tax on the same income that’s already been taxed in the hands of the company – that is, avoiding double taxation. 
The tax paid by companies is attached to the dividends received by shareholders – this is the franking credits. It’s important to recognise that dividends are not all franked to the same degree. 
A fully-franked dividend has the maximum amount of franking credits attached, which is shareholders receiving a $0.30 refund for every $0.70 of a dividend.
Partially-franked dividends have less franking credits attached to each dollar of a dividend.
Unfranked dividends have no franking credits, meaning shareholders can’t make a claim.
How do you claim franking credits?
Since franking credits are clearly a wonderful thing for Aussie investors, you should make a claim for them.
Shareholders need to find their Share Dividend Statements and complete a form from the Australian Taxation Office (ATO) known as the ‘Application for refund of franking credits for individuals’. This form can be downloaded from the ATO website. 
Alternatively, you can make your claim with the ATO over the phone. 
Remember that you’re entitled to claim franking credits as far back as 2001 – so hop to it!
-- By Stephanie Hanna