Political afficionados, what are franking credits and why is there a big deal about them? Google only gives me big financial terms that I understand approximately 0% of lol.
I'll try to be relatively thorough, sorry if this gets too detailed.
The (main) way companies can distribute their profits back to shareholders is by issuing dividends. The company might decide, for example, to issue a $1 dividend per share that you own.
Company profits are taxed - in Australia, 30%. That means that the dividend had already been taxed. Dividends are also taxed as personal income for the investor, at regular income tax rates (which would vary between investors, of course).
To avoid this 'double-taxation', in Australia we have what's known as dividend franking. Essentially, the investor receives a tax credit equal to the tax that the company had already paid on the dividend. Say your tax liability was $1000, but the franking credit is $120 (i.e. you received $400 in dividends, which taxed at a 30% rate means a $120 tax liability for the company), you only need to pay $880 in tax. The effect of this is that rather than the dividend getting taxed at the company tax rate, it's actually
only taxed at the individual investor's income tax rate, which could be higher or lower than the 30% corporate tax rate. Australia is fairly unique in having this 'fully-franked' imputation system.
Now, what happens if you have no income tax liability (i.e. you're a retiree)? As a further innovation on our dividend imputation system, Howard introduced cash refunds. So now you get that $120 as straight up cash from the government. The dividend doesn't get taxed at all, not in corporate tax and not for the investor.
Labor wants to abolish those cash refunds, except for pensioners.
The way this mechanically works with receiving the credit is a little different than described, but the outcome is the same.