45 Day Rule Calculator

The 45 Day Rule Calculator is a tool designed to determine eligibility for the franking credit tax offset under Australian tax law. It's particularly relevant for investors in the Australian stock market.

Historical Background

The 45 Day Rule was introduced to prevent investors from engaging in 'dividend stripping.' This involves purchasing shares just before a dividend is paid and then selling them immediately afterward, solely to claim the tax credit.

Calculation Formula

The eligibility is determined based on the number of days the shares are held. The shares must be held "at risk" for at least 45 days, not counting the purchase and sale dates, to be eligible for the franking credit tax offset.

Example Calculation

Consider an investor who:

• Held the shares for 50 days.
• The ex-dividend date occurred 48 days after the shares were issued.

Since both values exceed 45 days, the investor is eligible for the franking credit tax offset.

Importance and Usage Scenarios

• Tax Planning: Essential for investors to maximize their franking credit tax offset.
• Investment Decisions: Influences when to buy or sell shares to qualify for tax benefits.

Common FAQs

1. What is a franking credit?

   • It's a tax credit in Australia, attached to dividends that a company has already paid tax on.

2. Does the 45 Day Rule apply to all investments?

   • It primarily applies to shares in Australian companies and certain foreign companies.

3. Can I count the day I bought or sold the shares?

   • No, the purchase and sale dates are not counted in the 45-day period.

4. Is there a minimum investment to be eligible for franking credits?

   • Yes, the rule generally applies if the total franking credits are above a certain threshold.