With the increase in the Medicare rate to 2% and the 2% Temporary Budget Repair Levy from 1 July 2014, there will be more tax to pay (or reduced refunds) on franked dividends received next financial year. The proposed reduction in company tax rate to 28.5% from 1 July 2015 will have a further negative effect. This may be a good reason for private companies to pay out additional dividend in the current financial year. The following table shows the tax effect of receiving a dividend based on taxable income levels. As you have see, there is a 5% difference in the tax paid now compared to later for high income earners.
If you have available profits that can be released from a company and the capacity to pay the top-up tax then we recommend that you contact us to discuss the various strategies available to maximise the tax outcome for you.