Going fully franked.

How to generate cashflow, minimise tax liability & manage a non-ordinary (black sheep) lifestyle.

Cash flow through fully franked dividends from cash cow companies.

Six years ago, I dipped my toes into the world of investing with my first share purchase in a cyclical sector. Now, as I contemplate transitioning away from this sector, I'm exploring avenues to secure reliable cash flow while minimising tax liabilities.

Fully franked dividends. These dividends, distributed by companies that have already paid corporate taxes, offer not only consistent income but also tax benefits for investors.

By receiving franking credits, investors can effectively reduce their overall tax burden, making fully franked dividends an attractive option for those seeking to maximize returns while minimizing tax liabilities.

In Australia, it depends on your personal marginal tax rate and the amount of franking credits attached to the dividends. Fully franked (100%) dividends come with credits for the 30% corporate tax already paid by the company.

Investors in tax brackets higher than the corporate tax rate of 30% are required to pay supplementary tax on their dividend income. Nonetheless, the tax obligation is reduced by the inclusion of franking credits accompanying the dividends.

Conversely, if the investor's personal tax rate is below 30%, the franking credits can diminish their overall tax responsibility, potentially leading to eligibility for a tax refund.

Here's my approach and what I plan to pursue in the coming year given my current strange black sheep lifestyle in Latin America.

In essence, I aim to gradually accumulate positions in these cash-cow companies while enjoying minimal tax liabilities (if I can play it correctly).

Also, I'll illustrate why this holds significant relevance for non-Australian residents and my international audience.