a form of tax paid, which can reduce a taxpayer's total tax liability, and any excess is refunded. For example, an individual with income below the tax-free threshold ($18,200 since 2011/12) pays no tax at all and can get the franking credits back in full, after a tax return is lodged. Prior to 1 July 2000 such excess franking credits were lost. For example, an individual at that time paying no tax would get nothing back, they merely kept the cash part of the dividend received. Investors The easiest way for an investor to value a franked dividend is to think of the franking credit as part of the income they receive. The investor doesn't get it in cash, only as a kind of IOU from the tax office, but nonetheless it and the cash portion make up pre-tax income. Thus a franked dividend of $0.70 plus $0.30 credit is exactly equivalent to an unfranked dividend of $1.00, or to bank interest of $1.00, or any other ordinary income of that amount. (It's exactly equivalent because franking is fully refundable, as described above.) Franked dividends are often described as a "tax effective" form of income. The basis for this is that the cash $0.70 looks like it's taxed at a lower rate than other income. For example, for an individual on the top rate of 48.5% (for 2006) the calculation is $0.70 plus $0.30 credit is $1.00 on which $0.485 tax is payable, but less the $0.30 credit makes $0.185 net tax, which is just 26.4% of the original $0.70. Conversely, an individual on the 20% marginal tax rate actually gets a $0.10 rebate. In this latter case, the rebate looks very much like negative tax. There's nothing inherently wrong with the latter way of thinking about franked dividends, and it is frequently made to demonstrate how franking benefits the investor, but it can be argued a grossing-up like the former is better when comparing yields across different investment opportunities. Eligibility There are restrictions on who can use franking credits. Those who cannot must simply declare as income the cash dividend amount they receive. The restrictions are designed to prevent the trading of franking credits between different taxpayers. An eligible shareholder is one who either Owns the shares for a continuous period of 45 days or more (not counting purchase and sale days); or 90 days in the case of