Not all income is created equal and in a low tax environment like Super, the differences can make a big difference to your after tax returns.
Franked dividends are a great way to increase the effective income you earn from investments in Australian shares. Franking credits have no value to the company who has paid its taxes, but when attached to a dividend, the credits are refundable to the extent that they exceed the tax payable by the fund.
Unfranked dividends do not carry this advantage with all income being taxable. Foreign income has some of the characteristics of both. It is fully taxable, however credits can be attached for tax paid in the foreign country.
However, unlike franking credits, while foreign credits may offset tax payable they are not refundable once the tax liability of the fund has been reduced to nil.
Tax deferred income has an entirely different benefit for the SMSF. Tax deferred income is not taxed upon receipt, but acts to reduce the cost base of the asset it relates to.
If the fund becomes a pension fund prior to the sale of the asset, the income is effectively tax free.
