I'm struggling to understand how a US taxpayer who owns an Australian stock that pays dividends benefits (or not) from Australian Franking Credits.
As I understand it, the Australian system is that the company paying the dividend grosses the dividend up to an amount that - after tax is deducted - would realize the dividend they initially intended to pay. For example, if the company wants to pay a 10 cent per share dividend, and the tax rate is 30%, they calculate the dividend at a gross amount of 14.29 cents and then take out the 30%, thus giving the taxpayer a 10 cent dividend together with a "franking credit". It looks like the Australian taxpayer claims a
14.29 cent dividend on his Australian tax return together with the franking credit, thus avoiding paying any additional tax on the 10 cent dividend actually received. They thus avoid double taxation on dividends. If any of this is not quite right, someone please correct me. I'm not an Australian taxpayer.My question is would any of these facts benefit a US taxpayer receiving the same dividend? Specifically, can the US taxpayer claim the dividend at
14.29 cents, then claim Australian withholding of the dividend at 30%, thus at least partially reducing the additional tax that a 35% tax bracket US holder of the stock would need to pay in US taxes on that dividend?