It doesn’t matter what tax rate you are on, you still get the benefit.
If a company pays you $70 in dividends, 100% franked, they are actually paying you $100 : $70/(1-0.3) - with 0.3 being the company tax rate.
The trick is, they are putting $70 into your account and $30 to the tax man. Think of it as PAYG tax, but at a rate of 30% regardless of your marginal rate. Honestly, I don’t know why they don’t just say “$100 with $30 tax withheld”. It would make it simpler for a lot of people to compare the yield of different products.
Come tax time, you tell the tax man that you have earnt $100, but already paid $30 tax on it. If you owe more, or less, than the $30, then the difference will be paid in one direction or the other.
I could write it up myself, but this post above covers it.
A couple of examples:
1) If you are on the 32.5% marginal tax rate, you end up paying $4.50 additional tax on a $70 cash dividend (incl 2% medicare levy).
2) If you hold the shares in a super fund in the pension phase, you receive the $70 cash dividend, you declare $100 as income in your tax return, and you get a tax refund of $30 - so you end up with $100 cash.
