Can buying ASX dividend shares help you to pay less tax? Absolutely.
We'd all like to (legally) pay less tax, of course. But doing so can be tricky. There are the age-old methods of donating to charity or looking for deductions one can claim, for one. But ASX dividend shares give us a unique opportunity to make money while paying less tax.
Reducing tax bills is becoming a top concern for Aussie investors. According to an EY report earlier this year, reducing taxes "has almost doubled as a goal among Australian respondents in the past two years", with 23% of surveyed investors identifying this reason as a primary investing goal in 2023. That's up from 12% in 2021.
Fully-franked ASX dividend shares can help enormously in this endeavour.
Here in Australia, dividends often come with franking credits attached. These credits reflect if a company has paid company tax here in Australia. If it has, then this tax receipt is clipped to a dividend payment in the form of franking credit.
Since these dividends come from an already-taxed pool of cash, the Australian Taxation Office (ATO) lets us use those credits as a tax deduction, in order to ensure the same pool of cash isn't taxed twice (company tax and income tax).
So if you receive a fully-franked dividend payment, we can use those franking credits to legally reduce our tax burden, whilst still receiving income. It's one of the best win-wins we can get from investing here in Australia.
With this in mind, let's talk about five ASX dividend shares that I'd buy in FY2024 to take advantage of those franking credits
5 fully-franked ASX dividend shares I'd buy for FY24
First up is National Australia Bank Ltd (ASX: NAB). NAB is one of the ASX's big four banks, and as such, typically pays out some of the largest fully-franked dividends on the ASX. In NAB's case, we've seen the bank dial up its income over the past 12 months.
NAB's recent interim dividend of 83 cents per share was a nice increase over last year's interim payment of 73 cents. Today. NAB shares are trading with a fully-franked dividend yield of 5.95%.
Next, there's ASX dividend share Telstra Group Ltd (ASX: TLS) to consider. Telstra has long been famous for its fully-franked dividends – a reputation it has helped to uphold over the past 12 months with upped healthy payouts.
Its most recent dividend was the March interim payment of 8.5 cents per share, fully franked. That was up from 8 cents per share last year. Right now, Telstra shares have a fully-franked dividend yield of 3.95% on the table.
Coles Group Ltd (ASX: COL) is another ASX 200 dividend share with a fine yield on offer today. Coles has been increasing its dividend payments annually ever since listing on the ASX back in 2018.
The last two fully-franked dividends Coles has paid out came to 36 cents and 30 cents per share respectively. Those were both increases over the previous corresponding two dividends of 33 cents and 28 cents.
These give Coles shares a dividend yield of 3.64% today.
2 more ASX income stocks overflowing with franking credits
Another share to consider for tax-busting franking credits is Bunnings-owner Wesfarmers Ltd (ASX: WES). Wesfarmers is one of the oldest shares on the ASX 200, and today owns a plethora of successful businesses in its empire.
There's the crown jewel Bunnings, but also Wesfarmers Chemicals, Energy and Fertilisers, Officeworks, Kleenheat Gas, Target and Kmart, amongst many others.
Wesfarmers also has a strong history of paying fully-franked dividends. Investors have enjoyed a total of $1.88 per share in fully-franked dividend income over the past 12 months, which was again a nice increase over the previous 12 months' total of $1.70.
Today, the Wesfaremrs share price offers a trailing dividend yield of 3.84%.
Finally, let's discuss ASX 200 investment house Washington H. Soul Pattinson and Co Ltd (ASX: SOL). Soul Patts is ASX dividend royalty, being the only share on the index that has a 20-year-plus record of annual dividend increases. Yep, investors of this company have seen their fully-franked dividend rise every year since 2000.
This has continued in 2023 thus far, with May's interim dividend of 36 cents per share a strong increase over 2022's interim payment of 29 cents. This company has the lowest dividend yield on this list at present, with 2.49% on the table today. But given this impressive streak of dividend pay rises, it is still more than worthy of consideration for fully-franked income.
