Dividends with Imputation Credits

[flywire]

How can dividends with imputation credits be entered? The dividend is paid into a bank account but it also includes a tax credit. The Dividend form does not allow negative tax amounts.

eg

Paid      Code  Shares  Dividend  Imputation  Total
23/03/21  REA       64    $37.76      $16.19  $53.95

Dividend Imputation:

Dividend imputation is a corporate tax system in which some or all of the tax paid by a company may be attributed, or imputed, to the shareholders by way of a tax credit to reduce the income tax payable on a distribution. In comparison to the classical system, it reduces or eliminates the tax disadvantages of distributing dividends to shareholders by only requiring them to pay the difference between the corporate rate and their marginal tax rate. The imputation system effectively taxes distributed company profit at the shareholders’ average tax rates.

Australia, Malta[1] and New Zealand have imputation systems. Canada, Korea and the United Kingdom have a partial imputation system.[2] Germany had a dividend imputation system until 2000 and France until 2004.

I edited the xml directly to create this screen. Amount paid into bank account is $37.76 and real value for analysis is $53.95:

[Harry_Hirsch]

Hey flywire,
as I do not know that sort of system my guess is that the “Total” is to be compared with the actual dividend being payed based on the shares (in case you are part of a full imputation system). In that case you book the dividends (the “Total”) with no taxes. However, this would not consider the taxes you pay on the dividends through your income taxes.

I my be wrong, though

[flywire]

@Harry_Hirsch I tend to agree and note your previous response that tax systems are not properly accounted for.

[Harry_Hirsch]

There is, however, the possibilty to book tax refunds in PP as well. I think you need to find the best solution for yourself as we all will not get taxes 100% correct.

[flywire]

Allow Negative Tax (Tax Credits)

[flywire]

Nirus2000

Negative taxes or fees must always be entered as positive. (Unsigned)
In your example, however, the taxes are a tax refund. These can be posted separately so tax refund, or you create a PDF debug, then I’ll take a look.
This is not an error, but is correct. [???]

To be clear, can you show a screenshot of how you would process that dividend transaction?

Look at any other Australian Portfolio tracking software. This is a tax credit in the same transaction as the dividend payment, it is absolutely not a refund that would occur when tax is processed would almost always be a different amount.

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…from Allow Negative Tax and Fee (Credits) · Issue #3450 · portfolio-performance/portfolio · GitHub

Anatomy of a PDF importer
The structure of the PDF importers is as follows:

• Bank name

  • getLabel → display label of bank/broker, e.g. Deutsche Bank Privat- und Geschäftskunden AG

Nirus2000

A bank is a credit institution that provides banking and other financial services to its banking customers.

That definition applies in Australia too so I wouldn’t expect them to have anything to do with Contract Notes in the PDF importer, that would be a Share Broker, some owned by banks. I’m fairly sure it’s a translation issue. (btw In this instance I notice the description includes the term broker which is also on the recently reworked Debug: Extract text from PDF form but I haven’t seen the term broker used in the past.)

[Rafa]

Well, the cash flow is still inclear.

@flywire

Paid      Code  Shares  Dividend  Imputation  Total
23/03/21  REA       64    $37.76      $16.19  $53.95

Based on your given sample, which amount is accounted to your deposit account. Do you receive the 37.76 or 53.95?

[Nirus]

Hello @flywire
First of all, you are mixing up topics that have nothing to do with each other.

One is the “Anatomy of a PDF importer”, how we create a new PDF importer programmatically(!) and the other one we discuss here about dividends and taxes. So stay on topic.

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@flywire

How can dividends with imputation credits be entered? The dividend is paid into a bank account but it also includes a tax credit. The Dividend form does not allow negative tax amounts.

Again, I have already written to you that you need to make two transactions. One is the dividend and the other is a tax refund/taxes. The program does not allow any entries that have negative values.
The whole system of PP is based on this and will not(!) change.

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@flywire

I edited the xml directly to create this screen. Amount paid into bank account is $37.76 and real value for analysis is $53.95:

Please do not be surprised if then calculations are incorrect, these cannot be edited or other errors occur. If you manipulate the source file, then this is a result that we cannot reproduce.
This is logical that then PP outputs an error.

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Paid      Code  Shares  Dividend  Imputation  Total
23/03/21  REA       64    $37.76      $16.19  $53.95

I think this is correct way

Under Australian tax law, dividend imputation is a system that credits taxes paid by a company to shareholders. Franked dividends are profits the company has already paid tax at the Australian company tax rate of 30% before distributing dividends.

1x dividend at $53.95
1x taxes $16.19

Simple math with 10 seconds google:
$53,95 / 100 * 30 % = $16,185 → 16,19$ taxes

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Portfolio Performance does not take into account tax rules, regardless of the country. You can enter, but you have to understand yourself. In Germany alone we have 40 different tax systems, so we have agreed to distinguish only between gross and net.

Regards
Alex

[flywire]

Tax is something people normally pay but in this case people receive the tax from the company as part of their income.

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@Rafa

Do you receive the 37.76 or 53.95?

$53.95 being $37.76 in the bank account and $16.19 in the tax account.

@Nirus

Again, I have already written to you that you need to make two transactions.

To be clear, you are showing a single transaction with two splits.

@Nirus

Please do not be surprised if then calculations are incorrect

I assure you calculations are correct when data file is edited manually.

@Nirus

a system that credits taxes paid by a company to shareholders

This is not my tax, it is part of my income the tax office holds in my account. The tax office will charge me tax on the Total Dividend.

@Nirus

I think this is correct way

1x dividend at $53.95
1x taxes $16.19

That is what I thought you were suggesting but it is wrong because it is a tax CREDIT. In Australia dividends are grossed up, ie Franked Dividend + Franking Credit = Total Dividend.

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@Nirus

First of all, you are mixing up topics that have nothing to do with each other.

One is the “Anatomy of a PDF importer”

You brought that into the conversation:

Nirus2000

…create a PDF debug

[Rafa]

@flywire

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@Rafa

Do you receive the 37.76 or 53.95?

$53.95 being $37.76 in the bank account and $16.19 in the tax account

If this is the case, why it’s not suitable to apply 53.95 as gross dividend w/ 16.19 as tax to get a net dividend of 37.76? Just as workaround.

[Rafa]

@flywire

@Nirus

Please do not be surprised if then calculations are incorrect

I assure you calculations are correct when data file is edited manually.

Thats only what you see at the screeen. Internally each booking type is calculating positive or even negative in all instanc, regardless what is displayed.

[Nirus]

@flywire
That’s a dividend payment, isn’t it?
You get $53.95 dividend and have to pay $16.19 tax on it.

Otherwise, you need to be more specific about what your problem is.
We don’t know the tax system of Australia and Portfolio Performance doesn’t process tax system. But you can enter taxes.

Under Australian tax law, dividend imputation is a system that credits taxes paid by a company to shareholders. Franked dividends are profits the company has already paid tax at the Australian company tax rate of 30% before distributing dividends.

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If it is to be a tax credit according to the sense, then record the dividend individually and then a tax refund. A tax refund in the dividend transaction is not possible because it is a different type of transaction type with which Portfolio Performance works.

Regards
Alex

[flywire]

Let’s restate the problem. I need to track income to understand my investment performance and many people use it as a basis for tax returns. Dividend income includes bank and franking credit accounts. Parts of PP use income and it makes no sense to ignore up to 30% of dividend income (dividends might not be fully franked). This is before tax income.

Personal income tax rates vary for each person so for example, my partner and I might each own half of an investment and pay a different amount of tax on our part. It is not useful for me to calculate after tax income in PP.

@Nirus I agree the splits in the transaction could be entered as two transactions but this breaks the logical concept of a transaction, a dividend payment with two splits. A user could inadvertently enter part of the transaction at the wrong date or in the wrong account. (Set aside it’s not actually a tax refund.)

@Rafa A negative tax amount in a dividend is only a GUI validation issue. I can’t see any evidence of wrong PP calculations following the manual edit. If I’m wrong let’s demonstrate it.

It would also have all the data to generate the required information much simpler than the Australian portfolio trackers.

[Nirus]

Hallo @flywire

@flywire

Let’s restate the problem. I need to track income to understand my investment performance and many people use it as a basis for tax returns. Dividend income includes bank and franking credit accounts. Parts of PP use income and it makes no sense to ignore up to 30% of dividend income (dividends might not be fully franked). This is before tax income.

Let me explain this to you again
Portfolio Performance is not a tax program and never will be.
You will not be able to determine a basis for your tax returns with Portfolio Performance.

@flywire

This is before tax income.

Therefore, Portfolio Performance has the possibility to display the value in gross and in net.

@flywire

Personal income tax rates vary for each person so for example, my partner and I might each own half of an investment and pay a different amount of tax on our part. It is not useful for me to calculate after tax income in PP.

Portfolio Performance is not designed or programmed to manage or calculate various tax rates or the like.

@flywire

@Nirus I agree the splits in the transaction could be entered as two transactions but this breaks the logical concept of a transaction, a dividend payment with two splits. A user could inadvertently enter part of the transaction at the wrong date or in the wrong account. (Set aside it’s not actually a tax refund.)

What you can do is to create two separate files for your partner and for you and maintain them manually according to your wishes.

@flywire

@Rafa A negative tax amount in a dividend is only a GUI validation issue. I can’t see any evidence of wrong PP calculations following the manual edit. If I’m wrong let’s demonstrate it.

Once again. Portfolio Performance is designed so that negative numbers should not and cannot be written into the GUI. It is set that way and has been running without problems for more than 12 years.
If it were that simple, don’t you think we would have already implemented this?
“Go ahead… PP is open source”. Please consider the following points in your implementation.

A data structure with negative number values in Java may not be suitable in the following situations:

1. Not relevant to the use case: If your application doesn’t deal with negative numbers or has no need to store or process such values, using a data structure with negative numbers would be unnecessary.

2. Loss of semantic meaning: In some specific cases, negative numbers can alter the semantic meaning of data and make it harder to understand or process. For example, negative indices in a string referring to character positions may lead to undesired effects and errors.

3. Limited value range: If your application only needs to store positive values or numbers in the range from 0 to n, using a data structure that also supports negative numbers could be redundant and might increase storage and processing costs.

4. Complexity: Introducing negative numbers can increase the complexity of the application. If the use of negative numbers is not strictly required, it may be simpler and clearer to work exclusively with positive values.

5. Performance: In certain specific scenarios, data structures that support negative numbers may require additional memory or extra computational power. If performance is a critical factor in your application and the use of negative numbers is not necessary, it could lead to unnecessary overhead.

6. Consistency: If the majority of your application deals with data containing exclusively positive values, introducing negative numbers might lead to inconsistent behavior and make code maintainability more challenging.

It’s important to emphasize that the decision to use a data structure with negative numbers or not depends on the specific requirements and characteristics of your application. Sometimes, negative numbers are necessary and relevant, while in other cases, they may not be needed and could add complexity. Always carefully analyze the specific requirements of your use case to choose the most appropriate data structure.

Regards
Alex

[flywire]

Franking Credits are part of an investor’s income and not a tax they pay. Nevertheless, if the tax field is not used (as is normally the case for Australian investors) it can usefully be co-opted as the Franking Credits field.

@Nirus

Portfolio Performance is designed so that negative numbers should not and cannot be written into the GUI.

I recommend the following workaround demonstrated using the data given in Import CSV file

Enter the dividend with Gross Value blank, Taxes containing Franking Value, and Credit Note containing Total (Franked, Unfranked, and Franking Credit (Imputation Credit)).

Let’s demonstrate it using the GUI and a text editor:

Paid,Code,Shares,Dividend,Franking,Total
23/03/21,REA,64,37.76,16.19,53.95

It is best not to enter Gross Value, and enter Taxes before Credit Note and note as the last digit is entered for Credit Note that Gross Value will update.

Save the file and exit Portfolio Performance.

Now open the *.xml file in a text editor (eg NP++) and search for type="TAX". Make the Tax value(s) negative and save the file. You can see below amount="1619" needs to be changed to amount="-1619".

If you open Portfolio Performance again and view the transaction the Gross Value has been updated but if changes are made the taxes must be saved as a positive value (and edited in the text editor again).

Portfolio Performance will now have the full dividend income which will be used in calculations:

Taxes can change over time but with a constant (30%) Franking Credit, the Franked and Unfranked amount can be calculated from the Total amount.

Be aware of the concerns raised in this topic but don’t be concerned.

Portfolio Performance
Version: 0.64.4 (July 2023)
Platform: win32, x86_64
Java: 17.0.5+8-LTS, Azul Systems, Inc.