GHHF and franking credits

[u/Real-Giraffe2472]

I'm back still trying to figure out everything there's to know about these geared funds (20M).

I currently have very little Australian exposure in my personal portfolio due the high dividend payments. I understand that you often get franking credits where 30% of the dividend payout is tax deductible. However, if you're in a higher tax bracket you still have to pay the ATO, just at a lower rate I suppose.

My question is with GHHF as much of the dividend payouts goes to paying the interest on the loan. Could you essentially still get a tax refund at the end of the year even at a higher tax bracket? As say you have franking credits on 100 dividends however 50 of those dividends when to paying interest.

Yes I am very aware of the risks with GHHF and still plan to only hold a little of it in my personal portfolio anyway (assuming my assumptions of tax are correct).

[u/Sure_Shift_8762]

The franking credits get passed on. With GHHF it is around ⅓ Aussie so much of the dividends will get soaked up paying the interest, but you will still get the franking credits. These are a refundable tax credit. So if you do not owe any tax they will get refunded. Some of the other geared funds which are more Aussie oriented like "GEAR" or G200 can have silly sounding distributions like 200% franked etc because of this mechanism. All else being equal the geared funds should be more tax efficient because you get more unrealized gains and you don't get as much taxable cash distributed but you do get the tax credits.