Investing in Australian shares in an SMSF can be a great option due to the additional franking credits available.
Franked dividends are dividends or profits paid to shareholders by a company that pays company tax in Australia on part or all of the profit distributed as a dividend.
Generally, a listed company pays tax at a rate of 30 per cent. A shareholder who receives a franked dividend can claim a tax offset for the franking credits (otherwise known as imputation credits) attached to the franked dividend.
In practice, this would mean that if your SMSF owned BHP shares and a $1,000 dividend were declared, you would receive $700 as cash, and BHP would pay $300 (30%) in tax. If your SMSF is in pension mode on a 0% tax rate, you would then receive the $300 tax as a refund when you lodge your tax return.