Capital gains is a form of 'statutory income' - that is, it is not income under the common law, but deemed to be income by legislation. But in the grand scheme of things it becomes 'taxable income' which is where you get tax on it. Many years ago franking credits were not refunded if there was an excess amount - that was changed during the Howard government I think.
Just also note that franked dividends don't always have to come from dividends. They can also come from share buybacks - a big example of this would be mining giants like BHP. They don't pay much dividends so their franking credits from their massive profits can go wasted. So what happens is they 'buy back' shares from shareholders. They can load up the franking credits into the buyback so the shareholders receive this without having to get a standard bi-annual dividend.
Just also note that franked dividends don't always have to come from dividends. They can also come from share buybacks - a big example of this would be mining giants like BHP. They don't pay much dividends so their franking credits from their massive profits can go wasted. So what happens is they 'buy back' shares from shareholders. They can load up the franking credits into the buyback so the shareholders receive this without having to get a standard bi-annual dividend.