Types of listed products:
What is dividend imputation?
Dividend imputation – otherwise known as franking – is a system whereby investors benefit from the corporate tax paid by a company.
Currently, most companies pay tax at the corporate rate of 30% (less for those with an annual turnover less than $10 million).
With dividend imputation, Australian-resident shareholders are entitled to claim a tax credit (called a franking credit) on dividends received from a listed company that has paid Australian company tax.
The credits associated with franked dividends are essentially a tax credit against the shareholder’s tax liability. Investors who receive a dividend will pay income tax on the difference between 30% corporate rate and their own marginal tax rate.
|Marginal tax rate^||Tax payable on franked dividends|
|< 30%||No tax payable; excess franking credits can offset other income tax|
^ excludes Medicare levy and other loadings
In cases where the investor’s marginal rate is less than 30%, the franking credits can be used to offset other income tax liabilities. If excess franking credits remain, they can be refunded via the investor’s annual tax return.
Non-resident shareholders are not entitled to a tax credit or refund of imputation credits and are subject to withholding tax on any unfranked dividends they receive.