OpenMarkets Education

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.

Further Insights

Suitably capitalised – ASX capital requirements

Read More

Key stock picks 2018

Read More

The demand for 3D printers & why Robo 3D listed in Australia (ASX:RBO)

Watch More

Open a world of possibilities.

Start trading with OpenMarkets today.

Open a free account