Originally posted by pearHi Yogi"The Australian imputation...

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    One of the reasons for the introduction of Imputation Credits was a sale spiels by Keating, in getting rid off double taxation

    The introduction of the imputation tax system for companies in 1987 has partially eliminated the double taxation of the classical company tax system that prevailed before 1st July 1987.
    Under the classical tax system, company tax was charged on a company’s profit and then personal tax was charged on dividends distributed from after-tax company profits.
    Under the imputation tax system, tax is first collected as “company tax” and then when shareholders receive (franked) dividends they are credited with these “company tax” payments, called imputation credits, for use against their personal tax liabilities on the grossed up (for tax credits) dividends.

    Shareholders aggregate the cash dividends received and the credits allowed and are liable for personal tax on this total.

    Under the imputation tax system, the much of the money collected as “company tax” is really a withholding of personal tax. If shareholders could access all company tax payments as imputation credits and all such credits could be redeemed as pre-payment of personal tax liabilities, then there would be no company tax. The only tax liability would be the personal tax liability.
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