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Dividends paid to shareholders by Australian resident companies are taxed under a system known as imputation. It is called an imputation system because the tax the company pays is imputed, or attributed, to the shareholders. The tax paid by the company is allocated to shareholders by franking credits attached to the dividends they receive.
You include an amount equal to the franking credit attached to your dividend in your assessable income. If you are an Australian resident, you are also entitled to a franking tax offset equal to the amounts included in your income. (There are some exceptions to this rule, see Anti-avoidance rules)
The franking tax offset will cover, or partly cover, the tax payable on the dividends. If the tax offset is more than the tax payable on the dividends, the excess tax offset will be applied to any tax payable on other taxable income you received.
If any excess tax offset amount is left over after that, we will refund that amount to you.
Subject to satisfying anti-avoidance rules, you are eligible for a refund of excess franking credits if:
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