Imputation was introduced into the Australian tax system in 1987. The rules were rewritten and simplified and came into effect on 1 July 2002.
The rules introduced as part of the simplified imputation system apply to companies, corporate unit trusts, public trading trusts, limited partnerships and cooperatives which elect to enter the system.
The system is largely unchanged for individuals who receive franked dividends. (It should be noted that payment of company profits to shareholders is now referred to as a distribution of dividends).
The simplified imputation system generally provides the same outcomes as the previous system, but changed the mechanics of the former system to provide:
- simpler rules
- increased flexibility in franking distributions, and
- consistency of treatment across entities receiving franked dividends.
From 1 April 2003 New Zealand companies who pay Australian tax also became eligible to choose to use the Australian imputation system. Australian franking credits could be attached to distributions from 1 October 2003.