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  • How dividends are taxed

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    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    Dividends are taxed differently depending on whether you are a resident or non-resident of Australia. This section explains the taxation implications for resident shareholders. If you are a non-resident, read the section Dividends paid or credited to non-resident shareholders to see how the dividends you receive will be taxed.

    Dividends paid to resident shareholders by Australian resident companies are taxed under a system known as imputation. It is called an imputation system because the payment of company tax may be imputed, or attributed, to the shareholders.

    The basis of the system is that if a company pays or credits you dividends which have been franked, you may be entitled to a franking rebate for the tax the company has paid on its income. The franking rebate will cover, or partly cover, the tax payable on the dividends.

    Franked dividends

    A resident company may pay or credit you a dividend that is called a franked dividend. These dividends are said to carry 'imputation credits', a credit for the tax paid by the company. Franked dividends can be either fully franked-meaning that the whole amount of the dividend carries an imputation credit-or partly franked-meaning that only part of the amount of the dividend carries an imputation credit.

    Unfranked dividends

    A resident company may also pay or credit you a dividend that is called an unfranked dividend. There is no imputation credit attached to these dividends.

    When a resident Australian company pays or credits you a dividend, you will also receive a dividend statement that tells you whether the dividends have been franked and to what extent.

    Last modified: 23 Dec 2019QC 16138