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  • How dividends are taxed

    Attention

    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 the shareholder is 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 tax paid by a company 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 tax offset for the tax the company has paid on its income. The franking tax offset will cover or partly cover the tax payable on the dividends.

    Franked dividends

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

    Unfranked dividends

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

    Last modified: 13 Dec 2019QC 27432