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Explains imputation when paying and receiving dividends and other distributions plus the integrity rules.

Last updated 30 November 2016

When corporate tax entities distribute, to their members, profits on which income tax has already been paid – such as when a company pays a dividend to its shareholders – they have the option of passing on, or 'imputing', credits for the tax.

This is called ‘franking’ the distribution. The franking credits are attached to the distribution and can be used by the recipients as tax offsets.

The imputation system also applies to a non-share dividend paid to a non-share equity interest holder in the same way as it applies to a membership interest.

Although the recipients are taxed on the full amount of the profit represented by the distribution and the attached franking credits, they are allowed a credit for the tax already paid by the corporate tax entity.

This prevents double taxation – that is, the taxation of profits when earned by a corporate tax entity, and again when a recipient receives a distribution.

See also:

Explains franking accounts, franked distributions (dividends), allocating franking credits, returns and statements.

What to do if you receive dividends, franking credits and other distributions.

Integrity rules for entities receiving a franked distribution under the imputation system.

Detailed information about imputation.