The imputation system provides a way in which Australian corporate tax entities can pass on credit for income tax they have paid to their members. The system prevents income tax being levied twice - once when the income is earned by the entity, and once upon distribution of the income to the members.
This imputation system works by franking a distribution. The franking account is a record of franking credits and franking debits that arise within an income year. All corporate tax entities are required to maintain a franking account. Typically a franking credit would arise in the franking account when the corporate tax entity pays its income tax or receives a franked dividend. A franking debit would arise when the corporate tax entity pays a franked dividend or receives a refund of income tax it has paid.
FURTHER INFORMATION:- See the Imputation section of the ATO website.
|IMPORTANT DISCLAIMER: This article is published as a guide to clients and for their private information. This article does not constitute advice. Clients should not act solely on the basis of the material contained in this article. Items herein are general comments only and do not convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of these areas.|