Under an imputation tax system,what will be the dividend after tax on $1 of income generated by a company when 100 per cent of the after- tax income is paid out to the shareholder as a fully franked dividend and the shareholder's personal average tax rate is 47 per cent? The company tax rate is 30 per cent.

Question

Quizplus · Accepted Answer

Under an imputation tax system, the company tax paid can be used to offset the shareholder's personal income tax liability. In this case, the fully franked dividend indicates that the company has already paid the 30% company tax on the income generated. The shareholder's personal income tax liability is 47%, and since the company tax paid can be used to offset this, the dividend after tax will be $1 - (30% x 47%) = $0.53. Therefore, the correct answer is C.

Under an Imputation Tax System,what Will Be the Dividend After