In Australia, dividend imputation may reduce the tax payable by

Question

Quizplus · Accepted Answer

Dividend imputation is a tax system that aims to avoid double taxation of corporate profits, where the company pays tax on its profits and then the shareholders also pay tax on the dividends they receive from those profits. Under the imputation system, the company attaches a franking credit to the dividend it pays, which represents the tax already paid on the profits. Resident shareholders can use these franking credits to offset their own tax liability, effectively reducing the tax they have to pay on their dividends. Non-resident shareholders, however, may not be entitled to use these franking credits and may still have to pay tax on their dividends in their home country, so they may not benefit from dividend imputation to the same extent as resident shareholders. Therefore, the best choice is B, as dividend imputation can reduce the tax payable by a resident shareholder.

In Australia, Dividend Imputation May Reduce the Tax Payable by