Imputation tax is a system that helps to avoid double taxation in the case of a dividend. ... Basically, the system ensures that the investors who get dividends are not taxed twice. One while receiving the dividend and the other when reporting their dividend income in their individual tax returns.

Do you pay tax on imputation credits?

Franking credits recognise tax paid by a company.

Small companies may pay 27.5%. But when it comes to companies listed on the Australian Securities Exchange (ASX) the tax rate is generally a flat 30%. ... It pays tax of 30% on those profits. Then a dividend is paid to shareholders from the profits left over after tax.

What does dividend imputation tax system differ from classical tax system?

In comparison to the classical system, dividend imputation reduces or eliminates the tax disadvantages of distributing dividends to shareholders by only requiring them to pay the difference between the corporate rate and their marginal rate.