In 1987 an imputation system was introduced. Under this system, resident shareholders receive a credit for tax paid at the company level, thereby eliminating double taxation of dividends. Where the resident shareholder's marginal tax rate is below the company tax rate, the excess credit can be used to offset tax payable on other income (for example, wages and salary). Full refundability of excess tax credits for most resident shareholders was introduced to the Australian imputation system in 2000.
Under the imputation system, Australia's company income tax system operates as a withholding tax on the income that Australian residents earn through Australian resident companies, and as a final tax on (primarily Australian source) income earned by non‐residents through an Australian resident company or permanent establishment in Australia.
