ANZ NPAT $2322m & Div 46c, page-7

Bfpan



Dividends that are not fully franked can be the payment out of non taxable profit made by the company which would normaly be one off items but are more often an indication of where the profit has been earned not the quality of the earnings.

If a company makes profit and pays tax on those profits offshore then a franked dividend can not be paid out off those profits assuming the company does not have other franking credits that it can use.

To put it simple terms dividends can only be paid out of profits, imputation credits on dividends are a rebate of the Australian tax the company has already paid on the profit - no Australian tax paid = no imputation credits.

There are a large number of Australian companies that pay unfranked or partly franked dividends on quality earnings due to this.