Coming back with a vengeance!, page-36

Sort of right on dividends Fergl but a bit distorted.

Dividend imputation was introduced to prevent double taxation that is the same profit is taxed by the company and then by the shareholder something that in itself breaches tax law.

The dividends paid by a large number of Aust companies are fully franked generaly if the company earns most of its profits in Australia and pays tax in Aust on its profits the dividends will be fully franked.

If you receive a $70.00 fully franked income it will have $30.00 of imputation taxcredits attached to it. Your taxable income is $100 ($70 + $30) and you claim $30 worth of tax credits.

Therefore if your marginal tax rate is 30% (between $20,000 & $50,000 taxable income) the dividend is tax free. If marginal rate is under 30% you still claim the $30 tax credit which helps to reduce tax on other income. If your taxable income is over 30% as I am sure fergls rich relos would be the full tax liablity on the dividend is not covered with the tax credit so you have to pay the difference.