Then-treasurer Paul Keating. Source: AAPHi Miningnut,Thank you...

Then-treasurer Paul Keating. Source: AAP

Hi Miningnut,

Thank you for sharing your perspective.

The following is where my perspective stems from.

Before 1987 dividends were essentially taxed twice . . . firstly at the company rate and secondly at the personal rate.

In 1987, then treasurer Paul Keating, introduced franking credits - also known as dividend imputation credits - to address the issue.

Just for a hyperthetical example . . . if an unfranked dividend were to be paid this year then that amount would be carried forward by the company as a tax loss which would increase next year's NPAT. A greater NPAT next year = a greater dividend next year. So all evens out.

The key to Paul Keating's tax reform is the removal of what was then known as "double taxation".

Yes, there are some incrimental differences, both plus and minus, depending on one's individual tax position. But overall the sum total tax paid remains the same whether the company pays the tax or the individual pays the tax.

The change meant that at tax time, shareholders were compensated.

ANU's Associate Professor Geoff Warren told SBS News they are used to help reduce shareholders' income tax paid on dividends or given as a tax refund.

"What it effectively means is that the income coming from the company only gets taxed once," he said