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Dividend Imputation

   

Added on  2021-05-31

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Running head: TAXATION LAWTaxation LawName of the StudentName of the UniversityAuthors NoteCourse ID
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TAXATION LAW1Table of ContentsAnswer to Task A:.....................................................................................................................2Current system of Dividend Imputation Functions:...............................................................2Motive for Presenting Dividend Imputation in 1980:............................................................3Proposed labour reformation to the dividend imputation system:.........................................4Answer to task B:.......................................................................................................................5Labour Policies Advantages and Disadvantages:..................................................................5The advantages of labour Policy:...........................................................................................6Removing imputation credit refunds:.....................................................................................6Attributes of good tax policies:..............................................................................................7Answer to Task C:......................................................................................................................8Answer to question 1:.............................................................................................................8Answer to question 2:.............................................................................................................8Answer to question 3:.............................................................................................................8Answer to question 4:.............................................................................................................9Answer to question 5:.............................................................................................................9Reference List:.........................................................................................................................11
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TAXATION LAW2Answer to Task A: Introduction:The current report would be highlighting the present system of dividend imputation inAustralia. the report would seek to address the primary reason for introducing the dividendimputation system and the process involved in the administering of the dividend imputationsystem. The study would take into the consideration the proposal made by the labour policiesto the current system of dividends along with the advantages and disadvantages surroundingthe dividend imputation system. The report would be highlighting the attributes that isrequired in the good in the tax system with appropriate reference to current proposal of thedividend imputation made by the labour. Current system of Dividend Imputation Functions: Australian is viewed one of the few OECD countries that operate the system of fulldividend imputation (Barkoczy, 2014). The history of Australia’s imputation tax systemspans more that decades. While only some of the countries makes the use of dividendimputation system, majority of the nations have certain structure to administer the issuerelating to the double taxation. There are other options that are commonly used namely therebates or the concessional mode of taxing the dividend income. There are number of nations that does not consider dividend imputation in thepersonal assessable income. The major reformations that was made in the dividendimputation system operation includes the provision of rebate, where the allowable rebatesassociated to franking credits before 1st July 2000 was capped in terms of the tax obligation ofthe taxpayer with extra imputation credit was vanished (Coleman & Sadiq, 2013). During theyear 2000 in July a new system was introduced where the entire sum of franking credits wasrefunded to the taxpayer even though the franking credit goes past the tax obligations.
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TAXATION LAW3Consequently, the shareholders did not have to shoulder the wastage of additional sum offranking credit with the amount of imputation is retained by the taxpayer leading to marginalpersonal tax rate lower than the legal corporation tax rate. In Australia the system of dividend imputation requires a company to preserve therecords of franking credit which keeps the track of records associated to franking accountalong with the record of income tax payment made to ATO (Grange et al., 2014). As evidentin the company’s franking account the balance of maximum franking amount credits isreflected that is distributable to the shareholders. As an alternative a corporation is prohibitedfrom franking the dividends and the imputation credits attached to the dividends. A businessis prohibited from franking the dividends greater than the sum of corporation tax that is paid. When an Australian resident company pays tax lower than the statutory rate of tax aninsufficient amount of franking credits would be reflected in the corporations franking creditaccount in order to make the dividends completely franked (James, 2014). Likewise, wherethe companies do not pay any sum of tax on income after applying the applicable tax offsetsthe distributed amount of dividends must be unfranked. In Australia, the current dividendsystem is viewed as the prepayment of tax in respect of the corporate profits since thedomestic shareholders usually pay taxes on the distributed company profits based on theapplicable marginal tax rates. It is worth mentioning that this view is applied on companieswhere all the company’s shareholder is held as Australian resident for assessment purpose. The dividend imputation system functions by providing the Australian corporationswith the facilities of issuing franked dividends to shareholders (Jover-Ledesma, 2014). Thisconstitutes dividends which is paid following tax resulting the shareholders to obtain the aftertax dividends together with franking credits signifying the tax of corporation that are paid onincomes. In the current dividend imputation system, franking credits can be offset against the
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