Literature Review on Market Value of Dividend and Franking Credit in Australia

LITERATURE REVIEW ON MARKET VALUE OF
DIVIDEND AND FRANKING CREDIT IN AUSTRALIA

TABLE OF CONTENTS
Introduction....................................................................................................................................................3
Literature Review...........................................................................................................................................3
Back Ground of Franking credits...............................................................................................................3
Australian taxation with relevance to dividend.........................................................................................4
Impact of Australian taxation relating to dividend on investors and companies.......................................4
Market Value of dividend and franking credit...........................................................................................5
Conclusion.....................................................................................................................................................7
References......................................................................................................................................................9

INTRODUCTION
A literature review of a topic presents the facts and opinions provided by previous researchers or
authors. Present study presents a literature review of franking credit and market valuation
dividend in Australia. The report initiates with the basic core of the meaning of franking credit,
and further other related topics have been discussed in detail in order to depict an appropriate
conclusion.
LITERATURE REVIEW
Back Ground of Franking credits
Franking Credits also recognized as Imputation Credits are kind of tax credit that permit
Australian Companies to pass on tax paid at the corporate level to stakeholders. The
reimbursement is these franking credits which are utilised to decrease income tax paid on
dividends or potentially be received as a tax repayment. As per assertions of Dixon and Nassios,
(2016) if a person needs to understand about Franking Credits correct place should be considered
for that. Essentially, franking credits discontinued the double taxation of corporate income as the
tax paid at corporation level can be approved to the investor. Richardson (2017) specified that for
being qualified it is important to receive franking credits, which individuals require to hold and
further shares at risk for over 45 days at risk, it is not inclusive of purchase and sale dates,
thereby it comes into effect in a 47-day investment period. The refund is relevant when their total
accusation credits are connected to their franked dividends paid which goes beyond their basic
income tax legal responsibility for the year. Further, in accordance with the study of Richardson
(2017), the cash amount is available for being returned to them which represents the number of
surplus imputation credits. To this note, this will consecutively decrease their basic income tax