LAW2471: Taxation Law and Practice - Dividend Imputation Reform

This report analyzes the proposed dividend imputation reform by the Australian Labor Party, focusing on the removal of cash refunds for excess dividend imputation credits. It examines the policy's impact on various stakeholders, including shareholders, investors, employees, society, customers, and the government. The report identifies the winners and losers of the policy, highlighting the potential benefits for the ATO and the negative consequences for shareholders. It explores the pros and cons of the reform, including the potential for increased corporate tax payments and the elimination of cash adjustments for shareholders. Furthermore, the report discusses the implications of the reform for firms, including changes in compliance, investment strategies, and the behavior of taxpayers. Finally, it assesses the changes the reform will bring to the Australian Tax Office, including increased compliance requirements and changes in the processing of tax credits, along with a discussion of the need for the ATO to comply with all the rules and regulations prescribed in the standard related with the tax credit policy.

Running head: Taxation law
Taxation Law
Name of the Student
Name of the University
Author Note

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Table of Contents
Question No 1............................................................................................................................3
Question No 2............................................................................................................................3
Question No 3............................................................................................................................4
Question No 4............................................................................................................................5
Question No 5............................................................................................................................5
Bibliography...............................................................................................................................7

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Question No 1
The issue of this policy is significant as it will bring a change in the current taxation
policy related to the dividend imputation credit system. As the policy does not change the
current system but reduce the amount to claim in regards with the excess imputation credit in
cash from Australian Taxation Office (Abraham, Marsden and Poskitt 2015). As it will
reduced the amount which the individual have to get in refund from ATO so it will directly
affect the power of the individual so it will have a negative impact upon the individual and as
a result it would not be liked by the individual.
Question No 2
Key stakeholder in the given case:
1. Shareholders – The shareholder are the one who are the owner of the company.
There are the one who share the owner and share the profit of the company
(Ainsworth, Partington and Warren 2015). This policy affect them as there are the
one used to get the more amount so credit so they are the one who will able to lose
the amount and it will there loss.
2. Investors – The investors are the one who invest, they invest in the company and the
effect which will come by this policy is that they will not get affected by the case
there not playing any roles in related to the tax credit as they take interest from the
company in regards with the money they have invested so it does not take profit from
the company.
3. Employees – The employees are the one who work for the company, they get pay for
the work they do in the company (Cummings and Wright 2016). They are not
affected by the change in the policy related to the dividend imputation as they are not
able to get any amount of profit so they are not get affected by the change in the plan.

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4. Society – The society is the part in which the company do its work as it is know that
the society affects the company much but it can be said that the change in the
dividend imputation s this is given to the shareholder of the company and they are not
the shareholder but still it get affected as shareholder are the part of society so they
affected by the change they are not allow to do the cash exchange with the ATO so it
affect the profit part which the individual used to get from the franking credits
5. Customers – They are the one who gives business to the company, the maximum
revenue which the company use to get is from their customers. The change in which
is going to happen in the tax structure will not get affected as the profit is given to the
shareholder so the customers is also not the shareholders so they are not liable for the
franking credit so they will not able to affect with the changes which are going to
come in the tax policy (Tran 2015).
6. Government – They are the one who have some interest in the companies, as the
companies pay the tax but they will not get affected by the change in tax as they were
not entitle to get any amount of profit from the company so they will not get affected
by the change.
Question No 3
The winners in this are the ATO as they didn’t have to pay the excess of tax to the
shareholder and it will able to save the money in the cash so it can help them to increase the
compliance the in regards of the ATO (Davis 2016). The losers are the shareholders of the
company as they are the one who use to get much benefit from the tax credit policy but as
they are not able to get any more amount of cash credit in respect of the cash so it will affect
the total cash of the shareholder and they are the one who will lose the most amount of tax.
As they are the one who used to get more amount of dividend but as they are not able to get

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any amount after this law has been passed so this will affect them a lot and as a result they
may shift to different investments policy rather than investing in the company.
Pros of the policy
The policy will able to keep the corporate to pay more tax to the organization as a result the
company will pay more and the government will able to utilize those tax to make the country
more develop and if the company will pay more tax than the financial position of the country
will also be on a boost (Dixon and Nassios 2016).
Cons of the policy
The policy is able to eliminate the extra tax burden but it also taken the cash adjustment
which is done by the shareholder as it effect the most to the individual, SMSF and APRA
fund (Richardson 2015). This organization get much affected by the change in the policy and
it will not able to get the claim against the excess imputation credit from the company.
Question No 4
The implication in regards with the change in the firms is that the compliance will be
totally change as it have to take into consider the other matters also which were not taken into
consideration. It will change its investment details from the individual to the professional
terms as the investment are overstated due to behavioural changes as the taxpayers will be
minimize it but as the tax credit is not there the individual have to change the investment
decision process. The individual will go for higher risky fund which will affect the by the loss
of franking credit so to overcome that the company have to change their investment style in
related to high investments funds (Ato.gov.au, 2019). If the credit is removed than the
company will move to different investments process in regard of the listed and unlisted share
as it will not able to get the same amount of return from the company. It will also changes it
investments strategy regards with the SMSF as it will not able to get the required amount of

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credit which they should have got in regards with the SMSF as they are the one who are
affected much from the change in the tax credit policy (Murphy 2018).
Question No 5
The changes in the tax policy will bring huge change in the Australian Tax Office as
the compliance of the tax will be increase so the Australian tax officers have to check more
amount of file in order to look upon the real tax amount of the company (Graetz and Warren
2016). It will also reduce the amount of work which the officers do in related to the claim
computation of the excess tax as it will stop the amount of cash refund in excess of the
dividend imputation credit so the authority does not have to check and calculate much
amount of tax credit as it will reduce the amount of individual asking for the refund. It will
also help to know the actual amount of tax as there will be less number of person asking for
tax credit than it will be easy for the officers to check other tax payable amount and can stop
the tax evasion. They changes will also help them to increase the cost of the officers as they
have to comply with more law and regulation so they need to be pay more in related to the
tax compliance (Murphy 2016). The other issue which should be see is that the officers
should comply all the rules and regulation which are prescribed in the standard related with
the tax credit policy. This will help them to analysis the tax system more easily and
effectively and help them to evaluate the tax structure and help them to know various aspects
of the tax.

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References
Abraham, M., Marsden, A. and Poskitt, R., 2015. Determinants of a firm's decision to utilize
a dividend reinvestment plan and shareholder participation rates: Australian
evidence. Pacific-Basin Finance Journal, 31, pp.57-77.
Ainsworth, A.B., Partington, G. and Warren, G., 2015. Do franking credits matter? Exploring
the financial implications of dividend imputation. Exploring the Financial Implications of
Dividend Imputation (June 1, 2015). CIFR Paper, (058).
Ato.gov.au (2019). ElasticSearch. [online] Ato.gov.au. Available at:
https://www.ato.gov.au/elasticsearch
Cummings, J.R. and Wright, S., 2016. Effect of higher capital requirements on the funding
costs of Australian banks. Australian Economic Review, 49(1), pp.44-53.
Davis, K., 2016. Changing organizational form: Demutualization and the privatization of
communal wealth–Australian credit union experiences. Annals of Public and Cooperative
Economics, 87(4), pp.603-621.
Dixon, J.M. and Nassios, J., 2016. Modelling the impacts of a cut to company tax in
Australia. Centre for Policy Studies, Victoria University.
Graetz, M.J. and Warren, A.C., 2016. Integration of corporate and shareholder
taxes. National Tax Journal, Forthcoming, pp.16-36.
Murphy, C., 2016. The effects on consumer welfare of a corporate tax cut. Arndt-Corden
Department of Economics Working Paper, (2016/10).
Murphy, C., 2018. Modelling Australian corporate tax reforms: updated for the recent US
corporate tax changes.

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Richardson, D., 2015. Company tax cuts: an Australian gift to the US internal revenue
service. TAI Briefing Paper.
Swan, P.L., 2018. Investment, the Corporate Tax Rate, and the Pricing of Franking Credits.
Tran, A., 2015. Can taxable income be estimated from financial reports of listed companies in
Australia. Austl. Tax F., 30, p.569.