Imputation

The imputation system provides a way in which Australian corporate tax entities are able to pass on, to their members, credit for income tax they have paid. The system prevents income tax being levied twice - once when the income is earned by the entity, and once upon distribution of the income to the members.

This imputation system works by franking a distribution. The franking account is a record of franking credits and franking debits that arise within an income year. All corporate tax entities are required to maintain a franking account. Typically a franking credit would arise in the franking account when the corporate tax entity pays its income tax or when it receives a franked dividend. A franking debit would arise when the corporate tax entity pays a franked dividend or receives a refund of income tax that it has paid.

For more information see the Imputation section of the ATO website.

< Back to Tax Facts Index