Dividends from Australian Companies provide greater tax benefits than similar dividends paid by overseas non-resident companies to Australian tax residents.

The Australian dividend imputation system can represent an important advantage for investors when compared to the dividend taxation system of other countries, as the Australian system, essentially eliminates the double taxation of corporate profits.

If Australian company has paid company tax on its profits prior to paying a dividend to its shareholders then those taxes do not need to be paid again by the shareholder. The corporate taxes paid are attributed, or imputed, to the Australian investor through tax credits called franking credits. These franking credits can be used to reduce an investor’s total tax liability, for investors who are individuals or complying superannuation entities, any excess franking credits can be refunded at the end of the year if the investor’s tax liability is less than the amount of the franking credits.

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Disclaimer:  The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it.  It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.