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This article is from the soc.culture.australian FAQ, by Stephen Wales with numerous contributions by others.

8.4.3 Corporate taxation [JB]

Corporate tax is 33%. Australia has an almost unique system whereby
company income is NOT taxed again if it is passed on the
shareholders as dividends. The system, known as "dividend imputation"
works roughly like this:

If you get a dividend cheque from a company for $1,000, it will often
be accompanied by a notice saying that it is "fully franked" or
"partially franked" and that it has "imputation credits" of, say,
$500. This means that your "share" of the company's profits were
$1,500, on which $500 company tax has already been paid. When you do
your personal tax return, you declare income from this source of
$1,500, and the tax credit of $500. If your marginal tax rate is less
than the company tax rate, you will, in effect, get some of the $500
back. If your marginal rate is higher, you will have to pay some more
to make up the difference,

This system, which was introduced in 1985, did away with the previous
system wherein company profits were taxed twice. This "double
taxation" was a sore point with business for decades. Dividend
imputation was brought in by that arch-fiend, Paul Keating, which is
conveniently forgotten by people who want to paint him as a socialist
enemy_of_business.

Continue to:

• prev: 8.4.2 Personal income tax
• Index
• next: 8.4.4 Indirect taxes [DlC]