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Dividend imputation: a critical review of the future of the system

McLaren, J and Cormick, R 2018 , 'Dividend imputation: a critical review of the future of the system' , Australian Tax Forum, vol. 33, no. 1 , pp. 141-161 .

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Abstract

A full dividend imputation system for the taxation of companies and shareholders in Australia is only used by two OECD member countries: namely, Australia and New Zealand. A variety of models for the taxation of companies and shareholders are used by other countries to address: the distortions that are caused when determining the dividend to be paid to the shareholders; the way in which the company is financed either by debt or equity; the ability to attract foreign investors; and the decision to operate in foreign markets. This article critically examines the Australian dividend imputation system and its impact on domestic companies in terms of financing options and dividend policy, especially when attracting investment from superannuation (retirement) funds. It is suggested that the dividend imputation system creates a number of distortions and it is contended that a dividend deduction model of corporate-shareholder integration would be the preferred model in Australia. This method will allow for integration of corporate-shareholder taxation while maintaining the concessional tax environment for superannuation funds and eliminating some current distortions.

Item Type: Article
Authors/Creators:McLaren, J and Cormick, R
Keywords: tax reform, company taxation, superannuation
Journal or Publication Title: Australian Tax Forum
Publisher: Taxation Institute of Australia
ISSN: 0812-695X
Copyright Information:

Copyright 2018 The Tax Institute

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