Dividend Franking

Australian companies have a system known as dividend franking, whereby an imputation credit for the income tax paid by a company is passed on shareholders in the form of a franked dividend.  The system is designed to avoid double-taxation of income in the hands of the shareholders.

Franked dividends are valuable to a shareholder and, accordingly, companies try to maximise the level of franking attached to interim and final dividends.

In order to manage the franking position, companies need systems that will project and compute their franking account based on estimated tax payments and franked dividends received from other companies.