Companies and individuals are separate legal entities - each should pay his own tax. Easy .....
To do otherwise is using franking to avoid paying company tax while benefiting shareholders. It the idea of encouraging local investment worked so well, why is Australian business not prospering and developing?
It seems that not only Australian companies can offer franking..... sounds like a furphy to me.... when an offshore company calculates its tax burden here, it often pays zero tax - and there is zero obligation to pay tax on franked dividends.
In that case there are two beneficiaries for nothing, and tax is not paid on money earned.
https://www.asx.com.au/education/investor-update-newsletter/201805-how-franking-..." If you are on a marginal tax rate greater than 30 per cent, you pay the difference between tax at your marginal rate minus a tax credit at 30 per cent (company rate).
If you are on a marginal tax rate equal to 30 per cent, you pay no tax on the dividend.
If you are on a marginal tax rate under 30 per cent, you are reimbursed the tax credit that has not been used."
As this reads, ONLY those on a lower than 30% tax rate receive a dividend - however, it's not that simple - if someone is a PAYE with shares and gets a franked dividend - only that part of income tax which attaches to the extra income from shares cops tax... leaving a dividend.
To get a full franking return cheque, an investor would need to have an income lower than the tax free threshold. Otherwise a full refund is not applicable, but some may be.
It seems there is too much 'confusion' and fudging of books by many, including trust operators etc, and even SFRs and business people who may (or may not) 'draw' less than the tax free threshold, thus freeing income from dividends from some tax.
Try again - to gain a full refund of that 30% franking, your TOTAL income would need to be below the tax free threshold.... or you are cheating.
Let's try an example:- Coffee Shoppe Owner Joe Bloggzovic takes $16k pa from his business (laughable - how does he even run his Maserati?), and has franking dividends of $5000, and dividends of $10000. Therefore Joe's total income is earned income + dividend + dividend imputation = $31000, and he must pay income tax on $12900 @ 19% = $2451 - that tax is taken from his $5000 imputation, leaving a refund of $2549, for a total income of $28451.
It seems, from reports, that this is not the way it is working... but that Joe may be getting full value on dividends and imputation without paying any tax.... if so, blame the ATO under its political masters.
When family etc trusts enter into it, the situation becomes even worse, and that is why such things need to be resolved so that trusts pay tax.