The disappearing returns

Returns to shareholders include the value of dividend imputation credits to the extent that these can offset the shareholders' tax liabilities. At the time of the introduction of dividend imputation, Australian resident individual shareholders owned about 18.3% of shares listed on the Australia...

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Bibliographic Details
Published inJASSA no. 1; p. 8
Main Author Lonergan, Wayne
Format Journal Article
LanguageEnglish
Published Sydney Finsia - Financial Services Institute of Australasia 01.04.2001
Subjects
Bias
Capital assets
Capital costs
Capital gains
Corporate taxes
Cost reduction
Debt financing
Dividend distributions
Dividends
Equity capital
Foreign tax credits
Income taxes
Investments
Rates of return
Stockholders
Studies
Surcharges
Tax rates
Taxable income
Withholding taxes
Australia
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Summary:Returns to shareholders include the value of dividend imputation credits to the extent that these can offset the shareholders' tax liabilities. At the time of the introduction of dividend imputation, Australian resident individual shareholders owned about 18.3% of shares listed on the Australian Stock Exchange. In assessing any impact of imputation on the cost of capital, an important consideration is that the imputation system has eliminated the double taxation of dividend income for individuals. Its effect on companies was generally neutral, as dividend income of companies preimputation was effectively tax-free because of the intercompany dividend rebate. Allowable rates of return permitted by regulatory authorities in Australia have, on a number of occasions, been reduced because of the alleged reduction in the cost of capital as a result of imputation credits. As a result, some investors are being deprived of part of the rate of return to which they properly should be entitled.