Imputation 2013

Corporate tax strategy in the Australian dividend imputation system

Source: Australian Tax Forum Journal Article

Published Date: 1 Sep 2013


This paper examines the tax strategy of publicly-traded Australian companies in a dividend imputation system where corporate profits, if distributed as dividends, are ultimately taxed at the tax rates of Australian investors and corporate tax is a prepayment of investors’ tax. The study adopts the ratios of two effective tax rate measures to the corporate tax rate as the proxies for tax strategy and tests four hypotheses using the data for the period 1999 to 2003 when the corporate tax rate fell in two steps from 36% to 30%.

The results show that companies distributing franked dividends adopt a more conservative tax strategy than those that are not. Managers remunerated with share options adopt conservative tax strategies. They also do not respond to opportunities to save tax in the years before reductions of corporate tax rate. Further, closer scrutiny by the Australian Taxation Office leads to more conservative tax strategies. The findings have important theoretical and policy implications.

Sorry, this is subscriber only content.

To gain access to this material and much more - Subscribe Now.

(Note: Members can access Taxation in Australia journal articles without a Tax Knowledge Exchange subscription - please log in to access).

Already a Subscriber? Login now

Already a Subscriber? Login now


The material is copyright. Apart any fair dealing for the purpose of private study, research criticism or review, as permitted under the copyright Act, no part may be reproduced by any process without written permission from The Tax Institute.

Unless expressly stated, opinions are not that of The Tax Institute, which accepts no responsibility for the accuracy of any of the information contained within it.

The Tax Institute
(ABN 45 008 392 372 (PRV14016))


The Tax Institute is a Recognised Tax Agent Association (RTAA) under the Tax Agent Services Regulations 2009. 

Copyright Statement

All materials provided on this site are protected by copyright and are owned by or licensed to TTI.

Except as expressly permitted by TTI or the copyright owner, any person or company who uses this site must not use, reproduce, redistribute, retransmit, publish or otherwise transfer, or commercially exploit, the materials or any information, software or other content, in whole or in part, which is available through this site.


Imputation 2013

Share this page