Under Australias imputation tax system for dividends, the corporate tax rate doesnt matter . Do you agree
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Question:
- Under Australia’s imputation tax system for dividends, the corporate tax rate doesn’t matter”. Do you agree with this statement? Explain why. Can you give an example where the corporate tax rate does matter to investors?
- Assume company income tax rate is 30% and franking credits are available to be passed on to shareholders. Under the imputation tax system, if your marginal personal tax rate is 47%, would you prefer to receive equity investment income in the form of (fully franked) dividends or capital gain? Show all calculations.
- What are the characteristics of off-market share buybacks in Australia? Why would shareholders participate in the buyback when the buyback price is set at below the market price?
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