PASS, Business Finance, Week Eleven 1.

Draw a timeline showing how capital gains tax calculations have changed in Australia. 2. Consider a company with taxable income , and all income is paid out to its sole shareholder . For a share holder with marginal tax rate , find: i. Dividend received ii. Shareholders taxable income due to dividends iii. Shareholders tax liability due to dividends iv. Imputation credit passed on to the shareholder v. Tax owed by shareholder due to dividends vi. What happens to the tax owed when When 3. Explain the difference between a franked and unfranked dividend. 4. How do individuals determine if they prefer a company to pay high dividends to a company that pays low dividends? (What about a company that pays no dividends?) 5. One of the goals of the imputation tax system was so that companies would not hold a bias between equity and debt. i. During the classical tax system, were companies biased toward debt or equity? Why? ii. Under the imputation tax system, many companies still chose to maintain debt as part of their funding. List reasons as to why shareholders would agree to this.