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The Imputation System provides a way in which Australian corporate tax entities are able to pass on, to their members, credit for income tax they have paid. The system prevents income tax being levied twice - once when the income is earned by the entity, and once upon distribution of the income to the members.
This Imputation System works by franking a distribution. The Franking Account is a record of franking credits and franking debits that arise within an income year. All corporate tax entities are required to maintain a franking account. Typically a franking credit would arise in the franking account when the corporate tax entity pays its income tax or when it receives a franked dividend. A franking debit would arise when the corporate tax entity pays a franked dividend or receives a refund of income tax that it has paid.
For more information see the Imputation section of the ATO website.