Back in 2000, former Treasurer, Peter Costello, made the fateful decision to allow the conversion of franking credits into cash refunds for shareholders. This enabled tax-free (mostly wealthy) superannuation holders over the age of 60 to claim imputation credits even though they pay no tax, as explained by The Australia Institute:
When companies pay dividends to Australia shareholders out of after-tax profit, shareholders also receive ‘franking credits’ which are a credit against their own tax obligation and based on the tax paid by the company. This system, known as ‘dividend imputation’ is unusual and only 4 other countries in the world use it.
