The imputation system provides a way in which Australian corporate tax entities can pass on credit for income tax they have paid to their members. 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 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 it has paid.
FURTHER INFORMATION:- See the Imputation section of the ATO website.