How does the Green Book categorize dividends for tax purposes?

Dividends are categorized as income for tax purposes, and this classification is further divided into two types: franked and unfranked dividends.

Franked dividends come with a tax credit because they have already had tax paid on them at the corporate level, allowing shareholders to receive credit for the tax already paid. This feature helps prevent double taxation on the same income. In contrast, unfranked dividends do not carry such credits and are taxed at the recipient's marginal tax rate.

This categorization is significant because it informs how dividends are reported on tax returns and affects the amount of tax the recipient may owe or the potential for tax credits they can claim. Understanding this distinction helps clarifying the tax implications for investors receiving dividends and how they should account for them in their overall income.