or making an adjusting recalculation of the credits (e.g. into class C 30%). Trans-Tasman Imputation New Zealand companies can apply to join the Australian dividend imputation system (from 2003). Doing so allows them to attach Australian franking credits to their dividends, for Australian tax they have paid. Those credits can then be used by shareholders who are Australian taxpayers, the same as dividends from an Australian company. There are certain anti-tax-avoidance rules to prevent New Zealand companies deliberately streaming Australian franking credits towards their Australian shareholders; credits must be distributed on a pro-rata basis. Note that it is only Australian franking credits which can be used by an Australian taxpayer. New Zealand imputation credits on dividends paid to an Australian shareholder cannot be used against that shareholder's Australian taxes. Abuses of the system A company is not obliged to attach franking credits to its dividends. But it costs the company nothing to do so, and the credits will benefit eligible shareholders, so it is usual to attach the maximum available. It's actually possible for a company to attach more than it has, but doing so attracts tax penalties that mean this is not worthwhile. In the past it was permissible for corporations to direct the flow of franking credits preferentially to one type of shareholder over another so that each may benefit the most as fits their tax circumstances. For example, foreign shareholders cannot use franking credits (they can't be offset against withholding tax) but Australian shareholders can. This practice, known as dividend streaming, became illegal in 2002, whereafter all dividends within a given time frame must now be franked to a similar (but need not be identical) degree irrespective of shareholder location or which class of shares held. Effective elimination of company tax and thus incentives To a large extent, dividend imputation makes company tax irrelevant. This is because every dollar that a company pays in company tax can be claimed by the shareholder as franking credit, with no net revenue flowing to the government. (There are exceptions which include profits retained by the company that are never paid as dividends, and payments to international investors.) When gross company tax is reported by Treasury, it is unclear whether the number generally includes the effect of the corresponding franking credits. One effect is that this has reduced the effectiveness of tax incentives for corporations. If a corporation was given a