One of the poorly understood impacts of a company tax cut is that there is little benefit to domestic investors because the way that company tax payments are credited against the tax payable by Australian owners of companies. The system of crediting company tax paid against the income tax liability of shareholders is known as 'dividend imputation'. Under dividend imputation company tax is treated as a pre-payment of the tax ultimately payable by the domestic owner of the company. The domestic owner has to pay personal income tax according to the normal tax scale. But company tax paid before dividends are distributed is treated as an offset against any personal tax liability. Any saving from a company tax cut is nullified by a reduction in the offset received by the domestic investor. Hence a cut in the company tax rate from 30 per cent (28.5 per cent for small business) to 25 per cent increases the amount available for the company to pay out in dividends but reduces the franking credits that domestic taxpayers can apply against their personal tax liability. There is, however, one important exception to this rule. The tax offsets (franking credits) can only be used to reduce tax payable to the Australian government and, in turn, are worthless to foreign owners of Australian companies. Put another way, the only potential beneficiaries of a cut to the Australian company tax rate are foreign shareholders.