Contact Energy - CEN Chart

[Snoopy]

The second pillar revolved are around the impact on the individual shareholder. The company puts unimputed dividend of $1 into the shareholders pocket. Under my way of thinking, the tax of 30c is paid from the $1 in the pocket and the shareholder received a partial "return of capital" of 70c.

You are viewing an unimputed dividend as a return of capital which is taxed as a result of ending up in the shareholders pocket (the first pocket). I understand and agree with that way of looking at things.

Under your method, the tax of 30c is taken from a second pocket. The $1 in the first pocket is ignored, but the 30c taken out of the second pocket is deducted. I view that as inconsistent, despite the fact (and I acknowledge) the tax is paid to an entity outside of the circle of shareholder + entity.

I think what you are saying here is that by subtracting the imputed part of the dividend from the total dividend and effectively ignoring the imputed bit, I am effectively saying that the imputed part of the dividend does not exist. Therefore I should not take tax out of a dividend that I am claiming was effectively never paid in the first place?

However, I do not have this interpretation of what happened. I am not saying that the unimputed part of the dividend was not paid. I am saying it was paid but it had no cash benefit to the shareholder. If fact quite the opposite. The paying of the what is in effect shareholder capital back created a tax bill, which I think you acknowledge in the first part of your post that I have quoted.

SNOOPY