Tax Effects on the Pricing of Australian Stock Index Futures

This paper estimates the impact of the debt tax shield, cash dividends and imputation tax credits on the prices of Australian stock index futures. Relative to futures payoffs, the cost of financing the set of shares of the underlying index provides a mild tax shield, cash dividends are incompletely valued and imputation credits are worth at least fifty percent of their face value. The values that investors place on cash dividends and tax credits implied by index futures prices are close to those estimated in ex-dividend-date stock-price drop-off studies of the Australian share market.