It is to avoid double taxation, In Australia company tax rate is 30%, if companies earning have been fully taxed and they then pay dividends the shares are ‘fully franked’ and thus, if say you personal tax rate is below you can use the ‘franking credits’ which is the tax the company has allready paid on your earnings, if your tax rate is below 30% you recieve the difference between your rate and the company rate.. if your tax rate is above 30% you pay the tax office the difference
the idea is that the earnings are ultimatley taxed at the indivuals tax rate so if the company has paid tax at 30% adjustments are made at tax time to rectify this