Shareholders will be hit with double taxation on dividends from miners if the federal government’s mining tax legislation is passed, Australia’s biggest and oldest listed investment company says.

The minerals resource rent tax (MRRT) legislation, due to be voted on by the Senate on Monday night, will, if passed, be unfair toward shareholders, Australian Foundation Investment Company (AFIC) says.

“The proposed mining tax … gives no credit to shareholders,” AFIC chairman Bruce Teele told shareholders at a meeting in Melbourne on Monday.

“There’s no franking element,” he added, referring to the credit that represents the tax resource companies have already paid.

Franking credits allow Australian companies to pass through taxes that have already been paid on their profits to shareholders, so shareholders can claim them against their personal tax due and avoid paying tax on dividend income.

By contrast, shareholders in other advanced nations are taxed twice on dividend income.

“It is in my opinion quite inequitable that Australian company shareholders are being subject to more and more double taxing of their revenue,” Mr Teele said.

He thinks government policy could pose a challenge to the concept of franked dividends in the years to come.

“You get the impression that it’s certainly Treasury policy, and maybe government … policy that the double taxing of income streams certainly in the more prosperous companies is going to grow.”

Earlier on Monday Prime Minister Julia Gillard said the government would not be backing changes to its minerals resource rent tax legislation in the Senate.

AFIC is a blue-chip, venerable Melbourne listed investment company with a $4.3 billion investment portfolio.

It was founded over 80 years ago, and has stakes in many of Australia’s top 50 listed companies.

Its top investment holding at December 31, 2011 was in BHP Billiton shares worth $494 million, and its sixth biggest holding was in Rio Tinto shares worth $216.8 million.