INCOME TAX ASSESSMENT ACT 1997 - SECT 115.280 Deduction for certain dividends

INCOME TAX ASSESSMENT ACT 1997 - SECT 115.280

  (1)   You can deduct an amount for a * dividend paid to you by a company (the payment company ) if:

  (a)   you are:

  (i)   an individual, a * complying superannuation entity, a trust or a partnership; or

  (ii)   a * life insurance company where the dividend is in respect of * shares that are * complying superannuation assets; and

  (b)   when the dividend is paid, either you are an Australian resident or you are an individual who is a foreign resident and carries on business in Australia at or through your permanent establishment in Australia, being a permanent establishment within the meaning of:

  (i)   a double tax agreement (as defined in Part   X of the Income Tax Assessment Act 1936 ) that relates to a foreign country and affects the individual; or

  (ii)   subsection   6(1) of that Act, if there is no such agreement; and

  (ba)   if, when the dividend is paid, you are an individual who is a foreign resident and has in Australia such a permanent establishment--the dividend is attributable to the permanent establishment; and

  (c)   all or some part of the dividend is reasonably attributable to a * LIC capital gain made by a * listed investment company; and

  (d)   in a case where the LIC capital gain was made by a company other than the payment company--the payment company was a listed investment company when it received a dividend part of which is attributable to the LIC capital gain.

Note:   The concession is available for LIC capital gains made directly by a listed investment company, and for LIC capital gains that company receives as a dividend through one or more other listed investment companies.

  (2)   The amount you can deduct is:

  (a)   50% of your share of the amount (the attributable part ) worked out under subsection   (3) if you are an individual, a trust (except a trust that is a * complying superannuation entity) or a partnership; or

  (b)   33 1 / 3 % of your share of the attributable part   if you are a complying superannuation entity or a * life insurance company.

Note 1:   The listed investment company will advise you of your share of the attributable part.

Note 2:   If a shareholder in a listed investment company is a trust or partnership, a beneficiary of the trust or a partner in the partnership has no share of the attributable part.

  (3)   The attributable part   is worked out using this formula:

where:

"after tax gain" is the after tax * LIC capital gain.

Example:   A listed investment company (which is not a base rate entity) disposes of a CGT asset for $30,000. The asset had a cost base of $10,000. The capital gain is therefore $20,000. The company applies a capital loss of $10,000 against the gain. Its net capital gain is $10,000.

  The net capital gain is subject to tax at 30%. The after tax gain is therefore $7,000.

  The company pays a fully franked dividend to Daryl, one of its shareholders. It advises Daryl that his share of the attributable part of the dividend is:

  Daryl, being an individual, can deduct 50% of $10, which is $5.

  (4)   An amount is included in your assessable income if:

  (a)   a deduction is allowed under subsection   (1) to a trust or a partnership; and

  (b)   you are a beneficiary of the trust or a partner in the partnership and you are not an individual; and

  (c)   the income of the trust or partnership is reduced by an amount because of that deduction; and

  (d)   a part of the deduction (the reduction amount ) is reflected in your share of the net income of the trust or partnership.

  (5)   The amount included is:

  (a)   the reduction amount if you are a company, a trust (except a trust that is a * complying superannuation entity) or a partnership; or

  (b)   one - third of the reduction amount if you are a complying superannuation entity or a * life insurance company.

Example:   The Burnett Partnership received a dividend from a listed investment company. The dividend statement advised that the dividend included a $100 attributable part. The partnership deducted $50 under this section in calculating its net income.

  The partnership has 2 equal partners, Amy Burnett and Burnett Consulting Pty Ltd.

  Burnett Consulting's assessable income includes its share of the net income of the partnership plus $25 (being that part of the $50 deduction allowed to the partnership that is reflected in the company's share of the partnership net income).

  Subsections   (4) and (5) do not apply to Amy because she is an individual.