Listed investment company dividend
If a listed investment company (LIC) pays a dividend that includes a LIC capital gain amount, a shareholder who is an Australian resident at the time will be entitled to an income tax deduction.
A LIC paying a dividend will advise its shareholders how much of the dividend is attributable to a LIC capital gain (the attributable part).
Individual taxpayer
An individual can deduct 50% of the attributable part advised by the LIC.
Example: Resident individual
Ben, an Australian resident, is a shareholder in XYZ Ltd, a LIC. For the 2023–24 income year, Ben received a fully franked dividend from XYZ Ltd of $70, with an eligible capital gain amount (attributable part) of $50. Ben includes in his tax return the following amounts:
|
Franked dividend |
$70 |
|
plus franking credit |
$30 |
|
Assessable income |
$100 |
|
less 50% deduction for LIC capital gain |
$25 |
|
Taxable income |
$75 |
Note: Ben will be entitled to a franking tax offset equal to his franking credit if he satisfies the holding period rule.
End of exampleComplying superannuation entity or life insurance company
A complying superannuation entity or life insurance company can deduct 33.33% of the attributable part advised by the LIC.
Trust or partnership
A trust or partnership can deduct 50% of the attributable part advised by the LIC.
Beneficiary of a trust or partner in partnership
If a shareholder in a LIC is a trust or partnership, a non-individual beneficiary of the trust or a non-individual partner in the partnership has no share of the attributable part.
To allow for this, the beneficiary or partner (other than an individual) includes an amount in their assessable income in the income year in which a LIC capital gain dividend is paid if the trust or partnership is allowed a deduction and their income is reduced by an amount because of that deduction.
The amount included in the beneficiary or partner's assessable income is equivalent to that part of the deduction that reflects their share of the net income of the trust or partnership (the reduction amount).
A beneficiary or partner that is a complying superannuation entity or life insurance company trust must include in their assessable income one-third of that part of a deduction allowed to the trust, company or partnership that is reflected in the beneficiary or partner's share of the net income.
Example: Beneficiary of a trust or partner in partnership
The Robbie Partnership received from a LIC a $210 fully franked dividend that included an attributable part of $180. The partnership has three equal partners – Joe Robbie, Robbie Limited, and the Robbie Superannuation Fund (a complying superannuation entity).
The partnership claimed a deduction of $90 in respect of the attributable part in working out its net income of $12,000 (including the $210 dividend). Each partner's share of the net income is $4,000 and their reduction amount is $30 (one-third of $90).
Each partner includes $4,000 in their assessable income. The partners must also include the following additional amounts in their assessable income:
- Joe Robbie, $0 (Joe is an individual partner in the partnership)
- Robbie Limited, $30 (the reduction amount)
- Robbie Superannuation Fund, $10 (one-third of the reduction amount).