Income Tax Assessment Act 1936

PART III - LIABILITY TO TAXATION  

Division 2 - Income  

Subdivision D - Dividends  

SECTION 44   DIVIDENDS  

44(1)    

The assessable income of a shareholder in a company (whether the company is a resident or a non-resident) includes:

(a) if the shareholder is a resident:

(i) dividends (other than non-share dividends) that are paid to the shareholder by the company out of profits derived by it from any source; and

(ii) all non-share dividends paid to the shareholder by the company; and

(b) if the shareholder is a non-resident:

(i) dividends (other than non-share dividends) paid to the shareholder by the company to the extent to which they are paid out of profits derived by it from sources in Australia; and

(ii) non-share dividends paid to the shareholder by the company to the extent to which they are derived from sources in Australia; and

(c) if the shareholder is a non-resident carrying on business in Australia at or through a permanent establishment of the shareholder in Australia, and the company is a resident:

(i) dividends (other than non-share dividends) that are paid to the shareholder by the company and are attributable to the permanent establishment, to the extent to which they are paid out of profits derived by the company from sources outside Australia; and

(ii) non-share dividends that are paid to the shareholder by the company and are attributable to the permanent establishment, to the extent to which they are derived from sources outside Australia.

This subsection does not apply to a dividend (or non-share dividend) to the extent to which another provision of this Act that expressly deals with dividends includes some or all of the dividend (or non-share dividend) in, or excludes some or all of the dividend (or non-share dividend) from, the shareholder ' s assessable income.

Note 1:

Some other provisions that expressly deal with dividends are sections 23AI , 23AK and 128D of this Act and section 768-5 of the Income Tax Assessment Act 1997 .

Note 2:

An amount declared to be conduit foreign income is not included in assessable income under paragraph (1)(b) or (c): see section 802-15 of the Income Tax Assessment Act 1997 .

44(1A)    

For the purposes of this Act, a dividend paid out of an amount other than profits is taken to be a dividend paid out of profits.

44(1B)    

Where:

(a) the amount of the moneys or of the value of other property of which a dividend paid by a company consists is debited against an amount standing to the credit of a share capital account of the company; or

(b) a dividend paid by a company is a repayment by the company of an amount paid-up on a share,

the dividend shall, for the purposes of this section, be deemed to have been paid by the company out of profits derived by it.

44(2)    

Subsections (3) and (4) apply to a demerger dividend unless the head entity elects in writing, within one month after it decides which of its shareholders will receive ownership interests in the demerged entity under the demerger, that those subsections do not apply to the total demerger dividend for all shareholders.

44(2A) - (2C)    
(Omitted by No 165 of 1973)

44(2D)    
(Omitted by No 62 of 1987)

44(2E)    
(Omitted by No 46 of 1986)

44(3)    

This section applies to the demerger dividend as if it had not been paid out of profits.

44(4)    

A demerger dividend is not assessable income or exempt income.

44(5)    

However, subsections (3) and (4) do not apply to a demerger dividend unless, just after the demerger, CGT assets owned by the demerged entity or a demerger subsidiary representing at least 50% by market value of all the CGT assets (or a reasonable approximation of market value) owned by the demerged entity and its demerger subsidiaries are used, directly or indirectly, in one or more businesses carried on by one or more of those entities.

44(6)    

In applying subsection (5), disregard any assets that are ownership interests in a demerger subsidiary unless they are used in a business referred to in that subsection.

44(7)    

In this section:

permanent establishment
of a person:

(a) has the same meaning as in a double tax agreement (as defined in Part X ) that relates to a foreign country and affects the person; or

(b) has the meaning given by subsection 6(1) , if there is no such agreement.