• Non-share equity interest

    An equity interest in a company that is not in legal form solely a share in the capital of the company or stock in the company, is called a non-share equity interest. The definition of equity interest and related concepts of equity holder and non-share dividend are used in the imputation provisions of the income tax law. Both shareholders and holders of non-share equity interests may be paid frankable dividends by the entity.

    To be a non-share equity interest it is necessary for the whole interest, or a part of it, to be in a form other than a share. Therefore, if an equity interest in a company is made up of related interests and at least one of those interests is not a share, the interest is a non-share equity interest.

    Capital raised by a company from the issue of non-share equity interests is credited to a non-share capital account.

    A company has a non-share capital account if the company issues a non-share equity interest in the company on or after 1 July 2001, or the company has issued a non-share equity interest in the company before 1 July 2001 that was still in existence on 1 July 2001.

    Keeping a non-share capital account

    If a company issues a non-share equity interest in the company, the company has a notional account called a non-share capital account. The account records contributions to the company in respect of those non-share equity interests and returns by the company of those contributions. The notional account allows a distribution on a non-share equity interest to be characterised as either a non-share dividend or a non-share capital return.

    Sections 164–15External Link and 164–20External Link of the Income Tax Assessment Act 1997 specify the credits and debits that may be made to the non-share capital account.

      Last modified: 18 Jan 2017QC 36047