Non-share dividends are received by those who hold non-share equity interests in an entity.
Equity interests are defined in section 974-75 of the ITAA 1997. 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.
A payment to a non-share equity interest holder that corresponds to a dividend paid to a shareholder is treated in the same way as a frankable distribution.
Example: Non-share dividend
An example of a non-share dividend would be distribution paid out of retained profits for a convertible note that is an equity interest.
End of example
Under the debt/equity rules, certain interests which are not shares in legal form, are treated in a similar way to shares for some tax law purposes. These interests are called non-share equity interests.
Examples of non-share equity would be some income securities and some stapled securities.