What is the amount of the dividend?
The amount of the dividend is the amount paid or credited to the shareholder or their associate by the private company, subject to the private company's distributable surplus.
However, if the payment is a transfer of property, the amount of the dividend is the amount that would have been paid for the transfer by parties dealing at arm's length, less any consideration given by the shareholder or their associate for the transfer. The amount of a payment is nil if the consideration given by the shareholder or their associate is equal to, or greater than, the amount that would have been paid for the transfer at arm's length.
For information on working out the amount of a dividend for usage of assets that are not transfers of property, see What is the value of a payment arising from the provision of an asset for use?
Amounts treated as dividends under Division 7A are generally not frankable, even though they are taken to be paid out of the private company's profits. However, see below for some exceptions. For more information refer to the fact sheet Division 7A - franking implications.
Where a deemed dividend arises under Division 7A in 2001-02 or a later income year because of an honest mistake or inadvertent omission, the Commissioner has the discretion to disregard the deemed dividend (subject to conditions being complied with) or allow the private company taken to pay the dividend to choose to frank the dividend. Refer to the fact sheet Division 7A - exercise of Commissioner's discretion under section 109RB to disregard the operation of Division 7A or allow a deemed dividend to be franked.
On 3 January 2007, Goldfinger Pty Ltd gives office furniture to Renee, a shareholder who is not an employee or an associate of an employee of the company. The arm's length market value of the furnishings on that date is $5,000. When the property was transferred, Renee paid Goldfinger Pty Ltd $100 for the transfer costs.
On 30 June 2007, Goldfinger Pty Ltd is taken to pay a dividend to Renee. The amount of the payment is equal to $5,000 for the furnishings, less $100 paid by Renee for the transfer. Goldfinger is taken to pay a dividend of $4,900 to Renee, subject to Goldfinger Pty Ltd's distributable surplus.