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  • Paid to a listed country CFC



    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    The general rule is that section 458 will include a share of a dividend in your assessable income where a non-portfolio dividend is paid from an unlisted country CFC to a listed country CFC and you are an attributable taxpayer in relation to both CFCs. To work out the amount to include in your assessable income, you will need to know your attribution percentage in the listed country CFC receiving the dividend.

    There is an exception to the general rule if a listed country taxes the dividend at its normal company tax rate. In this case, the dividend will not be attributed to you. To qualify for the exemption the dividend must be subject to tax in the listed country at the same rate as, or at a higher rate than, the rate of tax that applies to non-dividend income of a company resident in that country. The tax law of the listed country should not provide any credit, rebate or other concession in respect of the dividend other than for foreign tax payable in another country.

    The dividend will also qualify for the exemption if it was exempt from tax in a broad-exemption listed country because it was paid from income previously attributed in that country under an accruals tax law and it was subject to tax at or above the country's normal company tax rate.

    This image illustrates the situation described above.

    The attributable dividend is reduced by the exempting profits percentage of the dividend if:

    • you are a resident company with a non-portfolio interest in both CFCs at the time the dividend is paid
    • the CFC receiving the dividend has a non-portfolio interest in the paying CFC
    • both CFCs are in a non-portfolio group with you - that is, each company in the group must have a non-portfolio interest in the company in the tier immediately below it.

    Apply your attribution account percentage in the CFC that received the dividend to the balance of the dividend. Take away from this amount an attribution debit or a FIF attribution debit that arose at the time the dividend was paid.

    You must include the remaining amount in your assessable income.

    Example 13
    Reduction for exempting profits

    Ausco has an interest of 75% in a listed country subsidiary, CFC1. CFC1 has a wholly owned subsidiary, CFC2, in an unlisted country.

    On 1 November 2003, CFC2 paid a non-portfolio dividend of $15,000 from its distributable profits. The distributable profits on that date comprised $20,000 exempting profits and $10,000 other profits. None of these profits had been attributed to Ausco. The dividend was not taxed in the listed country at its normal company tax rate.

    The amount that Ausco included in its assessable income for 2003-04 is worked out as follows:

    Dividend paid by CFC2


    deduct the exempting profits part of the dividend



    X $15,000




    Ausco's interest in CFC1
    75% of $5,000


    $3,750 was included in assessable income. This amount is increased by the amount of a foreign tax credit that can be claimed under section 160AFCC.

    Example 14
    Reduction for an attribution debit

    The facts are the same as in the previous example except that Ausco was attributed a part of the income of CFC2 and had an attribution surplus of $1,000 for CFC2 at the time the dividend was paid.

    In this case, the amount of $3,750 that was to be included in Ausco's assessable income is further reduced by the attribution debit that arose in the attribution account for CFC2 when CFC2 paid the dividend.

    Since the attribution debit cannot be more than the attribution surplus, the attribution debit was the lesser of:

    • the attribution surplus - $1,000, or
    • Ausco's attribution account interest in the dividend paid by CFC2 multiplied by the dividend that was not paid out of exempting profits - that is:
      75% x $5,000 = $3,750

    This means that the attribution debit was $1,000. The amount included in the assessable income of Ausco will be:

    the amount in Example 13


    deduct attribution debit


    amount included in assessable income


    This amount is increased by the amount of a foreign tax credit that can be claimed under section 160AFCC.

    Last modified: 05 Dec 2006QC 17522