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  • How non-share dividends are taxed



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    For the purposes of the imputation system, debt/equity rules dealing with non-share equity interests are designed to apply to non-share dividends in the same way that they apply to dividends. A non-share dividend may be franked or unfranked. Any amount of the dividend, whether it be franked or unfranked, or any amount of franking credit carried by the dividend should be shown at the appropriate place on the tax return as if it were in respect of a share.

    Dividends on non-equity shares

    Under the debt/equity rules, dividends paid on certain shares that are classified as non-equity shares are treated as not being dividends for imputation purposes. As a consequence, these dividends cannot be franked. The Guide to the debt and equity tests contains an example of a redeemable preference share which would be a non-equity share.

    Last modified: 12 Jan 2005QC 27523