If a LIC pays a dividend to you that includes a LIC capital gain amount, you may be entitled to an income tax deduction.
You can claim a deduction if:
- you are an individual
- you were an Australian resident when a LIC paid you a dividend
- the dividend was paid to you after 1 July 2001, and
- the dividend included a LIC capital gain amount.
The amount of the deduction is 50% of the LIC capital gain amount. The LIC capital gain amount will be shown separately on your dividend statement.
You do not show the LIC capital gain amount at item 17 on your tax return (or item 9 if you use the tax return for retirees).
Ben, an Australian resident, was a shareholder in XYZ Ltd, a LIC. For the 2002-03 income year, Ben received a fully franked dividend from XYZ Ltd of $70,000 including a LIC capital gain amount of $50,000. Ben includes on his tax return the following amounts:
Class C franked dividend (shown at T item 11 in TaxPack 2003) |
$70,000 |
Imputation credit (shown at U item 11 in TaxPack 2003) |
$30,000 |
Less deduction for LIC capital gain (shown as deduction at item D7 in TaxPack 2003) |
$25,000 |
Net amount included in taxable income |
$75,000 |
Note
If Ben uses the tax return for retirees, he shows the amounts as follows: Class C franked dividend at T item 8; imputation credit at U item 8; deduction for LIC capital gain at item 12.
End of example