ATO Interpretative Decision

ATO ID 2002/35

Income Tax

Assessability of Australian sourced franked dividends, unfranked dividends and interest received by a non-resident taxpayer
FOI status: may be released

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CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Does a non-resident taxpayer include Australian sourced franked dividends, unfranked dividends and interest in their assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. A non-resident taxpayer does not include Australian sourced franked dividends, unfranked dividends and interest in their assessable income under section 6-5 of the ITAA 1997.

Facts

The taxpayer is not a resident of Australia for income tax purposes.

The taxpayer receives Australian sourced franked dividends, unfranked dividends and interest.

Reasons for Decision

Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign resident taxpayer includes all ordinary income derived directly or indirectly from all Australian sources and other ordinary income that a provision includes on some basis other than having an Australian source. A foreign resident is defined in subsection 995-1(1) of the ITAA 1997 as a person who is not a resident of Australia.

Subsection 6-15(3) of the ITAA 1997 provides that if an amount is non-assessable non-exempt income, it is not assessable income. An amount is non-assessable non-exempt income if a provision of the ITAA 1997 or of the Income Tax Assessment Act 1936 (ITAA 1936) or of another Commonwealth law states that it is not assessable income and is not exempt income (section 6-23 of the ITAA 1997).

A non-resident is liable for withholding tax on dividends and interest under subsections 128B(1) and (2) of the ITAA 1936. However, franked dividends are excluded from the withholding tax provisions under paragraph 128B(3)(ga) of the ITAA 1936. A non-resident is defined in subsection 6(1) of the ITAA 1936 as a person who is not a resident of Australia.

Section 128D of the ITAA 1936 provides that interest and dividends upon which withholding tax is payable are not assessable income and are not exempt income of a person. This section also provides that franked dividends upon which withholding tax would be payable but for the operation of paragraph 128B(3)(ga) of the ITAA 1936 are also not assessable income and not exempt income of a person.

The franked dividends, unfranked dividends and interest received by the non-resident taxpayer are non-assessable non-exempt income and therefore not included in the taxpayer's assessable income pursuant to section 6-5 of the ITAA 1997.

Amendment History

Date of Amendment Part Comment
12 December 2014 Issue & Decision Rephrase to reflect the legislation
Facts Remove facts not necessary for the decision
Reasons for Decision Remove references to repealed provisions and clarify the basis for excluding amounts from assessable income
Legislative References Add new legislative references and remove references to repealed provisions
Keywords Add relevant keywords

Date of decision:  8 October 2001

Year of income:  Year ended 30 June 2000

Legislative References:
Income Tax Assessment Act 1936
   subsection 6(1)
   subsection 128B(1)
   subsection 128B(2)
   paragraph 128B(3)(ga)
   section 128D

Income Tax Assessment Act 1997
   section 6-5
   subsection 6-5(3)
   subsection 6-15(3)
   section 6-23
   subsection 995-1(1)

Related Public Rulings (including Determinations)
IT 2680

Keywords
Dividend income
Franked dividends
Interest income
Non-assessable non-exempt income
non resident dividend withholding tax
non resident interest withholding tax
Unfranked dividends
Withholding and indirect taxes
Withholding taxes

Business Line:  Small Business/Individual Taxpayers

Date of publication:  24 January 2002

ISSN: 1445-2782

history
  Date: Version:
  8 October 2001 Original statement
You are here 12 December 2014 Updated statement
  21 April 2017 Archived

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