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Edited version of your written advice
Authorisation Number: 1012870633797
Date of advice: 1 September 2015
Ruling
Subject: Dividend income
Question
Is the dividend income on shares sold to another entity included in your assessable income?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
The scheme commences on:
1 July 2010
Relevant facts and circumstances
You sold your share portfolio.
A capital gain was included in your income tax return as a result of the sale of the shares.
The purchaser has not registered the transfer of the shares.
All dividends have been taken up by the purchaser because it is considered that they own the shares.
You did not receive the dividends.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 44
Reasons for decision
Section 44 of the Income Tax Assessment Act 1936 provides that the assessable income of a taxpayer includes dividends.
Dividend income is assessable to the entities which are beneficially entitled to the income. That entitlement depends on the beneficial ownership of the shares on which the dividend income is derived. The general presumption is that the beneficial ownership lies with the entities who own the shares; however, this presumption may be rebutted with evidence to the contrary.
In your case, you sold shares and declared the capital gain. The purchaser has not registered the transfer of the shares however they have taken up all the dividends.
Although the shares have remained in your name, you are not the beneficial owner. In effect you are holding the shares in trust for the purchaser and you do not have any beneficial entitlement to the dividends earned on those funds.
As such, the dividend income is not included in your assessable income.