ATO ID 2002/772: Dividend: Shares received from demerger of foreign company - Australian resident shareholder
Date of decision: 5 June 2002
Year of income: Year ended 30 June 2001
Business line: Public Groups and International

Issue
Are the shares in the Danish company, Novozymes A/S, received by an Australian resident taxpayer, following the demerger of the Danish company, Novo Nordisk A/S, assessable as a dividend under subsection 44(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Decision
Yes. The shares received in Novozymes A/S following the demerger are assessable as a dividend under subsection 44(1) of the ITAA 1936.

Facts
The taxpayer owned shares in Novo Nordisk A/S. On 13 November 2000, Novo Nordisk A/S demerged by transferring some of its business activities to the new company, Novozymes A/S. There were no amounts debited to the share capital accounts of Novo Nordisk A/S in respect of the demerger. The taxpayer received one share in Novozymes A/S for each share owned in Novo Nordisk A/S. The Novozymes A/S share had similar rights, proportion of issued capital, par value, etc in Novozymes A/S as the equivalent share in Novo Nordisk A/S. The was no change to the taxpayer's Novo Nordisk A/S shares as a result of the demerger.

Reasons for decision
Summary: Subsection 6(1) of the ITAA 1936 defines dividend to include: The definition specifically excludes: The receipt of these shares, as a result of the demerger, do not fall into one of the exclusions to the definition of a dividend as outlined in subsection 6(1) of the ITAA 1936. Therefore the value of the shares will be an assessable dividend. Section 44(1) of the ITAA 1936 provides, subject to the other provisions of sections 44 and 128D of the ITAA 1936, that the assessable income of a shareholder in a resident or non-resident company includes dividends paid by a company: Therefore, the value of the shares received by an Australian resident in Novozymes A/S as part of the demerger will be included as a dividend in the assessable income of the shareholder.

Legislative references: Income Tax Assessment Act 1936 subsection 6(1) subsection 44(1) section 128D
Related ATO interpretative decisions: ATO ID 2002/771
Subject references: Acquisition of shares Company restructuring Dividend income Non resident companies Public companies Shares Shareholders