Private ruling: Income - dividends
Published: May 2012
Ruling period: Year ending 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Are the dividends received on shares inherited from a deceased estate included in your assessable income? | A1: Yes.

Relevant facts and circumstances: The ownership of the shares were transferred to you in 2012. Dividends were declared in 2012. You received the dividends as you were the legal owner of the shares at time dividends were declared. The dividend you received was less than $500. The dividend was fully franked.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 44(1)

Reasons for decision: Summary: Dividends paid by a company to a shareholder are included in the shareholder's assessable income under section 44(1) of the Income Tax Assessment Act 1936 (ITAA 1936). In your case, ownership of the shares were transferred to you in 2012. You were therefore a shareholder in the company when they announced their dividend in 2012. As you are the shareholder, you received the dividend and under section 44(1) of the ITAA 1936 you must include the dividend in your assessable income. The dividend you received was fully franked, which means there is an associated franking credit. The holding period rule requires you to continuously hold shares for at least 45 days to be eligible for a franking tax offset. However, under the small shareholder exemption, this rule does not apply if your total franked credit is below $5,000, which is roughly equivalent to receiving a fully franked dividend of $11,666. In your case, the fully franked dividend received is below the threshold amount and you are entitled to a franking tax offset.

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