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 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