Income tax: if a foreign company pays a taxable dividend into a foreign bank account of an Australian resident shareholder who has no access from Australia to the income, is the dividend assessable income of the shareholder?

Yes. The dividend is assessable income in Australia. It is irrelevant that the shareholder cannot transfer the funds out of the foreign country.

A resident shareholder is assessable on dividends paid to him or her by the company out of profits (subsection 44(1) of the Income Tax Assessment Act 1936 ('the Act')).

'Shareholder' is defined in subsection 6(1) of the Act to include a member or stockholder.

The dividend paid into the shareholder's foreign bank account is paid to the shareholder. Example In Blankfield v. FCT (1972) 3 ATR 258; 72 ATC 4177 an Australian resident taxpayer had a bank account in a foreign country. Dividends from a company based in the same foreign country were paid into the bank account. Restrictions imposed by the foreign country upon the export of currency and assets meant the taxpayer was unable to draw funds from the account. Through the depositing of the dividend in the taxpayer's bank account the dividend was paid to the taxpayer. The fact that the taxpayer could not draw on the blocked account was irrelevant to his liability to tax in Australia.