Detailed Tax Information
Cash Dividend
All dividends paid by NAB are paid out of NAB's profits. In addition to any cash dividend, the Directors may also determine that a dividend be provided in a form other than cash.
The Directors will nominate the proportion of any dividend (in cents per share) to be paid in cash. A statement giving details of the cash dividend paid, together with any franking credits attaching to that dividend is sent to each shareholder with their dividend cheque.
Australian resident shareholders
Australian Taxation Implications
The amount of the cash component of a dividend normally forms part of your Australian taxable income.
The cash component of the dividend may also be fully or partly franked under Australia's dividend imputation system. Franking credits represent Australian income tax paid by NAB. Any franking credits attached to the dividend also normally form part of your taxable income. However, you are generally entitled to a rebate of tax based on the franking credits attached to the dividend.
If your taxable income is too low to make you liable to tax, or the franking credit exceeds your overall tax liability, then you may be entitled to receive a refund from the Australian Taxation Office for any excess franking credit. Companies are not eligible for a refund but may gross up the credit and carry it forward as a tax loss, for utilisation against future income.
Non-Australian resident shareholders
Australian Taxation Implications
You will only be subject to Australian dividend withholding tax on any unfranked part of a dividend. There is no Australian dividend withholding tax on the franked part of the dividend.
However, you will not be subject to Australian dividend withholding tax on any unfranked part of a dividend to the extent that it is declared as "Conduit Foreign Income" by NAB. "Conduit Foreign Income" generally represents foreign income earned by NAB. The extent to which the dividend is declared as Conduit Foreign Income will be included on each relevant dividend statement.
Otherwise, the dividend is not subject to tax in Australia and you will not be able to use or obtain a refund on any franking credits attached to it.
New Zealand Shareholders
NAB can also attach New Zealand imputation credits to dividends paid. As a general rule, New Zealand imputation credits are only relevant for shareholders who are required to file New Zealand income tax returns.
In order for shareholders to obtain the benefit of New Zealand imputation credits, a New Zealand shareholder dividend statement will be sent to those shareholders with a registered address in New Zealand detailing the New Zealand imputation credits attached.
Overseas Taxation Implications
This discussion deals mostly with the Australian tax consequences for shareholders residing outside of Australia. You should seek independent tax advice in respect of the tax treatment of cash dividends in your country of residence.
Dividend Reinvestment Plan (DRP)
Australian resident shareholders
Australian Taxation Implications
The amount of the cash component of a dividend applied to acquire shares under the DRP normally forms part of your Australian taxable income. The cash component may also be fully or party franked under Australia's dividend imputation system. Any franking credits attached to the dividend also normally form part of your Australian taxable income. However, you are generally entitled to a rebate of tax based on the franking credits attached to the dividend.
In general, you are subject to Australian tax on any capital gain made when shares you receive under the DRP are disposed of. For the purpose of calculating any capital gain (or capital loss), the cost of the shares acquired under the DRP is the price calculated in accordance with the formula for calculating the "current market price" described on page 6 of the Dividend Package booklet. The price will be included on each relevant dividend statement.
Non-Australian resident shareholders
Australian Taxation Implications
You will only be subject to Australian dividend withholding tax on the unfranked part of the dividend. There is no Australian dividend withholding tax on the franked part of the dividend.
However, you will not be subject to Australian dividend withholding tax on the unfranked part of the dividend to the extent that it is declared as "Conduit Foreign Income" by NAB. "Conduit Foreign Income" generally represents foreign income earned by NAB. The extent to which the dividend is declared as Conduit Foreign Income will be included on each relevant dividend statement.
Otherwise, the dividend is not subject to tax in Australia and you will not be able to use or obtain a refund on any franking credits attached to it.
Australian Capital Gains Tax
If you dispose of shares you receive under the DRP you are currently not subject to Australian tax on any capital gain made, and you are not entitled to any capital loss derived.
New Zealand Shareholders
NAB can also attach New Zealand imputation credits to dividends paid. As a general rule, New Zealand imputation credits are only relevant for shareholders who are required to file New Zealand income tax returns.
In order for shareholders to obtain the benefit of New Zealand imputation credits, a New Zealand shareholder dividend statement will be sent to those shareholders with a registered address in New Zealand detailing the New Zealand imputation credits attached.
Overseas Taxation Implications
The discussion deals mostly with the Australian tax consequences of shareholders resident outside Australia. You should seek independent tax advice in respect of the tax treatment in your country of residence of dividends reinvested under the DRP and the disposal of shares provided under the DRP.
Bonus Share Plan (BSP)
Australian resident shareholders
Australian Taxation Implications
Generally, the bonus shares are not treated as a dividend for Australian tax purposes. Consequently, franking credits do not attach to these bonus shares and no amount should form part of your taxable income.
In certain circumstances, bonus shares are treated as a dividend, to which franking credits attach, for Australian tax purposes. Consequently, an amount equal to the dividend and any attached franking credits normally form part of your Australian taxable income in these circumstances. However, you are generally entitled to a rebate of tax based on the franking credits attached to the dividend.
The Commissioner of Taxation (Commissioner) may also determine that the bonus shares are treated as a dividend to which no franking credits attach. If the Commissioner makes such a determination, an amount equal to the dividend normally forms part of your Australian taxable income.
The precise circumstances in which the Commissioner may make such a determination are unclear. However, the explanatory memorandum to the Federal legislation that introduced the bonus share provisions indicates that the Commissioner should generally not make a determination where bonus shares are provided in the ordinary course of business by a publicly listed company as an alternative to franked dividends, unless the shareholder who receives the bonus shares engages in a course of conduct which provides an equivalent to the cash dividend in a more tax effective form (for example by consistently selling the bonus shares tax free after receiving them where they acquired their original shares prior to 20 September 1985).
Further, the Commissioner cannot make such a determination where shareholders who do not participate in the BSP receive fully franked dividends.
Australian Capital Gains Tax
You will not be subject to Australian tax on any capital gain made when your bonus shares are disposed of if
- the bonus shares are not treated as a dividend for Australian tax purposes; and
- your entitlement to bonus shares arises from original shares acquired (or deemed to have been acquired) before 20 September 1985.
Conversely, if your entitlement to bonus shares arises from original shares acquired (or deemed to have been acquired) after 19 September 1985 you are, in general, subject to Australian tax on any capital gain made when the bonus shares are disposed of. To calculate any capital gain (or capital loss), the cost of the bonus shares is calculated by apportioning the cost of the original shares over both the original and bonus shares.
If the bonus shares are treated as a dividend for Australian tax purposes, you are, in general, subject to Australian tax on any capital gain made when the bonus shares are disposed of. To calculate any capital gain (or capital loss), the cost of the bonus shares includes the amount of the dividend.
Non-Australian resident shareholders
Australian Taxation Implications
Generally, bonus shares are not treated as a dividend for Australian tax purposes. Consequently, no Australian dividend withholding tax is payable and no amount should form part of your Australian taxable income.
If bonus shares are treated as a dividend (in the same circumstances as set out above in relation to an Australian resident shareholder) then, as a general rule, you will be unable to use any franking credits attached to the dividend. However, you will avoid any Australian dividend withholding tax on the franked part of such a dividend and the dividend, regardless of the franking credits attached to it, is not treated as part of your Australian taxable income.
Australian Capital Gains Tax
Currently, you are not subject to Australian tax on any capital gain made if you dispose of bonus shares and you are not entitled to any capital loss incurred on the disposal.
Overseas Taxation Implications
The discussion deals mostly with the Australian tax consequences of shareholders resident outside Australia. You should seek independent tax advice in respect of the tax treatment in your country of residence in respect of the tax treatment of receiving bonus shares and the disposal of bonus shares.