iThe money comes from profit
A share is part ownership of a company. As a part owner, you are entitled to a share of the company’s profits, now and in the future, and Moneysmart says that potential is where a share’s value comes from.
A company may hand part of its profit to shareholders as a dividend, but some companies make no profit, and some pay no dividend. The ASX glossary simply calls a dividend a distribution by a company to its shareholders.
The right to a dividend comes with the share itself. When a company issues shares, the ATO explains, it gives shareholders entitlements such as the right to receive dividends, and because a company can issue different classes of shares, those entitlements can differ between shareholders.
When the company has already paid tax on the profits a dividend comes from, the dividend is called franked. That tax travels with the dividend as a franking credit, which is the subject of the franking credits guide.
iiThe words a dividend is announced in
Announcements and statements use a small vocabulary. These are the ASX glossary’s definitions, in plain words.
| Term | What it means |
|---|---|
| Dividend amount | Given in cents per share. A figure of 19 means 19 cents a share, and 7.5 means 7.5 cents. |
| Interim dividend | When a company pays more than once a year, every dividend except the final one. Paying twice a year, one interim and one final, is typical. |
| Final dividend | The last dividend in the company’s financial year. |
| Special dividend | Usually a dividend the company does not pay regularly each year, though the glossary notes that companies may use the word differently. |
| Bonus dividend | An extra dividend on top of the normal one. |
| Dividend yield | The dividend as a percentage of the last sale price of the shares. Why a high one deserves care is in the risks of chasing yield. |
From cents per share to a payment
The sum is the rate times the number of shares you hold. The ATO uses this example: a shareholder with 1,440 shares, and a dividend of 25 cents a share, is offered $360 in cash (1,440 × 25 cents).
iiiA dividend beside capital growth
Moneysmart describes two ways a share returns money. They behave differently, and they are taxed at different moments.
Dividend
- Paid out of profits, while you hold the share.
- Can be reduced or stopped by the company at any time.
- Counted as assessable income in the year it is paid or credited to you, going by the payment date on your statement.
Capital growth
- If the company’s profits grow, or are expected to, its value usually rises and investors may pay more for its shares.
- Moneysmart’s example: buy a share for $10 and sell it for $15, and the $5 difference is a capital gain. Sell for less than you paid and it is a capital loss.
- Capital gains tax can apply when you sell.
The capital gains tax rules are changing. The ATO says reforms announced in the 2026–27 Federal Budget are now law and apply from 1 July 2027: for gains that accrue after that date, the 50% discount that individuals, trusts and partnerships get is replaced by cost base indexation together with a 30% minimum tax rate on capital gains. Check the ATO’s page on the reform before relying on any capital gains figure.
ivCash, new shares, or neither
A dividend can be paid as money or as other property, including shares. Most dividends arrive by cheque or direct deposit, but a company may offer to reinvest them as new shares instead. That choice is a dividend reinvestment plan, and the ATO still counts the dividend as income: see dividend reinvestment plans.
Two less common cases, from the ATO’s guide:
- Bonus shares. Since 1 July 1998, where a shareholder could choose between a dividend and bonus shares, the bonus shares are taxed as a dividend, unless, in certain circumstances, a listed public company issues them and does not credit its share capital account.
- Demerger dividends. A dividend paid under an eligible demerger is generally not included in your assessable income, unless the head entity elects that it be assessable for all shareholders.
vPayments that look like dividends but are not
Not every regular payment from an investment is a company dividend, and the difference shows up in your tax return.
- Listed investment companies and trusts. A listed investment company pays dividends to its shareholders; a listed investment trust pays distributions to its unitholders.
- Funds. Distributions from an exchange traded fund or a managed investment trust are reported in a different section of myTax from dividends.
- Company bonds. A bond or debenture is a company’s promise to repay money it borrowed, and the interest it pays goes in your tax return as interest income.
Shares can also be owned indirectly: Moneysmart lists managed funds, exchange traded funds, listed investment companies and super funds as ways to own them. As the list above shows, what such a product pays you may be a distribution rather than a dividend.