National Income Securities (NIS) are a form of interest income security. They are not ordinary shares or bank deposits but they are listed on the ASX. NIS comprise two components: a fully paid debt security of $100 (Note) and an unpaid preference share (Preference Share). The two components are stapled together and cannot be traded separately.
NIS offer a floating rate of interest, payable quarterly in arrears. The interest rate will vary every quarter at the defined Market Rate plus 1.25% per annum. The defined Market Rate is the 90 Day Bank Bill Rate. A key feature of the NIS is that they have no maturity date and will not be repayable by the National. NIS may be sold on the ASX at the prevailing market price, or privately.
For Australian resident holders the distributions received will form part of your Australian taxable income. Franking credits are not attached to the distributions made.
For non-resident holders, generally the distributions received will not be subject to Australian tax. No Australian withholding tax will be deducted from your distributions due to a specific withholding tax exemption applicable to the National Income Securities.