NIS consist of two components:
- A fully paid debt security of $100 (Note).
- An unpaid preference share (or Preference Share).
These two components are stapled together and cannot be traded separately.
Floating distribution rate
NIS offer a floating distribution rate, payable quarterly in arrears. The distribution 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 feature of the NIS is that they have no maturity date and will not be repayable by NAB. NIS may be sold on the ASX at the prevailing market price, or privately.
Under Australian tax law, the NIS distributions represent non-share dividends which are unfrankable.
For Australian resident holders, the distributions received will form part of your Australian taxable income. Franking credits can’t be attached to the NIS distributions made. For tax return purposes the NIS distributions should therefore be disclosed as unfranked dividends.
For non-resident holders, the NIS distributions received generally won’t be subject to Australian tax. No Australian withholding tax will be deducted from your NIS distributions due to a specific withholding tax exemption applicable to certain non-share dividends.
Note: the above information is not financial or tax advice. Please consult your independent financial adviser if you are considering investing in NIS.