# Aussie tax laws regarding overseas investments



## telstrareg (20 June 2007)

I’m completely naïve about this subject. To take an example, if I as an Australian citizen earn income in a foreign brokerage account, is this taxable under the Australian taxation system? Does the tax only apply if I return profits to Australia? Does the same apply for earning interest in a foreign bank account (I assume if the foreign bank deducts withholding tax then any Aus tax could be offset)?

Now whatever the case above, I assume that if I earn income while I’m actually overseas, that is NOT taxable under the Australian system. That being the case, is it possible to avoid Aus tax on foreign investments by spending a certain amount of time out of the country and if so, how long is that?

If anyone wants to recommend a website that deals with this stuff I’m all ears. Thanks.


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## son of baglimit (21 June 2007)

ummm  ato.gov.au

or ring them.


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## barnz2k (22 June 2007)

I was told that if I earnt cash overseas and paid tax overseas, I would still have to include it in my aussie tax return, but the already paid tax is noted also.

Also, I saw a graph about the tax brackets which suggested a HIGHER bracket if you spend too long out of the country in 1 year.. This confused me and I need to look it up again. 

Ineterested in this topic too.


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## cubsfan (22 June 2007)

hey i'm also interested in the tax implications of overseas shares.
Corus Bancshares (cors) just announced a $1 special dividend, now the US government has already taxed dividends at 15%, do I still get taxed again from the australian government?   

arrrgghhh, why is our tax system so complicated.


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## son of baglimit (23 June 2007)

http://law.ato.gov.au/atolaw/Browse...MENTS ACT 1953:View list of provisions;#0~0~3

australia has tax agreements with 47 different overseas countries, which ''generally'' allow someone to consider the tax paid in that other country as FINAL, ALL TAX PAID, END OF STORY. 
if however you have income from other than those 47, and have paid tax on it, you show that amount of tax paid on your return, then make up the difference for australian tax.
all of that is on the assumption you remain an australian resident for tax, and not classify YOURSELF as a foreign resident - see http://www.ato.gov.au/individuals/c...001/002/046/004&mnu=1045&mfp=001/002&st=&cy=1

this is a questionaire to determine whether you are a resident of aust for tax.

or alternatively ring the tax office.


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## barnz2k (26 June 2007)

cheers for that info!

Looks like Canada, Japan, and UK have an agreement which is where im concerned right now.  nice.


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## Freddy222 (7 December 2012)

I've just started investing in U.S equities and am confused on the treatment of capital gains with regards to this  asset class. 

If I sell a particular U.S equity, but do not immediately convert the USD proceeds to AUD, I assume this is still classed as a capital gains event for Australian taxpayers?

However if for instance I convert the USD back to AUD in a subsequent tax year and make a further capital gain (from say the AUD weakening against the USD) is this viewed as a second capital gain event? Does this capital gain event (the crystallisation of USD back to AUD) straddle the first capital gain event, and is my cost in AUD calculated at the original AUD/USD rate at which I originally bought the USD cash ?

Thanks in advance.


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## cynic (7 December 2012)

The following web page might be helpful:

http://www.ato.gov.au/taxprofessionals/content.aspx?doc=/content/57624.htm


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## Freddy222 (11 December 2012)

cynic said:


> The following web page might be helpful:
> 
> http://www.ato.gov.au/taxprofessionals/content.aspx?doc=/content/57624.htm




Thanks for that. 

Is anyone able to recommend an accountant that is able to provide some quality tax planning advice in relation to these foreign equities and FX fluctuations ?

The accountants I've queried so far (from Google searches) have been rubbish.


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## theinvestorguru (18 February 2013)

telstrareg said:


> I’m completely naÃ¯ve about this subject. To take an example, if I as an Australian citizen earn income in a foreign brokerage account, is this taxable under the Australian taxation system? Does the tax only apply if I return profits to Australia? Does the same apply for earning interest in a foreign bank account (I assume if the foreign bank deducts withholding tax then any Aus tax could be offset)?
> 
> Now whatever the case above, I assume that if I earn income while I’m actually overseas, that is NOT taxable under the Australian system. That being the case, is it possible to avoid Aus tax on foreign investments by spending a certain amount of time out of the country and if so, how long is that?
> 
> If anyone wants to recommend a website that deals with this stuff I’m all ears. Thanks.




Very good topic for newbi
Thanks guys


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## bellenuit (18 February 2013)

telstrareg said:


> I’m completely naÃ¯ve about this subject. To take an example, if I as an Australian citizen earn income in a foreign brokerage account, is this taxable under the Australian taxation system? Does the tax only apply if I return profits to Australia? Does the same apply for earning interest in a foreign bank account (I assume if the foreign bank deducts withholding tax then any Aus tax could be offset)?
> 
> Now whatever the case above, I assume that if I earn income while I’m actually overseas, that is NOT taxable under the Australian system. That being the case, is it possible to avoid Aus tax on foreign investments by spending a certain amount of time out of the country and if so, how long is that?
> 
> If anyone wants to recommend a website that deals with this stuff I’m all ears. Thanks.




I'll answer specifically in regards to an Australian resident for tax purposes investing in US shares. There is a tax agreement with the US, but as far as I know, that just allows you to have a lower withholding tax rate used for income (not capital gains) coming from the US. However, apart from the applicable withholding rate, I think the rules would be the same for any foreign investment. What other foreign tax offices may do could be different to the US, but what the ATO does should be the same, irrespective of the foreign country (although there may be special rules for NZ). I am not an accountant, so take the following as coming from a non-expert who _thinks_ he understands the rules, rather than being gospel. 

Capital Gains tax on US shares held by an Australian resident are taxed exactly the same as Australian Shares. The US Tax Dept does not apply any tax. Shares held for more than a year by an individual tax payer get the 50% discount, just as they do for Australian shares. The important thing to note is the actual calculation of the capital gain. The cost base (usually just the cost of shares plus brokerage and plus any other regulatory fees applied at the time of purchase if applicable) is converted to Australian dollars at the exchange rate applicable when the shares were purchased. If there are other cost base elements directly related to the holding of the shares (for instance - interest on a loan to buy the shares when they are non dividend paying shares) then these elements are converted to Australian dollars at the rate for the date on which each of these costs were incurred. The same for the net proceeds (after deducting brokerage and SEC fee). That is converted to Australian dollars at the rate for the sell date. So the capital gain (or loss) is obtained by subtracting from the net proceeds of the sale in Australian dollars the cost base in Australian dollars. It doesn't matter whether the proceeds are repatriated or not. Due to fluctuations in exchange rate over the period the shares were held, you can actually have a capital loss in Australian dollars when calculated as above even though in US dollars it shows a capital gain, and vice versa. You include these figures in question 18 (assuming 2012 tax return) of the tax return, along with your Aussie shares.

US dividends will usually have 15% withholding tax deducted (you get this rate when you fill in the mandatory form W8-BEN (from memory) which the broker will ask you to do). These get converted to Australian dollars on the date the payment (and withholding deduction) is made to you and you include in your tax return whether repatriated or not. Its the section "Foreign Sourced Income". question 20 (20E and 20M for the gross dividend, i.e. amount before the withholding tax is deducted) and 20O for the Foreign Tax Credits (i.e. the withholding tax). There are no imputation credits attached to US dividends.

Interest you earn on your overseas cash balance also goes under 20E and 20M, but I don't believe they deduct withholding (I haven't recent figures to check, but if withholding is deducted and only the net is deposited in your account, include the gross interest in 20E and M, that is Net  Deposited + Withholding and in 20O the Withholding).

One thing you may also have to do, but I have never bothered as the amounts are small, is to also calculate foreign exchange gains and losses on cash held in your account between first depositing and buying some shares and between selling the shares and eventual repatriation. There are some examples in the tax booklets on foreign sourced income that you can check. I haven't bothered as I rarely have a positive cash balance in my US trading account.


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## blackjack (18 February 2013)

one fund in Thailand paid 80% last year
and no tax

keep money here and have a nice holiday


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