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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.
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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