Tax on Australian Shares

hada

Hi All

I'm currently tax resident in Australia but will be moving back to Ireland next year (so will be tax resident from that point).

I own (and will continue to invest in) a number of Australian domiciled ETFs when I move back to Ireland, and plan to hold those for 20 years or so.

I've read the Australian / Ireland tax treaty (see: https://www.revenue.ie/en/tax-professionals/tax-agreements/double-taxation-treaties/a/australia.pdf) but am unfortunately not entirely clear on what this means for (1) dividends which I may receive; and (2) CGT.

I had understood that dividends would be taxed at my usual income tax rate + prsi + usc if I was tax resident in Ireland, with CGT applicable at the standard rate on any sale.

However, the treaty has confused me (particularly on the dividend point), as Article 11 (Dividends) notes that dividends may be taxed in Ireland and may also be taxed in Australia... surely that doesn't mean I get hit with tax in both jurisdictions on any dividends?

It's probably also worth noting that while the ETFs will be Australian domiciled, the underlying shares in which it holds interests are international (so will be US, French, Japanese etc)..

Appreciate any advice - as surely I'm not the first Irish person to hold Australian shares. Many thanks.

Edit: Also note that I read the following: https://www.irishtimes.com/business/personal-finance/don-t-invest-in-an-etf-until-you-understand-the-tax-1.3421331 (as the ETFs which I hold are OECD domiciled, I understood that I fell into the third category described in the article and also managed to escape the deemed disposal every eight years for CGT purposes).

Peregrinus

SFAIK it works like this:

1. Your Australian-traded ETFs will be regarded as an Australian source of income. It doesn't matter where the underlying shares are traded.

2. You need to tell the Australian company/agency from which you receive the ETF dividends that you are non-resident. They will then deduct Australian non-resident withholding tax from all dividends paid to you. This is charged at a standard rate of 30%, but the Ireland-Australia DTA limits this to 15% - you've probably already noticed this.

3. Either way, you cannot reclaim this tax from the Australian authorities.

4. But you can claim it as a credit in Ireland against your liablity to Irish tax on the ETF dividends you receive. Art 25 of the DTA covers this.

5. So, bottom line: you will pay tax at the Irish rate on your dividend income. The first 15% goes to Australia; everything above that to Ireland.

As for CGT, when you dispose of the ETF shares you'll be liable for CGT in Ireland, at the Irish rates, calcuated under the Irish rules. SFAIK as a non-resident disposing of ETF shares you'll have no CGT liablity in Ireland.

hada

Peregrinus wrote: »

SFAIK it works like this:

1. Your Australian-traded ETFs will be regarded as an Australian source of income. It doesn't matter where the underlying shares are traded.

2. You need to tell the Australian company/agency from which you receive the ETF dividends that you are non-resident. They will then deduct Australian non-resident withholding tax from all dividends paid to you. This is charged at a standard rate of 30%, but the Ireland-Australia DTA limits this to 15% - you've probably already noticed this.

3. Either way, you cannot reclaim this tax from the Australian authorities.

4. But you can claim it as a credit in Ireland against your liablity to Irish tax on the ETF dividends you receive. Art 25 of the DTA covers this.

5. So, bottom line: you will pay tax at the Irish rate on your dividend income. The first 15% goes to Australia; everything above that to Ireland.

As for CGT, when you dispose of the ETF shares you'll be liable for CGT in Ireland, at the Irish rates, calcuated under the Irish rules. SFAIK as a non-resident disposing of ETF shares you'll have no CGT liablity in Ireland.

This is extremely helpful and what I had hoped the position to be. Thank you.

Also - it's worth noting that I'm in a bit of a CGT loophole at the moment... as a temporary resident (for immigration purposes) in Australia, I have not CGT liability (except for real property). So in fact, I could sell Aus shares before I leave at a profit and not pay any CGT to the Australian Tax Authority.

Peregrinus

If you have an accrued gain, may be worth selling and buying back so as to establish a higher acquisition cost for when you later dispose of the shares as an Irish resident.

(I'm assuming that in your current circumstances you would have no Irish CGT liability if you dispose of the shares - i.e. you are currently neither resident nor ordinarily resident in Ireland.)

guernseyguy

Hi All, came across this post with interest. I am Irish tax payer and own some Australian shares that pay dividends twice a year. The dividend statement shows a gross amount which includes an imputed tax amount (also called a franking credit) and a net amount which is what I actually receive into my bank account. As I understand it, the franking credit reflects the underlying tax paid by the Australian company on its profits.
(1) To calculate my Irish income tax liability, can anyone confirm which figure goes on my income tax return - is it the gross figure including the franking credit or the net figure without the franking credit? (2) Also, is the imputed tax/franking element creditable for Irish tax purposes under the double taxation treaty etc? I would appreciate any advice as the taxation of foreign dividends seems to be a very complex and confusing area. Many thanks in advance.