ASX Shares Are fully franked dividend shares good option for non-residents?

Discussion in 'Shares & Funds' started by Sick_of_scams, 8th May, 2021.

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  1. Sick_of_scams

    Sick_of_scams Well-Known Member

    Joined:
    31st Mar, 2018
    Posts:
    121
    Location:
    Gold Coast
    Hello,

    I am an Australian citizen, who has been spending extended periods offshore.

    I am aware of the potential to be deemed a non-resident (no need to discuss ins/outs of whether or not I will become non-resident here as have submitted other post about that).

    I have a share portfolio with mainly income stocks so as to receive dividend income.

    I am worried about non-resident tax implications.

    There are some advantages and disadvantages.

    With unfranked dividends I am subject to a withholding tax as a non-resident of 30%.
    I have read if living in a country with a dual tax arrangement then it can range from 15% to 30%, but I am retired and not paying taxes overseas and also not entitled to residency where I am. Can only have permission for annually renewable long term visas).

    I have read that shares paying Franked dividends are the preferred ones to have as a non-resident. I am not entitled to the Franking Credits but am not taxed any further as a non-resident.

    It's a big chunk to lose (Franking Credits) but only residents qualify.

    It is a complex area (for my brain) but it seems there are withholding taxes that if deducted upon payment, I therefore do not need to declare that dividend income in my tax return, which appears to be slightly advantageous compared to the non-resident income tax rate ($0 - $90,000 is taxed at flat rate 32.5% with no tax free and no reduced tax thresholds).

    I believe that means less income to declare at tax time and therefore less non-resident rate income tax liability.

    Should I be concerned about Unfranked dividends as a non-resident? Should I look at selling them and holding only fully franked dividends?

    I am also looking at transferring my shares offshore to a Singapore based International Brokerage to avoid CGT and a lower tax rate my ASX shares of 15% with dual tax agreement with Australia (another post I ask about this). Not sure then if unfranked dividends in Singapore would be advantageous?

    I am a long term investor now more concerned about dividend income to live off. So am not a frequent trader looking at quick Capital Gains.

    I do understand when deemed a non-resident you are taxed in advance your unsold shares at a resident rate of Capital Gains Tax which would be hefty but no future Capital Gains Tax liability if remaining a non-resident when selling.

    Alternative option to defer the Capital Gains Tax seems to be a worse option for me because if still overseas and sold my shares, I would need to pay the non-resident rate CGT.

    I read an article online with one opinion on this.
    Make tax-free capital gains on Australian shares whilst a non-resident expat | Expat Taxes Australia

    Thanks
     
    Last edited: 8th May, 2021