Shares & Funds Non-residents - a use for franking credits?

I came across this recently:

What Are Franking Credits & How Do They Benefit Australian Expats?

Quote:
However, as non-residents for tax purposes we are not entitled to receive franking credits refunds, but franking credits attached to dividend payments can be used to offset withholding tax on any unfranked or partially franked dividends received.

First I've heard of the possible of doing this - that franking credits, normally lost to non-residents, can be used like this.

Possible scenario: A non-resident owns shares in company A and company B. Company A dividend is fully franked, company B is unfranked.

Normally this is what would happen for non-resident:
Company A dividend is $24, franking credit is $10.30, withholding tax is 0.
Company B dividend is $68.70, franking credit is $0, withholding tax is $10.30 (15% tax rate)
So the nett tax payable to Australia is $10.30 and the franking credit can't be used.

However this information is suggesting this:
Company A dividend is $24, franking credit is $10.30, withholding tax is 0.
Company B dividend is $68.70, franking credit is $0, withholding tax is $10.30, but franking credits from Company A can be used to offset this -> $10.30-$10.30 =$0.00
So the nett tax payable to Australia is $0.

Anybody here with experience of this? If it's correct, then a non-resident should consider constructing their portfolio of Australian shares/LICs/ETFs in such a way that the franking credits received = withholding tax on the unfranked dividends.

 

I disagree.

A non-resident cannot include franked income in a return and the ATO will remove it if they do. Dividends that are unfranked are only to be reported if (withholding) tax has not been withheld at source. The dividend and interest fields of a non-resident return is only used for withholding tax purposes. If the taxpayer acquires ETFs the outcome may be different as "dividends" are not received but trust income may be. The ATO may then issue TWO accounts. One for withholding tax for the unfranked DIVs. However the Income Tax assessment would tax the trust income at the non-resident rates which are 32.5% or higher and apply anyeleible credits to reduce this. A shortfall may arise on the tax account...Not a credit. Franking credits are not creditable for non-residents so a tax account cant be issued in credit to enable this to offset withholding.

 

I think it's wrong too - this has been my experience in practice - as a non resident you can't use franking credits against other income. Bit strange that a company that specializes in non-resident topics would publish incorrect information.

For ETF income the distribution is itemized into it's different components, some are subject to withholding tax and some not.

For example the most recent VAS distribution:

Announcements

Cash distribution: 140.73
Franking credit: 53.71
Foreign income tax offset .144

Main components are:
Franked dividends: 122.31 -> no withholding
Unfranked dividends: 9.56 -> subject to WHT 15% -> WHT = 1.43
Unfrnaked dividends CFI: 2.23 -> no withholding
Interest subject to WHT: .345 -> subject to WHT 10% -> WHT = .0345
Other income: 4.18 -> subject to WHT 15% -> WHT = .627
Discount capital gain NTAP: .3127 -> no WHT
Assessable foreign source income: 1.438 -> -> no WHT

So a non-resident would pay .143+.345+.627 = 1.115 WHT on the cash distribution of 140.73. I don't think there is a way to offset this 1.115 WHT with the 53.71 franking credit even though it is income from a trust. Correct?

 

Atlas lack tax qualifications. Its no different to reading antivaxer view on medicine. You would normally ignore it and seek your own medical advice assuming the antivaxxer isnt a medical professional. Tax is no different. They lack skills or a duty of care to be giving personal "advice" on how to prepare a return. And therefore arent likely providing "tax agent services".

Withholding tax is creditable against FOREIGN income if the residency nation is a treaty partner and the income is declared and subject to local tax. (eg Wont be in HK) Otherwise it is a cost of the process and acts as a minimum final tax. Most people would see 10-15% withholding as a low final tax rate. This concept is likley to broaden with minimum taxes apply across many borders being a means to address avoidance. Its why there are also merits to taxing trusts like companies. It stops 0% tax and ensures some minimum base and limits "avoidance" practices. It is one of the very few ALP polciies I see merits in. It may actually encourage corporate trust beneficiaries so fully franked income avoids that leakage. Instead franking acts to store the tax that was paid.

 

Lo, but a good analogy.

 

I'm not a client of atlas and have never had any dealings with them, but they are registered as a "tax (financial) advisor":

Australian Expat Tax

A registered "tax (financial) advisor" provides the services of a tax agent:

Who needs to register as a tax (financial) adviser? | TPB

Could you clarify why you say this company lacks tax qualifications?

 

Being a tax financial adviser doesnt mean they have any qualifications or experience as taxation advisers. Just registered. TPB registration is NOT a qualification. I have always had concerns for the misleading nature of tax (financial) advisers. Ironically a tax adviser may employer experienced and qualified tax advisers but a financial adviser doesnt need ANY staff with any accounting, tax or professional qualifications in tax and the qualifiactions to become a financial adviser wont generally be acceptable. Fiannciala dvisers wont even have studies relevant subjects in tax or law like a tax agent must. Its a passing off concern. Not unlike the view financiala dvisers have the taxa gents shouldnt discuss certain elements of fianncial advice yet there is no exception in that. It limits financial advisers to some aligned tax advice concerning some issues and there is perfect example of how it can be deficient when they give "general advice"... That is what they gave in the article. Dont believe all things you read on the net.