Hi all, wondering if someone can help..I have bought VTS etf (US total stock market index fund) and just wanted to know how tax is applied to distribution that I may receive. I have filled the form W08BEN but not sure what exactly it is for. Does the distribution comes to my account after tax or I have to pay it later when I lodge tax returns? Thanks in advance.
That form has NIL to do with AU tax and is a compliance matter for US IRS reporting. Which gets shared with Australia if you are thinking of avoiding tax. At year end a Australian tax statement may be issued if the fund pays you any income and it will also show the foreign tax credits you are entitled to claim along with the income that is assessable and its components. Those values are included in the tax return. Unlike shares which are taxed on a cash basis VTS is based upon the entitlements in the period. The final distribution may be August for example and be included.
If you invest in the US via VTS you might be exposed to their death taxes. Their is a treaty exemption for Australians so you might be able to access the US residents world wide assets exemption (under $5.45m (ish)). A complete mess. It is actually $60,000 but our treaty helps. Very complex. Talk to a financial product advisor about products not affected by the US death tax. I think it is the cross listing of the product that impacts it. https://www.irs.gov/pub/irs-pdf/i706na.pdf Some Nonresidents with U.S. Assets Must File Estate Tax Returns | Internal Revenue Service
