Tax on Dividends if Living Overseas

NZ has a wait period as Australia does. I believe you must have worked and been resident in NZ for 10 years. There are benefits that can be reciprocal. NZ doesnt take the save view to super that Australian does so you need to consider this also. The trust would have issues if you move to NZ

 

Yes - The registry will determine if the country is a treaty or a non-treaty nation. If you dont then the requirement to lodge a return remains. If the registry withholds then only unfranked dividends are taxable income in Australia. If its a managed trust its more complex.

 

Thanks Paul,

Looking down that list of treaty countries and their many different rates and rules, would the registry base the withholding tax precisely on the country your living?

Reason I'm asking is because in the country I mentioned, that 15% dividend tax is for the companies types below only and all others are taxed at 20%.

7. The term "industrial undertaking" means-
(a) any undertaking engaged in:
(i) manufacturing, assembling or processing;
(ii) construction, civil engineering or shipbuilding;
(iii) production of electricity, hydraulic power or gas;
(iv) the supply of water; or
(v) agriculture, forestry or fisheries or the carrying on of a plantation;

I wonder if the registry can automatically set the rate.

I was thinking maybe sets a fixed 15% then leaves it up to the non resident to go through their share dividends to decide what company the type it is and then having to submit a tax return.

Any idea please?

 

The rate of interest and dividend withholding for non treaty and treaty countries are here Interest, unfranked dividends and royalties

There are some exceptions both ways too. Eg The USA will withhold based on other factors (eg a trust) and IRS certificates are issued. and property withholding too....Uk, USA and AU are all starting to do it

 

also found this little gem today. Living Overseas and SMSFs
45% tax!!?

 

Yeah I'll be winding mine up and moving it to a superfund. Better then expecting a relo or friend to become a trustee.

 

No, the "franking" of a dividend offers no benefits if you are living in Europe. Yes they are tax free in Australia, but then the Europeans say "thanks very much we will tax that since Australia didn´t".

In my case I had almost no tax due in Australia in 2015 due to franked dividends and a loss on property offsetting the unfranked dividends. But Spain does not recognize franking or negative gearing, so I had to pay over 20% tax on those in Spain.

It really depends on the tax laws of the country you settle in. In the Spanish case property losses can be offset against property gains, permanent rentals get 60% discount, margin loan interest is not deductible, accountancy fees not deductible (accountant laughed when I said you could do that in Australia). In 2016 I restructured things a bit so my Australian property generated income and was taxed in Australia. This tax paid I could then apply against the franked dividend income in Spain, & Spain did not tax the property so much because of the generous 60% deduction and a very generous flat 3% depreciation allowance. Complicated.

I try to work it so I pay about 15% tax in Australia on all net income. If I pay more than that the excess tax is not credited in Spain, so double taxation on income. The other pain is the different tax years 6 months out of sync, so I have to do everything twice.

People have said why bother declaring everything ? Well the fines are horrendous and usually exceed the value of the asset (in one case here a bloke was fined 440K on a 340K asset they discovered in Switzerland), and there is now automatic data matching being improved every year and reporting to countries automatically without an investigation required. Even the Swiss are joining this scheme next year, a lot of people worried.

 

Wow 20% tax

It's only 9% for my country of origin.. makes it very attractive for me to live off dividends overthere, especially because living costs are around 50% cheaper.

 

A UK person owning a negatively geared IP in Australia has a far worse outcome under the new buy to let rules coming in the next few years

 

Residency issues happen with ALL trusts not just a SMSF. CGT triggers and other tax issues can occur. And the tax jurisdiction of the persons involved can also be a factor. For example if you reside in the USA they disregard the SMSF and treat it as a dodgy form of trust income and tax the member even though they may not even receive a cent as its preserved.

Anyone who plans to cease to reside in a country really should seek two bits of advice. Australian tax advice and then local tax advice in the new country...Before making the move

 

Definitely. I may move in the next few years... need to find someone that can help with globally flexible structuring arrangements. Not to avoid taxes, but to avoid being taxed more than once!!

 

Depending on age withdrawal of super may be a option. Portability can also be explored.
Early legal / tax / financial advice would be advised.

 

Thanks Paul,

I'm still digging around the ATO a bit with this and noticed the wording here: What are tax treaties?

Unfranked dividends are deducted at a rate of 30% unless you are a resident of a country with which Australia has entered into a taxation agreement that varies the amount of withholding tax that can be levied on dividends.

I will be a non-resident for tax (ATO check) and in the other country, living long term on a retirement visa will not actually be a "resident" there.

Is it possible not having residency in the other country effect the tax paid on unfranked dividends please?

 

Tax residency is different to immigration residency, but you would have to look into the relevant tax treaty to find out.

 

Thanks Terry, wow this gets complicated!

I have just read the treaty and is difficult (for me) to follow but think a non-resident for Australian tax and resident for tax in the "Contracting States".

So "unless you are a resident of a country" meaning for tax, guess I will be resident of the other country

Cheers.

 

Q Does australia have a tax agreement with that country? If so there are standard rules under the OECD model standardd. It can vary however.

 

Thanks Paul, yes definitely there is a tax agreement. I tried looking up the OECD standard but couldn't find details. Think I'm OK with this now anyway.

Something related to this thread too. Found the form to advise (withholding tax on non fully franked shares) ) Computershare of non-residency here: Computershare Investor Centre - Australia

The form under Tax Residency Self-Certification

 

Interesting, read this in the paper at work today but you may not be able to read this article below. "Reader view" in FF browser is handy.

Investors to lose dividend tax credits in 'epic proportions'

I still don't understand how/if this effects franking credits ie: 27.5%* vs the current 100% franked share where non-residents pay zero tax. Any ideas if we makeup the 2.5% shortfall?

* reducing to 25% over years

 

This will not affect a non-resident taxpayer. They dont benefit from franking. Their assessable amount will be unchanged.

 

This is my take on it. Try not to become non-res if possible because there's more disadvantages than advantages, especially losing the tax free threshold. Any shares that you held before you become a non-resident and sold (irrespective of your status) will have to be reported for the gain or loss -- if this results in a loss then it can be carried forward. Any shares that you have bought and sold during the period you were non-resident does not need to be reported and losses cannot be carried forward. So that is an important distinction.