Financial Professionals: Taxation for Non-Residents

Fixed Interest, Dividends from Direct Shares and Dividend & Interest Components of Distributions from Managed Funds

Non-residents from countries who have double tax agreements (DTA) with Australia will pay:

q        15% withholding tax on un-franked dividends

q        No withholding tax on fully franked dividends

q        10% withholding tax on interest

Withholding tax is a final tax and therefore dividend & interest income will not be subject to any further Australian taxation.  Franked dividends are also not subject to any further taxation.  

Capital Gains & other Income Components of Distributions from Managed Funds

A managed fund will deduct tax from distributions of capital gains and other income at non-resident rates:

Rental Income from Direct Australian Property

Generally rental income sourced from Australian property will be taxed at non-resident marginal tax rates (non-resident rates as shown above). 

Fixed Interest

Interest received would be subject to withholding tax at a rate of 10% for non-residents.

Capital Gains Tax on Disposal of Managed Funds?

When a non-resident disposes of units in a resident unit trust (managed investment), which is a resident for CGT purposes, where the taxpayer beneficially owns less than 10%, the non-resident will not be liable for capital gains tax.

What are the Capital Gains Tax Implications on becoming an Australian Resident?

When a non-resident becomes an Australian resident, special cost base and acquisition rules apply in relation to capital gains tax.  The special acquisition rule is that the taxpayer is treated as having acquired the asset at market value at the time of becoming a resident.  Therefore a non-resident who became a resident after investing in a unit trust, which increased in value, would be advantaged.  However, this does not apply to pre-CGT assets or assets that have the necessary connection with Australia. 

Is a Refund for Tax Paid at Non-Resident Rates Allowed?

Distributions that have been subject to non-resident tax can be included in an Australian tax return.  In the case where a non-resident has losses, income can be offset against the loss, which will result in a tax refund.