To The Moon

Capital gains tax (CGT) is applicable in Australia, which is a tax on the profit made from the sale of an asset, including stocks, that has increased in value since it was acquired.

For individuals, the CGT tax rate typically range from 19% to 45%, plus a 2% Medicare levy. Some assets are exempt from capital gain tax, such as the main residence.

The capital gain tax rate in Australia depends on 1. Income tax bracket and 2. How long an individual has held the asset.

If an individual who has owned an asset for more than 12 months, it is eligible for a 50% discount on capital gain. This means you only pay tax on half of net capital gain. The net capital gain is added to taxable income and taxed at different marginal tax rate.

How about Dividend Tax in Australia?

Since Australia follows a one-tier corporate tax system, the dividend tax in Australia depends on whether the dividends are franked or unfranked.

• Franked dividends are dividends that have been taxed at the corporate level and carry a franking credit that can offset the tax payable by the shareholder.

• Unfranked dividends are dividends that have not been taxed at the corporate level and are subject to withholding tax.

For resident shareholders, franked dividends are exempt from withholding tax, since franked dividends may entitle them to a franking tax offset for the tax paid by the company. Unfranked dividends are included in the assessable income of resident shareholders.

Check the Australian Taxation Office website

Besides, Australian dividend withholding tax rate on unfranked distributions to foreign shareholders is 30%.

How is REITs dividend taxed in Australia?

Individuals investors could tell a dividend from a REIT or a regulated investment companies (RIC) by looking at the dividend statement or distribution statement. The statement should indicate the type and source of the dividend, as well as the amount of any withholding tax or franking credit.

A RIC dividend may include different types of income, such as qualified REIT dividends, qualified dividend income, capital gain dividends, etc. A RIC dividend may also pass through any foreign tax paid or withheld on its income to its shareholders.

REITs dividends in Australia may be taxed differently depending on the source and type of the dividends.

Generally, REITs dividends are classified as either rental income distributions or capital gains distributions.

• Rental income distributions are taxed at the marginal tax rate of the investor, and may carry a franking credit if the REIT has paid tax on its income.

• Capital gains distributions are taxed at the capital gain tax rate of the investor, and may be eligible for a 50% discount if the investor has held the units for more than 12 months.

However, some REITs dividends may also include other types of income, such as interest or foreign income, which may be subject to different tax rules.

What if Australia individual investors get dividend from US stocks?

Australian investors may have to pay dividend tax on US stocks depending on the type and source of the dividends.

Generally, US dividends paid to non-residents are subject to a 30% withholding tax, unless reduced by a tax treaty.

Australia has a tax treaty with the US that reduces the withholding tax rate to 15% for most dividends (qualified dividend).

US Tax Treaty Countries

However, a few dividends from REITs or RICs may not qualify for the treaty rate and be taxed at 30%(Unqualified dividend).

Australian investors may also be able to claim a foreign income tax offset for the US withholding tax paid on their Australian tax return. However, the offset rules are complex and there are certain limits on claims.

Generally, Australian tax residents are subject to tax on their worldwide income, including foreign dividends. However, they may be able to claim a foreign income tax offset for any tax paid on this income in the US. The offset rules are complex and there are certain limits on claims.

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