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_deaglan11(Newbie)Newbie
17 May 2021

Am I correct to understand that share buybacks are excluded from any taxation in Australia as a temporary resident? For clarity

  • the company itself is non-resident, does not involve Australian property
  • the shares were purchased at market value (and so at least in the UK are not considered employment related securities)
  • has not been an employee of the company for several years prior to arriving in Australia

From reading https://www.ato.gov.au/general/capital-gains-tax/shares,-units-and-similar-investments/share-buy-backs/ it sounds like they'd be treated as both a dividend and capital gains in Australia, but from what I understand of the temporary residence rules that would exclude them? Thank you.

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BlakeATO(Community Support)Community Support
ATO Certified Response19 May 2021

Hi @deaglan11

It depends on if you're a resident for tax purposes or not.

If you're a foreign or temporary resident for tax purposes, you are only liable for capital gains on taxable Australian property (that is, tangible property in Australia).

If you're a resident for tax purposes, you're taken to have acquired the shares at the time you became a resident for tax purposes for their market value. This forms the first element of your cost base for the shares.

If the company performs a buy back at market value, the capital proceeds are the market value minus any dividend you've already received, then less the cost base. Take a look at the example calculation on the page you've linked for a visual representation of the process. :)

You can read about Your tax residency and CGT for foreign residents and temporary residents on our website.

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Most helpful replyATO Certified Response

BlakeATO(Community Support)Community Support
ATO Certified Response19 May 2021

Hi @deaglan11

It depends on if you're a resident for tax purposes or not.

If you're a foreign or temporary resident for tax purposes, you are only liable for capital gains on taxable Australian property (that is, tangible property in Australia).

If you're a resident for tax purposes, you're taken to have acquired the shares at the time you became a resident for tax purposes for their market value. This forms the first element of your cost base for the shares.

If the company performs a buy back at market value, the capital proceeds are the market value minus any dividend you've already received, then less the cost base. Take a look at the example calculation on the page you've linked for a visual representation of the process. :)

You can read about Your tax residency and CGT for foreign residents and temporary residents on our website.

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