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Antipode(Newbie)Newbie
12 Dec 2023

I would like to understand the tax implications of holding US-domiciled exchange-traded funds (ETFs) as an Australian tax resident.


The ETFs are held in a US brokerage account, and make distributions through the year in USD.


My questions are:

  1. Would the foreign ETF distributions be taxed as ordinary income in Australia? (If not - how are they taxed?)
  2. Is there different tax treatment depending on the nature of the distribution, for example, capital gain distribution vs dividends?
  3. Do I use the USD/AUD spot exchange rate on the date of receipt (date they are credited to the brokerage account) to calculate the income in AUD for taxation purposes?
  4. If, after receiving a distribution in USD, I later send the money to Australia (i.e., convert the USD to AUD), do I have to account for any potential gain/loss resulting from fluctuations in the foreign currency exchange rate between the date of receipt and the date of conversion?

Thanks

3,129 views
5 replies
3,129 views
5 replies

Most helpful response

Most helpful reply

AriATO(Community Support)Community Support
14 Dec 2023

Hi @Anitpode


Is this the same as a managed fund where you get statements each year with a breakdown of your distributions?


As an Australia tax resident, you'll let us know about your income from your ETF's. If you pay tax overseas you might be entitled to a foreign income tax offset.

You'll still be taxed on your total income at your marginal tax rate. It's more about getting your reporting right in your tax return which we can help with if you know what your distributions are classed as. If you have capital gains you may be entitled to the CGT discount or apply capital losses if you have any.

You'd need to convert your income to AUD at specific times, and you can check out the rules for translating foreign amounts on our website.

You may have to account for forex gains or losses, depending on the situation. If you have a CGT event, the exchange rate fluctuation is usually folded into the CGT calculation. It's easier to let you know if it applies if you can give us a scenario.

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How are foreign ETF distributions taxed, and what are the tax implications for conversion to AUD? | ATO Community