Hi,
I'm an Australian resident for tax purposes and recently started trading US stocks. I have questions about dividend income taxation and the impact of forex conversion rates.
1A. Forex Conversion Rate for Purchase Price:
- I transfer & convert AUD to USD through Australian stock broker. My AUD converts to USD on the spot. Now, sometime I convert AUD to USD well in advance of my trading stock so basically, i convert AUD to USD at 65c AUD/USD rate but on the day of trading (few days after) the conversion rate is 66.5c AUD/USD. So my question is what conversion rate I should consider while inputting my stock purchase cost for ATO? Do I use 65c which is what it costed me or I use 66.5c which was the rate on the date of the trade.
1B. Reporting US ETF Distributions:
I buy ETF on US stock market and that ETF pays monthly distribution to me. This distribution sometime has three components : 1. Regular income 2. Capital Return and 3. Capital Gain. So my question is how do I report this distribution to ATO ?
Does ATO accept this distribution category as defined under the ETF according to the US law or I have to send ETF statement to ATO separately to make determination as to what category ATO considers them under Australian law?
1C. Double Taxation Agreement:
My US broker will withhold 15% of the distribution income for TAX to US Government and only pays me 85% and after March every year they refund any excess tax they withhold from me such as tax related to capital return is refunded to me while remaining tax paid to the US government. So how do I avoid double taxation? Does ATO charge another tax on top of 15% charged by US government?
Because I believe under the tax treaty between US and Australia to avoid double taxes they agree to have only one country charging tax so in this case only US government charge 15% and ATO charge remaining tax on top of 15% if my tax band is above 15%. so if my tax band rate is 25% then ATO only charges me 10% as US government already charged me 15%. Or does ATO charge me 25% on top of 15% charged by US Government?
1D. Offsetting Capital Gains/Losses:
Can I offset distribution paid as capital gain by US ETF against the capital loss I have on Australian stock? or ATO consider this capital gain distribution as income and not the capital gain.
Specific ETFs:
While the information above applies to many ETFs, for the purpose of this query you can look at last distribution from ETF ticker code QQQI, SPYI, GPIQ, GPIX, IVVW, and FEPI.
Please use question number to respond each answer so easy for me to join the dots and also help other community members.
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