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Foreign Dividend paid in AUD by Broker = difference from ATO daily rates

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Newbie

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I understand that I must convert all foreign income, deductions and foreign tax paid into Australian dollars for tax purposes.

 

However, what if I receive a foreign equity dividend via my broker (an australian entity) deposited into my australian cash account already converted at their FX rate. For example:

 

Ex Date 08/11/2018

Holdings as at Ex Date 12 shares
Gross Dividend Rate 2.2591850
Gross Amount USD 18.84
Non Resident Tax USD 5.65 (Federal income taxes imposed by the Internal Revenue Code)
Net amount (Local) USD 13.19
Exchange Rate @ 0.69494
Net Amount AUD 18.98
 
However the offical ATO exchange rate on the day of 8th November 2018 for USA was 0.7642
 
Understanding I need to provide Gross Amount in the tax return I would put AUD 24.65 Gross as per the ATO daily rate.
  1. USD 18.84 / 0.7642 = AUD 24.65 (ATO daily exchange rate)
  2. USD 18.84 / 0.69494 = AUD 27.11 (broker exchange rate)
Understanding I need to provide Foreign Tax Paid in the tax return I would put AUD 7.39 Foreign Tax Paid as per the ATO daily rate.
  1. USD 5.65 / 0.7642 = AUD 7.39 (ATO daily exchange rate)
  2. USD 5.65 / 0.69494 = AUD 8.13 (broker exchange rate)

It seems that I'm actually receiving more funds than I'm reporting given:

  1. Using ATO daily exchange rate: AUD 24.65 Gross - AUD 7.39 Tax = AUD 17.26 reported income
  2. Using broker exchange rateAUD 27.11 Gross - AUD 8.13 Tax = AUD 18.98 ACTUALLY RECEIVED income in my bank.

 

It seems that by using the ATO exchange rate I'm under-reporting my actual income.

At such a small amount this is not really a vast different, however if the holdings were x 1000 it would be very noticiable approx ~9% difference.

 

Am I correct in converting the Dividends received using https://www.ato.gov.au/Individuals/International-tax-for-individuals/In-detail/Foreign-income-of-Aus... and ignoring the actual amount received from the broker?

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

Former Community Support

Replies 0

Hi @lantrix,

 

Thanks for your patience whilst we checked information with a specialist area.

 

You need to use the A$ amount that is deposited to your bank account as this amount is based on the actual exchange rate used at the time of the transaction.  Generally, an exchange rate published on our website only needs to be used if an amount of foreign income is not remitted to Australia.

 

As you have noted, there is a relatively large difference between the ATO published rate (which we have checked as being correct) and the rate apparently used by your broker. If you have any concerns in this area, you may wish to contact your broker to discuss.

 

As a separate issue, it appears that US tax of 30% has been withheld on the dividends you have received. The Double tax agreement between Australia and the United States (US) provides for a maximum tax rate of 15% on dividends paid by a US resident company to a person who is a resident of Australia.  You may wish to enquire about this aspect also. General information on dividend tax withholding and tax treaties can be found on our website.

 

Thanks, JodieH.

2 REPLIES 2

Community Moderator

Replies 0

Hi @lantrix,

 

We are checking this with a specialist area and will get back to you with a response soon.

 

Thanks, NateH

Most helpful response

Former Community Support

Replies 0

Hi @lantrix,

 

Thanks for your patience whilst we checked information with a specialist area.

 

You need to use the A$ amount that is deposited to your bank account as this amount is based on the actual exchange rate used at the time of the transaction.  Generally, an exchange rate published on our website only needs to be used if an amount of foreign income is not remitted to Australia.

 

As you have noted, there is a relatively large difference between the ATO published rate (which we have checked as being correct) and the rate apparently used by your broker. If you have any concerns in this area, you may wish to contact your broker to discuss.

 

As a separate issue, it appears that US tax of 30% has been withheld on the dividends you have received. The Double tax agreement between Australia and the United States (US) provides for a maximum tax rate of 15% on dividends paid by a US resident company to a person who is a resident of Australia.  You may wish to enquire about this aspect also. General information on dividend tax withholding and tax treaties can be found on our website.

 

Thanks, JodieH.