If you are a temporary resident and receive dividends from a non-resident company you will not need to show the dividend on your Australian income tax return. For more information, see Foreign income exemption for Australian residents and temporary residents - employee share schemes.
If you are a shareholder of a New Zealand franking company that has paid a dividend that is franked with Australian franking credits, you may be eligible to claim a franking tax offset. For more information on how to claim the franking tax offset, see Trans-Tasman imputation overview fact sheet.
Non-resident companies, other than certain New Zealand franking companies, are not subject to the imputation system and you will not be entitled to claim a franking tax offset for any tax paid by the company.
However, you may find that foreign tax has been withheld from the dividend so that the amount paid or credited to you is reduced.
In most circumstances, you will be liable to pay Australian income tax on the dividend. You must include the full amount of the dividend at item 20 Foreign source income and foreign assets or property on your tax return. This means the amount you are paid or credited plus the amount of any foreign tax which has been deducted. You may be able to claim a foreign income tax offset for the foreign tax paid.
In certain circumstances, foreign dividends may be exempt from tax. For example, they may be exempt to avoid any double taxation, or exempt because the portfolio out of which the dividends have been paid has already been taxed at a comparable rate.
There are special rules which need to be satisfied for you to claim a foreign income tax offset. For more information, read:
- Q20 Foreign source income and foreign assets or property
- Guide to foreign income tax offset rules (NAT 72923).
Example 9: Payments by foreign companies
Emma has shares in a company resident in the United States of America. She was entitled to be paid a dividend of $400. Before she was paid the dividend the company deducted $60 in foreign tax, sending Emma the remaining $340. (All amounts have been translated into Australian dollars.)
When she fills in her Australian tax return, Emma should include $400 at M Other net foreign source income item 20 on her tax return and she may be able to claim a foreign income tax offset of $60 at O Foreign income tax offset item 20.
End of exampleDividends denominated in a foreign currency
All assessable dividends received that are denominated in a foreign currency must be translated into Australian dollars before being included on your Australian tax return.
For more information on the exchange rates that should be used in translating foreign currency amounts, see: