do overseas non resident investors need to pay CGT for stock portfolio?

My dad has a mutual fund in Australia although he lives overseas.

I just noticed in his statement that the ATO has taken out Witholding tax about 50% from the 'distributions' to his Cash Fund. Can he claim back the full amount from the ATO? I guess that means he needs to fill in a tax return?

Also, how about CGT? I read in some articles that non-residents do not need to pay CGT for Australian shares.

Can someone help?
thanks
 
Your dad needs to establish whether he is a non-resident for tax purposes. This depends on Australian law and any double tax treaty with the country he is in at the moment.

Then if he is a non-resident, supplying an overseas address to the fund manager should be enough for them to withold the correct taxes from payments.

It sounds like no information has been supplied and the manager is witholding TFN amounts at the top marginal rate, rather than non-resident rates.

Cheers,

Rob
 
hi, learn something new everyday. I didn't know that non residents don't have to pay CGT on shares.

And I was a non resident for many years. What a fool I was!

KY
 
Your dad needs to establish whether he is a non-resident for tax purposes. This depends on Australian law and any double tax treaty with the country he is in at the moment.

Then if he is a non-resident, supplying an overseas address to the fund manager should be enough for them to withold the correct taxes from payments.

It sounds like no information has been supplied and the manager is witholding TFN amounts at the top marginal rate, rather than non-resident rates.

Cheers,

Rob
Hi Rob,

this was what we thought. He always has his overseas address with the fund manager (BT Fund). That is why I thought it's so strange for them to deduct witholding tax. He only started the Cash Funds last year after he switched some of the units from Australian Share Fund into Cash Fund to avoid the downturn.

I called the fund and they told me the new rule is that ATO wants to take out the witholding tax from interests (and dividends?)earnings, and what if we want it back, then the non-resident MUST lodge a tax return every year. Aparently this is the new ATO rule to force people to file tax returns, and if they forget, then ATO takes a 50% piece of the pie anyway. Very sneaky isn't it?

:mad:
 
Hi Rob,

this was what we thought. He always has his overseas address with the fund manager (BT Fund). That is why I thought it's so strange for them to deduct witholding tax. He only started the Cash Funds last year after he switched some of the units from Australian Share Fund into Cash Fund to avoid the downturn.

I called the fund and they told me the new rule is that ATO wants to take out the witholding tax from interests (and dividends?)earnings, and what if we want it back, then the non-resident MUST lodge a tax return every year. Aparently this is the new ATO rule to force people to file tax returns, and if they forget, then ATO takes a 50% piece of the pie anyway. Very sneaky isn't it?

:mad:

Non-resident investors DON'T file a tax return in Australia where they just derive passive income from dividends, interest and royalties.

The PAYER (i.e. BT) is obliged to withhold tax at the prescribed rate for that country of residence.

For most tax treaty countries this is generally:

interest 10%
franked dividends 0%
unfranked dividends 15%

It could be even less for countries like the US & UK.

see the ATO link:

http://www.ato.gov.au/businesses/content.asp?doc=/content/50240.htm&page=14&H14

So where does the 50% tax come from ???

If they mistakenly listed your father as a resident without a TFN, then they will be withholding 46.5% from all income distributions, including CGT which should be zero !!

Cheers,

Rob
 
Hi Rob

I told BT that my dad is non-resident for tax, and they said they have his overseas address as his permanent residence..

all the operator told me was this is the new rule,,, do u think they made a mistake?
Im beginning to think so............

Does my dad need a TFN as a non-residence?
 
The "new rule" for managed investment funds is that income from sources other than dividends, interest or royalties is now subject to a final withholding tax.

The good news is no need for a tax return for distributions, and this is now at a lower rate.

However, this rate should only be about 15%, and will be lower next year.

So where does the 50% come from ?

Cheers,

Rob
 
Rob,

not sure where the 50% came from.

So how can my dad claim back the 40%? I assume all he needs to pay for interest received is 10% witholding tax. How to get back the 40%?
 
If you want anything back, submit the tax return. No way around it. But I would ask your dad to submit the TFN and change the address to your place. All statements can be read online anyway so theres nothing they send which your dad can't get online. This way the operations team at BT won't include your dad's distributions when they do their ATO reports. How does ATO get their cut? ask em to send your dad a bill.
 
so u mean if i change his address to my address, he wont get the witholding tax. But still, he has to submit a witholding tax when he does a tax return.

Anyway, can i apply a TFN for him, or he has to go to the ATO himself.
 
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