Taxes of foreign investors

[Knobby22]

A proposal within the “One Big Beautiful Bill” – to raise taxes on foreign investment is another deterrent to acquiring US assets and US dollar exposures.

Section 899 of the bill would increase US taxes on dividends and interest income by five percentage points each year for four years. Both foreign direct investment and portfolio investment would be hit.

 

[Bellcose]

I guess if this bill passes that is the end of me dabbling on the NASDAQ as an investor and also a worry for the large mining stocks in my SMSF who source income from the USA. Other stocks may be affected.

It is indeed a changing world.

gg

 

[ShareSuccess]

The qldfrog will love this Thread ha ha.....We all know how much he loves Taxes

Only Joking Mr Frog

 

[StockyGuy]

IF it's actually realised as anticipated, IMO it would seem likely bullish for the ASX and even the AUD. How it would pan out even if the bill passes is up for debate though - US tax for Aussies is already a headache (stuffing around with FITO and exchange rates at tax time). Prolly good for VC's beloved Berkshire Hathaway stock that famously pays no dividends (who knows what might happen when the Oracle of Omaha leaves, though).

 

[Value Collector]

IF it's actually realised as anticipated, IMO it would seem likely bullish for the ASX and even the AUD. How it would pan out even if the bill passes is up for debate though - US tax for Aussies is already a headache (stuffing around with FITO and exchange rates at tax time). Prolly good for VC's beloved Berkshire Hathaway stock that famously pays no dividends (who knows what might happen when the Oracle of Omaha leaves, though).

Australians already have 15% clipped by the USA when we earn dividends on USA companies, but that gets deducted from what we owe the ATO, so any increase in that 15% doesn’t affect me, it affects the ATO.

Yep, Berkshire is a lot easier for tax purposes, especially because the USA government doesn’t charge Australians Capital gains tax, and the Australian government gives us a 50% discount.

Berky is going to be just fine after Warren, it will be a new Era for sure, but Greg Abel is good.

 

[StockyGuy]

Australians already have 15% clipped by the USA when we earn dividends on USA companies, but that gets deducted from what we owe the ATO, so any increase in that 15% doesn’t affect me, it affects the ATO.

Correct, if you're at the highest tax bracket the extra burden would only come if they raise it all the way up to the 50% spoken of, expected to happen in the seventh year, as our highest marginal tax rate is only 45% (and I presume you are likely at the highest rate).

But then it does make ya wonder in that scenario if the ATO might be empowered to "clip" something extra if they're getting nothing from US dividends and interest at year 6 with 45% and year 7 with the 50% withholding rate. But yeah it's hard to know how exactly it would play out. Even if they STARTED raising the extra 5% per year over 15% we currently have withheld it certainly doesn't mean the administration after Trump would continue in like fashion all the way up to 50%. Some consider it just a bargaining chip.

I welcome anyone to correct me on any of that, but I understand even the experts have differing ways to interpret this bill and how it might or might not impact Australians, if it passes.

(This is not tax advice.)

 

[Value Collector]

Correct, if you're at the highest tax bracket the extra burden would only come if they raise it all the way up to the 50% spoken of, expected to happen in the seventh year, as our highest marginal tax rate is only 45% (and I presume you are likely at the highest rate).

But then it does make ya wonder in that scenario if the ATO might be empowered to "clip" something extra if they're getting nothing from US dividends and interest at year 6 with 45% and year 7 with the 50% withholding rate. But yeah it's hard to know how exactly it would play out. Even if they STARTED raising the extra 5% per year over 15% we currently have withheld it certainly doesn't mean the administration after Trump would continue in like fashion all the way up to 50%. Some consider it just a bargaining chip.

I welcome anyone to correct me on any of that, but I understand even the experts have differing ways to interpret this bill and how it might or might not impact Australians, if it passes.

(This is not tax advice.)

I don’t think the 50% rate will apply to Australia’s, it’s seems to apply to countries with “unfair tax systems”.

But yeah if it went to 59% that would increase my tax rate from 47% to 52% (if the Medicare levy is not allowed to be deducted.

The ATO still gets to tax the capital gains to though.

Tax systems do change over time, I think the USA benefits from both foreign investors investing in the USA and their own investors investing around the world, if Trump causes foreign investors to flee the USA and foreign government to put heavy taxes on USA companies, it wouldn’t be good for the US economy and would likely be changed and new tax treaties negotiated.

I am in favor of a global Tax system, maybe one day it will happen.

 

[StockyGuy]

I don’t think the 50% rate will apply to Australia’s, it’s seems to apply to countries with “unfair tax systems”.

But yeah if it went to 59% that would increase my tax rate from 47% to 52% (if the Medicare levy is not allowed to be deducted.

The ATO still gets to tax the capital gains to though.

Tax systems do change over time, I think the USA benefits from both foreign investors investing in the USA and their own investors investing around the world, if Trump causes foreign investors to flee the USA and foreign government to put heavy taxes on USA companies, it wouldn’t be good for the US economy and would likely be changed and new tax treaties negotiated.

I am in favor of a global Tax system, maybe one day it will happen.

Yes, agree the 50% seems unlikely - but “unfair tax systems” is rather subjective and some folk in the US would describe even our GST along those lines. But for superannuation, typically taxed at 15%, an increase to even 20% on US dividends and interest is not trivial. Fingers crossed Albo doesn't embarrass us in front of the guy and turn a vague possibility into some type of harsh reality.

 

[Value Collector]

Yes, agree the 50% seems unlikely - but “unfair tax systems” is rather subjective and some folk in the US would describe even our GST along those lines. But for superannuation, typically taxed at 15%, an increase to even 20% on US dividends and interest is not trivial. Fingers crossed Albo doesn't embarrass us in front of the guy and turn a vague possibility into some type of harsh reality.

Yeah, it’s subjective what he means by unfair, but considering we are already operating under a tax treaty that treats the USA fairly well hopefully we do ok.

Yes, certain investments would start to pull out of the USA pretty quickly, I believe they will feel the pinch.