Non-resident and buying ASX shares

[bigt]

Hello,

I am a non resident for tax purposes this FY, I want to know if I can buy shares on the ASX without impacting this status. I cant find anything on the ATO website relating specifically to this (only CGT events). Does anyone herehave any knowledge of this? Thanks.

 

[Ferret]

Yes, you can.

You might also want to think about whether you choose to notionally dispose of any shares you already hold on the day of becoming non-resident and notionally reacquiing them when you become resident again. You will have to pay cgt on gains at the notional sale date, but would avoid a cgt liability for gains while you are non-resident. The ATO site used to have something about this.

 

[bigt]

Thanks for the reply ferret. When you say "notionally, does this mean you dont really sell the shares you hold at the time you become a nonresident, but "pretend" you have, and declare any capital gains (or losses) you WOULD have had if you REALLY sold them?

Sounds wierd, but plausible :

 

[Cink]

I am in a similar situation as you (Non-Resident) and buying ASX shares, i will be talking to a tax adviser in the coming weeks and will be happy to update you regarding our circumstances.

 

[Ferret]

Thanks for the reply ferret. When you say "notionally, does this mean you dont really sell the shares you hold at the time you become a nonresident, but "pretend" you have, and declare any capital gains (or losses) you WOULD have had if you REALLY sold them?

Sounds wierd, but plausible :

Yes, thats it.

 

[Ferret]

I used to think it was great holding ASX shares as a non-resident and not being up for cgt. The last year has seen more capital losses than gains, and the flip side to not paying cgt is that you also can't use any capital losses.

My other peeve at the moment is that most of the discounted capital raisings that have come up over the last few months have only been available to redidents with addresses in Aust or NZ. I haven't been able to participate and keep seeing my holdings diluted.

Another thing is that dividends are taxed differently for non-residents. You pay no tax on franked dividends, but you also don't get the franking credits. This is a plus if you were in a tax bracket above 30c in the dollar.

Most companies paying unfranked dividends these days pay the dividend as "foreign conduit income" or some words to that effect. It means the company is saying it has already paid tax in another country, so you don't have to pay any tax on the dividends, even though it was unfranked.

 

[theasxgorilla]

I used to think it was great holding ASX shares as a non-resident and not being up for cgt. The last year has seen more capital losses than gains, and the flip side to not paying cgt is that you also can't use any capital losses.

Ah yes, you probably want to time when you become a non-resident for tax purposes... or that being difficult, time your entry/exit from the market... in other words, try to increase your chances of making a profit.

I take the CGT excemption a step further, my tax status in Holland means I'm NOT liable to pay tax on my foreign source gains here either... what, me, gloating... maybe a little

 

[danno75]

I'm also a non resident for tax purposes and havent bought or sold anything since changing status (only recently) officially due to the new tax laws for expat workers that came in. If I had an IB account running out of a Singapore bank I gather I would be able to trade ASX as well as any other market that IB offered without any tax issues. Can someone confirm this for me?

 

[exgeo]

Not sure about the tax issues, but using IB you can take part in share purchase plans only available to Australian-addressed particpants, because the custodian IB uses is based in Australia.

 

[Ato]

Expats should check their country of residence tax laws to find out what, if anything, they are up for.

In Japan, for example, I am required to pay tax on any profit I make anywhere in the world to the Jap tax office as I'm a resident of Japan (not just tax on money I make in Japan). So, I pay non-residence tax in Oz of 10% on profit made, and then I need to pay the remainder in Japan; remainder being so that double taxation isnt occuring. The remainder depends on the tax bracket I'm in here. For my bracket, I pay 20% here, so that means I owe the Jap tax office 10% too (20% here minus the 10% non-resi in Oz).

Australia simply requires you pay the non-resi tax, I believe. For info on the country you are currently resident in, you'll need to contact that country's tax office. Each country will be different, I expect.

I know a couple of people who have never bothered informing the Jap tax office of their profits overseas. But personally I think that's pretty risky. Dont want the tax office to catch you with your pants down imho.

 

[Ferret]

I pay non-residence tax in Oz of 10% on profit made

Profit on what? Non residents don't have to pay Australian tax on fully franked dividends or CGT. The 10% applies to unfranked dividends, bank interest etc.

 

[Ato]

Profit on what? Non residents don't have to pay Australian tax on fully franked dividends or CGT. The 10% applies to unfranked dividends, bank interest etc.

Well, yes of course. As you say, stuff like fully franked divis already has the tax fully paid. Sorry if my post was unclear. My point was check your country of residence too.

 

[wildkactus]

If I had an IB account running out of a Singapore bank I gather I would be able to trade ASX as well as any other market that IB offered without any tax issues. Can someone confirm this for me?

Look at having the account held by a corporation somewhere offshore, just to be sure. the laws change to quickly, especially at the moment with the OZ gov trying to get as much money back as they can.
I would also speak with an expat specialist accountant about your situation as everyones is differnet. there is plently of these accountants in singapore

Happy Trading

 

[danno75]

Thanks for the info all. I will have to look into talking to someone in Singapore probably. I am in Laos which doesn't really have the strongest tax laws or accounting system but it is better to have the bases covered. I have an Etrade account and they have told me that I have to give them a copy of a bill with my Laos residential address on it and they will change my status to Non resident for tax purposes, then they will take 29% with holding tax of every thing I make i.e. profit from sales. This better for me for trading as capital gains for sales of shares before 12 months is 48% or something for Oz residents I believe. I can't claim capital losses but they do accumulate until I return to Oz on a permanent basis. I will have to enquire about the IB details purely for the brokerage savings, Etrade is over the top $33 each way + $8 for a conditional order to have a stop loss safeguard. I might still be able to run the IB account because I have a mailing address at my Mums place which I use for everything. I am only just getting ready to trade and am trying to get everything sorted before I start. Hopefully in 6 months or so I might be able to start trading with money if my trading plan works out all good on paper.

Cheers
Danno

 

[bloomy88]

If the Rudd government abolishes the section 23AG exemption for Australians working overseas can you still notionally dispose of your shares?