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 further information, see the fact sheet Foreign income exemption for temporary residents available on our website.
If you are a shareholder of a New Zealand 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, go to the 'Businesses home page' on our website and then click on 'Trans-Tasman imputation'.
Non-resident companies, other than certain New Zealand 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 19Foreign source income and foreign assets or property on your Tax return for individuals (supplementary section) 2007. 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 credit 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 tax credit. See question 19 in TaxPack 2007 supplement and the publication How to claim a foreign tax credit 2007 (NAT 2338-6.2007).
Emma Citizen has shares in a company resident in the United States. 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. (Note: All amounts are in Australian dollars.)
When she fills in her Australian tax return, Emma should include $400 at M item 19 on her tax return (supplementary section) and she may be able to claim a foreign tax credit of $60 at O item 19.
Dividends denominated in a foreign currency
This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.
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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 the fact sheet Foreign exchange (forex): the general translation rule (NAT 9339), available on our website.
Last modified: 28 Jun 2007QC 27900