How Australian Shares Are Taxed for Non-Residents

Thinking of leaving Australia?

An increasing number of Australians are relocating overseas for a variety of reasons. If you plan to cease Australian tax residency, it’s essential to understand how your assets and investment income will be treated once you become a non-resident.

In this article, we break down how Australian shares are taxed after you exit the Australian tax system.

Franked Dividends

A franked dividend is a dividend paid from company profits that have already been taxed at the Australian corporate tax rate.

For individuals who are non-residents for Australian tax purposes, fully franked dividends are not subject to further Australian tax, and no withholding tax applies. However, non-resident taxpayers are not entitled to claim the imputation credits attached to these dividends, meaning the credit is effectively forfeited.

Because no additional Australian tax is payable, fully franked dividend income generally does not need to be reported to the ATO in an Australian non-resident tax return.

Unfranked Dividends

An unfranked dividend is a dividend paid from profits on which the company has not paid Australian corporate tax.

For non-resident Australian taxpayers, unfranked dividends are generally subject to withholding tax at a rate of 30%, unless a double tax agreement (DTA) applies. Many of Australia’s tax treaties reduce this withholding tax rate, commonly to 15%.

Want to Exit the Australian Tax System?

If you’re thinking about leaving Australia and exiting the tax system, getting it right from the start is critical.

We’ve created a practical blueprint for exiting the Australian tax system, covering both pre-departure and post-departure planning. It includes clear checklists, common traps to avoid, and the key steps needed to make a clean, compliant, and financially efficient exit.

Get the Exit Kit

Conduit Foreign Income

Conduit Foreign Income refers to income that is foreign-sourced, even though it is distributed to you by an Australian-listed company or investment vehicle.

Because the income retains its foreign source, it is not taxable in Australia once you are a non-resident.

No Australian withholding tax applies, and the effective tax outcome will depend on any tax paid in the original source country and the tax rules of your country of residence.

A Word on Exit Tax

Exit tax is a capital gains tax event that applies to assets that are not classified as Taxable Australian Property, such as shares listed on the ASX.

When you cease Australian tax residency, you are deemed to have disposed of these assets at their market value on the date you exit the Australian tax system, even though no actual sale has occurred.

Upon departure, the ATO provides two options:
– Pay the exit tax at the time you cease residency; or
– Defer the tax until the assets are ultimately sold.

Choosing between these options can have significant long-term consequences, particularly if asset values increase or your residency status changes again. As such, it’s critical to obtain professional advice before making this decision, as the financial ramifications can be substantial.

Next Steps

If you’re considering exiting the Australian tax system, it’s important to get advice early. Poor planning, or no planning at all, can result in significant and often unnecessary tax liabilities.

The decisions you make before you leave Australia can have long-term consequences for your investments, income, and overall tax position.

If you’d like tailored guidance on structuring your affairs correctly before becoming a non-resident, get in touch with our team.

We work with Australians relocating offshore to help them exit the tax system compliantly and position themselves for the next stage of their financial life.

Aaron Parslow

Aaron has been travelling to Southeast Asia for 20 years, these days based in Bangkok. With a background in business structuring, investment and taxation, Aaron always has his ear to the ground for new opportunities.