Hi all

I'm a kiwi and curious how Australians are taxed on their overseas index funds / ETFs?  And how do you you take it into account in your early retirement plans?

I'm keen to understand how it compares to NZ - which is quite unfavorable :-(


Thank you

So in Australia, if you purchase and international ETF you are taxed on the dividends and then you pay a capital gain tax when you sell.  How much is the capital gains tax?

I was going to say the tax situation in NZ is actually comparatively favourable as long as you hold your international assets through an NZ-based platform.  No CGT and you aren’t subject to the reporting requirements and assumed 5% return. Either MoneykingNZ or MoneyHub go into quite a bit of analysis of the pros and cons of holding directly vs through an NZ-domiciled platform.

I know people here like to complain about the tax-burden but it’s actually quite advantageous for investors compared to income. 

option 4:  Use an investment vehicle that isn't subject to FIF i.e. "NZ domiciled funds and ETFs that invest in foreign markets e.g. Smartshares’ and Kernel’s international funds". That means you only pay tax on the dividends not on the capital gains.

https://moneykingnz.com/what-taxes-do-you-need-to-pay-on-your-investments-in-new-zealand/
https://moneykingnz.com/tax-on-foreign-investments-how-do-fif-and-estate-taxes-work/

I've looked through your post-history and given your income level and holdings, it would pay to talk this through with a proper tax advisor. Right now, your tax will be high because of your income, however once that fire-hose of cash isn't coming in AND if you structure your holdings with the advice of a properly credentialed investment advisor/accountant, then your income as far as the IRD is concerned is your dividend/interest income, which will be a significantly lower rate.

As an example and absolutely not as advice, since I am not earning income other than my dividends and interest, my tax rate [RWT and PIR] is somewhere between 10.5 and 17.5%. I can sell holdings to cover expenses but that's not counted as "income" other than in my head to make me feel ok about spending it. If I was in Australia, then yes I'd have the overall tax-free threshold for income tax but both dividends and capital gains for any holdings I sell would count towards my overall income tax level. Make sense?

TL:DR talk to an actual tax advisor. It's worth it.

Interesting, thanks for the info. I’ll be more accurate in future.