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I recently sold some shares in ...

I recently sold some shares in Australia, do I have to pay tax on my profits?

Under Australian Tax Laws, if you are a non resident for tax purposes (which basically means that you are living permanently out of Australia), then any profits made on publicly traded shares are not

Under Australian Tax Laws, if you are a non resident for tax purposes (which basically means that you are living permanently out of Australia), then any profits made on publicly traded shares are not taxable at all.

This is great news for any expatriate, as you can use share investment as a means to build up a savings pool while you are overseas, completely free of Australian tax.

You need to be wary if you had owned the shares prior to your departure from Australia.  Under Capital Gains Tax rules, you are deemed to have disposed of your Australian investment assets at the market value on the date of departure.

This means that any profits, or losses, up to the time you left Australia need to be brought to account in the tax return in your year of departure. Once this is done, all future profits become tax free.

It is possible to make a deferral of any tax payable by a written declaration in that return electing to have capital gains tax on the eventual sale instead.  You should be cautious of doing this, as it will include the profit both while in Australia and the duration of time abroad.

In most cases this is not in your best interest, as having the ongoing profits free of tax is usually a preferred option.

However, if a substantial tax bill may arise, deferral can be wise if you are in fact able to build up some tax losses on your Australian property investments, which can then be used to offset the capital gain on the shares when eventually sold.Due analysis is required to establish the best option for you, as whichever option is chosen, it can not be changed later.

Regardless of which option you choose, any dividends you may receive after your date of departure are free of income tax.  If the dividend is “fully franked” then no tax issues occur.  If they are unfranked, then they may be subject to a Withholding Tax.

Franking simply means that the company has paid corporate income tax prior to declaring the dividend.

Saving during your time as an expatriate is essential, and having shares tax free in Australia may well be a further incentive to ensure that you wisely accrue capital whilst abroad.

All information provided is of a general nature only and does not take into account your personal financial circumstances or objectives. Before making a decision on the basis of this material, you need to consider, with or without the assistance of a financial adviser, whether the material is appropriate in light of your individual needs and circumstances. This information does not constitute a recommendation to invest in or take out any of the products or services provided by SMATS Services (Australia) Pty Ltd or Australasian Taxation Services Pty Ltd.

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