In this article:
Tax on foreign dividends, investments and CGT
Your shares and your company's profits are taxed separately
Paying a dividend before you return
The new cost base for eligible assets
Portfolio Checklist
Australian property you kept while overseas
Changes from 1 July 2027
Illustrative example: a Singapore holding company
Dividends Before & After
Checklist before you return
Frequently Asked Questions
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Tax on foreign dividends, investments and CGT
When you become an Australian tax resident, many of your overseas investments and private business operations receive a new cost base for capital gains tax. Business owners often incorrectly assume this means everything built up overseas is now outside the Australian tax system. Getting Australian written advice on each asset is important to position your affairs moving forward.
Three things need attention: profits still held inside your overseas company, investments the new cost base does not cover or does not help, and Australian property you kept while you were away.
Your shares and your company's profits are taxed separately
The new cost base applies to your shares in the company. It does not apply to the profits the company holds – but the profits reinvested can affect the cost base. Those profits are taxed when they reach you as a dividend.
An ordinary dividend paid by a foreign company after you become an Australian resident is generally included in your assessable income, even though the profit was earned while you lived overseas. Rules prevent double taxation of amounts previously attributed to you under the controlled foreign company rules (Part 3). Overseas dividends carry no Australian franking credits. At the top personal rate, including the Medicare levy, the tax can be 47% of the dividend. A credit is available for foreign tax withheld, but many countries withhold little or none. Further, the underlying tax paid by the company prior to the dividend being being paid does not reduce the Australian tax position.
Winding up the company after you return does not necessarily convert retained profits into tax-free capital. Section 47 can treat part of a liquidator’s distribution as a dividend, including amounts representing certain company income.
Paying a dividend before you return
Paying a dividend while you are clearly a non-resident can avoid Australian tax on it. That depends on residency not having already started (Part 1).
Other points need checking first:
- Retained profits are not the same as cash. The company may not have the money to pay.
- The company must (normally) remain solvent and comply with its own country’s company law.
- The foreign tax cost of the dividend and when it is paid, if any.
- Lending the money back to the company gives it cash again, but also a liability to you. It does not restore the value of your shares.
The valuation of your shares at the residency date must reflect any dividend paid before it.
The new cost base for eligible assets
When you become a resident, your assets are treated, for tax purposes, as purchased at their market value at that time (section 855-45 of the Income Tax Assessment Act 1997). Gains that accrued while you lived overseas are generally not taxed in Australia when you later sell. The rule applies asset by asset. For a share portfolio, that means parcel by parcel.
The rule does not apply to Australian assets you already own, such as Australian real estate, or acquired before 20 September 1985, or to assets you chose, when you left Australia, to keep within the Australian tax system. It applies to assets you own personally. Assets held by an overseas company or trust follow different rules (Part 3).
The new cost base must be supported by evidence of market value as at the residency date. For large holdings, we recommend an independent valuation. It is easier to support your deemed tax acquisition price when the valuation is prepared close to the date and the evidence behind it is kept. Westcourt can coordinate that work with a valuer.
Your investment portfolio
From your residency date, the income from your investments is taxable in Australia, with a foreign income tax offset for foreign tax paid. The offset is limited to the Australian tax on that income, and any excess foreign tax is lost. How each investment is treated on arrival depends on what it is.
Each overseas fund and policy should be reviewed against its documents before you return. The name used overseas does not decide the Australian treatment.
Australian property you kept while overseas
The main residence exemption is generally not available if you are a foreign resident when the CGT event happens, subject to limited exceptions and the usual main residence conditions. For an ordinary sale, the CGT event happens when the contract is signed, not at settlement. A contract signed while you are a foreign resident can cost the exemption even if settlement happens after your residency starts.
The 50% CGT discount is reduced for periods after 8 May 2012 when you were a foreign resident. Also, after you become a resident the CGT discount will stop 30 June 2027.
On a sale by a foreign resident, the purchaser must generally withhold 15% of the price and pay it to the ATO. There is no minimum property value for contracts from 1 January 2025. A foreign resident vendor cannot use a clearance certificate but can apply for a variation where the circumstances justify it. A resident vendor needs a clearance certificate to avoid withholding.
From 1 July 2027 resident individuals will apply cost base indexation and a minimum tax rate on real capital gains and the 50% CGT discount will stop accruing. Exceptions and transitional rules apply, and some depend on your residency history. In August 2026 Treasury consulted on further amendments, including for people who are Australian residents for only part of the time they own an asset.
From 1 July 2027, separate rules limit the use of rental losses from certain residential property investments acquired after 7.30 pm AEST on 12 May 2026, subject to grandfathering and exceptions including qualifying new residential dwellings.
Any disposal or rental property decision near or after 1 July 2027 should be modelled with your full residency history. Foreign pensions and super are covered in Part 4.
Illustrative example: a Singapore holding company
Let’s take the case of an Australian citizen who has lived in Singapore for ten years, built a great business, and is clearly a non-resident until the residency date. The company is worth $5 million: $3 million of cash from retained profits and a business worth $2 million. There is no foreign tax on the dividend. The owner holds the shares personally, on capital account. The company remains a foreign resident (Part 3), the valuations are supportable, and no other cost base adjustments or special rules apply.
In the dividend-after-residency scenario, the capital loss cannot be used against the dividend. The order of the two transactions decides most of the tax cost.
Checklist before you return
- List each company, trust, fund, policy and asset, with its owner, original cost and current value.
- Identify which investments get a new cost base, and which are taxed as income.
- Review each overseas fund and life policy against its documents.
- Confirm the company's cash position, not just its retained profits.
- Test dividend timing against the residency timeline in Part 1.
- Arrange valuations at the residency date that reflect any prior dividend.
- Model any Australian property sale by contract date, including the 2027 changes.
FAQ’s
Generally not on foreign assets you own personally. Australian property, many bonds and some life policies are different.
Generally yes, if paid after you become a resident, whenever the profits were earned. Amounts already taxed to you under the CFC rules are generally not taxed again. Sometimes these dividends can be tax free as well when paid from a listed country.
Not necessarily. Section 47 can treat part of a liquidation distribution as a dividend.
Already back in Australia?
The value of your shares and investments at your residency date still needs to be established, and future dividends and sales still need to be planned. We can model them before you act.
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Talk to us before the move
Planning to return to Australia? Our pre-return tax planning review maps your residency date, overseas entities, investments and pension arrangements before irreversible transactions occur. Before a dividend, sale contract or valuation is settled, ask us to model the alternatives and their order.
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