ETFs and tax statements

Q: I am preparing my Income tax return and I have distributions from Exchange Traded Funds (ETF) in the financial year. Will I receive a tax statement for the Financial Year?

A: Tax statements are typically sent out by ETF providers in July following the end of financial year in respect to ETFs that have paid a distribution in the Financial Year.

Tax statements are usually released via the applicable share registry or via mail if you have elected this method. It is important to confirm that the Share registry has your current contact details.

Once you have received your distribution data, you will be able to lodge your return. Alternatively, if you can wait a few weeks, Share Registries will pass your distribution details to the ATO to enable ATO pre-filling of data for your Tax return. Please ensure you check the accuracy of the data to ensure it reflects distributions received.

Distributions received will reflect dividends and earnings received by the underlying investments within the ETF. Some distributions may be from offshore investments and as foreign sourced income, will not have been subject to Australian tax.

If the income has been taxed overseas, the distribution may also contain a credit for the tax paid overseas. Depending on your individual circumstances, you may be able to claim an offset for tax paid overseas.

If an ETF’s portfolio includes companies that earn foreign source income, then your distributions from that ETF may include a foreign source income component, and possibly a foreign income tax offset. Details of the components of your distribution will be contained in the annual tax statement you receive for your ETF.

Your ETF’s distribution will be subject to income tax, regardless of whether you take it in cash, or participate in a dividend reinvestment plan (DRP).

If you participate in a Dividend Reinvestment Plan (DRP), it is important to keep records of each distribution and the cost base of each . When you dispose of your ETF units, you will need to calculate your capital gain/loss. This must also be calculated for each individual parcel of units you have bought, including those you received as part of a DRP. You need to know the date and allocation price for each distribution that was reinvested.

Share this post