Australia levies dividend withholding tax, distinguishing between "unfranked" and "franked" dividends. The franking system was set up to avoid double taxation (one at the company level when the profit is generated and then at the shareholder level when that profit is distributed as a dividend). Franked dividends are dividends distributed from profits that have been subject to Australian corporate income tax. Unfranked dividends are dividends distributed from profits that have not been subject to Australian corporate income tax (for example profits from a tax-exempt sale of an asset).

The Australian dividend withholding tax rate on “unfranked” distributions to foreign shareholders is 30%. “Franked” dividends are exempt from withholding tax.  

Double tax treaties and possible relief methods

Australian dividend withholding tax may be reduced, or in some situations even eliminated, under Australia’s double tax treaties. Generally, the ATO can refund excess non-resident tax withheld if you complete and send the Refund of over-withheld withholding application form within period established by the statute of limitations.

Statute of limitations

The statute of limitations for Australia is 4 years after the date on which the withholding tax was paid to the ATO (under certain exceptional circumstances the ATO may allow reclaims up to six years after the date on which the withholding tax was paid).

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