If you own shares in Apple, Microsoft, Tesla or any other overseas company, the capital gains tax rules are almost the same as for Australian shares — with one twist that catches nearly everyone out. Your gain is worked out in Australian dollars, converted at the exchange rate on the day of each transaction. That means you can owe Australian CGT on shares that made no profit at all in US dollars, and you can make a loss in Australian dollars on shares that rose in US dollars.
The good news: the 50% CGT discount still applies after 12 months, the US generally charges you no capital gains tax at all on the sale, and the Australia–US tax treaty stops most double taxation on dividends — provided your W-8BEN form is in place. This guide works through the full calculation with real 2026–27 figures, the dividend rules, the foreign tax offset, and the US estate-tax trap that no broker warns you about.
How the ATO taxes foreign shares: the short version
- Australian residents are taxed on worldwide income. A gain on US, UK or European shares goes on your Australian tax return exactly like a gain on ASX shares.
- There is no separate CGT rate. Your net capital gain is added to your taxable income and taxed at your marginal rate — 15%, 30%, 37% or 45% in 2026–27, plus the 2% Medicare levy.
- The 50% discount applies. Hold the shares for at least 12 months and an individual pays tax on only half the gain.
- Everything is converted to Australian dollars. The cost base is converted at the exchange rate on the purchase date; the sale proceeds are converted at the rate on the sale date. The ATO accepts the monthly average rate if it is a reasonable approximation of the daily spot rates, but the daily rate is the safe default.
- The US does not tax your capital gain. Non-resident aliens generally pay no US tax when they sell publicly traded US shares. Your only CGT bill is the Australian one.
- Dividends are different. US dividends are taxed in the US first (15% withholding with a valid W-8BEN, 30% without), then declared in full in Australia, with a foreign income tax offset for the US tax already paid.
2026–27 resident tax rates
Your discounted capital gain is added to your other income and taxed at these 2026–27 resident rates:
| Taxable income | Tax on this income |
|---|---|
| $0 – $18,200 | Nil |
| $18,201 – $45,000 | 15c for each $1 over $18,200 |
| $45,001 – $135,000 | $4,020 plus 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $31,020 plus 37c for each $1 over $135,000 |
| $190,001 and over | $51,370 plus 45c for each $1 over $190,000 |
On top of that, most residents pay the 2% Medicare levy. The low income tax offset (up to $700) can reduce the bill for lower earners, but it does not apply to the Medicare levy.
Step by step: working out the gain on foreign shares
The formula is the same as for any CGT asset. The only extra step is the currency conversion, done separately at each end of the deal.
1. Work out the cost base in the foreign currency. The five cost-base elements are the same as for Australian shares: the purchase price, plus incidental costs of buying (brokerage, transfer fees), plus costs of owning the asset, plus capital costs to increase or preserve its value, plus costs of defending your title. For most share investors that means purchase price plus brokerage.
2. Convert the cost base to AUD at the purchase-date exchange rate. Every element is converted at the rate that applied when that cost was incurred. If you bought in several parcels, each parcel has its own cost base and its own exchange rate.
3. Work out the capital proceeds in the foreign currency. That is the sale price minus the incidental costs of selling, such as brokerage and the SEC fee on US sales.
4. Convert the proceeds to AUD at the sale-date exchange rate. The CGT event happens on the contract (trade) date, not the settlement date — so use the rate on the day you traded, and the gain belongs in that financial year even if the cash lands later.
5. Subtract the cost base from the proceeds. A positive number is your capital gain; a negative number is a capital loss, which can only offset other capital gains (now or carried forward), never your salary.
6. Apply the 50% discount if you held the shares for 12 months or more. The discount applies to the gain after subtracting any capital losses. Companies do not get the discount; individuals and trusts do.
One point that confuses people: the currency movement is inside the capital gain. You do not calculate a separate foreign exchange gain while you hold the shares. The gain or loss on the currency is absorbed into the difference between the AUD cost base and the AUD proceeds. A separate forex event can arise only in the gaps — between converting your AUD to USD and actually buying, or between selling and converting the proceeds back to AUD. If you trade and convert promptly, there is usually nothing extra to report.
Worked example: Sarah’s US shares
Sarah earns a $100,000 salary and holds no other investments. Here is her full working for a US share trade across two financial years.
3 March 2026 — the buy. Sarah buys 100 shares in a US company at US$50 each: US$5,000, plus US$10 brokerage, for a total of US$5,010. The exchange rate that day is A$1 = US$0.65, so her cost base is US$5,010 ÷ 0.65 = A$7,707.69.
During the year — the dividends. The company pays Sarah US$120 in dividends. The US withholds 15% (US$18) because her W-8BEN is on file, and she receives US$102. For her Australian return she declares the gross dividend, US$120 ÷ 0.65 = A$184.62, and claims a foreign income tax offset of US$18 ÷ 0.65 = A$27.69 for the US tax already paid. At her 30% marginal rate the dividend costs $55.39 in Australian tax, less the $27.69 offset — $27.70 extra.
15 May 2027 — the sell. Sarah sells all 100 shares at US$80 each: US$8,000, less US$10 brokerage, for net proceeds of US$7,990. The exchange rate is now A$1 = US$0.60, so her proceeds are US$7,990 ÷ 0.60 = A$13,316.67.
The gain. A$13,316.67 − A$7,707.69 = A$5,608.98. Sarah held the shares for 14 months, so the 50% discount applies: A$2,804.49 is added to her assessable income. At her 30% marginal rate the CGT bill is A$2,804.49 × 30% = $841.35. Without the discount it would have been $1,682.69.
Notice how much of the gain came from the currency. In US dollars Sarah made US$2,980 (US$7,990 − US$5,010). In Australian dollars she made A$5,608.98 — nearly double — because the Australian dollar fell from US$0.65 to US$0.60 while she held the shares. The currency move is real, taxable profit, not a rounding difference.
The trap: a $0 US-dollar gain that still owes CGT
This is the question that fills the Whirlpool and r/AusFinance threads every tax time. Imagine you put US$10,000 into US shares and later sell for exactly US$10,000. In US dollars you broke even. But if the Australian dollar fell from US$0.70 when you bought to US$0.60 when you sold:
- Cost base: US$10,000 ÷ 0.70 = A$14,285.71
- Proceeds: US$10,000 ÷ 0.60 = A$16,666.67
- Capital gain: A$2,380.95 — on a trade that made nothing in US dollars
Held for more than 12 months, the discount halves it to A$1,190.48, but the bill is real either way. The reverse also happens: shares that rose in US dollars can show an Australian-dollar loss if the Aussie dollar strengthened while you held them. Your broker’s US-dollar performance figure tells you nothing about your Australian tax position. Always do the working in AUD, at both ends, at the rate on each transaction date.
US dividends: the 15% rate, the W-8BEN, and the foreign tax offset
Dividends are where most Australian investors overpay, and it is entirely avoidable. The US normally withholds 30% of dividends paid to non-residents. The Australia–US tax treaty cuts that to 15% — but only if your broker holds a valid W-8BEN form (Certificate of Foreign Status) for you. The form is usually completed once when you open the account and lasts three years; each broker needs its own copy.
On a $200,000 portfolio yielding 2%, that is US$4,000 of dividends a year. At 30% the US keeps US$1,200; at 15% it keeps US$600. That is US$600 a year — every year — for a form that takes ten minutes. Check your broker’s tax settings today; if no W-8BEN is on file, you have probably been overpaying since you opened the account, and the IRS will not volunteer a refund.
Two more dividend traps. First, a missing or expired W-8BEN can also trigger backup withholding on your sale proceeds — a slice of the full sale amount, not just your profit, held back until you claim it from the IRS. Second, dividend reinvestment plans are not tax-free. If your US dividends are automatically reinvested in new shares, the dividend is still assessable income in the year it was paid — and you may owe tax with no cash in hand to pay it. The new shares take a cost base equal to the dividend amount, so keep the DRP statements.
On your Australian return, declare the gross dividend converted to AUD at the rate on the payment date, and claim the foreign income tax offset for the US tax withheld. The offset is capped at the Australian tax payable on that foreign income — it can reduce the tax on those dividends to zero, but it cannot create a refund or offset tax on your salary. If the US withheld 30% because your W-8BEN had lapsed, you can still claim the full 30% as an offset, but only up to the Australian tax on that income; the excess is lost unless you reclaim it from the IRS.
The $60,000 US estate-tax trap
This is the risk almost no Australian article about US shares mentions, and it is the most expensive one in this guide. The US imposes estate tax on the US-situated assets of non-resident, non-citizen investors — and shares in US companies are US-situated assets. The exemption for a non-domiciled foreigner is just US$60,000, unchanged since 1988 and not indexed for inflation. Above that, rates run from 18% to 40%.
Take a $500,000 US share portfolio held until death. The taxable amount is $500,000 − $60,000 = $440,000, and the US estate tax on that is roughly $135,400 — before any Australian tax is even considered. Your executor must also file Form 706-NA with the IRS within nine months, and brokers routinely freeze the account until the IRS issues a transfer certificate, which can take six to nine months.
There is a fix, and Australians are luckier than most. The 1953 Australia–US estate tax treaty lets a non-domiciled Australian claim a pro-rata share of the full US citizen exemption — about US$15 million for 2026 — based on the share of their worldwide estate held in the US. If US shares are 20% of a $2.5 million worldwide estate, the pro-rata exemption is 20% × US$15 million = US$3 million, which covers the $500,000 portfolio entirely. But the treaty benefit is not automatic: the executor must disclose the worldwide estate on Form 706-NA and claim it. An alternative is to hold the US market through Ireland-domiciled ETFs instead of US-domiciled ones — the Irish fund is a non-US company, so its shares are not US-situated property at all, and the estate-tax exposure disappears while the underlying exposure stays the same.
Common mistakes with foreign shares
1. Using the US-dollar gain. Your broker’s profit figure is in USD. The ATO wants AUD at the rate on each transaction date. Re-do the working; the difference is often thousands of dollars.
2. Declaring the net dividend. The amount that hit your account is after US withholding. The ATO wants the gross amount, with the withholding claimed separately as a foreign income tax offset. Declaring the net figure understates your income and forfeits the offset.
3. Letting the W-8BEN lapse. The form expires after three years. Set a reminder; the 30% rate applies silently the moment it lapses.
4. Forgetting the tax year is set by the trade date. A sale on 29 June counts in the old financial year even if the cash settles in July. The same applies to the exchange rate: use the trade-date rate, not the settlement-date rate.
5. Assuming leaving Australia ends the tax. If you cease Australian tax residency, you are deemed to have disposed of your worldwide assets — including foreign shares — at market value on the day you leave, unless you elect to defer the gain. There is a narrow exception in the Australia–US treaty for people who move to the US before selling, but it needs careful timing and usually a private ruling.
6. Ignoring the 1 July 2027 CGT reform. From 1 July 2027, gains accruing after that date will be calculated on an indexed (inflation-adjusted) basis instead of the 50% discount, with a 30% minimum tax rate for most individuals. The reform applies to foreign shares just as it does to Australian ones. Gains accrued up to 30 June 2027 keep the discount treatment, so the timing of a planned sale in 2027 deserves a second look.
Tips for keeping foreign shares tax-simple
- Use one broker and one tracker. A portfolio tracker that records the AUD cost base and the exchange rate on every trade (Sharesight is the common choice) turns a dreadful EOFY job into a download.
- Keep every broker tax statement. Your broker’s annual tax summary lists dividends, withholding and sales in the foreign currency. The ATO receives the same data through its data-matching program, so anything you omit is likely to surface as an amended assessment plus interest.
- Check the W-8BEN every year at tax time. Three-year expiry, one form per broker.
- Consider ASX-listed exposure instead. An ASX-listed ETF that holds US shares gives you the same market exposure with Australian-domiciled tax reporting, franking-style simplicity and no W-8BEN or estate-tax exposure. It is worth comparing before your next buy.
- In super, use the right form. An SMSF holding US shares files a W-8BEN-E rather than a W-8BEN. The fund pays 15% tax on the dividends with a foreign tax offset, and 10% effective tax on discounted capital gains — but the offset can only reduce the fund’s tax to zero, never below it.
Frequently asked questions
Do I pay US capital gains tax when I sell US shares?
Generally no. The US does not tax non-resident aliens on gains from selling publicly traded US securities, provided you were not present in the US for 183 days or more in the year. Your Australian CGT bill is the only one — which is exactly why the AUD conversion matters so much.
Does the 50% CGT discount apply to foreign shares?
Yes, for individuals who held the shares for at least 12 months. The discount is an Australian rule and applies to all CGT assets, wherever they are located. Companies do not get the discount.
What if I hold US dollars in my broker account between trades?
The currency itself can create a separate tax event. While your shares are held, the FX movement is inside the capital gain. But if you convert AUD to USD and wait before buying, or sell and leave the USD sitting before converting back, the gain or loss on the currency over those gaps can be a separate foreign exchange event. Trade and convert promptly to keep it simple.
What about UK, European or Asian shares?
The Australian rules are identical: convert to AUD at each transaction date, apply the discount after 12 months, declare gross dividends and claim the foreign tax offset. The withholding rates differ by treaty — 15% for the UK, 10% for Japan, 15% for most of Europe — and the estate-tax trap is specific to the US, so check the treaty for the country you are investing in.
I am a foreign resident living in Australia temporarily. Do I pay CGT on US shares?
If you are a foreign tax resident, Australia generally does not tax your US share gains at all, because they are not taxable Australian property. But the moment you become an Australian resident, you are deemed to have acquired all your CGT assets at their market value on that day — that becomes your cost base for Australian purposes, so keep the valuation.
What happens to my foreign shares under the 1 July 2027 CGT reform?
The same as Australian shares. Gains that accrue from 1 July 2027 will be worked out on an inflation-indexed basis rather than with the 50% discount, and a 30% minimum tax rate will apply to most individuals. Gains accrued up to 30 June 2027 keep the current discount treatment, and the finer details are still being finalised — so treat any sale planned for 2027 as a decision worth modelling both ways.
The bottom line
Foreign shares are taxed like Australian shares, but the currency does the quiet damage. Convert every figure to Australian dollars at the rate on the day it happened, claim the 50% discount after 12 months, keep your W-8BEN current so your dividends are withheld at 15% instead of 30%, declare the gross dividend and claim the offset, and do not let a US share portfolio grow past US$60,000 without an estate plan — the treaty or an Ireland-domiciled fund can fix that one, but only if someone acts before it matters. Get those five things right and the tax side of investing overseas is entirely manageable; get them wrong and the bill arrives in dollars you never thought you had made.
Use the CGT calculator to model the gain on your own trades, and read the CGT on shares guide, the cost base guide and the foreign income tax guide for the rules behind each step. For the official word, see the ATO’s guidance on cost base of an asset and conversion of foreign amounts.
