US-Listed ETFs for Australian Residents: Withholding, the Foreign Income Tax Offset, Super and US Estate Tax

Published 3 November 2026 by Steffan Kharmaaiarvi, founder

For US-listed ETFs held by Australian residents, the comparison with an Australian-domiciled or Irish-domiciled fund comes down to four things: the US withholding on dividends, whether Australia gives credit for it, whether the holder is an individual or a super fund in accumulation or pension phase, and US estate tax on a non-US person's US assets. The answer is not the same for every holder. This note sets out the rules, an illustrative worked example across three holders, and what Borderfolio for Advisors computes. It is decision support for a professional conversation, not tax or investment advice.

US withholding: 15% with a W-8BEN, 30% without

The IRS states that most US-source income received by a foreign person is subject to US tax of 30%, reduced where a tax treaty applies. Article 10(2)(b) of the Australia–US tax treaty, as amended by the 2001 protocol, limits US tax on portfolio dividends paid to an Australian resident to 15% of the gross dividend (5% for a company holding at least 10% of the voting power). The IRS treaty table shows the same 15%.

The reduced rate depends on paperwork. Form W-8BEN is how an individual claims a reduced rate of, or exemption from, withholding; the IRS instructions warn that failing to provide one when requested may lead to withholding at 30%. A W-8BEN generally remains in effect until the last day of the third calendar year after it is signed, so a form signed in 2023 lapses at the end of 2026.

The foreign income tax offset, and its limits

An Australian resident includes the gross US dividend in assessable income and can claim a foreign income tax offset (FITO) for the US tax paid on it (s770-10 ITAA 1997). Three limits matter:

• Only correctly imposed tax counts. The ATO's FITO guide says foreign tax must be imposed in accordance with any tax treaty; its example limits the offset to the treaty rate and sends the taxpayer to the foreign tax authority for the excess. Without a W-8BEN, the extra 15% is a refund claim against the IRS, not an Australian offset.
• It is non-refundable. The offset reduces Australian tax; it does not create a refund. Above A$1,000 of foreign tax in a year the client has to work out an offset limit, and any excess above the limit is lost.
• Only tax on assessable income counts. Under s770-10(1) foreign tax counts only if paid on an amount included in assessable income. Exempt income gives no offset.

Tax passed through a trust in which the client is a beneficiary can count as tax the client paid, according to the ATO guide. An Australian-domiciled ETF that holds US shares reports the foreign income and the foreign income tax offset on its AMMA statement, and that figure goes on the return.

Super: an offset in accumulation, a final cost in pension phase

• Accumulation phase. A complying fund pays 15% on its assessable income. The US 15% is creditable against that 15%, so with a W-8BEN in place a US dividend typically bears about 15% in total.
• Retirement phase. Income from assets supporting a retirement-phase income stream is exempt current pension income. Because the income is exempt, the US 15% cannot be offset: it is a final cost.

Irish-domiciled funds

An Irish fund that holds US shares is not paid US dividends at the Australian treaty rate; the US–Ireland treaty also sets 15% on portfolio dividends (IRS treaty table). That withholding happens inside the fund. It is not tax withheld from the client, so in Borderfolio's model it is a cost of the fund that the client cannot offset in Australia. Check the fund's legal form and its Australian tax treatment before relying on any comparison.

An illustrative worked example

The figures are invented to show the arithmetic. US shares held through a US-listed ETF pay A$10,000 of gross dividends in a year. A W-8BEN is on file, so A$1,500 is withheld. The comparison fund is an Irish ETF holding the same shares: it suffers the same A$1,500 inside the fund and pays out A$8,500, taxed in Australia as ordinary income (an assumption). Fund fees and currency movements are left out. The individual is on the 2026–27 top rate, 45% plus the 2% Medicare levy.

• Individual, US-listed. Tax 47% × 10,000 = A$4,700, less the A$1,500 offset = A$3,200. Kept: 10,000 − 1,500 − 3,200 = A$5,300.
• Individual, Irish. 47% × 8,500 = A$3,995 with no offset. Kept A$4,505, A$795 less than the US-listed fund.
• Accumulation. 15% × 10,000 = A$1,500, fully offset. Irish: 15% × 8,500 = A$1,275. Kept A$8,500 against A$7,225.
• Retirement phase. Income exempt either way; the A$1,500 is a final cost in both. Kept A$8,500 in both.
• Without a W-8BEN. The individual has A$3,000 withheld, but only A$1,500 counts towards the offset. Australian tax is still A$3,200, so the client keeps A$3,800 until the extra A$1,500 is recovered from the IRS.

For an Australian resident who can use the offset, the Irish wrapper keeps less of the dividend in this example, not more. The difference disappears in pension phase. A missing W-8BEN costs more than either choice of domicile.

US estate tax on US-situs assets

A client who is neither a US citizen nor US-domiciled can owe US estate tax on assets situated in the US. The IRS Form 706-NA instructions treat stock of corporations organised under US law as US-situated, set a filing requirement when US-situated assets exceed USD 60,000, and give a unified credit of USD 13,000 (IRC s2102(b)(1)). US-listed ETFs organised as US corporations fall under that stock rule; Australian- and Irish-domiciled funds are not US corporations.

Australia is on the IRS list of estate tax treaty countries. The 706-NA instructions name Australia among the treaties containing provisions to which IRC s2102(b)(3)(A) applies; under that section, where a treaty requires it, the credit is the US applicable credit amount multiplied by the share of the worldwide estate situated in the US. Whether the treaty applies to a given estate needs specialist US advice.

What Borderfolio shows

• Withholding per holding. US-domiciled holdings carry 15% with a W-8BEN on file and 30% without; home relief is capped at the treaty rate, so the excess shows as reclaimable from the IRS, not creditable. The W-8BEN renewal date is a Cross-Border finding.
• Super wrappers. Accounts set as super in accumulation phase are taxed at 15% with the US withholding creditable; retirement phase at 0% with the US withholding a final cost.
• The Irish comparison. For each US-domiciled position the engine shows the change in dividends kept after all tax if it were held through an Irish fund, never the gross withholding as a saving. Scenarios compare a proposed switch after tax and fund fees.
• Estate screen. US-situs holdings are converted to USD and checked against the USD 60,000 threshold.

Not modelled: the Australia–US estate tax treaty (the screen applies the statutory threshold and says so), US estate tax itself, the FITO limit above A$1,000, the foreign tax inside an Australian-domiciled fund (use its AMMA statement), Division 296, and the Australian tax treatment of a particular Irish fund beyond the assumption above. Australian residence has no default dividend rate: after-tax figures need the client's marginal rate on the profile. See tax wrappers and cross-border findings.

Sources: US Treasury, Australia–US treaty protocol (2001), Article 10, IRS, tax treaty table 1, IRS, NRA withholding, IRS, Instructions for Form W-8BEN, IRS, Instructions for Form 706-NA, 26 USC 2102, ITAA 1997 s770-10, ATO, when a FITO applies (2026 guide), ATO, myTax 2026 foreign income tax offset, ATO, how SMSFs are taxed, ATO, exempt current pension income, ATO, AMMA statement example, ATO, resident tax rates.

Frequently asked questions

What US withholding applies to an Australian resident's US dividends?

15% of the gross dividend under Article 10 of the Australia-US tax treaty, if the broker holds a valid W-8BEN. Without one, the IRS warns that withholding may be at 30%.

Can an Australian resident claim the US withholding back?

As a foreign income tax offset against Australian tax on the same dividend, up to the 15% treaty rate. The offset is non-refundable, and tax withheld above the treaty rate has to be recovered from the IRS, not offset in Australia.

Is US withholding a cost for an SMSF in pension phase?

Yes. Income supporting a retirement-phase income stream is exempt, and foreign tax counts towards the offset only if paid on assessable income, so the 15% is a final cost. In accumulation phase it offsets the fund's 15% tax.

Do Australians face US estate tax on US ETFs?

A non-US person's US-situated assets, including stock of US corporations, can be subject to US estate tax; the IRS requires Form 706-NA when they exceed USD 60,000. Australia has an estate tax treaty with the US that can change the credit, which needs specialist advice.

Not tax advice. This article is general information for financial advisers, current as at 3 November 2026. Confirm each client's position with a registered tax agent or lawyer before acting.