A 2025 Guide to ATO Dividends and Distributions
Published on August 6, 2025 by Lee at Taxtallee
For many Australian investors, dividends and distributions are the lifeblood of their portfolio, providing a steady stream of income. However, when tax time rolls around, this income brings with it a unique set of rules that can be confusing. Understanding the difference between franked dividends, foreign income, and trust distributions is crucial for accurate reporting and tax optimisation.
This guide will break down the essentials for the 2025 tax year, referencing the latest Australian Taxation Office (ATO) guidelines to ensure you're prepared.
Standard Australian Company Dividends
When you own shares in an Australian company, any profits distributed to you are called dividends. Your dividend statement is the key document here, and it contains several important figures.
As the ATO notes in its myTax 2025 Dividends guide, your statements will show "amounts of franked and unfranked dividends, amounts of franking credits, [and] tax file number (TFN) amounts withheld from unfranked dividends."
Decoding Your Dividend Statement
- Franked Amount: This is the portion of the dividend on which the company has already paid Australian tax.
- Unfranked Amount: This portion has not had Australian company tax paid on it. You will pay tax on this at your marginal rate.
- Franking Credits: These are attached to the franked portion of your dividend. They represent the amount of tax the company has already paid on your behalf. You must declare the franking credits as income, but you can then claim them as a credit to reduce your overall tax bill.
- TFN Withholding Tax: If you haven't provided your Tax File Number (TFN) to the company, they are required to withhold tax from the unfranked portion of your dividend. This is also claimable as a credit.
The 45-Day Rule: A Crucial Catch
You can't just buy shares before a dividend is paid and sell them straight after to harvest the franking credits. The ATO requires you to hold the shares "at risk" for at least 45 days (or 90 days for certain preference shares) to be eligible to claim the franking credit.
Distributions from Managed Funds & ETFs
This is where things get more complex. Unlike a simple dividend from a single company, a distribution from a managed fund or ETF is a bundle of different income types. The fund does the buying and selling of assets throughout the year, and it passes on the tax consequences to you, the unitholder.
The ATO clarifies that if you receive income from a managed fund, such as an ETF, you should complete the managed funds section of your tax return. Your statement will break down the distribution into various components.
- ATO: myTax 2025 Managed funds
Your annual tax statement (often an AMMA statement for an Attribution Managed Investment Trust) will have many labels (like 13U, 13C, 18H) that correspond to specific sections of the tax return. These can include capital gains, foreign income, and other components alongside regular dividend income.
(We'll be publishing a more detailed explainer on how to read and process your AMIT and annual managed fund statements soon!)
Foreign Dividends
If you own shares in international companies, any dividends you receive are considered foreign income. These are handled differently from Australian dividends.
The ATO's guide on Other foreign income states that if you are an Australian resident, you must declare your assessable foreign income, even if you paid tax on it in the foreign country.
Key points for foreign dividends:
- Currency Conversion: You must convert all foreign income and taxes paid into Australian dollars (AUD) using the exchange rate at the time the dividend was paid or credited to you.
- Foreign Income Tax Offset (FITO): If you've already paid tax on the dividend in another country, you may be able to claim a tax offset in Australia to prevent being taxed twice on the same income.
From Statements to Strategy with taxtallee
Juggling dividend statements, AMMA statements, and foreign currency conversions is a significant administrative burden. It's easy to make mistakes, and even easier to miss opportunities for optimisation.
Taxtallee is designed to eliminate this complexity.
- All-in-One Tracking: We handle local dividends, foreign dividends (with automatic currency conversion), and complex trust distributions in one place.
- Annual Statement Entry: Our 'Annual Tax Statement' tool allows you to easily input the various components from your ETF and managed fund statements, ensuring every figure is allocated correctly.
- Tax-Ready Reports: At the end of the year, generate a comprehensive Taxable Income Report that summarises all your investment income, ready for you or your accountant.
Stop drowning in paperwork and start focusing on your investment strategy. Let taxtallee handle the details.