ETF tax in Australia: how ETFs are taxed, with worked examples

The two taxes

An Australian ETF is a trust. Trusts of this kind do not pay tax on their own account. Instead, everything the fund earns is attributed to unitholders each year, keeping its character: a franked dividend received by the fund reaches you as a franked dividend, a capital gain as a capital gain.

That gives an ETF investor two separate tax events to understand:

1. Every year: income tax on the distributions attributed to you.
2. When you sell: capital gains tax on the difference between what you receive and your cost base.

For reference, resident individual tax rates for 2026-27 are nil up to AUD 18,200, 15 percent to AUD 45,000, 30 percent to AUD 135,000, 37 percent to AUD 190,000, and 45 percent above that, plus the 2 percent Medicare levy. (In 2025-26 the lowest rate was 16 percent.)

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Tax on distributions

A distribution is rarely one thing. A typical Australian share ETF distribution contains franked dividends, unfranked dividends, a little interest, perhaps some foreign income, and in some years a capital gain the fund realised when the index changed. Each component goes to a different label in your tax return, which is why you use the annual statement and not the cash amount.

A worked example. You hold AUD 20,000 of an Australian share ETF. Over the year it pays you AUD 800 in cash, with AUD 240 of franking credits attached. Your taxable income rises by AUD 1,040: the cash plus the credits. At a 30 percent marginal rate plus 2 percent Medicare levy, tax on that is AUD 332.80. The AUD 240 of franking credits is then subtracted, leaving AUD 92.80 to pay on AUD 800 of income. An investor on a marginal rate below 30 percent would get some of the franking credits refunded.

Three rules catch people out:

• Reinvested distributions are taxable. The ATO is explicit that you declare distributions "even if you haven't received money from the ETF".
• Timing follows the fund's year, not your bank account. The June distribution lands in July. It is taxed in the year that ended on 30 June. Vanguard's June 2026 ETF distributions, for instance, were paid on 21 July 2026 and belong in 2025-26 returns.
• The 45-day rule. To claim franking credits you must hold the units at risk for at least 45 days, not counting the days of purchase and sale. Individuals whose total franking credits for the year are AUD 5,000 or less are exempt from the rule.

Reading the AMMA statement

Most ETFs are attribution managed investment trusts (AMITs), and their annual statement is the AMMA statement. Issuers release them from mid July through to September; Betashares, for example, says its statements are available in July and August. If you lodge your own return through myTax, wait. The ATO says most Australian ETFs supply data to pre-fill your return, and that data typically arrives by early September. Lodging on 2 July with estimates is how amended returns happen.

The statement has two halves. The first lists the income components and the tax return label each belongs at. The second is the capital gains section: discounted gains, other gains, and the gross-up. If the fund passes you a discounted capital gain, you double it, subtract any capital losses you have, and then apply your own 50 percent discount again. The statement does most of the arithmetic, and myTax does the rest.

At the bottom is a line most people ignore: the AMIT cost base net amount.

Capital gains when you sell

Selling ETF units is a CGT event. Your capital gain is the sale proceeds less your cost base, which is the purchase price plus incidental costs such as brokerage on both the purchase and the sale.

A worked example. You buy 200 units at AUD 80.00 with AUD 10 brokerage, so your cost base is AUD 16,010. Over three years the AMMA statements show net cost base increases totalling AUD 150, taking it to AUD 16,160. You sell all 200 units at AUD 100.00, paying AUD 10 brokerage, which is added to your cost base: AUD 16,170.

• Capital gain: AUD 20,000 less AUD 16,170 = AUD 3,830
• Held more than 12 months, so 50 percent discount: taxable gain of AUD 1,915
• At 37 percent plus 2 percent Medicare levy: tax of about AUD 747

Sell after 11 months instead and the taxable gain is the full AUD 3,830, with tax of about AUD 1,494. The 12-month line is the single most valuable date in an investor's calendar.

Which units did you sell? If you bought in several parcels, each parcel is a separate asset. The ATO lets you choose which parcels you are selling, provided your records can identify them. First-in-first-out is a common convention but it is not compulsory. Choosing the highest-cost parcels, or parcels older than 12 months, can legitimately change the tax bill. Capital losses can be offset against capital gains, or carried forward indefinitely, but cannot reduce other income such as salary.

The cost base adjustment

This is the part of ETF tax that nearly everyone gets wrong, mostly by not knowing it exists.

Sometimes the amount attributed to you for tax is more than the cash you received. You paid tax on income you did not get in hand, so your cost base goes up by the difference, and you will pay less CGT later. Sometimes the cash exceeds the taxable amount (the old "tax-deferred" distribution). Then your cost base goes down, and you will pay more CGT later.

The AMMA statement nets these into a single figure each year, the AMIT cost base net amount. The ATO's rule is that your cost base is adjusted by it at the end of each income year. Keep a simple spreadsheet per ETF: parcels, dates, costs, and each year's adjustment. After 15 years of statements, trying to reconstruct this at sale time is miserable. If the downward adjustments ever exceed your whole cost base, the excess is an immediate capital gain.

US-domiciled ETFs

Two groups of products fall here: US ETFs you buy through a broker with US market access (SPY, VOO, QQQ), and a handful that are cross-listed on the ASX but legally domiciled in the United States, the best known being Vanguard's VTS and VEU.

The differences:

• W-8BEN. You lodge this form through your broker or the registry to claim the Australia-US tax treaty rate. With it, US tax is withheld from dividends at 15 percent. Without it, up to 30 percent. The form expires after three calendar years.
• Foreign income and offset. You declare the gross dividend as foreign income and can generally claim a foreign income tax offset for the US tax withheld.
• No AMMA statement. These funds do not produce Australian tax statements. You work from dividend advices and convert to AUD yourself.
• US estate tax. The IRS requires an estate tax return where a non-resident dies holding more than USD 60,000 of US-situated assets, which includes shares in US-domiciled funds even when held through a nominee. Tax treaties can modify the result, but it is a genuine issue for larger holdings and a reason some investors prefer Australian-domiciled equivalents.

Australian-domiciled ETFs that invest in US shares (IVV, for example) handle the W-8BEN at fund level and send you a normal AMMA statement, with foreign tax offsets already calculated.

Investor, trader, or CFD trader

Everything above assumes you are an investor: you hold ETFs to earn income and long-term growth. The ATO distinguishes this from a share trader carrying on a business, judged by the purpose of the activity, its repetition and volume, whether it is organised in a business-like way, and the capital involved. A trader's gains are ordinary income with no CGT discount, and losses and costs are deductible against other income. Buying ETFs monthly does not make you a trader. Turning over your portfolio several times a week with a trading plan might.

ETF CFDs sit in a different category again. A CFD is not a unit in a fund; it is a derivative contract with a broker. Under TR 2005/15 the ATO expects CFD gains and losses will most often be on revenue account: gains are ordinary income, losses are generally deductible, and the CGT discount does not come into it. Set the two side by side. The investor above paid about AUD 747 on a AUD 3,830 gain after the discount. A CFD trader making the same AUD 3,830 pays about AUD 1,494 at the same marginal rate. On the other hand, a CFD trading loss can generally be deducted against other income, which a capital loss cannot. The mechanics of trading this way are in ETF trading in Australia, and the tax framework for CFD traders is set out in the forex and CFD tax guide.

ETFs in super and SMSFs

A complying super fund, including an SMSF, pays 15 percent on investment income in accumulation phase. It gets a one-third CGT discount on assets held at least 12 months, for an effective 10 percent on long-term gains. Income from assets supporting a retirement-phase pension is exempt. Franking credits are especially valuable here, because a 30 percent credit against a 15 percent or nil tax rate produces a refund. ETFs are administratively easy for SMSFs: one annual statement per fund and clean audit evidence.

Records to keep

• Contract notes for every purchase and sale
• Every annual tax statement (AMMA or otherwise), for as long as you hold the units and five years after you sell
• DRP statements, since each reinvestment is a separate parcel
• A running cost base per parcel, updated yearly for the AMIT adjustment
• W-8BEN confirmation and dividend advices for any US-domiciled holdings

Tools such as Sharesight automate most of this. A spreadsheet works if you keep it up.

Frequently asked questions