Domicile: USA
What does tax domicile USA mean?
If you see the "Domicile - USA" note on the Best ETFs Australia website it means a fund/ETF is not registered in Australia for tax purposes. That is, the fund might be registered in the United States of America and may expose you to extra tax rules.
Investors who invest in a foreign domiciled fund may face added (foreign) legal risks, estate planning laws and taxes -- compared to funds or ETFs which have their domicile set to be Australia.
Imagine two ETFs:
- Both ETFs invest in international shares (e.g. from the US, Asia, Europe, etc.)
- "Fund A" has a domicile in Australia
- "Fund B" has a domicile in the USA
The Australian-registered fund, Fund A, will be taxed just like any other managed fund providing investments in Australia. Fund B will be subject to extra laws & tax rules.
If you invest in a fund or ETF that is not domiciled in Australia: it's likely you will have to fill in extra tax forms (such as the USA's W8-BEN form). Read the fund's PDS to better understand how tax impacts your fund/ETF.
Which domicile is best for me?
For Australian tax residents, if you have the choice of two ETFs that are exactly the same but one is Australia domiciled and the other is US domicile, consider the Australia domiciled ETF. Using Australia domiciled ETFs or funds simply means less paperwork, less direct exposure to foreign tax or estate laws, potentially fewer legal implications, and -- as a result -- fewer headaches.
The tax information on your chosen fund can change, so you should always read the Product Disclosure Statement (PDS) to learn where your chosen ETF is domiciled. Then consult a financial adviser and tax agent if you're confused. They will be able to tell you what this information means if you're still confused after reading the PDS.