Choose IVV instead of VTS! Here’s how it works: Certain companies issue stock that stipulates its dividends—which are a kind of payment that goes to shareholders — will be paid, instead of cash, in the form of more stock. The tax rate on qualified dividends is 0%, 15%, or 20%, depending on an investor's taxable income and filing status. Your ETF’s distribution will be subject to income tax, regardless of whether you take it in cash, or participate in a dividend reinvestment plan (DRP). A ‘full or partial’ Distribution Reinvestment Plan (DRP) means the ETF or managed fund allows you, the investor, to take none, some or all of your monthly, quarterly, half-yearly or yearly distributions as new units in the ETF/fund. The combination of the USA taxation issues and the lack of a dividend reinvestment plan makes VTS an unattractive ETF. Once enrolled, your ETF dividends will be automatically reinvested. Each share (or parcel of shares) acquired in this way – on or after 20 September 1985 – is subject to CGT. you need to declare all your dividend income on your tax return, even if you use your dividend to purchase more shares - for example, through a dividend reinvestment plan. This information can retroactively modify your cost base and taxable dividend income, making your tax lodgement difficult. This ETF provides high monthly distributions and the opportunity for capital gains by investing in an actively managed portfolio of Global Real Assets companies (primarily real estate, utilities, infrastructure, resources) selected by Brompton, complemented by a proprietary covered call options program to enhance monthly income. From there you can add in your TFN for further tax purposes on dividends, as well as updating your information as mentioned above. There is no guarantee that a dividend will be declared, or that if declared, the amount of any dividend would remain constant or increase over time. Gross dividends are the sum total of all dividends received, including all ordinary dividends paid, plus capital-gains and nontaxable distributions. Tax consequences of dividends may vary between investors as taxpayers. Do not ignore this letter! Generally, ETFs aim to track as closely as possible the performance of a given index or asset class. TD Exchange-Traded Funds Distribution Reinvestment Plan 1. the costs you may be able to claim as tax deductions include management fees, specialist journals and interest on money you borrowed to buy the shares. However, this is still bad news for most investors. 1 Day NAV Change as of 03-Dec-2020 -4.38 (-0.88%) Fees as stated in the PDS Management Fee: 0.04% In the second half of 2018 this fund was converted into an Australian domiciled iShares ETF, removing the need to complete U.S. tax forms known as “W-8BEN” forms. Dividend reinvestment plans offer shareholders the opportunity to use their dividend to "purchase" more shares in the company (versus receiving a cash payment). This is clearly marked. Essentially this is a discounted purchase of new shares when you're dividend comes out. Tax on distributions and capital gains applies to ETFs, just as it does with shares, and there may be different tax implications for investing in international ETFs. Dividend exchange traded funds are on a hot streak this year. If you’re looking for dividend-paying ETFs to invest in, you can use PFF and DTD as starting points, or do your own research on other ETFs that pay high dividends. Subtract any withholding tax; 3. Also, it cannot be on the unqualified dividend list and it must be paid by a U.S. or qualified foreign corporation. If you hold an ETF for more than a year, then you will pay capital gains tax. Many investors favor DRIPs because of their ease, low-to-nonexistent fees and ability to strengthen returns over a long time horizon. Tax obligations for ETF dividends depend on whether or not they’re qualified or unqualified dividends. Degree of Participation 4.1 Full or partial participation Participation in the Plan must be in full. Qualified dividends and unqualified dividends. VTS does not have a dividend reinvestment plan available, but IVV does; Recommendation: IVV is the clear winner here. The cost base of the new shares includes the price you paid to acquire them – that is, the amount of the dividend. In your case, Nathan, your question about a Dividend Reinvestment Plan or DRIP is a good one, but as a tax reduction strategy, it is not. Note: A dividend ETF is a special type of ETF which consists of dividend-paying stocks and usually tracks a dividend index like the S&P/ASX Dividend Opportunities Accumulation Index. A dividend reinvestment plan does just what its name suggests: It reinvests dividends paid by a mutual fund, stock or ETF into more shares or units of that same mutual fund, stock or ETF. No investment is bulletproof. Dividend Period Ending Payment Date Cash Dividend (cents per unit, AUD) Part subject to interest withholding tax (cents per unit, AUD) Part subject to dividend withholding tax (cents per unit, AUD) Part subject to fund payment withholding tax (cents per unit, AUD) Income year to which the dividend relates; 30-Jun-20: 24-Jul-20: 51.000000: 0.362900: 2.227100: 3.952400: 2020 ETFs—exchange-traded funds—are taxed in the same way as its underlying assets would be taxed. For capital gains tax (CGT) purposes, if you participate in a dividend reinvestment plan you are treated as if you had received a cash dividend and then used the cash to buy additional shares. As an ETF, the first thing you want to look at is the expense ratio. Introduction ... Plan – means the TD ETFs’ Distribution Reinvestment Plan described herein. In order for an ETF dividend to be taxed as qualified, the equity in the fund paying the dividend must be owned by the investor for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. Identifying when shares or units are acquired, Managed investment fund (trust) distributions, Non-assessable payments in relation to shares and units, Company non-assessable payments (CGT event G1), Trust non-assessable payments (CGT event E4), AMIT non-assessable payments (CGT event E10), Rights and options to acquire shares or units, Work out the correct treatment of rights or options, Takeovers and mergers, scrip-for-scrip rollover, Examples of how section 45B of the ITAA 1936 applies to demergers, Demergers: Sale of pre-CGT shares in a demerged entity, Using the discount method if you sell your shares after the demerger, Investments in a company in liquidation or administration, CGT listed investment companies concession, Determining a beneficiary's share of a trust's capital gain, Calculating a partial exemption - inherited dwelling, Extensions to the two-year ownership period, Consequences of rollover applying or not applying, Calculating your capital gain or loss - marriage or relationship breakdown, Basic conditions for the small business CGT concessions, Partner in a partnership - using the small business entity test, Continuing time periods for active asset test for involuntary disposals, Modified active asset test for CGT event D1, Extra conditions if the CGT asset is a share or trust interest, Small business 50% active asset reduction, Keeping records for CGT small business concessions, Small business concessions in prior years, Foreign residents and temporary residents, CGT discount for foreign resident individuals, Foreign resident capital gains withholding payments, Indirect Australian real property interests, CGT and foreign exchange gains and losses, Foreign residents and main residence exemption, Westfield Group - takeover by Unibail-Rodamco SE (2018), Key events for Australian shareholders 2015-16, Key events for Australian shareholders 2014-15, Key events for Australian shareholders 2013-14, Key events for Australian shareholders 2012-13, Key events for Australian shareholders 2011-12, Key events for Australian shareholders 2010-11, Key events for Australian shareholders 2009-10, Key events for Australian shareholders 2008-09, Key events for Australian shareholders 2007-08, Key events for Australian shareholders 2006-07, Key events for Australian shareholders 2005-06, Key events for Australian shareholders 2004-05, Key events for Australian shareholders 2003-04, Key events for Australian shareholders 2002-03, Key events for Australian shareholders 2001-02, AMP group demerger: How it affects Australian resident shareholders, AMP Limited (AMP): 2005 return of capital, AMP Limited (AMP): 2006 return of capital, Merger of AMP Limited (AMP) and AXA Asia Pacific Holdings (AXA) fact sheet, Aristocrat Leisure Limited (Aristocrat): 2005 return of capital, Arrow Energy Limited group demerger (2010), Australian Foundation Investment Company Limited (AFIC): bonus share plan, Australian Gas Light Company (AGL) return of capital, Demergers: 2002 BHP Billiton group demerger, Demergers: 2002 BHP Billiton group demerger worksheet, CSR Limited (CSR): 2005 return of capital, Henderson Group PLC (formerly HHG PLC) restructure, Hibernian demutualisation: impact on shareholders, IOOF demutualisation: impact on individual shareholders, Jupiters Limited merger with TABCorp Holdings Limited, Managed investment schemes associated with Mark Letten, Mayne Group Ltd (renamed Symbion Health Ltd) demerger 2005, Merger of MyState Financial Credit Union of Tasmania Limited and Tasmanian Perpetual Trustees Limited, Demergers: 2003 Mincor Resources NL demerger, News Corporation Limited (TNCL): 2004 corporate restructure. 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