International Shares

Investing in International Shares with your SMSF

Investing in foreign stock markets offers SMSFs greater portfolio diversity, exposure to international markets and potentially higher returns. However, consideration must also be given to investment risk, SIS requirements and complexity of dealing with foreign exchange rates and foreign regulations.

Although SMSFs have mainly invested in Australian shares, ATO figures show overseas share investment reached $20.3 billion in June 2025, up from $9.5 billion in June 2020. A significant increase in 25 years. Australian listed shares remain the largest SMSF asset class at $295.9 billion. Today, SMSFs can access international markets more easily through direct shares, ETFs, or managed funds.

Investing in public markets internationally doesn’t increase your SMSF costs. International shares are included in our fixed price fees for the accounting, audit and tax return in the $1,300+GST per annum bracket.

Why Should my SMSF Invest in Overseas Markets?

SMSFs can reduce their exposure to the local Australian economy and politics by investing in international markets. Globally, Australia is very small and overseas markets in the US, Europe and Asia provide SMSFs access to corporate giants such as Microsoft, Apple, Volkswagen, Shell, Samsung Electronics, Saudi Aramco and Emirates Airline. Emerging Asian markets also offer potentially higher, though also potentially riskier, returns.

How can my SMSF invest in Foreign Shares?

An SMSF can purchase international shares directly or choose to invest via ETFs or managed funds.

SMSF Investing in international shares directly

Choose a suitable broker offering access to the overseas markets your SMSF wants to invest in. The services provided vary a lot. The following need to be considered when engaging a broker:

• do you require a broker for transaction purposes only or do you want one offering a full-service such as the provision of data about stocks and best picks
• on-line brokers offer tech solutions ranging from professional high tech trading platforms to more user-friendly options
• ensure the broker is ASIC regulated and is a licensed broker
• does the broker allow access to sub-accounts in different currencies to reduce FX conversion fees
• what foreign markets does the broker have access to?
• consider the fees which can include brokerage fees, foreign exchange conversions, management fees, research and educational tools

All of the four major banks and Macquarie via belldirect offer broker platforms in foreign shares and there are other trading platforms such as Selfwealth providing these services to SMSFs.

SMSF Investing in international shares through ETFs and managed funds

Exchange traded funds (ETFs) are trending upwards in accordance with recent reports from Class with newly established SMSFs taking a higher interest in ETFs reflecting a younger dynamic driven by tech-savvy members. The overall asset allocation for SMSFs is 12% with new entrants investing 31% of their SMSF portfolios in ETFs in the 2024/25 year.

An ETF is a type of managed fund where investors’ money is pooled and invested into a basket of securities such as stocks, bonds or commodities and the ETF trades on a stock exchange similar to direct shares. The securities mirror a market index or sector giving the SMSF exposure to that market with low costs, diversity and simplicity. ETFs can provide SMSFs with exposure to:

• S&P500 index- 500 largest US publicly traded companies – iShares S&P 500 ETF (IVV) a popular choice for tech stocks like Microsoft and Apple
• MSCI World Index –global developed market stocks– Vanguard MSCI Index International Shares ETF (VGS) tracking high-quality international companies representing hundreds of companies
• MSCI World Ex-Australia Quality Index – VanEck MSCI International Quality ETF (QUAL) focussing on international companies (ex-Australian) with low debt, high profits and healthy earnings representing around 300 stocks expecting to outperform the broader global equity market over the long term
• Nasdaq 100 Index – 100 of the largest non-financial companies listed on the Nasdaq – BetaShares Nasdaq 100 ETF (NDQ) following high-growth technology companies

Can my Fund use a Limited Recourse Borrowing Arrangement (LRBA) to invest in International Shares or ETFs?

An SMSF can borrow via a Bare Trust/LRBA to invest in foreign stocks and ETFs provided it is not an asset which is otherwise prohibited from being acquired by an SMSF and the following applies:

• single acquirable asset – the loan must be made in relation to a single asset or a collection of identical assets – a loan can relate to a parcel of the same foreign shares as they are identical assets purchased for the same price at the same time i.e. purchasing 100 shares in Microsoft for $US480 per share is a single acquirable asset but splitting the purchase over two lots with 50 Microsoft shares acquired for $US 480 and 50 Microsoft shares acquired for $US 470 are two distinct and separate acquirable assets.
• the foreign shares or ETFs must be held in a separate bare trust and the SMSF must be able to have the title transferred to the SMSF when the loan is repaid
• the lender only has recourse to the parcel of foreign shares or parcel of ETFs
• borrowing costs such as loan establishment can be paid from the loan
• asset replacement is allowable if the replacement results from a takeover, merger, demerger or restructure of the original company

Hint – listed foreign securities are allowable assets which can be held by SMSFs

SMSF borrowing – the lender only has recourse to the single acquirable asset

The lender’s recourse shall be limited solely to the parcel of foreign shares or ETFs. Additionally, the lender may secure a mortgage over these foreign shares or ETFs. Banks generally require the bare trustee to be a company. Banks are often hesitant to provide a loan to an SMSF acquiring foreign shares or ETFs. Nevertheless, numerous non-traditional lending institutions may be more inclined to provide such financing, particularly when the foreign equities in question are blue chip securities. Higher interest rates and LVRs may apply to an SMSF loan used to purchase foreign equities.

Safe Harbour Rules when borrowing from a member or other related party

The ATO provided safe harbour guidelines in relation to an SMSF obtaining a member related party loan.  The guidance only applies to loans in relation to the purchase of real property and listed shares and unit trusts. Related party loans with non-commercial terms and conditions are at risk of breaching the non-arm’s length income (NALI) provisions of the tax act and the dividend income and capital gain potentially taxed at 45%. The ATO will not prosecute an SMSF trustee where the related party loan agreement is in line with the safe harbour guidelines and the loan is actually in line with the agreement.

The general terms and conditions must include the following:

• interest rates are in line with the Reserve Bank of Australia indicator lending rates for banks providing standard variable housing loans plus 2% which is 10.95% for the 2025/26 year
• variable interest rates – can use fixed for interest for the first three years
• maximum seven-year loan term
• maximum LVR is 50%
• register a security interest over the foreign shares using “Personal Property Securities Register”
• repayments must include principal and interest unless a fixed interest period is included in the agreement
• loan agreement must be in writing and executed by all parties

SMSF related party loans do not have to follow the safe harbour guidelines, but objective third-party evidence would have to reflect an actual third party lender’s terms which are only available if your SMSF actually applied and was accepted for a loan.

Taxation of Income from Foreign Shares in your SMSF

SMSFs are residents of Australia and therefore all income derived in Australia and from foreign countries are taxed in Australia at a maximum of 15% unless NALI or other penalty tax provisions apply. To avoid double taxation Australia has over 40 double-taxation treaties with foreign countries generally limiting withholding tax to 15% on dividend income.

Can SMSFs Claim a Foreign Income Tax Offset (FITO)

SMSFs are eligible to claim a foreign income tax offset (FITO), which is restricted to the lower amount between the foreign withholding tax paid and the Australian tax liability on the relevant foreign income. Any excess FITO cannot be refunded or carried forward to subsequent financial years. When the fund operates in pension phase, the FITO must be apportioned, thereby limiting FITO to assessable income.

Capital Gains Tax (CGT) on sale of foreign shares and ETFs

CGT applies to the sale of foreign shares and ETFs. Similar to other Australian capital gains if the investment is held more than 12 months the capital gain is subject to a 1/3 discount reducing tax to 10% when in accumulation phase.

How are foreign dividends and capital gains treated in Pension Phase?

Foreign capital gains are consolidated with Australian capital gains and if the fund is in 100% pension phase for all of the financial year capital gains are disregarded including capital losses. When an SMSF has segregated pension assets the investment income, including from foreign sources, is exempt from tax provided the fund is entitled to use the segregated method. Otherwise, capital gains and foreign dividends are reduced by the exempt current pension income (ECPI) percentage. Tax is reduced to nil when the fund is in 100% pension mode for all of the year.

Foreign Exchange (Forex) Gains and Losses

Foreign transactions must be reported in Australian dollars. The taxing point for forex gains or losses is at the time an “realisation event” occurs such as:

• disposal of foreign currency
• the receipt of foreign dividends or disposal of foreign shares
• the payment of foreign expenses

Forex gains or losses are incorporated into the CGT calculation when foreign shares are disposed of within 12 months of acquisition. An SMSF may be eligible to use the $250,000 balance election which means any forex gains and losses are disregarded for qualifying currency denominated accounts such as a forex bank account used for foreign share trading purposes provided the balance does not exceed $AUS250,000 and the SMSF has made a written election prior to the forex event.

Can my SMSF undertake Forex Trading?

SMSFs are prohibited from entering into forex trading involving margin trading and some Contract for Difference (COD) investments when it includes placing a charge over fund assets breaching regulation 13.14 of the SIS regulations.

What are Foreign Investment Risks for your SMSF

• fluctuating foreign exchange rates
• understanding foreign tax implications i.e. in the US an SMSF must complete a W-8BEN-E form when investing directly into the US share market to avoid 30% withholding tax on US dividends and sale of shares
• withholding tax may be imposed on dividends – if there is a double tax agreement the withholding tax may be refunded subject to some limits
• the Australian franking credits will not apply to other foreign jurisdictions

What are the SIS Compliance requirements for International Share Investing?

Foreign share/ETF investing must be done and maintained for the sole purpose of providing retirement benefits to SMSF members or their beneficiaries on the member’s death. Foreign investments must be allowed in the fund’s trust deed and included in the investment strategy. All transactions must be made and maintained on an arm’s length basis and foreign investments must be reported in Australian dollars at the 30^th June and reflect the market value. The title of foreign assets must be in the name of the SMSF trustee and designated for the fund i.e. “Smith Pty Ltd ATF Smith Family SMSF”. SIS legislation and regulations restrict investments involving related parties such as:

• prohibiting loans or provision of financial assistance to SMSF members or member’s relatives
• acquiring assets form related parties with limited exceptions
• prohibition on acquiring or holding in-house assets exceeding 5% of the market value of fund assets
• fund assets must be kept separately from personal assets of SMSF trustees or directors of a corporate trustee

Can Foreign ETFs be acquired from an SMSF member?

A foreign ETF which is listed on an approved stock exchange such as the Australian Stock Exchange (ASX), the New York Stock Exchange (NYSE) or the NASDAQ is an exception to the prohibition on acquiring assets from related parties and can be acquired by the member’s SMSF provided it is at market value which can be verified for audit purposes.

Can Listed Foreign Shares be contributed to my SMSF?

Provided the foreign shares are listed on an approved stock exchange you can make an in-specie contribution to your SMSF. Consider whether the contribution can be made as a concessional or non-concessional contribution and ensure the contribution caps are not exceeded. The shares must be valued in Australian dollars and be transferred at market value. The transfer will be an off-market transfer and a copy of the transfer form must be kept with the fund’s records and provided to the auditor. The standard transfer form must show the correct date, consideration, seller and the name of the SMSF trustee designated for the fund as the purchaser and must be properly executed and lodged with the appropriate share registry.

Investing in International Shares – Key Takeaways

• Diversifying your SMSF portfolio by investing in international shares and ETFs
• Fluctuating foreign exchange rates are a specific risk to foreign investments
• Excess Foreign Income Tax Offset cannot be carried forward
• Forex trading is prohibited where it includes placing a charge over fund assets breaching regulation 13.14 of the SIS regulations
• The taxing point for forex gains or losses are at certain “realised events” being disposal of foreign currency, receipt of foreign dividends or disposal of foreign shares or ETFs and payment of foreign expenses
• Foreign ETFs and international shares can be acquired from related parties provided they are listed on an approved stock exchange
• Listed foreign shares can be contributed to your SMSF as an in-specie contribution but consider the type of contribution and the contribution caps
• If you have a foreign bank account used for foreign trading purposes, consider making a $250,000 balance election
• An LRBA can be used to acquire a parcel of listed foreign shares or foreign ETFs

Do you want to learn more about International Shares and for your SMSF?

Give us a call on 1300 392 544 or get in touch online.