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Master Member
Group: Forum Members
Last Login: 2 days ago @ 9:53:37 PM
Posts: 111,
Visits: 1,917
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I had tagged this query onto my previous post in the "bugs & fixes" forum, re the distribution filtering. However, my remaining problem is really just with how to enter the information so it seemed more appropriate to start a topic in this forum.
As per my previous post:
We now have NWS shares and I understand that, as an American company, the dividends are foreign income (account 4170?) and the 15% US tax withheld is a foreign tax credit (account 4175?) so I was looking at the best way to record that. Looking at the cash receipt options, the normal dividend selection only applies to Australian shares with no options for foreign share dividends so the only applicable choice seems to be distributions - which then gives me the option to input foreign income and foreign tax credits.
You confirmed this approach:
Yes, foreign dividends (containing foreign income and foreign tax credits) are best recorded as distributions.
However, I am having problems implementing this:
NWS withholds US tax at 15% and the fund is set with the maximum foreign tax credit claimable as 15% - so there should be no problem - however when I go to process the distribution it tells me I am exceeding the maximum claimable tax rebate - and asks me if I want to proceed anyway.
So now I'm confused as to whether I should be putting the gross dividend or net dividend into the foreign income box - I had assumed it should be the net dividend since the whole amount is put to the bank account - but then why am I getting this warning?
To give an example:
Say NWS pays a gross dividend of $100 and witholds 15% tax ($15) then I get paid $85 net to my bank account.
I enter a distribution of $85 with $85 in the foreign income box and $15 in the foreign tax credit box. When I go to save, MySF warns me I am exceeding the maximum claimable foreign tax credit but if I proceed anyway it seems to give the correct journal entries, ie:
credit $85 4170 Foreign Income, debit $85 1101 Bank account
credit $15 4175 Foreign Tax Credit, debit $15 2220 Foreign Tax Rebate
if I were to put the gross $100 into the foreign income box, then I may not get the warning? but I would get the wrong bank account debit.
I realise that the gross dividend should be used in the tax calculation - but I had assumed that MySF adds in both 4170 and 4175 during the tax calc (similar to how the franking credits are processed?). However, I won't really see all that till the end of year rollover.
I would appreciate if you could confirm (or otherwise) that the net $85 payment is what should go into the foreign income box and tell me why I am getting the warning that I am exceeding the maximum claimable tax credit when both the credit and the set rate are both 15%.
Regards,
Neil H.
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MySF Administrator
Group: Administrators
Last Login: 4/11/2010 3:24:01 PM
Posts: 464,
Visits: 633
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Hi,
Another user has also advised us of similar problems. It appears that the warning is being calculated based on the net figure rather than the gross. This means that the warning pops up even when you have not exceeded the threshold.
You are correct to enter the net amount. Please disregard the warning that pops up.
Regards,
MySF
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Master Member
Group: Forum Members
Last Login: 2 days ago @ 9:53:37 PM
Posts: 111,
Visits: 1,917
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Hi,
Thanks for that, its a relief to know I still understand what's going on 
Can you just confirm that when the tax liability is calculated at the end of year rollover, the full Foreign Tax Credit will be claimed - ie it won't be scaled back to 15% of the net amount (as per the warning calculation).
Regards,
Neil H.
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MySF Administrator
Group: Administrators
Last Login: 4/11/2010 3:24:01 PM
Posts: 464,
Visits: 633
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Hi,
I can confirm that the year end will use the amount that you enter as foreign tax credit and will not override it.
Regards,
MySF
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