An ASX dividend does not follow you to Israel intact. The shares keep paying, the payment keeps its Australian character, but one piece of it stops at the border and never crosses. That piece is the franking credit.
Two things catch people out. First, the Australia-Israel Convention is not what protects your franked dividends. Australia's own domestic law already does. The ATO states plainly that "franked dividends you receive are exempt from Australian income and withholding taxes" for a foreign resident, on a page last updated 28 July 2017 1. A treaty rate is a ceiling on what the source country may charge 13, so where Australia charges nothing the ceiling is never reached, and the Convention only ever bites on the unfranked slice. Second, the credit that used to arrive as a cash refund does not become a smaller credit after aliyah. Both of the routes the ATO describes for collecting a franking credit close behind you, and the section below works through why.
The year that takes the most work is your first. The ATO's short refund application asks, among other criteria, that "you're an Australian resident for tax purposes for the whole of 2025-26", on instructions last updated 30 May 2026 6. Your aliyah year is, by definition, the year you were not.
> This is educational information for newcomers, not tax advice and not a licensed opinion on your circumstances. Cross-border outcomes turn on your exact residency dates, your holdings and your aliyah date. A cross-border accountant working in both Australia and Israel is the right check before you lodge, sell or transfer anything.
This page is the deep dive under Australian Financial Planning for Aliyah, which carries the wider picture of super, CGT and the treaty.
Which rulebook decides what each slice of your dividend is worth?
Three rulebooks apply at once, and each one governs a different slice of the same payment: Australian domestic law, the 2019 Convention, and Israeli residence taxation. Splitting the payment first is the only way the answer stays honest. All dollar figures on this page are Australian dollars.
| Slice of the payment | What Australia charges (domestic law) | What the Convention allows | Withheld at source? | Israel's reach |
|---|---|---|---|---|
| Fully franked dividend | Nothing. Exempt from Australian income and withholding taxes 1 | Article 10 sets a ceiling on source-country tax 13; a nil charge never reaches it | No 2 | Foreign-source income, covered by the 10-year new-oleh exemption 14 |
| Unfranked, not conduit foreign income | The treaty rate for a treaty-country resident; 30 per cent where no treaty applies, per the ATO's foreign-resident table as updated 22 June 2026 24 | 15 per cent for an individual; 5 per cent only for a company directly holding 10 per cent of the voting power over a 365-day period; nil only for governments, central banks and recognised pension funds 13 | Yes, and it is a final withholding tax 2 | Same as above, and once taxable, Israel allows a deduction against its own tax for Australian tax paid, capped at the related income 13 |
| Unfranked but declared conduit foreign income | Nothing withheld 23 | Not reached | No 23 | Same as above |
| Managed fund or trust "fund payment" | MIT final withholding: 15 per cent for a resident of an information-exchange country, 30 per cent otherwise, per ATO guidance updated 24 July 2025 89 | Outside Article 10. Dividends, interest and royalties are excluded from a fund payment because separate provisions withhold on them 8 | Yes, final 8 | Same as above 14 |
You do not have to guess which row you are on. The ATO requires the paying company to issue a statement to its shareholder indicating the extent to which the dividend is franked or is conduit foreign income 2, and the dividend statement you already keep for Australian purposes shows the franked amount, the unfranked amount, the franking credit, the date of payment and any tax withheld 5.
The 15 per cent on that last row does not come from the treaty at all. It comes from a regulation: Israel is item 86 in the table of information exchange countries in section 34 of the Taxation Administration Regulations 2017, with effect from 1 January 2019 10.
Australia (source country): what happens to the franking credit when you stop being a resident?
Nothing collects it. Under the imputation system an Australian company attributes the tax it paid to you as a franking credit attached to the dividend, and the ATO's franking page, last updated 22 June 2026, states what follows under a residence condition: if you are an Australian resident, the ATO uses that information to reduce your tax liability from assessable income and to "refund any franking credits to you after your tax and Medicare levy liabilities are met" 5.
That page and the refund instructions name two ways to collect the credit, and aliyah closes both. The short application is open only to someone who was an Australian resident for tax purposes for the whole income year, and the stated fallback is blunt: "If you don't meet all the above criteria, you'll need to lodge a tax return to claim your franking credits" 6. But a franked dividend paid to a foreign resident is exempt from Australian income tax 1 and carries no withholding 2, so lodging produces no Australian tax on that dividend for a credit to reduce. After aliyah the franked dividend arrives whole, and nothing arrives with it.
Whether you still lodge in Australia turns on what else you hold there. Foreign residents "do not have to pay us any more tax if their only Australian income is from interest, dividends and royalties which have had the correct amount of withholding tax withheld", and "foreign resident payees must lodge an Australian tax return if they have assessable income other than interest, dividends or royalties in Australia" 2. Australian rent and Australian business income are exactly that other income 1.
The departure-year integrity rules. The parcels you sell or reshuffle in the run-up to aliyah are the ones this catches. Per the ATO's franking page as updated 22 June 2026, a franking tax offset requires that you held the shares "at risk" for at least 45 days, or 90 days for preference shares, not counting the days of acquisition and disposal, and that you meet the related payments rule 5. That holding period rule applies once your total franking credit entitlement for the income year is $5,000 or more, which the same 22 June 2026 page puts at roughly a fully franked dividend of $11,667 for a company taxed at 30 per cent or $15,000 at 25 per cent 5. Where more than $5,000 of credits come from a single parcel and that parcel fails the holding period rule, you cannot claim any of that parcel's credits, not even up to $5,000 5. Below $5,000 in total entitlements the small shareholder exemption sets the holding rule aside, though the related payments rule still applies to every dividend 5.
The threshold shrinks in the same year. The ATO's guidance updated 3 June 2026 gives a part-year tax-free threshold of $13,464 plus $4,736 divided by 12 and multiplied by the number of months you were an Australian resident, counting the month you left 7. Less tax-free room means more of the grossed-up dividend is taxable, and less of the credit comes back as cash.
How Australia learns you moved. For a US dividend you certify treaty residence on a form and the broker drops the rate, as covered in Avoiding the 30% Withholding. The Australian trigger the ATO describes is a different shape. A resident company must withhold from unfranked or partly franked dividends that are not conduit foreign income if either "the payment is made to an entity which has an address outside Australia" or the company "is authorised to pay the dividend to any entities outside Australia" 2. Those two limbs are independent, so an Australian address on the register does not by itself settle what a payer will do. What the ATO asks of you is specific: "tell your Australian payer your current overseas address so they can withhold the right rate of tax", warning that otherwise "they may withhold tax at the higher rate of 47% (from 1 July 2017)", on the page as updated 22 June 2026 4. On the payer side, the ATO frames that same 47 per cent as the top-rate withholding for an Australian resident living overseas who has not quoted a TFN or ABN 2. A third, separate mechanism can also bite: the ATO says tax will be withheld from your dividend where the paying company does not have your tax file number and the dividend is partly or fully unfranked 5. Updating the address on every Australian holding is the one step that addresses all of it.
The shares producing these dividends are also the assets covered by Australia's departure tax under CGT event I1. Whether you still hold them depends on the election you made there; this page is about what the retained ones pay. Super is a separate track again, covered in Your Australian Super After Aliyah.
The 2019 Convention (treaty layer): which Article 10 rate actually applies to you?
Fifteen per cent. The Explanatory Memorandum to the implementing bill sets out Article 10 (Dividends): the standard maximum source-country rates are "5 per cent for certain intercorporate dividends, and 15 per cent for other dividends" 13. The 5 per cent row is closed to a private holder, because it requires a beneficial owner that is a company directly holding at least 10 per cent of the voting power in the paying company throughout a 365-day period that includes the day the dividends are paid 13. A treaty rate also applies only where the recipient is both a resident of the treaty country and beneficially entitled to the income 2.
Article 10 carries a nil row too, and it is narrower than it looks. Dividends beneficially owned by Australia or Israel, a political subdivision, a local authority or a government investment fund escape source-country tax only where the holder has no more than 10 per cent of the voting power in the paying company 13. The row extends to the Reserve Bank of Australia and the Bank of Israel, and to recognised pension funds of either country 13. For Israel, it covers a fund whose income is exempt from Israeli tax, and it extends to residents of Israel who derive dividends in respect of a pension plan approved as a Provident Fund under the Control of Financial Services Act (Provident Funds) 2005, on the express condition that those dividends are not taxed in Israel 13. The provision is keyed to dividends derived in respect of such a plan, so it does not describe a dividend on shares registered in your own name.
The Convention was signed 28 March 2019 and entered into force on 6 December 2019, and Treasury's treaty table shows no Multilateral Instrument modification for Israel 11. It was given legislative authority by the Treasury Laws Amendment (International Tax Agreements) Bill 2019, Act 107 of 2019, assented to on 28 November 2019 12. Under Article 29, Australian withholding under the Convention applies to income derived on or after the first 1 January following entry into force, which is 1 January 2020 13. An oleh who left before 2020 was not covered by it at the time, and Treasury's table lists no earlier Australia-Israel treaty 11.
Two further points the Explanatory Memorandum makes. Relief runs one way here: under Article 23, paragraph 1, Israel as residence country allows a deduction against its own tax for Australian tax paid on income derived by a resident of Israel from Australian sources, and that deduction cannot exceed the related income 13. Where Australia charges the foreign resident nothing on a franked dividend 1, there is nothing for Israel to deduct. And Article 4, paragraph 1 defines a resident by the standard "liable to tax as a resident" formulation, while Article 22 denies treaty benefits where obtaining one was a principal purpose of the arrangement 13. For the generic treaty frame across countries, see Israel Tax Treaties.
Israel (residence country): how is an Australian dividend taxed once you live here?
As foreign-source income, and for a new oleh that means exempt for 10 years. The Israel Tax Authority's guide for new immigrants, published 24 April 2025 and updated 19 August 2026, states that a dividend from a foreign company is income sourced outside Israel, that an Israeli resident is taxed on worldwide income, and that a new oleh or a veteran returning resident who was abroad more than 10 years has a 10-year exemption on all foreign-source income which expressly covers passive income including dividends 14. An ordinary returning resident, foreign-resident for six years before returning, gets five years on non-business foreign income including dividends 14.
Reporting is a separate question from tax, and the dividing line is your aliyah date. A first-time Israeli resident or a veteran returning resident who arrived up to 31 December 2025 is exempt from reporting both foreign income and foreign assets for 10 years from arrival. That reporting exemption does not apply to anyone who arrived from 1 January 2026, while the 10-year tax exemption on the income itself continues unchanged 14. The Ministry of Aliyah and Integration says the same in English: olim who arrived as of 1 January 2026 must report income earned abroad, on a page updated 23 June 2026 15.
One correction worth making before you assume it is handled: the headline "0% Income Tax" reform for recent olim does not cover this money. Its own gov.il page states the benefit applies to "eligible income earned through personal effort", meaning salary from employment and business income, and that it "does not apply to passive income, such as rental income, accrued interest, or dividends" 15. What covers your ASX dividends is the older 10-year exemption on foreign income, which the same page confirms the reform does not cancel 15.
For the Israeli rate that applies once the exemption years run out, the shekel real-gain mechanic, mikdamot and the duty to self-report when nobody withholds for Israel, see How Israel Taxes Your Foreign Brokerage Gains. Keep your Australian dividend statements from year one, which the ATO requires anyway and which show the franked amount, the franking credit and any tax withheld 5, and note that you can ask your payer to request an ATO certificate of payment as proof of Australian withholding tax paid 4.
Worked example: what does the same franked dividend pay in your aliyah year and in year three?
The gap is what the credit was worth in cash, and here that is $2,303.68. Take a hypothetical oleh who leaves Australia on 15 September 2025, using the ATO's part-year arithmetic as published on 3 June 2026 and a company tax rate of 30 per cent for the gross-up. The figures below ignore the Medicare levy and any tax offsets.
The aliyah-year dividend (2025-26, resident part-year).
- Resident months in the Australian income year beginning 1 July 2025: July, August and September, counting the month of departure, so three 7.
- Part-year tax-free threshold: $13,464 + ($4,736 / 12 x 3) = $13,464 + $1,184 = $14,648 7.
- A fully franked dividend of $7,000 cash carries a franking credit of $3,000, on the same 30/70 relationship the ATO uses when it puts $5,000 of credits at roughly $11,667 of fully franked dividend for a company taxed at 30 per cent, so the grossed-up amount assessed is $10,000 5.
- With $9,000 of Australian salary earned before departure, taxable income is $19,000. Above the threshold: $19,000 - $14,648 = $4,352, taxed at the 16 per cent rate the ATO's own part-year example names, giving $696.32 7.
- The $3,000 credit covers that, and the balance is refundable once tax and Medicare levy liabilities are met: $2,303.68 on these figures 5.
- Total entitlements are under $5,000, so the small shareholder exemption sets aside the 45-day holding rule, though the related payments rule still applies 5.
- The short application is closed: our oleh was not an Australian resident for the whole of 2025-26, so the credits can only be claimed by lodging a full Australian return 6.
The year-three dividend (non-resident). The same shares pay the same $7,000 fully franked. Australia exempts it from income and withholding tax 1 and the payer withholds nothing 2. Israel does not tax it either, inside the 10-year exemption 14. Cash in hand: $7,000, against $9,303.68 of value in the aliyah year. Nothing went wrong. The refund was a benefit the ATO frames for Australian residents 5, and it ended when residency did.
If you also hold a US passport, what changes?
The pooled vehicles are where this bites. The Form 8621 instructions revised December 2025 define a passive foreign investment company by two tests applied to a foreign corporation: 75 per cent or more of gross income is passive income, or at least 50 per cent of the average percentage of assets produce or are held to produce passive income. A foreign corporation is a PFIC if it meets either 16. The ATO's own description of a managed investment trust is a vehicle in which members of the public collectively invest in passive income activities such as shares, property or fixed interest assets 3, so whether a particular Australian holding is caught turns on how it is classified and what it earns, which is work for a US preparer rather than something a ticker tells you. Where a holding is a section 1291 fund, a distribution above 125 per cent of the average of the prior three years is an excess distribution carrying a separate tax and interest charge under section 1291(c) 16. Background: The PFIC Problem for American Olim.
On the foreign tax credit, work the IRS's four tests rather than assuming. A creditable foreign tax must be imposed on you, must have been paid or accrued by you, must be your legal and actual foreign tax liability, and must be an income tax 17. On a franked dividend paid to a foreign resident, no Australian tax is withheld 2, so there is no Australian tax paid or accrued for the second test to reach. The unfranked slice matters more than it looks, because the IRS caps the credit at the treaty rate you were eligible for, not the rate actually taken: its own worked example limits a credit to 15 per cent where 30 per cent was withheld only because the taxpayer failed to give the withholding agent the certificate that invoked the lower rate 17. A stale address on an Australian share register produces the same shape of problem.
FBAR is separate and mechanical: a US person files when the aggregate value of foreign financial accounts exceeded $10,000 at any time during the calendar year, an account at a financial institution outside the United States being a foreign financial account, due 15 April with an automatic extension to 15 October, per the IRS page as reviewed 30 July 2026 18. The IRS names brokerage accounts among the accounts covered 18, so an Australian broker account counts.
This section is about US citizens. If you hold no US passport, none of it reaches you.
If the registry got it wrong, how do you get over-withheld tax back?
Through the ATO, and only with a document Israel issues. The timing split decides who pays you: if too much was withheld from an interest, dividend or royalty payment and the error is found by 30 June of the relevant year, your payer refunds you; after 30 June, you apply to the ATO. Over-withholding on a managed investment trust distribution always goes to the ATO 19. The payer-facing guidance mirrors it, instructing payers not to refund amounts once that date has passed 2.
The application is the Refund of over-withheld withholding form, NAT 75265, which covers non-resident withholding on interest, dividends, royalties and MIT distributions, and the ATO aims to issue refunds within 28 days of receiving all the required information, per its page updated 7 August 2024 19. Then comes the sentence that makes this an aliyah problem: "Included in your supporting documents must be a Certificate of Residency from your tax authority for the requested years, or your claim may be rejected" 19. Your tax authority is now the Israel Tax Authority. The same page adds that if you cannot obtain a certificate you must contact the ATO for further help, so it is a hurdle rather than a wall 19.
The cheaper move is upstream. Tell the Australian share registry or payer your current overseas address, which is the ATO's own instruction to foreign residents 4, and the withholding lands right the first time.
Next step: How Israel Taxes Your Foreign Brokerage Gains covers what happens to this same portfolio once your Israeli exemption years are over, including the self-report duty that catches olim who are used to withholding doing the work for them.
Frequently asked questions
Australia's own law decides it, not the treaty. The ATO says franked dividends paid to a foreign resident are exempt from Australian income and withholding taxes, so nothing is withheld and no route collects the franking credit. Only the unfranked, non-conduit slice carries withholding, and the 2019 Convention caps that at 15 per cent for an Israeli resident.
Because Australia's domestic law already charges nothing. The ATO states that franked dividends received by a foreign resident are exempt from Australian income and withholding taxes. Article 10 of the Australia-Israel Convention sets a maximum rate the source country may charge, and a nil charge never reaches a maximum, so the cap only matters on the unfranked slice of a payment that is not conduit foreign income.
No. Its criteria, on instructions last updated 30 May 2026, include being an Australian resident for tax purposes for the whole income year, and your aliyah year is not a whole resident year. The ATO's stated fallback is that if you do not meet all the criteria you will need to lodge a tax return to claim your franking credits.
No. The ATO tells payers to withhold from unfranked or partly franked dividends that are not conduit foreign income where either the payment goes to an entity with an address outside Australia or the company is authorised to pay dividends outside Australia. Those two limbs are independent. Separately, the ATO tells foreign residents to give their Australian payer their current overseas address so the right rate is withheld, warning on its page as updated 22 June 2026 that otherwise the payer may withhold at the higher rate of 47 per cent that has applied since 1 July 2017. A reduced treaty rate also applies only where the recipient is both a resident of the treaty country and beneficially entitled to the income.
Because a fund payment is not a dividend. Under the managed investment trust rules, as set out in ATO guidance updated 24 July 2025, the fund-payment component of a distribution to a foreign member carries a separate final withholding tax of 15 per cent for a resident of a country with an exchange of information agreement with Australia and 30 per cent otherwise. Dividends, interest and royalties are excluded from a fund payment precisely because other provisions withhold on them. Israel is item 86 in the information exchange countries table in section 34 of the Taxation Administration Regulations 2017, with effect from 1 January 2019.
It depends on your aliyah date. The Israel Tax Authority's guide for new immigrants states that a first-time Israeli resident or a veteran returning resident who arrived up to 31 December 2025 is exempt from reporting foreign income and foreign assets for 10 years from arrival, and that the reporting exemption does not apply to anyone who arrived from 1 January 2026, even though the 10-year tax exemption on the income itself continues unchanged.
No. The gov.il page for that reform, updated 23 June 2026, states the benefit applies to eligible income earned through personal effort, meaning salary from employment and business income, and does not apply to passive income such as rental income, accrued interest or dividends. What covers foreign dividends is the separate, older 10-year exemption on foreign-source income, which the same page confirms the reform does not cancel.
If the error on an interest, dividend or royalty payment was found by 30 June of the relevant year, your payer refunds you. After that date you apply to the ATO on the Refund of over-withheld withholding form, NAT 75265, and over-withholding on a managed investment trust distribution always goes to the ATO. The ATO requires a Certificate of Residency from your tax authority, now the Israel Tax Authority, for the years claimed, or the claim may be rejected, and says to contact it for help if you cannot obtain one. It aims to issue refunds within 28 days of receiving everything it needs.
The Explanatory Memorandum describes a source-country exemption for governments, political subdivisions, local authorities and government investment funds holding no more than 10 per cent of the voting power, for the central banks of both countries, and for recognised pension funds. For Israel the exemption covers a fund whose income is exempt from Israeli tax, and extends to residents of Israel who derive dividends in respect of a pension plan approved as a Provident Fund under the Control of Financial Services Act (Provident Funds) 2005, on the condition that those dividends are not taxed in Israel. The provision is keyed to dividends derived in respect of such a plan, so it does not describe a dividend on shares registered in your own name.