Here are some concerns:
- Double taxation:
- U.S. automatically tax-withholds 30% of dividend payouts. Because of the U.S.-Australia tax treaty though, this number is dropped to 15%.
- Australia has tax treaties with more than 40 jurisdictions to prevent double taxation for Australia tax residents who get foreign investment income.
- U.S. automatically tax-withholds 30% of dividend payouts. Because of the U.S.-Australia tax treaty though, this number is dropped to 15%.
- U.S. Estate Tax.
- Australia also has a tax treaty with the U.S. so that the estate tax threshold is higher.
- Currency exchange risk:
- Forex is zero sum. A bit of an inaccurate statement, but consider it as such.
- Currency rates can be unfavourable for a very long period of time, longer than bear or bull markets for index funds.
- Note: VTS is currently not currency-hedged.
- From brief research, Bogleheads are unopinionated about currency risk. Don’t worry about it too much.
- Extra transaction costs. E.g. The conversion of AUD to USD.
- You need W-8BEN form to be up to date. This is a document you send to the IRS to establish your status as a foreign investor so they withhold less tax from you.
Conclusion: Feel free to buy U.S. stocks via a U.S. stock broker if you’re willing to deal with the above complications. It’ll just be a bit more painful come tax return time.