Non-residents of Australia are not subject to capital tax on Australian shares, which means that they are attractive compared to say Australia property which is subject to capital gains tax.

Dividends are taxed at an effective withholding rate of 30%. If a dividend paid to a non- resident is fully franked, then the franking credit is treated as the final withholding on that dividend. If a partially franked or unfranked dividend is paid, additional tax will be payable by the non-resident taxpayer.

The chart below shows the returns from 1900 to 2010 on Australian shares after adjusting for the CPI (inflation).

You can see that there have been long periods when the share market has risen and also periods when stock prices have fallen considerably.

Share investments are typically more volatile than property investments, which means you need to know what you are doing or engage a good adviser in order to be successful in investing in the share market.

A return of 5-7% above the underlying inflation rate is a very good return and indicates that Australian shares are a good investment over the long term. However, the timing of when you invest can be very important and it is also essential to have a well-diversified portfolio.