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Old Aug 21st 2013, 12:09 pm   #1
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Smile Taxes and ISA's

Hi everyone,
I'm new to the forum. Moving to Oz in 3 weeks and trying to get my finances in order. There are a lot of old threads about ISA's but wanted to get some up to date info.

I have a range of savings and investments here in the UK - including both cash ISA's and stocks & shares ISA's.

As I understand it, I'm allowed to keep my ISA's open, but any profits gained will be taxable - by the UK HMRC if I have interest paid into a UK bank account, or by ATO if paid into an Oz account.

Is this right? If so, what [I]are[I] those tax rates and which would be better (considering money transfer/exchange rates).

If I don't need access to the money right now, and the stocks and shares ISAs are in accumulation funds whereby the money is reinvested automatically, surely I don't need to declare this? ie. what if I don't touch the money and it just stays in the funds for years, through a fund supermarket like "cofunds" growing in strength.

Thanks in advance folks
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Old Aug 21st 2013, 3:10 pm   #2
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Default Re: Taxes and ISA's

You can keep your existing ISAs (which will remain tax free in the UK) but you can't add to them - http://www.hmrc.gov.uk/isa/faqs.htm#14

Australia doesn't view UK ISAs as tax free so any income arising from them once you take up Australian tax residence will be taxable in Australia at your marginal tax rate. Ditto capital gains on shares held in an ISA, calculated as the increase in value since you became Australian tax resident (and including any exchange gain or loss), with the amount taxable as a capital gain being halved if you held the asset for more than 12 months.

(NB - this last bit from memory, so not 100% sure)
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Last edited by louie; Aug 21st 2013 at 3:15 pm.
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Old Aug 21st 2013, 7:18 pm   #3
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Default Re: Taxes and ISA's

Quote:
Originally Posted by louie View Post
You can keep your existing ISAs (which will remain tax free in the UK) but you can't add to them - http://www.hmrc.gov.uk/isa/faqs.htm#14
The exception being Junior ISAs for kids.
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Old Aug 22nd 2013, 1:21 am   #4
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Default Re: Taxes and ISA's

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Originally Posted by Mode View Post
Hi everyone,
As I understand it, I'm allowed to keep my ISA's open, but any profits gained will be taxable - by the UK HMRC if I have interest paid into a UK bank account, or by ATO if paid into an Oz account.
If you are a tax resident of Australia, the income has to be declared on your Aus tax return regardless of whether you bring it into Aus or not.
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Old Aug 22nd 2013, 7:17 am   #5
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Default Re: Taxes and ISA's

I guess your talking about thousands of pounds....thinking of living off the interest..... If so , your gona have to pay tax on it.
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Old Aug 23rd 2013, 11:24 am   #6
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Default Re: Taxes and ISA's

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Originally Posted by StSabre View Post
If you are a tax resident of Australia, the income has to be declared on your Aus tax return regardless of whether you bring it into Aus or not.
... see also the exemption discussed here:
http://www.ato.gov.au/General/Intern...-introduction/

Best regards.
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Old Aug 25th 2013, 12:02 am   #7
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Default Re: Taxes and ISA's

I agree ISA's remain tax free in the UK as far as UK tax is concerned.

And any income is taxable in Oz (whether it is brought across here or not) assuming you are tax resident in Oz.

ALSO any capital gain in the ISA has to be declared in Oz and again that is also taxable (not sure whether you get the 50% tax allowance for holding it more than 12 months).

The gain is worked out by valueing the ISA when you arrive in Oz$ and then again valueing the ISA at the end of the tax year (again in Oz$). Cannot see how the 50% could be claimed in the first year as you would be considered as having owned the ISA from the point you become tax resident, but subsequent years the 50% allowance might be possible.
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Old Sep 4th 2013, 11:47 am   #8
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Default Re: Taxes and ISA's

A slightly off topic question but sort of related too: what about the interest that we pay on the mortgage of our former home in the UK that we're now renting... Can that be deducted from the rental income that we have to declare to the ATO?
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Old Sep 4th 2013, 12:37 pm   #9
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Default Re: Taxes and ISA's

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Originally Posted by paulry View Post
A slightly off topic question but sort of related too: what about the interest that we pay on the mortgage of our former home in the UK that we're now renting... Can that be deducted from the rental income that we have to declare to the ATO?
In short, yes - and you can negatively gear a UK property in Australia too (given you aren't a temporary visaholder).

Best regards.
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Old Sep 4th 2013, 1:00 pm   #10
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Default Re: Taxes and ISA's

Quote:
Originally Posted by Alan Collett View Post
In short, yes - and you can negatively gear a UK property in Australia too (given you aren't a temporary visaholder).

Best regards.
That's good news, thanks.
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Old Sep 4th 2013, 3:23 pm   #11
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Default Re: Taxes and ISA's

The question of whether to retain UK £ investments in UK or to move your £ to Aus is tricky.

Example for 1 year:

UK Building Society Interest say 1%
UK inflation say 3%
After 1 year, loss = 2%

Move to Australia
Term Savings rate say 4%
Aus Inflation say 2.5%
After 1 year , gain 1.5%

Now to exchange rates:

Assume Exchange rate at start is 1.7AUD = £1
Assume exchange rate after 1 year is 1.75 = £1
Gain purely on exchange rate = 2.9%


Disregarding tax, the point I am making is that with REAL interest rates (nominal rate minus inflation) in both countries so pathetically low, the exchange rate effect on your wealth (gain or loss) will likely exceed your leave-in-UK-or-move-to-Aus (gain/loss) by a considerable margin


Unfortunately that leaves us guessing the future movements in exchange rates. After what the Oz financial pundits were saying at Xmas last year when the dollar was US$1.05 and was on a roll, best of luck if you listen to them!
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