[sunflower7]

Leaving for OZ on the 22nd Feb. I'm at that point of transferring GBP to AUD with HifiX, and was informed today that if you leave it longer than 6 months after arrival into Oz, you are taxed a large amount on any additional increase in the exchange rate since leaving UK.
I'm not really sure what to do as I could leave a large amount in UK for another year ( then may need it for property), but then I considered the higher interest rates in Oz savings acounts. That increase is nothing compared to what I could loose (i'm guessing) if the exchange fallls even lower by this time next year, and I haven't exchanged. Or the exchange rate is better, but I loose ??? amounts due to taxation post emigration.
Are there any financial wizards out there who could offer their opinion pleeeease
Thanks in advance.

[Techno Freak]

Originally Posted by sunflower7 Leaving for OZ on the 22nd Feb. I'm at that point of transferring GBP to AUD with HifiX, and was informed today that if you leave it longer than 6 months after arrival into Oz, you are taxed a large amount on any additional increase in the exchange rate since leaving UK. I'm not really sure what to do as I could leave a large amount in UK for another year ( then may need it for property), but then I considered the higher interest rates in Oz savings acounts. That increase is nothing compared to what I could loose (i'm guessing) if the exchange fallls even lower by this time next year, and I haven't exchanged. Or the exchange rate is better, but I loose ??? amounts due to taxation post emigration. Are there any financial wizards out there who could offer their opinion pleeeease Thanks in advance.

I don't think there is a 6 month 'rule'. The way I understand it is that when you become Tax Resident in Australia, any foreign income is assesable on your Oz tax return.

Basically, if you bring money over before or on the date you become tax resident, then there is no tax to declare.

Say 3 months later you bring some more money over and the exchange rate between that date and the date you became tax resident has given you a 'profit' then that profit is taxable. You need to look on the ATO website as they have tables of the rates you need to use for the dates you exchange, (you use the ATO rate regardless of the actual rate you got).

However, it works both ways. If you get a worse eschange rate then you deduct the 'loss' from your anual tax return.

Hope that makes sense?

Originally Posted by Techno Freak However, it works both ways. If you get a worse eschange rate then you deduct the 'loss' from your anual tax return. Hope that makes sense?

Unfortunately, not 'quite' as easy as that:

foreign losses cannot be deducted from Australian source assessable income, and can only be carried forward to deduct from assessable foreign income in the same category derived in a later income year

[Techno Freak]

Originally Posted by ABCDiamond Unfortunately, not 'quite' as easy as that:

Yes, but does that not refer to losses and gains in a particular type of foreign investment rather than purley a cash exchange of currency already held in another country?

I seem to remember when filing my return, that foreign exchange losses had it's own tab on the e-tax seperate to foreign investments. The ATO e-tax software did indeed take into account the forex loss when it finalised my return.

[Techno Freak]

From the ATO e-tax software help page for item D15 'Other Deductions' the following is stated:-


Expenses you may be entitled to claim

You may claim at this item:

●
election expenses for local, territory, state or federal candidates

●
income protection, sickness and accident insurance premiums

●
foreign exchange losses

●
debt deductions incurred in earning assessable income that are not disallowed under the thin capitalisation rules and have not been claimed elsewhere

●
debt deductions incurred in earning certain foreign non-assessable non-exempt income that are not disallowed under the thin capitalisation rules

●
amounts deductible under section 40-880 of the Income Tax Assessment Act 1997 (ITAA 1997) (five year write-off for certain business-related capital expenditure) not claimed in full before you ceased business or before you stopped carrying on your business as an individual (for example, if you started to carry on your business through a company or in a partnership)

●
a deduction for the net personal services income loss of a personal services entity that related to your personal services income

●
United Medical Protection Limited (UMP) support payments

●
certain deductible capital expenditure not claimed in full before ceasing a primary production business where a deduction can be claimed in a subsequent year or years - for example, water conservation expenditure, which may be deducted over a three-year period

[Lisa and Martin]

Apologies if this is a stupid question - I bought a forward contract through HiFX to move about £8000 quid per month to Australia, starting in March 09 and running for a year (ie 12 payments). I bought the contract back in October 08 on that happy day when exchange rates hit a high. I plan to move to Oz around October 2009. So would I be assessed as making the last 5 transfers whilst tax resident? Or, because the contract was set up whilst I was still UK resident, would the whole lot be viewed as a contract done whilst resident in the UK?
Just when you think you have most things covered another little thing to think about pops out of the ether!!

[MartinLuther]

Originally Posted by sunflower7 Leaving for OZ on the 22nd Feb. I'm at that point of transferring GBP to AUD with HifiX, and was informed today that if you leave it longer than 6 months after arrival into Oz, you are taxed a large amount on any additional increase in the exchange rate since leaving UK. I'm not really sure what to do as I could leave a large amount in UK for another year ( then may need it for property), but then I considered the higher interest rates in Oz savings acounts. That increase is nothing compared to what I could loose (i'm guessing) if the exchange fallls even lower by this time next year, and I haven't exchanged. Or the exchange rate is better, but I loose ??? amounts due to taxation post emigration. Are there any financial wizards out there who could offer their opinion pleeeease Thanks in advance.

There is no 6 months. However if you bring it in from an account you opened before CGT started (Sept 86 springs to mind) then you don't get taxed. If the account was opened between that date and 1 July 2003 then you get hit with CGT (so there is the potential to get a 50% tax discount) and after 2003 you get hit with Forex Gains Tax.

The above is general. You may want to check what will happen in your personal circumstances with the ATO.

Remember that if you end up paying tax then you're still better off than if you exchanged at a lower rate.

[MartinLuther]

Originally Posted by Lisa and Martin Apologies if this is a stupid question - I bought a forward contract through HiFX to move about £8000 quid per month to Australia, starting in March 09 and running for a year (ie 12 payments). I bought the contract back in October 08 on that happy day when exchange rates hit a high. I plan to move to Oz around October 2009. So would I be assessed as making the last 5 transfers whilst tax resident? Or, because the contract was set up whilst I was still UK resident, would the whole lot be viewed as a contract done whilst resident in the UK? Just when you think you have most things covered another little thing to think about pops out of the ether!!

I'm not sure how the buy-back bit works but things like this are generally based on the contract date. If I understand what you're saying then you're going to get a fixed amount of $s for the last 5 payments. If this is so, then the asset is not increasing in value and is hence not subject to tax.

To be sure, get a personal ruling from the ATO. It's just a form you fill in and send off and they will tell you whether you're liable for tax or not.

[EvannTel]

Originally Posted by Lisa and Martin Apologies if this is a stupid question - I bought a forward contract through HiFX to move about £8000 quid per month to Australia, starting in March 09 and running for a year (ie 12 payments). I bought the contract back in October 08 on that happy day when exchange rates hit a high. I plan to move to Oz around October 2009. So would I be assessed as making the last 5 transfers whilst tax resident? Or, because the contract was set up whilst I was still UK resident, would the whole lot be viewed as a contract done whilst resident in the UK? Just when you think you have most things covered another little thing to think about pops out of the ether!!

Assuming this money is going into an interest bearing account, you will be taxed at 48.5% on interest due to with holding tax BEFORe you arrive. But with UK reates you're still quids in and can claim the tax for that tax year.
I suspect you could argue as contarct was fixed you had effectively already changed (as locked in) so no CGT.

[Lisa and Martin]

Thanks MartinLuther you are a good bod. But just to be safe maybe I should make the monthly payments out of my Barclays-had-it from-childhood account rather than my Barclays-joint-set-up-with-partner-about-10yrs-ago account?
Would this be a sensible ar*e-covering exercise?

To EvanTel - I only get charged 10% non-resident witholding tax by my Oz bank at the moment & declare the difference for tax in the UK. Gordon needs it right now.

[EvannTel]

Originally Posted by Lisa and Martin To EvanTel - I only get charged 10% non-resident witholding tax by my Oz bank at the moment & declare the difference for tax in the UK. Gordon needs it right now.

Yes of course I was wrong, I think the 48.5% pertains to residents. Thanks for the clarification.

[sunflower7]

Thanks everyone.
I'm still however a little confused For example if I could've have exchanged £100,000 at rate 2.3% and now at 2.08%, the loss is approx £30,000!! My worry is that if I leave it longer Hifix state it could go down further. My account with them is already set up in the UK, just need to call them and then do a bacs transfer. I'm going over as a permanant resident, so tax at 48.5% seems a lot.
So can I really claim that loss or the difference in exchange rate back?? so am I better off financially waiting until a better exchange rate?

[Techno Freak]

Originally Posted by sunflower7 Thanks everyone. I'm still however a little confused For example if I could've have exchanged £100,000 at rate 2.3% and now at 2.08%, the loss is approx £30,000!! My worry is that if I leave it longer Hifix state it could go down further. My account with them is already set up in the UK, just need to call them and then do a bacs transfer. I'm going over as a permanant resident, so tax at 48.5% seems a lot. So can I really claim that loss or the difference in exchange rate back?? so am I better off financially waiting until a better exchange rate?

You can only claim the loss on money transferred after you become tax resident, nothing to do with when you 'could have' changed.

If you move to Australia tomorrow and the rate (as per on the ATO exchnage rate table on their website for that day) was say 2.08 - then that is your benchmark. In say a months time you exchange your money at 2.06, (for aguments sake the ATO rate states 2.06 on their website also), then you have made a loss of 0.02 cents per pound. Does that make sense?

It doesn't matter what rate you actually change at, for tax purposes you have to use the rate that the ATO set for that day, (usually close to what you actually got). Look on the ATO website for the rate tables. The date to use when calculating your loss/gain is the date that the exchanged funds landed in your Oz account.

Once you get to Oz apply for your tax file number straight away then you won't pay 48% witholding tax - you'll pay whatever tax is 'normal' for your income. It doesnt take long for your tax file number to come through but you can't apply until your in the country. You can apply on-line once you arrive.

[MartinLuther]

Originally Posted by Lisa and Martin Thanks MartinLuther you are a good bod. But just to be safe maybe I should make the monthly payments out of my Barclays-had-it from-childhood account rather than my Barclays-joint-set-up-with-partner-about-10yrs-ago account? Would this be a sensible ar*e-covering exercise? To EvanTel - I only get charged 10% non-resident witholding tax by my Oz bank at the moment & declare the difference for tax in the UK. Gordon needs it right now.

I would definitely use your old account for the transfers. It's bizarre but it's the account that you make the transfer from that seems to count and not the one where the money is stored.

[MartinLuther]

Some general points on the 48.5% witholding tax that's been mentioned.

• Firstly, it is now 46.5% (the top rate of tax + medicare).
• It is only charged if you don't/can't supply a tax file number.
• Once you supply a tax file number (TFN) you are either recredited with the tax taken or you can claim the excess (i.e. the amount above what you should have paid) on your annual tax return.
• Don't worry about it. You're not being charged a stupid amount of tax (unless you make a stupid amount of money ).

It's also worth noting that once you supply a TFN, Aus banks don't charge tax at source like the UK. You will have to pay the tax at the end of year (so be careful not to spend it). Or, if most of your income comes from investments, you will have to pay quarterly through PAYG (which is like paying on-account in the UK system).