chrisp6

If i transfer £110,000 to Australia (From Sale of House etc.) when we emigrate do I have to pay tax on this money?

ABCDiamond

Under normal circumstances NO.

The only tax normally paid is on any deemed profit you have made, after expenses in creating that profit.

ie: if the £110k is worth $275k at a rate of 2.5, and you keep the money in the UK till the rate hits 3.0, then making it worth $330k, you would then be taxed on the profit created of $330k-$275k = $55k at whatever tax rate is appropriate for you.

http://www.abcdiamond.com.au/info_tax.htm

kirsty&al

If you transfer on or before the day you arrive to stay permanently (validation trip does not matter) then there are no Oz tax implications. If you transfer after then you could be subject to a foreign gains tax as described by ABCDiamond.

steve the man

As I understand it you only pay tax on any profit gained if you are transferring from an account specially set up to hold proceeds from house sale etc before transferring to aussie dollars , if the money is in an existing account set up before july 2003 there should be no tax implications, if you search through this forum I believe this subject has been raised before.

kirsty&al

Hello,

I think that you are subject to Capital Gains Tax if you transfer from an account opened before July 2003 and Foreign Currency Gains Tax (FCGT) if you transfer from an account opened after this date.

See Alan Collett's note.
http://www.gomatilda.com/news/article.cfm?articleid=327

To quote Alan: "However, it should be noted that this gain may be assessable under the capital gains tax provisions."

My accountant here, in Oz, says that it is. (He may be wrong, but until someone proves otherwise I'll have to go along with what he says.)

The only difference between the 2 taxes is that the FCGT does not have the 50% discount on gains made after 12 months.

If you can (and you can get a good rate) then it is easier to transfer to $s before you arrive.

Regards
Alistair

chrisp6

Thanks to all your replies am I correct in saying that if I transfer my cash for eg.. on May 12th into an Oz bank and then travel to Oz 5 days later I will not pay any tax on the money?
Chris

kirsty&al

Correct (assuming that you have paid your UK tax). In this situation you will not have any tax implications with the ATO.

Regards
Alistair

tractor boy

we may have to travel before the sale of our house is concluded becauce of the date of entry on our visas, would we have to pay fcgt in this stiuation?

ABCDiamond

It doesn't sound like it. But if any major changes occur in the foreign exchange rate, then you may pay something.

eg: Lets say the House is being sold for £100,000 and the FX rate is 2.5, the house is deemed to be worth $250,000

Lets say the FX rate became 2.6 at the time that you receive payment, so it is now worth $260,000. Therefore you have made $10,000 extra and MAY be taxed on that portion. However, I would then deduct all selling costs from that figure to minimise any profit. Also deduct all extra Mortgage Interest payments after the date you move, as these would be deemed part of the cost of keeeping the "asset" whilst it appreciated in value.
And I wouldn't stop deducting things until I made a loss

Also if you originally had the house up for sale at £110,000, with the intention of having to sell because you more migrating, I would try to use that value as the original value ie 110 x 2.5 = $275,000, therefore no OZ taxable profit anyway !

If you can put across a convincing case, the ATO may well feel it isn't worth even following it up.

Kiwipaul

Also it's a self assessment system here so the taxman won't automatically demand you pay tax on a money transfered even if the exchange rate has moved significently. To start with he won't know where the money has come from (maybe it's come from Canada and your from UK).

So strictly speaking you should declare your gain when you lodge your tax return at the end of the year But it's very easy to forget what with everything else going on with you move to Oz.

So basically it's an honor system here, you declare it you pay tax on it. But their are so many exceptions and anomalies that they will rarely chase you up for it if you don't announce it yourself.

kirsty&al

Beware that they seem to investigate individuals more here than in the UK. Last year there was some comments from a retiring head of ATO that they may be concentrating too much on individuals and not enough on corporates.

As with the UK there are fines and heavy interest for tax evasion, but there are also penalty tax rates as well.

Note that the ATO can trace all transfers greater than $10,000 using Austrac (if they want to).

Regards
Alistair

Kiwipaul

If you have foreign income you have to fill in a sup tax form but it is so bacic as beyond belief. It dosn't ask anything about where your foreign income comes from, and you have to provide no proof of what you state on this form.

IF my income from abbroard was $1,000,000 and I had expences of the same I would just need to declare the $1,000,000 in my total gross income but not explain where it came from or what the expenses were or any documentation at all. And I wouldn't have to pay any extra tax in Oz.

As they don't ask for any details of your foreign income I don't see how they can investigate it easily. (In NZ they asked for proof of my income and origional bank statements).

I've regularly brought into Oz more than $10,000 (all perfectly legally via bank transfers) but never been asked about the source or to explain it (I can if I'm asked).