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Capital Gains Tax on UK bank balances

Capital Gains Tax on UK bank balances

Old Jan 17th 2012, 11:07 am
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Default Capital Gains Tax on UK bank balances

Hi everyone,

Wondering if you can help me I have heard that if you have money in a uk bank account when you move to Australia, any money you make from the improvement in the exchange rate of british pounds to Australian dollar, when you eventually change it to Australian dollars, is subject to Australian capital gains tax.

Does anyone know if this is true. I'm thinking anyone who has left money in the UK and eventually brought to Australia would know this one.

Any help would be greatly appreciated.

unclebob
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Old Jan 17th 2012, 10:15 pm
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Default Re: Capital Gains Tax on UK bank balances

The Australian government need never know the balance of your UK bank accounts, keep that kind of information to yourself if you can. Draw cash out of the ATM here and they will be none the wiser.

Not so easy if you're holding onto huge amounts I suppose and need to transfer money for house purchases etc, but for drawing pensions and investment interest.......... say nowt.
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Old Jan 17th 2012, 10:20 pm
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Default Re: Capital Gains Tax on UK bank balances

You are also supposed to pay Australian tax on any interest paid.

Failure to declare is tax evasion and is illegal
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Old Jan 17th 2012, 10:36 pm
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Default Re: Capital Gains Tax on UK bank balances

Originally Posted by unclebob
Hi everyone,

Wondering if you can help me I have heard that if you have money in a uk bank account when you move to Australia, any money you make from the improvement in the exchange rate of british pounds to Australian dollar, when you eventually change it to Australian dollars, is subject to Australian capital gains tax.

Does anyone know if this is true. I'm thinking anyone who has left money in the UK and eventually brought to Australia would know this one.

Any help would be greatly appreciated.

unclebob
In theory, yes this is true, however the tax payable upon forex gains is an argument that has raged back and forth on this forum for many years. Some schools of thought suggest that as the money is private in nature, then it is not subject to taxation on the gain, and also that it is not subject to a gain because you can't register selling at a low price as a loss. However, the other school of thought is that the legal terms make it reasonably clear that any realisation of a gain on Forex is taxable.

I believe that some folks have been stung for tax, and others in similar circumstances haven't been. I also recall that one member was in the process of applying to the ATO for a private ruling, though I am not sure if the results were ever posted.


S
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Old Jan 17th 2012, 10:48 pm
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Default Re: Capital Gains Tax on UK bank balances

Topic of much debate, don't think anyone knows, even the ATO.

Interesting post on tax on pension value increases: http://britishexpats.com/forum/showp...1&postcount=11

"Afraid if it grows in GBP then that is what you are taxed on - the exchange rate is not taken into account. So if the fund grew 1000 pounds you are taxed on 1000 pounds converted to AUD.

I know this because I have been taxed and have seen the calculation done by the tax person. "

on this thread: http://britishexpats.com/forum/showthread.php?t=745134

..suggests the ATO is not interested in foreign exchange gains/losses. I don't believe they can have it both ways.

Maybe search ATO database for any private rulings that might apply. Or get a private ruling yourself.
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Old Jan 17th 2012, 11:31 pm
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Default Re: Capital Gains Tax on UK bank balances

Basically if the total value of the accounts is less than $250,000 you can ignore the gain due to currency fluctuations.

http://www.ato.gov.au/businesses/con...0&mfp=&st=&cy=

QUOTE
The ordinary operation of the foreign exchange gain and loss measures (the forex measures), as contained in Division 775 of the Income Tax Assessment Act 1997 (ITAA 1997), is that deposits to, and withdrawals from, foreign currency denominated bank accounts (where a gain or loss arises from a currency exchange rate fluctuation) give rise to a gain or loss that is realised under the measures. Withdrawals from an account with a credit balance will also generally have a consequence under the capital gains tax (CGT) provisions.

However, the $250,000 balance election broadly enables taxpayers to disregard certain foreign currency gains and losses on certain foreign currency denominated bank accounts and credit card accounts with balances below a specified limit.


You don't even have to tell the tax office you have made this declaration you just have to keep a record of the accounts in your tax records at home.
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Old Jan 18th 2012, 8:05 am
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Default Re: Capital Gains Tax on UK bank balances

Thank you for all the replies.

The amount I am talking about was designed (before the GBP dropped so much) to buy a house in Sydney, so it is more that 250K Australian.

If it is taxable, I have thought of is to put the money into mortgages of what will be buy to let mortgages and store the money there for a time. That way, only the increase in the value of the property is taxable rather than the profits made through forex.

What do you think?
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Old Jan 18th 2012, 7:13 pm
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Default Re: Capital Gains Tax on UK bank balances

Originally Posted by unclebob
Thank you for all the replies.

The amount I am talking about was designed (before the GBP dropped so much) to buy a house in Sydney, so it is more that 250K Australian.

If it is taxable, I have thought of is to put the money into mortgages of what will be buy to let mortgages and store the money there for a time. That way, only the increase in the value of the property is taxable rather than the profits made through forex.

What do you think?
The rental income would also be taxable
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Old Jan 18th 2012, 7:29 pm
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Default Re: Capital Gains Tax on UK bank balances

I wouldn't tell them. How would they know?
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Old Jan 18th 2012, 7:30 pm
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Default Re: Capital Gains Tax on UK bank balances

Originally Posted by Tramps_mate
I wouldn't tell them. How would they know?
So are you advocating breaking the law?

Not a good start to your new life.

Tax evasion is a serious offence in any country.
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Old Jan 18th 2012, 7:36 pm
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Default Re: Capital Gains Tax on UK bank balances

Only breaking the law if you get caught..
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Old Jan 18th 2012, 9:15 pm
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Default Re: Capital Gains Tax on UK bank balances

The private and domestic nature exemption from forex is worth investigating.

Best regards.
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Old Jan 18th 2012, 9:21 pm
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Default Re: Capital Gains Tax on UK bank balances

Originally Posted by Tramps_mate
I wouldn't tell them. How would they know?
Once you file your first tax return here in Oz you might be surprised at just how much they DO know.
ATO has hooks into almost everything.
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Old Jan 18th 2012, 10:29 pm
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Default Re: Capital Gains Tax on UK bank balances

Originally Posted by unclebob
That way, only the increase in the value of the property is taxable rather than the profits made through forex.

What do you think?
What profit from foriegn exchange over the last 10 years the pound has collapsed and so you are looking at a loss NOT a profit. Assumeing we are talking about Sterling.
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Old Jan 18th 2012, 10:34 pm
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Default Re: Capital Gains Tax on UK bank balances

Originally Posted by iamthecreaturefromuranus
Once you file your first tax return here in Oz you might be surprised at just how much they DO know.
ATO has hooks into almost everything.
I agree the have access to virtually any online finiacial institution in Oz, but their access to those abroard are far more limited and I would susopect they would have to ask (the foreign gov office) to access the infor rather then just go ahead and access it.
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