Cgt
Sep 17th 2003, 9:13 am
#1
Forum Regular
Thread Starter
Joined: Aug 2003
Location: surrey
Posts: 84
capital Gains tax on exchange rates?
If for example you emmigate to OZ on 1/1/2004. You hold at that stage £100,000 and the current exchange rate is A$2=£1, you have an overseas asset valued at A$200,000. You don't want to convert it yet because of the low current exchange rate.
At 1/4/2004 the exchange rate has moved to A$3=£1 , and you decide to convert this you will now have A$300,000.
Therefore you will have made a Capital gain of $100,000 which will be taxed at about 48%
Am I right in this or is my logic wrong?
At 1/4/2004 the exchange rate has moved to A$3=£1 , and you decide to convert this you will now have A$300,000.
Therefore you will have made a Capital gain of $100,000 which will be taxed at about 48%
Am I right in this or is my logic wrong?
Last edited by Enzo&Chloe; Sep 17th 2003 at 9:34 am.
Sep 17th 2003, 10:40 pm
#2
BE Forum Addict
Joined: Jan 2003
Location: Brisbane
Posts: 1,576
To the best of my knowledge you are correct with a couple of minor points.
This $100,000 might not all be taxed at 48%, it depends on how much you earn between arriving in Oz and 30 June (end of tax year). Lets say you earn 0$ then they will tax this $100,000 as your taxable income for the year, so the first $20,000 will be taxed at 20%, from $20,001 to $40,000 at 40% and balance at 48%. Also each month you are here you have a tax free allowance of $500.
I cannot remember the exactly tax % or band limits but this is the principle.
If their are 2 of you might be able to split it $50,000 each and that would reduce the tax bill as well.
Also if instead of waiting 3 months you waited 1 year or more you'd only pay tax on 50% of the gain, so instead of $100,000 being liable for tax only $50,000 would be liable for tax.
This $100,000 might not all be taxed at 48%, it depends on how much you earn between arriving in Oz and 30 June (end of tax year). Lets say you earn 0$ then they will tax this $100,000 as your taxable income for the year, so the first $20,000 will be taxed at 20%, from $20,001 to $40,000 at 40% and balance at 48%. Also each month you are here you have a tax free allowance of $500.
I cannot remember the exactly tax % or band limits but this is the principle.
If their are 2 of you might be able to split it $50,000 each and that would reduce the tax bill as well.
Also if instead of waiting 3 months you waited 1 year or more you'd only pay tax on 50% of the gain, so instead of $100,000 being liable for tax only $50,000 would be liable for tax.
