So .... friend of mine moved to Australia 4 years ago and left his life savings in the UK. He just bought a house in Sydney and needs every cent he can get to reach his required 20% deposit. Therefore he just transferred it over - yeah worse possible time but he wanted this house and needed the cash.

In that time the exchange rate has gone from 2.12 to 1.45

Bearing in mind the Australian Tax Office could have hit him up for any gain that was made had the exchange rate moved in his favour, does anyone think he could claim for the loss or a portion of?

Don't think he can claim a capital loss - after all, he hasn't lost any money, he just hasn't got as good an exchange rate when moving from one currency to another.

Some years ago I bought a 32" LCD TV for around $2400 - nowadays you can buy one new for less than $500. Do you think I could claim a capital loss on that just because the market has changed over time?

Are you sure the ATO could claim capital gains due to exchange rate variations? If the cash had been in Australia before being invested in the UK, then exchange rate gains when bringing it back may be taxable, but surely not when bringing it across for the first time?

It's been discussed on BE before that any foreign exchange gain on money earned abroad could be hit for capital gain tax. It is a gain after all.

Apparently, and I do not know if this is true or not, you have a 6 month grace period when becoming an Australian resident to move large sums without attracting GCT.

I thought the 6 month 'rule' had been debunked as a myth, as it only applied to certain pension schemes.


S

I don't know myself. This whole thing is a mystery to me.

If the whole CGT on transfers that have seen a boost due to a exchange rate change is a myth then that's great.

I honestly don't see how the ATO can tax you on some mythical capital gain or loss. Are they going to say "You could have transferred this money over here when the exchange rate was 1.5 but instead you waited until the rate was 2.5 so we're going to tax you on the difference? I don't think they could ever make that stick.

If however you transferred money from Australia to the UK at 1.5 and brought it back at 2.5, then you have definitely made an Australian capital gain which you can get taxed on.

This argument has raged on for many years, and has got quite heated at times. I think it was resolved by a private ruling IIRC.


S

It is actually quite plausible, that does represent a gain since the time of becoming resident. It has been discussed a lot on here. I also don't know the answer but I think it lies in this being "private use" or something. Of course if they don't tax the gains, then they aren't going to give allowances for the losses.

I am not an expert on this but

It might be that the loss can only be offset against income from the same class. That would explain why you have to pay if a gain but cant deduct if a loss. Unless you have a gain from another source that the loss can be offset.
That gain would have to be in same class ie related to transfer of cash for capital gain.

I made a considerable capital loss when an investment went bust - that loss is sitting there waiting for me to make a taxable capital gain which I can offset it against. If I don't have a capital gain subject to tax, then I just have to absorb the loss.

In principle foreign currency is a chargeable asset, liable to capital gains but also capable of generating capital losses. Capital losses can normally only be offset against other capital gains.

However, due to the complexity of the rules, and various discussions about whether currency for private use is outside the scope of capital gains, I would recommend to consider getting an ATO private ruling to document the claiming of the loss and its scope for use against future capital gains.

You are pretty much correct except that in I think 2009 they scrapped the different classes of losses and gains and so now a losss can be applied against any capital gain.

I will recommend that to my mate ....... either way he has nothing to lose.