aquaaddict

Hi,

Planning on moving to Oz in January, was just opening another ISA savings account that was going to be locked for a year, but as I understand it they are for UK residents only, and if abroad you then get taxed on them?

What has happened to other people when you moved abroad?

I am guessing I would be best to put it into an account that I can withdraw it from just before I emigrate and transfer it into the highest normal savings account I can find, and put up with paying tax?

I wanted to ideally leave it in the UK for the time being due to the poor exhange rate, but are there any tax free savings schemes similar in Oz?

Thanks,

Anthony

EvannTel

I believe if you resident in Australia for tax purposes then indeed you cannot benefit from ISA's and they are taxable. Many peeps on here are more knowledgeable in these matters than I though!

I'm not aware of any similar products here - they tax you for just about everything! Tax efficient investments aren't that easy here, especially now they've chopped the superannuation allowances.
I'm now considering "margin lending" but its not without its risks! But then again what investments aren't?

fairywings

It depends upon when you get the interest from the ISA, I would suggest you think about looking into an instant access one, which you can close when you leave the UK. That will mean that you get the tax free interest upto the day you close it.

If you are a resident for tax purposes in Oz you can't get tax free interest from your isa, like wise if you remain a UK tax payer while living here HMRC will tax you on everything you hold in Oz, although there are agreements in place so you don't get charged by the Aussies and HMRC.

Les Avalook

I was just thinking about this question when I found this thread.

If I read this correctly if you leave any money/stocks etc in the UK when you move to Oz you must declare it and you will be taxed in Oz on the interest/capital gain/dividend less any tax you have paid in the UK.

An Isa in the UK loses its tax benefit once you are in Oz, so while it is an advantage to us brits to put cash into an Isa in the UK, once we move to Oz and we wish to leave cash in the UK for whatever reason we just want an UK account paying the highest rate of interest. The fact that high rate could be in an UK account that is not an ISA would not matter. If that is then taxed in the UK at 20% then unless you pay more than 20% in Oz (I do not know Oz tax bands) you would not need to pay anymore tax.

Please tell me if I have this understanding wrong.

aquaaddict

That was the conclusion I am also coming to, however what I am unclear about is what if the Interest is paid at the end of the year, just after you move to OZ, do you have to pay tax on it all, or can you claim back pro rate the tax on the interest for the period of that year that you were resident is Oz?

Or can u remain a UK resident for tax purposes, and then become an Oz resident a little later when its all resolved?

Anthony

sparkley23

I probably didn't do it properly but I left mine in an instant ISA, told my bank I was moving abroad and they said it was fine to keep money in account but just couldn't put any more money in it once went abroad as wasnt entitled to once not a UK resident. I declared the interest I made on it in Aus and was taxed on it. But didn't get taxed on interest in UK due to the account it was in being an ISA

Les Avalook

Please realise I am a new member (and still 2 years away from Oz) so would like to corrected if wrong.

As I understand it you have one year to bring over and bank your assets from wherever you are moving from. Again I am not sure if that is a tax year or calendar year.

Once your first year is up anything earned after then will be taxed at your Oz rate wherever that income is earned less the local tax, in our case the UK. If money remains in an UK Isa where it is not taxed then Oz will tax it at your personal tax rate. If it is in a UK savings account which is taxed in the UK then you declare in the interest plus tax paid and they will tell you if you have to pay anymore tax in Oz.

If, for example, you moved to Oz in May 2010 and you had Isa’s in the UK earning interest if you then closed them and transferred the whole lot to Oz within the first year the total sum would not be taxed, but it would start to be taxed once it is in your Oz bank account.

aquaaddict

Ooooh, just found this on the HMRC website
http://www.hmrc.gov.uk/leaflets/isa-factsheet.htm:

If you cease to be a UK resident while you already have an ISA open, you will no longer be able to put money into it. However, you will still be able to keep your ISA open and you will still be entitled to the tax benefits on investments held in the ISA. If you then return to be UK resident and ordinarily resident, you can start putting money in again.

So that seems to imply that you can carry on earning interest tax free, but I guess you get caught for tax if/when you transfer the money into Oz as it will be coming in withough have previously having tax paid on it?

Anthony

Wol

No, you will have paid Oz tax on the interest/dividends from the ISA. If you close the ISA you can bring in the capital and technically pay Oz tax on any gain between taking up residence and transferring the cash - both in AU$ so the exchange rates will also come into it.

Les Avalook

Hi Wol

Are you saying there is no allowance give in time for you bring over to Oz your savings from your home country?

The day that you touch down in Oz and take up PR then you must transfer your savings or declare them from that day for Oz tax.

Where is it best to find this information out?

Wol

The ATO website is probably the best place to explore this.

People get very hung up on the extra-Oz accounts: except for one or two things like transferring pension arrangements it's really quite straightforward.

As a tax resident - ie from the day you come in to stay (as opposed to just validating, if that's different) - you are liable for Oz tax on all your income wherever it comes from.

If you have ISAs you can keep them but not add to them but you will now have to pay Oz tax on them - the untaxed advantage is purely a UK thing and now has no relevance.

aquaaddict

So my ISA that pays interest at the end of the year, i.e. after I (hopefuly) move to Oz, I will then have to pay tax on all of that even though most of that interest was effecitvly earned during the year that I was in the UK? If so it sounds like I should switch it to monthly interest so I get most of it paid back and thus turned into capital before I land in Oz?

Anthony

Wol

That sounds sensible.

Swerv-o

The ATO won't be interested in any of your accounts up until the moment you walk out of the airport. If you can obtain a valuation of how much interest you have earned for the year up tuntil the date you leave, then you should use that as an extimate for the part year tax remaining. If not, then you may struggle to separate what interest you earned as a UK tax resident, and what you earned as an Australian one.

I had similar dealings with the ATO just recently, and they were surprisingly fair and balanced in their decision making.


S