Little known fact – avoiding tax on UK investments for Australian tax residents
May 13th 2004, 10:27 pm
#1
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Little known fact – avoiding tax on UK investments for Australian tax residents
I came across this on the Gomatilda website. If you have UK investments classed as FIFs (foreign investment funds) – this could be shares, unit trusts, peps or isas - you can avoid paying Oz FIF tax on these. You need to sell them by June 30th and buy back in the following tax year. This could be as soon as July 1st. Ad infinitum!
I thought it too good to be true at first but checked it out on the ATO website.
I thought it too good to be true at first but checked it out on the ATO website.
May 13th 2004, 11:44 pm
#2
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Re: Little known fact – avoiding tax on UK investments for Australian tax residents
Originally posted by Ozbound7
I came across this on the Gomatilda website. If you have UK investments classed as FIFs (foreign investment funds) – this could be shares, unit trusts, peps or isas - you can avoid paying Oz FIF tax on these. You need to sell them by June 30th and buy back in the following tax year. This could be as soon as July 1st. Ad infinitum!
I thought it too good to be true at first but checked it out on the ATO website.
I came across this on the Gomatilda website. If you have UK investments classed as FIFs (foreign investment funds) – this could be shares, unit trusts, peps or isas - you can avoid paying Oz FIF tax on these. You need to sell them by June 30th and buy back in the following tax year. This could be as soon as July 1st. Ad infinitum!
I thought it too good to be true at first but checked it out on the ATO website.
I would think that the loss made from selling shares and buying them back at a higher price (given that the bid/sell price can differ by some margin) would outweigh the oz tax due on any dividend.
Also, the 20% tax paid in the UK on dividends would surely be available for offset against Oz tax liability in any event.
Gaz
May 14th 2004, 12:12 am
#3
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I would think that the loss made from selling shares and buying them back at a higher price (given that the bid/sell price can differ by some margin) would outweigh the oz tax due on any dividend.
One thing you would need to be careful of, is when the the Ex Dividend and record date is for the particular shares you have. You could end up without any dividends if you happened to sell and buy back your shares either side of these 2 dates.
Is that right that the Australian tax year goes from July 1st to June 30th?
May 14th 2004, 8:13 pm
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Tax gets very complex and is not an area where an online forum can substitute for professional advice.
Even if the above is technically legal I'd point out a few things:
- you may be crystallising a capital gains tax liability
- I understand that direct shareholdings in most listed companies are exempt from FIF taxation anyway: Alan Collett should be able to confirm this.
- If you sell a PEP or ISA, you can't repurchase back into it out of previous year's allowances (in fact, one key factor that should drive whether you keep or sell these is whether you think you may go back to the UK - if you sell your holdings you can't recover the previous years' investment allowances).
- I believe the ATO have powers to impose taxes on transactions which are entered into solely for tax avoidance purposes. Again, I'm open to correction on this.
- as someone else has posted, you have buy/sell costs and a risk on the price moving to take into account.
The Australian tax year does run from 1 July to 30 June.
I would suggest that while tax is an important consideration for any financial deal, it's not the *only* consideration.
Jeremy
Even if the above is technically legal I'd point out a few things:
- you may be crystallising a capital gains tax liability
- I understand that direct shareholdings in most listed companies are exempt from FIF taxation anyway: Alan Collett should be able to confirm this.
- If you sell a PEP or ISA, you can't repurchase back into it out of previous year's allowances (in fact, one key factor that should drive whether you keep or sell these is whether you think you may go back to the UK - if you sell your holdings you can't recover the previous years' investment allowances).
- I believe the ATO have powers to impose taxes on transactions which are entered into solely for tax avoidance purposes. Again, I'm open to correction on this.
- as someone else has posted, you have buy/sell costs and a risk on the price moving to take into account.
The Australian tax year does run from 1 July to 30 June.
I would suggest that while tax is an important consideration for any financial deal, it's not the *only* consideration.
Jeremy
Originally posted by migrantoz
You could actually make a dividend profit if the share price dropped during the time you didnt hold any, enabling you to buy back more shares. Remember shares can go down as well as up.
One thing you would need to be careful of, is when the the Ex Dividend and record date is for the particular shares you have. You could end up without any dividends if you happened to sell and buy back your shares either side of these 2 dates.
Is that right that the Australian tax year goes from July 1st to June 30th?
You could actually make a dividend profit if the share price dropped during the time you didnt hold any, enabling you to buy back more shares. Remember shares can go down as well as up.
One thing you would need to be careful of, is when the the Ex Dividend and record date is for the particular shares you have. You could end up without any dividends if you happened to sell and buy back your shares either side of these 2 dates.
Is that right that the Australian tax year goes from July 1st to June 30th?
May 15th 2004, 1:35 am
#5
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Joined: Mar 2004
Posts: 55
Originally posted by JAJ
Tax gets very complex and is not an area where an online forum can substitute for professional advice.
Even if the above is technically legal I'd point out a few things:
- you may be crystallising a capital gains tax liability
- I understand that direct shareholdings in most listed companies are exempt from FIF taxation anyway: Alan Collett should be able to confirm this.
- If you sell a PEP or ISA, you can't repurchase back into it out of previous year's allowances (in fact, one key factor that should drive whether you keep or sell these is whether you think you may go back to the UK - if you sell your holdings you can't recover the previous years' investment allowances).
- I believe the ATO have powers to impose taxes on transactions which are entered into solely for tax avoidance purposes. Again, I'm open to correction on this.
- as someone else has posted, you have buy/sell costs and a risk on the price moving to take into account.
The Australian tax year does run from 1 July to 30 June.
I would suggest that while tax is an important consideration for any financial deal, it's not the *only* consideration.
Jeremy
Tax gets very complex and is not an area where an online forum can substitute for professional advice.
Even if the above is technically legal I'd point out a few things:
- you may be crystallising a capital gains tax liability
- I understand that direct shareholdings in most listed companies are exempt from FIF taxation anyway: Alan Collett should be able to confirm this.
- If you sell a PEP or ISA, you can't repurchase back into it out of previous year's allowances (in fact, one key factor that should drive whether you keep or sell these is whether you think you may go back to the UK - if you sell your holdings you can't recover the previous years' investment allowances).
- I believe the ATO have powers to impose taxes on transactions which are entered into solely for tax avoidance purposes. Again, I'm open to correction on this.
- as someone else has posted, you have buy/sell costs and a risk on the price moving to take into account.
The Australian tax year does run from 1 July to 30 June.
I would suggest that while tax is an important consideration for any financial deal, it's not the *only* consideration.
Jeremy
1) There is only a small number of exempt UK shares (like banks) which are exempt from FIF taxation.
2) You can hold up to $A50000 of FIFs without fear of taxation.
3) You are correct about pep/isa selling - but this UK tax wrapper is not recognised in Oz anyway. Therefore you could sell your fund holding within the pep/isa and repurchase as oeic/unit trust etc. I think the small cost of the spread would more than outweigh any FIF tax due on capital gain or income during the tax year.
4) It is the ATO themselves who ruled about buying and selling between tax years.
I agree not to let the tax tails wag the dog and investments, whether in UK or Oz, should be made on their merits. But I thought it would be useful to point out that people moving to Oz have a choice about selling their UK funds in terms of when and if, with the possibility of avoiding Oz tax on them.
Regards
May 15th 2004, 11:54 pm
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Originally posted by Ozbound7
To answer your points
1) There is only a small number of exempt UK shares (like banks) which are exempt from FIF taxation.
2) You can hold up to $A50000 of FIFs without fear of taxation.
3) You are correct about pep/isa selling - but this UK tax wrapper is not recognised in Oz anyway. Therefore you could sell your fund holding within the pep/isa and repurchase as oeic/unit trust etc. I think the small cost of the spread would more than outweigh any FIF tax due on capital gain or income during the tax year.
4) It is the ATO themselves who ruled about buying and selling between tax years.
I agree not to let the tax tails wag the dog and investments, whether in UK or Oz, should be made on their merits. But I thought it would be useful to point out that people moving to Oz have a choice about selling their UK funds in terms of when and if, with the possibility of avoiding Oz tax on them.
Regards
To answer your points
1) There is only a small number of exempt UK shares (like banks) which are exempt from FIF taxation.
2) You can hold up to $A50000 of FIFs without fear of taxation.
3) You are correct about pep/isa selling - but this UK tax wrapper is not recognised in Oz anyway. Therefore you could sell your fund holding within the pep/isa and repurchase as oeic/unit trust etc. I think the small cost of the spread would more than outweigh any FIF tax due on capital gain or income during the tax year.
4) It is the ATO themselves who ruled about buying and selling between tax years.
I agree not to let the tax tails wag the dog and investments, whether in UK or Oz, should be made on their merits. But I thought it would be useful to point out that people moving to Oz have a choice about selling their UK funds in terms of when and if, with the possibility of avoiding Oz tax on them.
Regards
Cheers
May 16th 2004, 12:15 am
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Joined: Apr 2004
Posts: 34,649
And in answer to your points:
1. There is also an 'active business' exemption on top of that given to banks.
2. I know.
3. It makes a difference if someone returns to the UK.
As to whether people have planning opportunities to minimise FIF taxation - of course they do. I don't think we're disagreeing on that,
Jeremy
1. There is also an 'active business' exemption on top of that given to banks.
2. I know.
3. It makes a difference if someone returns to the UK.
As to whether people have planning opportunities to minimise FIF taxation - of course they do. I don't think we're disagreeing on that,
Jeremy
Originally posted by Ozbound7
To answer your points
1) There is only a small number of exempt UK shares (like banks) which are exempt from FIF taxation.
2) You can hold up to $A50000 of FIFs without fear of taxation.
3) You are correct about pep/isa selling - but this UK tax wrapper is not recognised in Oz anyway. Therefore you could sell your fund holding within the pep/isa and repurchase as oeic/unit trust etc. I think the small cost of the spread would more than outweigh any FIF tax due on capital gain or income during the tax year.
4) It is the ATO themselves who ruled about buying and selling between tax years.
I agree not to let the tax tails wag the dog and investments, whether in UK or Oz, should be made on their merits. But I thought it would be useful to point out that people moving to Oz have a choice about selling their UK funds in terms of when and if, with the possibility of avoiding Oz tax on them.
Regards
To answer your points
1) There is only a small number of exempt UK shares (like banks) which are exempt from FIF taxation.
2) You can hold up to $A50000 of FIFs without fear of taxation.
3) You are correct about pep/isa selling - but this UK tax wrapper is not recognised in Oz anyway. Therefore you could sell your fund holding within the pep/isa and repurchase as oeic/unit trust etc. I think the small cost of the spread would more than outweigh any FIF tax due on capital gain or income during the tax year.
4) It is the ATO themselves who ruled about buying and selling between tax years.
I agree not to let the tax tails wag the dog and investments, whether in UK or Oz, should be made on their merits. But I thought it would be useful to point out that people moving to Oz have a choice about selling their UK funds in terms of when and if, with the possibility of avoiding Oz tax on them.
Regards
