Alex Hall

Hi,

I've spent quite a bit of time now trying to read previous posts on FIF/CGT and Exchange Rate considerations for investments outside of Australia. Have just finished reading the ATO FIF Guide.

Can anyone comment on whether I have understood the various rules correctly and the implications of these.

1. If your FIF holdings are < $50,000 then there is no FIF consideration
2. If your FIF holdings are > $50,000 but you sell the FIF(s) before 30th June then there is no FIF consideration (Note: there would be for previous years if you held the FIF on a previous 30th June) (Note: there could be CGT and exchange rate tax considerations)

Consider the following example:

a. As a UK tax resident I buy a St James Place (UK Financial Company) International Investment Bond (UK tax free) in April 2003 with a value of £25,000 and the exchange rate is £1=$2.5

b. In September 2005 the Bond is worth £40,000 and the exchange rate is £1=$2.6. During this month I emigrate to Australia on a permanent visa.

c. In May 2006 I sell the Bond when its value is £45,000 and the exchange rate is £1=$2.7. The money is put into a UK bank account.

And then the following questions:

1. In the above scenario is there any FIF tax liabilty? - I presume not, due to selling before 30th June 2006.

2. Is there any CGT liability? - Not sure and if so would presumably be for the increase in value from Sept 05 to May 06 (i.e. £5000)?

3. Would the increase in Exchange rate be applicable for tax reasons? - Presumably not if the money does not re-enter Australia.


d. If I had decided during May 2006 to transfer the money to Australia...


4. Is there any CGT liability? - Not sure.

5. Would the increase in Exchange rate be applicable? - Presumably yes as the exchange rate when I entered Australia was $2.6 and when I transfer the money to Ausrtalia it is $2.7.

6. To what sum is the exchange rate applied to for tax reasons is it £45,000-£40,000 i.e. £5,000, Is it the full £45,000, the original £25,000 or some other value?


Any thoughts?

thanks

Alex

Kiwipaul

Once you become resident in Oz for Tax purposes you need to value all your foreign holding in Oz dollars at that point. If you sell some of these holding 6 months later you have to work out the gain (in Oz dollars) based on your valuation when you arrived in Oz. This gain you have to decalare on your tax return for that year and you will be taxed on that gain.

If you hold these assets for more than 12 months you only need to declare 50% of the gain unless you are a dealer and this is how you earn a living.

Wether you transfer the money to Oz is irrevellent as you made a profit, you are tax resident in Oz Ipsofacto the Oz taxman taxes you anyway.