Tax, FIF and Exchange Rates
Nov 10th 2003, 7:30 pm
#1
Forum Regular
Thread Starter
Joined: Jul 2002
Location: Sydney, NSW
Posts: 122
Tax, FIF and Exchange Rates
Hi all,
I'd be interested to know your thoughts (particularly you tax experts) on the following:
My understanding is that the Tax office treats you as a 'permanent resident' 6 months after you have arrived in Australia to settle. Any investment not transfered within the 6 months, will attract tax on its 'growth' from your initial arrival date.
Assuming a UK current account is treated as a FIF (foreign investment fund), you will be taxed on any interest gained each financial year (unless you're exempt, e.g. if all interest from all FIF's is less than $50,000). With this in mind, this is my query:
As the GBP/AUS exchange rate is poor at present, could we leave most of our funds in the UK until it recovers? Would the FIF rules ONLY apply to the 'interest' gained each year, meaning FIF won't apply to any extra dollars gained by the exchange rate swinging in our favour?
e.g.:
- £100,000 in UK account
- £3,000 gained in interest (3% APR)
- FIF would tax you on the £3,000 for the first year
- Exchange rates go from 2.2 to 2.5, meaning a gain of $30,000 when transfer to Oz
- FIF doesn't apply to the $30,000 gain???
Complicated, I know. Any help would be appreciated!!!!!
Cheers,
C.
I'd be interested to know your thoughts (particularly you tax experts) on the following:
My understanding is that the Tax office treats you as a 'permanent resident' 6 months after you have arrived in Australia to settle. Any investment not transfered within the 6 months, will attract tax on its 'growth' from your initial arrival date.
Assuming a UK current account is treated as a FIF (foreign investment fund), you will be taxed on any interest gained each financial year (unless you're exempt, e.g. if all interest from all FIF's is less than $50,000). With this in mind, this is my query:
As the GBP/AUS exchange rate is poor at present, could we leave most of our funds in the UK until it recovers? Would the FIF rules ONLY apply to the 'interest' gained each year, meaning FIF won't apply to any extra dollars gained by the exchange rate swinging in our favour?
e.g.:
- £100,000 in UK account
- £3,000 gained in interest (3% APR)
- FIF would tax you on the £3,000 for the first year
- Exchange rates go from 2.2 to 2.5, meaning a gain of $30,000 when transfer to Oz
- FIF doesn't apply to the $30,000 gain???
Complicated, I know. Any help would be appreciated!!!!!
Cheers,
C.
Nov 10th 2003, 7:43 pm
#2
BE Enthusiast
Joined: Apr 2003
Location: West Melbourne
Posts: 462
Hi there
Alan Collett's site has some very useful free factsheets that cover some of the areas that you ask about. Try this link:
http://www.collettandco.com/factsheet.cfm
Alan Collett's site has some very useful free factsheets that cover some of the areas that you ask about. Try this link:
http://www.collettandco.com/factsheet.cfm
Nov 10th 2003, 11:05 pm
#3
Migration Agent
Joined: May 2002
Location: Offices in Melbourne, Brisbane, Perth, Geelong (Australia), and Southampton (UK)
Posts: 6,459
Re: Tax, FIF and Exchange Rates
Comments below.
Given your questions you have some misunderstandings about the tax rules ... I understand some might be reticent about spending money to receive formal tax advice, but if you aren't clear on the issues please don't try to shortcut matters simply by reading factsheets. Paying a fee for professional advice might pale into insignificance compared with the tax that might otherwise be payable.
Best regards.
Given your questions you have some misunderstandings about the tax rules ... I understand some might be reticent about spending money to receive formal tax advice, but if you aren't clear on the issues please don't try to shortcut matters simply by reading factsheets. Paying a fee for professional advice might pale into insignificance compared with the tax that might otherwise be payable.
Best regards.
Originally posted by cruisey
Hi all,
I'd be interested to know your thoughts (particularly you tax experts) on the following:
My understanding is that the Tax office treats you as a 'permanent resident' 6 months after you have arrived in Australia to settle. Any investment not transfered within the 6 months, will attract tax on its 'growth' from your initial arrival date.
=> No, this only applies to the section 27CAA Rules, which relate to the transfer of a pension fund into a complying Australian superannuation fund. The FIF Rules apply from the date you arrive in Australia to live, subject to certain exemptions.
Assuming a UK current account is treated as a FIF (foreign investment fund), you will be taxed on any interest gained each financial year (unless you're exempt, e.g. if all interest from all FIF's is less than $50,000). With this in mind, this is my query:
=> A UK bank current account isn't a FIF.
As the GBP/AUS exchange rate is poor at present, could we leave most of our funds in the UK until it recovers? Would the FIF rules ONLY apply to the 'interest' gained each year, meaning FIF won't apply to any extra dollars gained by the exchange rate swinging in our favour?
e.g.:
- £100,000 in UK account
- £3,000 gained in interest (3% APR)
- FIF would tax you on the £3,000 for the first year
- Exchange rates go from 2.2 to 2.5, meaning a gain of $30,000 when transfer to Oz
- FIF doesn't apply to the $30,000 gain???
Complicated, I know. Any help would be appreciated!!!!!
Cheers,
C.
Hi all,
I'd be interested to know your thoughts (particularly you tax experts) on the following:
My understanding is that the Tax office treats you as a 'permanent resident' 6 months after you have arrived in Australia to settle. Any investment not transfered within the 6 months, will attract tax on its 'growth' from your initial arrival date.
=> No, this only applies to the section 27CAA Rules, which relate to the transfer of a pension fund into a complying Australian superannuation fund. The FIF Rules apply from the date you arrive in Australia to live, subject to certain exemptions.
Assuming a UK current account is treated as a FIF (foreign investment fund), you will be taxed on any interest gained each financial year (unless you're exempt, e.g. if all interest from all FIF's is less than $50,000). With this in mind, this is my query:
=> A UK bank current account isn't a FIF.
As the GBP/AUS exchange rate is poor at present, could we leave most of our funds in the UK until it recovers? Would the FIF rules ONLY apply to the 'interest' gained each year, meaning FIF won't apply to any extra dollars gained by the exchange rate swinging in our favour?
e.g.:
- £100,000 in UK account
- £3,000 gained in interest (3% APR)
- FIF would tax you on the £3,000 for the first year
- Exchange rates go from 2.2 to 2.5, meaning a gain of $30,000 when transfer to Oz
- FIF doesn't apply to the $30,000 gain???
Complicated, I know. Any help would be appreciated!!!!!
Cheers,
C.
Nov 11th 2003, 8:06 am
#4
Forum Regular
Thread Starter
Joined: Jul 2002
Location: Sydney, NSW
Posts: 122
Re: Tax, FIF and Exchange Rates
Originally posted by Alan Collett
Comments below.
Given your questions you have some misunderstandings about the tax rules ... I understand some might be reticent about spending money to receive formal tax advice, but if you aren't clear on the issues please don't try to shortcut matters simply by reading factsheets. Paying a fee for professional advice might pale into insignificance compared with the tax that might otherwise be payable.
Best regards.
Comments below.
Given your questions you have some misunderstandings about the tax rules ... I understand some might be reticent about spending money to receive formal tax advice, but if you aren't clear on the issues please don't try to shortcut matters simply by reading factsheets. Paying a fee for professional advice might pale into insignificance compared with the tax that might otherwise be payable.
Best regards.
We'll probably get advice on all our financial affairs next year when we plan to move, too many things are up in the air at the moment to do it now.
Thanks for your comments.
Nov 11th 2003, 8:42 am
#5
Forum Regular
Joined: Aug 2003
Location: surrey
Posts: 84
From my understanding you will pay your top rate tax on the capital gain. (even though this is only exchnage rate) (ie probably 48%)
If you hold the money overseas for more than 12months you get a 50% reduction in the tax. (IE 24% tax)
Therefore in your case you would pay (A$30,000 x 48%) = A$14,400
hope this is of some assistance
If you hold the money overseas for more than 12months you get a 50% reduction in the tax. (IE 24% tax)
Therefore in your case you would pay (A$30,000 x 48%) = A$14,400
hope this is of some assistance
