GLR

We've still got some money left in the UK and I'm now thinking about what to do with it.

I understand that any forex gain made after I became an Australian resident for tax purposes is subject to tax - however I've also read of an exemption if the bank account was opened prior to 1 July 2003.

Article by Alan Collett:
http://www.gomatilda.com/news/article.cfm?articleid=327

Does anyone know how the ATO interpret that rule? I have a low interest earning current account opened pre 2003 and a high interest earning savings account opened post 2003.

Is there the opportunity to place the sterling funds in the high interest account for say three months and then transfer them back to the low interest account prior to converting into oz dollars.
That way the forex gain or loss would have been crystallised by transfering from the pre 2003 acc so may be exempt from tax.

Has anyone any advice on what I appreciate is a complicated and rather boring subject!

Cheers

GLR

Hafan

I called the Australian tax office to see if I could take a loss for a difference in exchange rate from the time I became a resident to when I sold the GBP and bought A$ and they almost laughted at me - said it was just a change in the market - no gain or loss available!!

HUP

As I understand it the exchange of funds is not liable to tax within the first year.

JAJ

No such exemption.



Jeremy

JAJ

There are rules that subject unrealised foreign exchange gains and losses to income tax. But these are generally only for large corporations to worry about.

What's more likely is that if you make a capital gain on buying or selling foreign currency, this can be subject to capital gains tax. Similarly, losses incurred may be offsettable against other capital gains.

Jeremy

HUP

What I mean is that you do not pay tax on the funds that you transfer. You only start paying tax on the interest it earns in a bank account

JAJ

There is no capital transfer tax *at all*. Whether you transfer in the first year or the tenth year.

Interest earned from overseas (after becoming tax resident) is taxable as income, and capital gains and losses realised on the currency change (since becoming tax resident) may be caught by the capital gains tax regime.

But there is no tax on capital movements into and out of Australia - lots of people think there is. Hence there is no exemption from a tax that does not exist.

Jeremy

kirsty&al

Hello,

Unfortunately you either get hit under old rules (i.e. taxed as a capital gain) or under new rules (foreign exchange gain).

Regards
Alistair

JAJ

What 'new rules'? The 2003 rules generally only apply to large corporations with heavy duty systems for calculating unrealised exchange gains (usually a very complex calculation).

In general, for the ordinary taxpayer, the capital gains rules apply. You can only be subject to CGT if you have made a gain, and loss relief is available. As is the 12 month rule which halves the rate of CGT.

Jeremy