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Tax on transferring cash through Foreign Exchange Companies (for HIFX/Ozforex)

Tax on transferring cash through Foreign Exchange Companies (for HIFX/Ozforex)

Old Oct 17th 2006, 4:57 am
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Default Tax on transferring cash through Foreign Exchange Companies (for HIFX/Ozforex)

Having followed the question of possible tax payable on cash transfers I have a question for Ozforex and HIFX who both advertise here.

There has been a lot of debate about possible tax consequences of transferring cash from GBP to AUD. (Latest being “Tax on Forex Gains”)

We seem to have a clearing view and consensus of the implications when transferring from a personal bank account. However it is less clear about doing this through a foreign exchange company.

Can you make a comment about the possible tax implications of making the transfer through your UK Barclays forex account? Or at least say when your Barclays account was opened?

Thanks
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Old Oct 19th 2006, 5:55 am
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Default Re: Tax on transferring cash through Foreign Exchange Companies (for HIFX/Ozforex)

In my humble view the question is based on a false premise - there isn't a consensus on the taxation of forex gains and losses so far as I am aware. Rather, you may be drawing conclusions based on comments made by other participants on a discussion forum, and that is a relatively dangerous basis on which to plan one's tax affairs.

The only consensus I can see from comments made in the last few weeks on this and other forums is a general acceptance that the ATO didn't realise the consequences of the law that was being enacted insofar as it has an impact on individuals, to the point that they are now trying to paper over the cracks, as evidenced by the various published extracts of Private Rulings that have been highlighted in this and other forums.

Or it might be that I've overlooked something - can you set out your view of the consensus in this area, and make reference to where this comes from?

Are you saying that you consider gains and losses on disposals of non-A$ currency that derive as a result of disposals from private bank accounts are never assessable/deductible? Or are in certain circumstances? Or that the ATO will not expect individual Aussie resident taxpayers to include such gains and losses on their tax returns?

My hunch is that the question of whether the funds are transferred through HIFX, OzForex, or any other currency specialist and when the bank account was opened is a non-issue. If you transfer funds from your personal bank account to (say) HIFX that constitutes a disposal of your currency which might be a capital gains tax issue or it might be a forex taxation issue. Any subsequent gains or losses arising when you sell (say) GBP's and buy A$'s would then (probably) be a forex tax issue.

As ever, I'm happy to be corrected - these are just initial thoughts and I haven't dived into the legislation to check the position in more detail.

Thanks - in anticipation of your reply!
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Old Oct 19th 2006, 9:46 am
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Default Re: Tax on transferring cash through Foreign Exchange Companies (for HIFX/Ozforex)

Originally Posted by Alan Collett
In my humble view the question is based on a false premise - there isn't a consensus on the taxation of forex gains and losses so far as I am aware. Rather, you may be drawing conclusions based on comments made by other participants on a discussion forum, and that is a relatively dangerous basis on which to plan one's tax affairs.

The only consensus I can see from comments made in the last few weeks on this and other forums is a general acceptance that the ATO didn't realise the consequences of the law that was being enacted insofar as it has an impact on individuals, to the point that they are now trying to paper over the cracks, as evidenced by the various published extracts of Private Rulings that have been highlighted in this and other forums.

Or it might be that I've overlooked something - can you set out your view of the consensus in this area, and make reference to where this comes from?

Are you saying that you consider gains and losses on disposals of non-A$ currency that derive as a result of disposals from private bank accounts are never assessable/deductible? Or are in certain circumstances? Or that the ATO will not expect individual Aussie resident taxpayers to include such gains and losses on their tax returns?

My hunch is that the question of whether the funds are transferred through HIFX, OzForex, or any other currency specialist and when the bank account was opened is a non-issue. If you transfer funds from your personal bank account to (say) HIFX that constitutes a disposal of your currency which might be a capital gains tax issue or it might be a forex taxation issue. Any subsequent gains or losses arising when you sell (say) GBP's and buy A$'s would then (probably) be a forex tax issue.

As ever, I'm happy to be corrected - these are just initial thoughts and I haven't dived into the legislation to check the position in more detail.

Thanks - in anticipation of your reply!
I am hoping for a response from HIFX and OZFOREX and I think I already understand your views on this.

I realise the ATO have screwed up but the rulings and ITs etc have not been changed to reflect their verbal statements. In these circumstances I am going, like you, purely on published information. This is why the date of opening of their UK Barclays forex bank accounts could be important.

Regards
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Old Oct 19th 2006, 9:49 am
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Default Re: Tax on transferring cash through Foreign Exchange Companies (for HIFX/Ozforex)

Noted.

Can you confirm the consensus view though, or direct me to a thread that sets it out?

Best regards.
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Old Oct 19th 2006, 9:50 am
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Smile Re: Tax on transferring cash through Foreign Exchange Companies (for HIFX/Ozforex)

Originally Posted by Alan Collett
In my humble view the question is based on a false premise - there isn't a consensus on the taxation of forex gains and losses so far as I am aware. Rather, you may be drawing conclusions based on comments made by other participants on a discussion forum, and that is a relatively dangerous basis on which to plan one's tax affairs.

The only consensus I can see from comments made in the last few weeks on this and other forums is a general acceptance that the ATO didn't realise the consequences of the law that was being enacted insofar as it has an impact on individuals, to the point that they are now trying to paper over the cracks, as evidenced by the various published extracts of Private Rulings that have been highlighted in this and other forums.

Or it might be that I've overlooked something - can you set out your view of the consensus in this area, and make reference to where this comes from?

Are you saying that you consider gains and losses on disposals of non-A$ currency that derive as a result of disposals from private bank accounts are never assessable/deductible? Or are in certain circumstances? Or that the ATO will not expect individual Aussie resident taxpayers to include such gains and losses on their tax returns?

My hunch is that the question of whether the funds are transferred through HIFX, OzForex, or any other currency specialist and when the bank account was opened is a non-issue. If you transfer funds from your personal bank account to (say) HIFX that constitutes a disposal of your currency which might be a capital gains tax issue or it might be a forex taxation issue. Any subsequent gains or losses arising when you sell (say) GBP's and buy A$'s would then (probably) be a forex tax issue.

As ever, I'm happy to be corrected - these are just initial thoughts and I haven't dived into the legislation to check the position in more detail.

Thanks - in anticipation of your reply!
Alan, can you explain what the suspected issue is in a language I can understand easily?

Thanks

Buzzy
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Old Oct 19th 2006, 10:16 am
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Default Re: Tax on transferring cash through Foreign Exchange Companies (for HIFX/Ozforex)

Hi Buzzy.

"Tax" in a language that can be "understood"? Isn't that an oxymoron?!

Best regards.
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Old Oct 19th 2006, 10:24 am
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Talking Re: Tax on transferring cash through Foreign Exchange Companies (for HIFX/Ozforex)

Originally Posted by Alan Collett
Hi Buzzy.

"Tax" in a language that can be "understood"? Isn't that an oxymoron?!

Best regards.
"raison d'etre" Alan?



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Old Oct 19th 2006, 11:01 am
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Default Re: Tax on transferring cash through Foreign Exchange Companies (for HIFX/Ozforex)

Originally Posted by Alan Collett
Noted.

Can you confirm the consensus view though, or direct me to a thread that sets it out?

Best regards.
I think this is the current forum's "consensus view"

http://britishexpats.com/forum/showt...private+nature
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Old Oct 19th 2006, 11:13 am
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Default Re: Tax on transferring cash through Foreign Exchange Companies (for HIFX/Ozforex)

Thanks Renth. Am not sure this represents a consensus though!

I'm loathe to comment too much more as I know my opinion as to assessability and the private nature aspects don't coincide with several.

I'll only say here that if my take on the situation is correct it would seem any gain arising on a disposal of non-A$ currency is assessable - under either the CGT or forex regimes - and that a loss is likely to be deductible if it occurs in respect of a non-A$ bank account that was either opened on or after 1 July 2003, or if it was opened before that date and a transitional election was made.

I look forward to someone seeking a Ruling on whether a forex loss on a bank account opened after 1 July 2003 is an allowable deduction - that might flesh out the issue a bit further.

Remember also that the redemption of a non-A$ loan account (eg a property mortgage loan that is redeemed on the disposal of a property) is potentially also within the scope of the forex tax provisions.

Best regards.
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Old Oct 19th 2006, 11:20 am
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Smile Re: Tax on transferring cash through Foreign Exchange Companies (for HIFX/Ozforex)

If I am a oz tax non-resident and I transfer money from the UK into Oz $ would I pay any tax at any point in the transaction and if so how much?

The same question if I am an Oz tax resident?

No comprende all the accountant-speaky.

Thank you for your assistance in helping this mere dimwit.

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Old Oct 19th 2006, 11:25 am
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Default Re: Tax on transferring cash through Foreign Exchange Companies (for HIFX/Ozforex)

Buzzy,

Re question 1: no tax payable in the UK on the transfer of UK£ into A$'s if you are a tax resident of the UK at the time.

Re question 2: possibly.

And to muddy the water still further, if you dispose of A$'s when you are a UK tax resident you may have tax issues in the UK, as I believe non UK£ currency is a chargeable asset under UK tax law ...

A perhaps pertinent question is whether all of this is on the radar of the tax authorities in Australia (and the UK). I know some say it isn't.

Best regards.




Originally Posted by Buzzy--Bee
If I am a oz tax non-resident and I transfer money from the UK into Oz $ would I pay any tax at any point in the transaction and if so how much?

The same question if I am an Oz tax resident?

No comprende all the accountant-speaky.

Thank you for your assistance in helping this mere dimwit.

Buzzy
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Old Oct 19th 2006, 11:35 am
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Smile Re: Tax on transferring cash through Foreign Exchange Companies (for HIFX/Ozforex)

So it is financially beneficial from a tax perspective if I transfer money before I become an Oz Tax resident unless I am likely to make a loss on the exchange rate?

I give up. I'm going to stuff my kids toys full of £50 notes on the way over and deny all knowledge if inspected.

note to immigration and customs - this is a joke.



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Old Oct 19th 2006, 11:45 am
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Default Re: Tax on transferring cash through Foreign Exchange Companies (for HIFX/Ozforex)

Buzzy,

Am I right in thinking (based on your signature block) that you are (or will be) applying for a 461 visa?

If so, that is a temporary visa under the Migration Act 1958 and might mean you can make use of the tax exemptions affecting temporary tax residents that came into effect on 1 July 2006 ...
http://www.ato.gov.au/individuals/co...tent/76537.htm

Best regards.
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Old Oct 19th 2006, 11:59 am
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Smile Re: Tax on transferring cash through Foreign Exchange Companies (for HIFX/Ozforex)

Alan

On my list of things to talk to you about when I return from my trip to Oz in December!



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Old Oct 19th 2006, 11:14 pm
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Default Re: Tax on transferring cash through Foreign Exchange Companies (for HIFX/Ozforex)

I have just seen this thread so apologies for the delayed response. I can't give an answer at this point as we don't have any tax expertise internally. I will endeavour to get some professional tax advice on this issue as it's relevant to many of our customers. I must say though that I would be very surprised if the tax treatment differed using OzForex versus a bank.

Regards
Matt Gilmour
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