Ex rate fluctuations and capital gains

[urbancoyote]

Hi

I'm British and currently living in the UK with my Australian girlfriend. We may look to move out to Australia at the end of 2019, depending on a few things. To make the decision easier I would appreciate any help to the following questions.

1) As I understand it the exchange rate on the date at which you become a resident for Australian tax purposes, will be used as a base for working out overseas capital gains in the future. If I move to Australia on a tourist visa and then apply for a de facto 820 visa in Australia, is the date i become resident for tax purposes the date I arrived in the country, the date I lodged my application for the de facto visa, or a later date when I have got my TFN and can officially work?

2) I have some money outside of investments and not gaining any interest in the UK - in various sports betting accounts and a sports betting syndicate specifically and I may choose to keep that money to bet with in the UK. If I did so and then transferred money across 2 years later for example at 1.9 dollars to the pound instead of 1.7 dollars to the pound, would i have to pay a capital gain on the increase in AUD worth, even though the funds are not actually invested in anything, so nothing is being sold and there isn't an actual real capital gain on the money?

3) Do you have to declare every single pound of investments and funds you have overseas when you become an Australian resident for tax purposes, or is this not the case?

4) Furthermore sports gambling is at the moment tax free in the UK and Aus. If I happen to make money after my date of Australian residence for tax purposes and then transferred across in a few years time at 1 pound to 2 dollars for example. Would I still be liable for a capital gain based on the initial 1.7 dollars to the pound rating, when I arrived, even though I made the money well after I became an Australian tax resident? Instead if i had lost for example £50k in sports gambling in the 2 years after I left in the UK, but the exchange rate had gone up to 2 dollars and I decide to send money over, would I still have to pay capital gains on the increase in AUD, despite me actually having lost money in the UK.

5) I also own a small flat in the UK, which we have lived in for the last year. If we were to move to Australia, and become a resident for tax purposes, but only rent in Australia, would I have to pay capital gains on my house in the UK (at 28%) if I was to sell it 3 years later, or would it still be classified as my home and therefore immune from capital gains tax, as I didn't yet own one in Australia?

 

Obviously I may win or lose sports gambling going forward and i understand losses can't be used as a capital loss for tax purposes. I know this a niche area, but any help or advice to let me understand the situation better, is much appreciated.

 

Thanks

 

Mack

[Guest The Pom Queen]

Have a chat with both @Andrew from Vista Financial For the financial advice and @Alan Collett for the tax side.

[Gbye grey sky]

1) It is the date you arrived in the country but if you make the gain while you are on a temporary visa the gain is declarable on both your UK and Aus tax returns.  My understanding is that the UK tax would be payable and then allowed as a deduction against any Australian tax on that gain by means of the Double Taxation Agreement.

2) Unless you are actively trading in currencies then my understanding is that any gain that you make from an improvement in the exchange rate on money simply left in the UK when you moved will not be taxable and likewise any loss is not allowable.  I moved in 2015 when the exchange tate was 2.10 and if I moved my money over now I could otherwise claim a large loss.

3) You have to declare all income, not the actual value of investments.  My understanding is that gambling income is generally exempted though I would encourage anyone to ensure that they have good records of such income in case they are challenged at some future date.

4) Same answer as 1 above.

I don’t have any answer to 5 and am ready to stand corrected on any of my answers above.

[Ken]

5 hours ago, Gbye grey sky said:

1) It is the date you arrived in the country but if you make the gain while you are on a temporary visa the gain is declarable on both your UK and Aus tax returns.  My understanding is that the UK tax would be payable and then allowed as a deduction against any Australian tax on that gain by means of the Double Taxation Agreement.

2) Unless you are actively trading in currencies then my understanding is that any gain that you make from an improvement in the exchange rate on money simply left in the UK when you moved will not be taxable and likewise any loss is not allowable.  I moved in 2015 when the exchange tate was 2.10 and if I moved my money over now I could otherwise claim a large loss.

3) You have to declare all income, not the actual value of investments.  My understanding is that gambling income is generally exempted though I would encourage anyone to ensure that they have good records of such income in case they are challenged at some future date.

4) Same answer as 1 above.

I don’t have any answer to 5 and am ready to stand corrected on any of my answers above.

No, on point 1) you've got that backwards. If you are in Australia on a permanent visa then a Capital Gain in the UK is declarable on both your UK and Aus tax returns, but on a temporary visa only Australian Gains are declarable on your Aus tax return. In addition if you arrived on a tourist visa that arrival wouldn't make you tax resident (not even as a temporary tax resident). Also with point 4) I think you meant to put "Same answer as 2 above".

Other points:

3) In addition to what you've said on investments there is a simple yes/no question on the tax return: "During the year did you own, or have an interest in, assets located outside Australia which had a total value of AUD$50,000 or more?" You do not provide a list or valuation (other than the total being over $50,000).

5) You can keep your home as your main residence for up to 6 years after you cease to live there for Australian CGT purposes - but UK CGT on residential property applies (if I remember correctly) just 18 months after leaving the UK.

Edited January 20, 2018 by Ken

[urbancoyote]

Thank you Ken and Gbye grey sky for your detailed responses

Therefore i could keep cash balances in the UK, after I've become an Aussie tax resident and wait until the exchange rate was more favourable, before sending the funds over, so long as they were only one-way transfers.

In terms of investing in your Super, am I right in understanding that under the current rules, you can place a maximum of 25k AUD per year in your Super at 15% tax concessional contribution and 100k none-concessional contribution after tax (x3 if you used three years rollover). Both are taxxed at 10% capital gains during the lifetime of super (if funds held for 12 months+) Then at the end you pay no extra tax on the none-concessional and 15% on the concessional part. Is that right?

In order to put $325k into your Super in one year, would you need to have income that year of $325k. If so would the capital gains income count fully towards this income amount or only 50% of it, if you had kept for over 12 months? Also would you need to have been a resident for 3 years before you can put in the 3 years rollover contribution?

Also this is just an opinion question. But is there much talk of changing the 50% capital gains allowance for shares/investments held for over 12 months, or does this seem unlikely?

 

Many thanks for any advice and sorry for the long-winded questions. I am just trying to get a feel for the system over there, before i take the plunge. Feel free to point me to any discussion boards, if they answer my question's already.

 

Many thanks

 

 

Mack

 

[Ken]

 

 

You no longer need to have any income to make contributions to Super (at one time a distinction was drawn between earned income and investment income).

You would not need to be resident for 3 years to use the bring forward provisions because it is not past years caps that you are allowed to add to your current year cap but future years.

Changing the 50% capital gains allowance is an idea that's been floated around. I don't think it's got legs but if a government found itself short on cash it does have the advantage of being easy to implement - unlike a GST hike which to most governments would be a simple thing to do (especially considering how low the GST rate is in Australia) but due to how badly the GST legislation was drawn up is almost impossible.

Edited January 23, 2018 by Ken