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Philip

Australian tax on UK house sale money

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I have been reading the forex pages on the ATO website which are extremely complex and hard to understand.

Suppose I own a UK property outright and sell it for £500,000. Suppose it is fully covered by the exemptions for main home in both countries so no CGT.

I become an Australian resident before the property is sold.

When I exchange contracts the exchange rate is A$1.9 so $950,000.

When the transaction is settled the exchange rate is A$2 so $1 million.

Information on the ATO website indicates that I would have made a "profit" of $50,000 since signing the contract, which is taxable? Is that right? Basically wiping out my personal allowance and tax offsets and potentially pushing me into the medicare levy surcharge band etc etc even though in GBP terms I haven't made anything.

I get the £500,000 into my bank account on the day of completion, but then I wait a few days before sending it to Australia (not because I think the rate is going to rise, but just because I'm sleeping / busy and the time difference makes it hard to get things done quickly). By that time the exchange rate has risen to $2.05. Does this mean I make a further $25,000 taxable profit?

There is an exemption for foreign currency held in bank accounts up to a total of $250,000 with a temporary higher threshold of $500,000. So it sounds like holding £500,000 even for a few days is not covered by this.

Of course it could go the other way where I make an AUD loss despite not losing any GBP but it appears this can only be offset against "true" AUD gains?

Have I understood correctly or incorrectly?

Edited by Philip

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In this hypothetical scenario you've sold your primary residence in the UK and transferred the proceeds into Australian dollars. Is that correct? If, as you say, the property meets CGT exemptions in both countries then I'm failing to see where the taxable income is here. You've sold a tax-exempt asset in one country and transferred the proceeds to another, and that's it.

Just my observation as a well-meaning amateur, but given the sums of money involved and the complexity of your enquiry I'd be inclined to seek professional advice from someone who knows their onions.


Australian Citizen since 2007 | Returned to the UK between 2008-2011 | QLD resident for over 20 years

All advice and opinions I provide on PomsInOz are solely my own and are general in nature. I am not a migration agent, accountant, tax expert or financial adviser, and my insights are no substitute for professional advice. I strongly encourage you to seek the guidance of qualified professionals for specific concerns. I do not assume any responsibility for actions taken based on the information provided in any of my posts, and if you choose to act on this information then you do so entirely at your own risk.

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I am an amateur too but if it was me i would not be declaring anything to the taxman. I doubt they would ever find out unless you are audited for some other reason.

Years ago i received a fairly sizeable inheritance from the UK when my father died. It wouldn't be taxable but my point is i was never queried by anyone where this money came from and the ATO was none the wiser.

So i would not worry about. Just send the money over when you want.

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Buy a man eat fish. The Day, Teach Man, to lifetime.      - Joe Biden.

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The tax on forex gains is a bit of a grey area. I have been told different things by different accountants and tax advisors. My eventual take is that the ATO aren’t really bothered about people’s personal taxed income and incidental gains because of timings of transfer. They are more interested in people who are actually trading currency to make profit. 
We have transferred various amounts from the UK over the years as our decision to stay became firm. Some were at a better rate than when we moved and some were worse. We have not declared any unless they triggered a tax event, like withdrawing shares or dividends. 

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So many wineries ......so little time :yes:

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I've realised that the ATO pages I was reading are under the "business" section, but the examples of Tom, Lisa and Eleanor don't sound like businesses to me.

Just look at these

https://www.ato.gov.au/Business/Foreign-exchange-gains-and-losses/Forex-realisation-events/#Forexrealisationevent1

https://www.ato.gov.au/Business/Foreign-exchange-gains-and-losses/In-detail/Forex-elections/

How many hours did smart minds waste on coming up with this rubbish instead of doing something more productive...

 

5 hours ago, Parley said:

i was never queried by anyone where this money came from and the ATO was none the wiser.

AUSTRAC certainly knew about it but they probably don't have the time or staff to query everything. AUSTRAC has asked some of my relatives to explain their large transfers into and out of Australia before, but from what they said it was quite simple to provide the information.

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9 hours ago, Parley said:

I am an amateur too but if it was me i would not be declaring anything to the taxman. I doubt they would ever find out unless you are audited for some other reason.

Years ago i received a fairly sizeable inheritance from the UK when my father died. It wouldn't be taxable but my point is i was never queried by anyone where this money came from and the ATO was none the wiser.

So i would not worry about. Just send the money over when you want.

I totally agree, that's what I'd do - but I wouldn't advise someone else to go ahead and do anything that might result in tax evasion.

If I had complex financial affairs involving double taxation scenarios then I'd be happy to pay the small amount of money for professional advice rather than trying to wing it.

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Australian Citizen since 2007 | Returned to the UK between 2008-2011 | QLD resident for over 20 years

All advice and opinions I provide on PomsInOz are solely my own and are general in nature. I am not a migration agent, accountant, tax expert or financial adviser, and my insights are no substitute for professional advice. I strongly encourage you to seek the guidance of qualified professionals for specific concerns. I do not assume any responsibility for actions taken based on the information provided in any of my posts, and if you choose to act on this information then you do so entirely at your own risk.

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On 14/11/2023 at 22:03, InnerVoice said:

< snip >

... I'd be happy to pay the small amount of money for professional advice rather than trying to wing it.

That's good to hear!   🙂

Best regards.

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Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 8637 0337 (Australia)

E - alan.collett@gomatilda.com and acollett@bdhtax.com

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On 14/11/2023 at 22:03, InnerVoice said:

I totally agree, that's what I'd do - but I wouldn't advise someone else to go ahead and do anything that might result in tax evasion.

If I had complex financial affairs involving double taxation scenarios then I'd be happy to pay the small amount of money for professional advice rather than trying to wing it.

If it was a small amount I'd agree with you, but often it's vastly over values for generally sub-par information that most could get from a simple read of the documents. Almost always this advice is caveated to the moon and back so even after paying you are still the one on the hook for it actually being the correct course of action

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2 hours ago, Ausvisitor said:

If it was a small amount I'd agree with you, but often it's vastly over values for generally sub-par information that most could get from a simple read of the documents. Almost always this advice is caveated to the moon and back so even after paying you are still the one on the hook for it actually being the correct course of action

Not sure whether to laugh or cry at these comments ...

Onwards!


Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 8637 0337 (Australia)

E - alan.collett@gomatilda.com and acollett@bdhtax.com

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4 hours ago, Ausvisitor said:

If it was a small amount I'd agree with you, but often it's vastly over values for generally sub-par information that most could get from a simple read of the documents. Almost always this advice is caveated to the moon and back so even after paying you are still the one on the hook for it actually being the correct course of action

.....and in my personal experience, unless you have a serious amount of money involved, and the company giving you advice can see a large gain for themselves, they will simply brush you off asap to concentrate on their more affluent clients.

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On 22/11/2023 at 06:09, Ausvisitor said:

If it was a small amount I'd agree with you, but often it's vastly over values for generally sub-par information that most could get from a simple read of the documents. Almost always this advice is caveated to the moon and back so even after paying you are still the one on the hook for it actually being the correct course of action

 

On 22/11/2023 at 10:57, Nemesis said:

.....and in my personal experience, unless you have a serious amount of money involved, and the company giving you advice can see a large gain for themselves, they will simply brush you off asap to concentrate on their more affluent clients.

No doubt there are still a few charlatans out there but every financial advisor I've ever approached has been transparent about their charges, and their initial consultation has been free.

After my first year teaching in Australia a colleague advised me to use a tax professional as there were likely to be items I could claim for that I wasn't aware of. For the paltry sum of $69 (which was tax deductible the following year) a nice chap in the mall took care of my tax return, and I subsequently received a refund of two thousand dollars. From then on I've completed my own return because I know what I can and can't claim for, but that initial $69 has saved me thousands over the last decade.

I agree that all the information is out there and readily accessible for free but you also need the acumen to apply it correctly, and that's what you're paying for. The OP appears to have done some research but clearly he's in a quandary, or he wouldn't have posted such a complex question.

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Australian Citizen since 2007 | Returned to the UK between 2008-2011 | QLD resident for over 20 years

All advice and opinions I provide on PomsInOz are solely my own and are general in nature. I am not a migration agent, accountant, tax expert or financial adviser, and my insights are no substitute for professional advice. I strongly encourage you to seek the guidance of qualified professionals for specific concerns. I do not assume any responsibility for actions taken based on the information provided in any of my posts, and if you choose to act on this information then you do so entirely at your own risk.

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I would think a $69 guy in a shopping mall may not be an expert on complex matters relating to foreign income/assets 😛

I've received quotes of $2000-$3000 to provide tax advice and help with preparing returns involving both UK and Australia.

Edited by Philip

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On 14/11/2023 at 09:14, Parley said:

I am an amateur too but if it was me i would not be declaring anything to the taxman. I doubt they would ever find out unless you are audited for some other reason.

Years ago i received a fairly sizeable inheritance from the UK when my father died. It wouldn't be taxable but my point is i was never queried by anyone where this money came from and the ATO was none the wiser.

So i would not worry about. Just send the money over when you want.

They already know where the money came from. They're watching you! They have eyes and ears everywhere.

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7 hours ago, Blue Manna said:

They already know where the money came from. They're watching you! They have eyes and ears everywhere.

You might be right. I hadn't considered that.


Buy a man eat fish. The Day, Teach Man, to lifetime.      - Joe Biden.

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11 hours ago, Blue Manna said:

They already know where the money came from. They're watching you! They have eyes and ears everywhere.

 

3 hours ago, Parley said:

You might be right. I hadn't considered that.

A few years ago I was dabbling in Bitcoin, using the UK platform of CoinJar. They also have an Australian platform, which I've never signed up to or logged into. Sure enough, when it came to complete my tax return there was an ATO message along the lines of 'You may have made gains from cryptocurrency dealing'. CoinJar must have shared that information with the ATO, unless it was just a blanket message sent out to try and everyone to get people to declare their crypto gains. Anyway, it worked, and I had to cough up.

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Australian Citizen since 2007 | Returned to the UK between 2008-2011 | QLD resident for over 20 years

All advice and opinions I provide on PomsInOz are solely my own and are general in nature. I am not a migration agent, accountant, tax expert or financial adviser, and my insights are no substitute for professional advice. I strongly encourage you to seek the guidance of qualified professionals for specific concerns. I do not assume any responsibility for actions taken based on the information provided in any of my posts, and if you choose to act on this information then you do so entirely at your own risk.

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If you have ever sold any crypto then they will probably send you that message every year.

But i think now all those crypto companies do provide information to the ATO.

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Buy a man eat fish. The Day, Teach Man, to lifetime.      - Joe Biden.

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15 hours ago, Philip said:

I would think a $69 guy in a shopping mall may not be an expert on complex matters relating to foreign income/assets 😛

I've received quotes of $2000-$3000 to provide tax advice and help with preparing returns involving both UK and Australia.

I'm sure he isn't, but I bet he still knows more about the Australian tax system than either of us!

$2-3k sounds like a lot but if you're talking a $1m or more then that represents a 0.2% fee, so much better value than my $69 to save a couple of grand (0.35%).

If it was me and the UK house was still classed as my primary residence, then I'd sell it, transfer the money to my Australian bank account and that would be the end of the matter. In fact, that's exactly what I did when I sold my UK home a few years ago. However, I was still a UK resident when the sale was completed, but you're not, so unless I'm missing something the sale would be subject to CGT in the UK. Even if there's no CGT to pay, you still need to report the sale to the HMRC within 60 days of disposal or risk receiving a fine.

https://www.gov.uk/tax-live-abroad-sell-uk-home

https://www.gov.uk/guidance/capital-gains-tax-for-non-residents-uk-residential-property

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Australian Citizen since 2007 | Returned to the UK between 2008-2011 | QLD resident for over 20 years

All advice and opinions I provide on PomsInOz are solely my own and are general in nature. I am not a migration agent, accountant, tax expert or financial adviser, and my insights are no substitute for professional advice. I strongly encourage you to seek the guidance of qualified professionals for specific concerns. I do not assume any responsibility for actions taken based on the information provided in any of my posts, and if you choose to act on this information then you do so entirely at your own risk.

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If you want to improve your Australian tax knowledge ...

https://www.hrblock.com.au/income-tax-course

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Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 8637 0337 (Australia)

E - alan.collett@gomatilda.com and acollett@bdhtax.com

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1 hour ago, InnerVoice said:

However, I was still a UK resident when the sale was completed, but you're not, so unless I'm missing something the sale would be subject to CGT in the UK.

If it's your only/main home, as far as I know, you still get private residence relief, and no CGT for the last 9 months. Plus even if you then acquire another home you can nominate it as your main home (provided it still genuinely remains your home). Obviously everyone should check the rules for their own situation.

In Australia it seems that non-residents don't get any relief even if they lived in their home for 30 years but sell it on the day after they leave Australia 😐 This is a new thing from a few years ago.

Edited by Philip
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5 hours ago, Philip said:

If it's your only/main home, as far as I know, you still get private residence relief, and no CGT for the last 9 months. Plus even if you then acquire another home you can nominate it as your main home (provided it still genuinely remains your home). Obviously everyone should check the rules for their own situation.

In Australia it seems that non-residents don't get any relief even if they lived in their home for 30 years but sell it on the day after they leave Australia 😐 This is a new thing from a few years ago.

In your hypothetical scenario you stated you were already an Australian resident before the property was sold so I assumed you'd been for some time, but I see from an earlier post you're still in the UK until the end of the year. I'd just bear in mind that if you have PR then you'll be considered an Australian resident for tax purposes from the moment you arrive here, and non-resident in the UK, which means you'll still need to report the sale to the HMRC - even if the property is exempt from CGT. Good luck with the move!


Australian Citizen since 2007 | Returned to the UK between 2008-2011 | QLD resident for over 20 years

All advice and opinions I provide on PomsInOz are solely my own and are general in nature. I am not a migration agent, accountant, tax expert or financial adviser, and my insights are no substitute for professional advice. I strongly encourage you to seek the guidance of qualified professionals for specific concerns. I do not assume any responsibility for actions taken based on the information provided in any of my posts, and if you choose to act on this information then you do so entirely at your own risk.

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