The Australian dollar is falling!
Thanks to the Coronavirus pandemic and increasing fears about inflation, the value of the Australian dollar is falling. As a consequence, many expats are transferring money back to Australia because of the good exchange rate. This might seem like a wise decision, but there may be tax implications you need to be aware of. This article looks at tax issues to consider if you transfer money to Australia.
Foreign Currency Gains and Losses May be Taxable
Depending upon your residency stats, and the various characteristics of your bank account, Australia’s foreign currency gains and loss rules laid out by Australia’s Taxation Of Financial Arrangements rules, and the rules laid out in Div 775 may apply to tax your foreign exchange gains and losses. These rules detail the timing and disposal rules for transactions that involve foreign currency. If you want to transfer money, you should be aware of the relevant rules to make sure any foreign exchange gain is not subject to tax in Australia.
Section 99B
Under Section 99B, Australian tax residents receiving funds from a foreign trust may be required to include that income in their Australian tax return.
Section 99B usually applies to Australian taxpayers who receive lump sum payments from foreign pension funds, or from an overseas inheritance or to those taxpayers who use overseas trusts whilst living abroad. The total amount of funds received from foreign trusts/pensions funds is generally assessable unless you can prove that some or all of the distribution represents corpus (i.e. capital of the trust) rather than income.
Residency Status
Transfers of funds to Australia will generally be monitored by AUSTRAC (Australian Transaction Reports and Analysis Centre), with the information regularly passed across to the Australian Taxation Office (ATO). As a result, it’s quite common for the ATO to raise question about the funds that enter Australia.
Usually the first issue that the ATO questions, will be about your residency status for Australian Taxation purposes, followed by questions about the source of the funds. As such, before transferring any funds, you should carefully consider your tax residency status.
If you’ve lived abroad for under two years you may still be an Australian tax resident in which case, your overseas income may still subject to Australian tax. If you’re not an Australian tax resident, however, you’ll be likely to need to prove this to the ATO. The outcome of your residency status will play a big part in whether your foreign exchange gains will be taxable in Australia or not!
Investing in Australian Property
With the falling dollar, many Australian expats are considering purchasing investment properties in Australia. If you’re planning on purchasing a property, be sure to understand the Australian tax implications of doing so as there will be income tax and capital gains tax implications of doing so. In particular, make sure that you understand just how Australia’s Capital Gains Tax concessions apply to non-residents.
Need More Information?
If you need help understanding the tax implications of transferring money to Australia from expats who really understand the issues, we can help, so book an appointment with us today to find out more.
Here at Expat Taxes, we specialise in Australian tax advice and preparation of Australian tax returns for Australian expats located all over the world. If you need some advice or assistance with your returns, <a href=”https://www.expattaxes.com.au/contact_us/”>contact us to find out more.
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