Tax on Foreign Exchange Gains?
As my handle may suggest I have just arrive in Adelaide. This is a great site, and I hope I can contribute to it as well as ask questions.
The big thing that has me worried at the moment is tax - in particular FOREX (ie tax on gains made through foreign exchange transactions). When I arrived, the pounds to aus$ exchange rate was about 2.38, now it's nearer to 2.53 (a difference of 0.15 or 6.3% - Wow), so if I convert 100,000 pounds, I have made a potential "profit" of 6,300 pounds.
Will I be taxed on this so called 6,300 pounds FOREX profit? All the rules I have read say it is classed as income, and hence "yes". But maybe I'm missing something? For example, are we allowed a grace period, before this FOREX tax kicks in? Otherwise it seems a mite unfair, because in reality I haven't made any profit over and above money that has always been in my account anyway.
Thanks for any help
Personally I do not expect there to be any liability to tax on Currency transactions.
I think your tax position depends on on your status permanent or temporary, and there could be a liability to tax on the interest received from money invested , either in Aus or GB.
I wish I could be 100% certain on the tax position, but there still seem to be a number of issues I need to be clear about on the Australian Tax System, I have seen somewhere that if you are in on a temporary visa, that your income particularly on investment income is taxed in the UK, and as it is likely you are out of the country for more than 6 months no tax is payable in the UK either.
No doubt all will be revealed!!!
As far as we are aware if you change all your money when you emmigrate you do not pay tax. However if you only change some and leave the rest untill the excange rate improves then you will be taxed on any gaines you make as capital gains. However I think you have to bare in mind that this is tax on money you would not have at the lower excange rate, so both you and the goverment make a small gain, so it may be worth doing.
It seems even straightforward issues can become confusing. I imagined this was an issue that would affect most people on this site, but maybe not?
Well I don't intend to transfer my savings in one go, but probably over a 3 month period, etc, depending on how the exchange rate goes, and when I can clear my funds.
I was lucky enough to get a permanent visa, but I'm still finding the rules and regulations confusing - especially tax, medicare, etc.
Paying tax on interest is straightforward - initially the bank deducts a sum, then the rest is declared with a tax return (which we all have to fill out).
BTW, there is a double taxation agreement between the UK and Aus, which means you won't be taxed twice on the same income but you will mostly likely pay the higher of the two taxes due. You can't pick and choose which tax you want to pay if you do come under both systems.