Author: _m7(Newbie)Newbie 10 Jan 2021
Hello
I am an Australian citizen and I want to invest in US shares from Australia using Commonwealth bank services. I am bit confused about my future CGT and dividend.
From my understanding, let's say I invest 10000 USD now, (assume it is 12000 AUD for simplicity), and I sell the shares for 12000 USD after few months (assume it will worth 13000 AUD), is it correct that my CGT payable is 1000AUD? (first finding out amount of AUD used for purchase, then find out the amount of AUD obtained using the exchange rate on the selling date).
And for the exchange rate, is it correct to use daily exchange rate published by RBA, for instance, if the exchange rate is 0.75 on the purchase date and 0.8 on selling date, then these 2 rates will be used correspondingly as discussed above?
What if I directly use the USD i have now for investment? i.e. the previous example is that I convert 12k AUD to USD for investment, but what if I already have 10k USD and I directly use that for investment? Is the calculation for CGT same? (i.e. i need to record the exchange rate on the purchase date for my own calculation) Or the CGT will be 2k USD, and then convert that 2k USD to AUD using the exchange rate on the selling date?
If i remember correctly (pls correct me if I am wrong), 50% discount will be applied to CGT fot the shares that hold more than 12 months, does this discount also apply to international shares such as US shares or it only applies to Australian shares?
For the dividend receive, is it correct that the amount of USD received should convert to AUD using exchange rate on that date and then include it in the income tax?
Thanks a lot!
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4 replies
Author: BlakeATO(Community Support)Community Support 11 Jan 2021
Hi @martonlee,
The amount of capital proceeds will depend on what your cost base is versus your sale amount, so while on a basic level your example is right, there are other things that go into making up your cost base.
Assuming your shares cost $12,000AUD to acquire/hold/maintain and you receive $13,000 for the sale of them, then yes, CGT will be payable on that $1,000 profit once you apply your cost base.
Under the translation (conversion) rules, any CGT events must be translated into Australian dollars at the time of the transaction. Dividends, which are ordinary income, are translated at the earliest of when they are derived or received. This is done using the RBA exchange rates and is the same whether or not you held the amount in Australian currency or US currency prior to the transaction.
If you use the gains to immediately reinvest, you would have a CGT even happen on the sale/disposal, and then form a new cost base on the new assets acquired.
The discount method does not apply to forex realisation events (that is, gain of income due to fluctuations in currency, not the shares), but still applies to the shares themselves. Remember under income tax treaties that income is usually taxable in the state it is derived first, meaning you may lose out on part of your discount due to holding foreign shares.
Author: _doctor_b(Initiate)Initiate 4 May 2021
@BlakeATO
To follow up on the question posed, and your response I'm curious to understand when a forex realisation event would actually occur? If the purchase/disposals are settled within 2 days, then under the 12 month Forex rules, aren't the foreign exchange fluctuations actually folded into the capital gains calculations themselves. (ie. a specific forex realisation event would not have occured?). Perhaps I've misinterpreted the rules, but wouldn't this mean that in the cases specified in the original question, that a separate forex realisation event would not have occured - and as a result, the discount method would be applicable to all aspects of the CGT calcuation.
