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bigboy123(Initiate)Initiate
7 Feb 2021

Hi there,

I have two questions which are partially related.

I am aware that brokerage fees on investments can be included in the cost basis once it comes time to calculate CGT upon disposal.

But I am also curious about other fees associated with attaining and holding onto investments.

The two main queries here are ETFs and currency exchange fees.

1. ETFs

I am wondering if the management fees on exchange traded funds can be claimed as part of the cost basis of purchasing and holding the investment?

For context, Vanguard VGS etf has 0.18% per annum management fee. Does this mean these annual fees can also be used as the cost basis like brokerage fees?

So if I held a lackluster ETF with a 1% management fee per annum that made 0% capital gains at the end of 5 years, am I able to claim the 5 years of 1% management fees as a capital loss?

Further to this, Vanguard Personal Investor product in Australia charges a further 0.2% of total account holdings per annum to maintain an investment account on their website - Does this mean this fee can also be claimed as the cost basis of the holding upon disposal?

2. Currency exchange fees

Whether translating from AUD to a foreign fiat currency or to a cryptocurrency, exchanges charge spreads so you will never get the mid market rate. Does this mean the ‘cost of foreign exchange' or spread on a foreign exchange transaction can be claimed in the cost basis of the investment?

  • Eg. I move $50,000 from AUD to USD for investment purposes, and the exchange charges 1% exchange fee above the mid market rate- current fx rate is $1aud=$1usd
  • I have now incurred a $500 exchange fee and am left with $49,500usd
  • I invest this $49,500USD and hold.
  • A year from now I sell the investment for $49,500usd - no gain has been made.
  • I move this back into AUD with another 1% exchange fee - $495; current fx rate is still $1aud=$1usd
  • Now I am left with $49,005AUD

My question in this unlikely hypothetical is, am I able to claim a capital loss of $995 since the foreign exchange fees were paid for investment purposes?

And if so, can this ‘currency exchange fee' also apply as part of the cost basis for when calculating gains on cryptocurrencies?

Thanks

3,952 views
7 replies
3,952 views
7 replies

Most helpful response

Most helpful reply

KylieATO(Community Support)Community Support
10 Feb 2021

Hi @bigboy123

Thanks for your patience.

Question 1

Unlike brokerage fees, the ETF annual management fee is an indirect fee (not directly charged to you) and accordingly you treat this differently to the brokerage fee.

To work out how to take into account the ETF annual management fee, Vanguard provides an AMMA statement (Annual Tax Statement) and should send this to you after the end of the financial year. The AMMA statement helps you prepare your tax return and contains information you need to modify your cost base. There should be a section that says "AMIT shortfall/excess". The ETF annual management fees is included in the "AMIT shortfall/excess� so you do not separately make any specific adjustment in your cost base calculations as this would be doubling up. See Cost-base adjustments for AMIT members.

Question 2

If a specific fee is charged to you for foreign currency conversion and it is an actual cost that you are required to pay then you can include it in the cost base of your cryptocurrency. If you outlay other specific fees such as a brokerage fee then you would be able to add it to the cost base.

All replies

Most helpful reply

KylieATO(Community Support)Community Support
10 Feb 2021

Hi @bigboy123

Thanks for your patience.

Question 1

Unlike brokerage fees, the ETF annual management fee is an indirect fee (not directly charged to you) and accordingly you treat this differently to the brokerage fee.

To work out how to take into account the ETF annual management fee, Vanguard provides an AMMA statement (Annual Tax Statement) and should send this to you after the end of the financial year. The AMMA statement helps you prepare your tax return and contains information you need to modify your cost base. There should be a section that says "AMIT shortfall/excess". The ETF annual management fees is included in the "AMIT shortfall/excess� so you do not separately make any specific adjustment in your cost base calculations as this would be doubling up. See Cost-base adjustments for AMIT members.

Question 2

If a specific fee is charged to you for foreign currency conversion and it is an actual cost that you are required to pay then you can include it in the cost base of your cryptocurrency. If you outlay other specific fees such as a brokerage fee then you would be able to add it to the cost base.

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ETF management fees and currency conversion fees | ATO Community