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Conversion into A$ of CG for CGT on selling previous main residence overseas

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Newbie

Views 479

Replies 5

Hi,

We have a similar situation as stated in this post, just with a property in Germany

 

https://community.ato.gov.au/t5/Investment-property/CGT-Tax-on-selling-previous-main-residence-in-UK...

As german residents we bought a house in Germany and moved in

moved to Australia with a permanent Visa

rented a house in Australia and rented out our german property

bought a house in Australia 

sold our house in Germany to our tenants

paid CGT Tax in Germany

 

As we just exceeded the 6 years by approx 3 month we will need to work out our capital gain of the german property in any case.

So, when do I convert the € into A$?

Do I have to calculate the capital gain in € first like this:

selling price in €

- purchase price in €

- related costs in €

= capital gain in €

and then

convert € into A$?

If so, do I need to use the conversion rate from the day the contract of selling was signed or when we received the money?

Or, if not, at what time do I convert the € into A$ at the then effective conversion rate?

 

Thank you!

 

 

 

1 ACCEPTED SOLUTION

Accepted Solutions
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Most helpful response

Community Support

Replies 2

Hi @Sue3 and @Iheartrefunds 

 

Thanks for contacting ATO Community.

 

When you convert amounts for CGT calculations you use the spot rate at the relevant time of the transaction or CGT event (eg acquisition, disposal) with reference to the RBA rates or the ATO-published dates (see https://www.ato.gov.au/Rates/Foreign-exchange-rates/).

 

It can also be from "a banking institution operating in Australia including, where relevant, the banking institution through which your foreign income is received".

The ATO requires you to "keep the rate used and the source of rates with your records and be mindful that you cannot obtain an average rate (or rates) of exchange from an associate, or from yourself, unless otherwise notified by us."

Also where there's a currency exchange rate fluctuation (for example, between the date you entered into the contract (time of event) and the date of settlement of the contract (time of payment) you may also have to calculate and bring into account any forex realisation gains or losses on the CGT transaction.

 

If you would like further information on the conversion rules, refer to the publications:

Or use our General information on average rates on our website.

 

I hope this information is helpful and you remain well.

 

MariR

5 REPLIES 5
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Devotee

Replies 4

You haven’t provided enough information for me to be sure if you have looked at the Australian
capital gains tax correctly. You would need to consider the date you became an Australian resident, the value of the property at that time.
However, to answer your question on when you convert, it looks like it is generally the rate at the time of transaction. Read the ATO website for more information on which exchange rate to use: https://www.ato.gov.au/Rates/Foreign-exchange-rates/
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Newbie

Replies 3

Hi,

 

thank you for your answer.

 

We have an almost similar situation as the person in the post I linked.

 

There the answer to one of the questions was:

  1. The cost base of capital gains tax assets are made up of a number of elements, including the costs associated with acquiring the asset. We'd look at the cost of the property at the time you acquired it, rather than valuations obtained later.

 

That post answers almost all my questions, but not when I have to convert into Australian dollar.

When we acquired the asset we didn't even know that we will become permanent residents of Australia and as we paid and sold in €, it seems to make the most sense to calculate the gain(or loss) in € first and then convert it.

 

Who would be able to give me a clear answer to that, the Early Intervention Team?

 

Thank you

 

 

Highlighted

Most helpful response

Community Support

Replies 2

Hi @Sue3 and @Iheartrefunds 

 

Thanks for contacting ATO Community.

 

When you convert amounts for CGT calculations you use the spot rate at the relevant time of the transaction or CGT event (eg acquisition, disposal) with reference to the RBA rates or the ATO-published dates (see https://www.ato.gov.au/Rates/Foreign-exchange-rates/).

 

It can also be from "a banking institution operating in Australia including, where relevant, the banking institution through which your foreign income is received".

The ATO requires you to "keep the rate used and the source of rates with your records and be mindful that you cannot obtain an average rate (or rates) of exchange from an associate, or from yourself, unless otherwise notified by us."

Also where there's a currency exchange rate fluctuation (for example, between the date you entered into the contract (time of event) and the date of settlement of the contract (time of payment) you may also have to calculate and bring into account any forex realisation gains or losses on the CGT transaction.

 

If you would like further information on the conversion rules, refer to the publications:

Or use our General information on average rates on our website.

 

I hope this information is helpful and you remain well.

 

MariR

Highlighted

Newbie

Replies 1

Hi @MariR

 

thank you for your answer.

 

Just one more question (for better understanding)

lets say I've bought a house in Germany as german resident, when I haven't been an Australian resident, with Euro, cost of acquisition was 100,000€, spot rate was 0.8333 (example)

If I convert it at time of acquisition it would have been A$120,000
2 years after acquisition I become an Australian resident

a few years later (still living in Australia) I sell the house in Germany for 100,000€, but now the spot rate is 0.625 (example)

which would be A$160,000
In this whole scenario there was never a conversion from A$ to € to buy the German property and there was no gain in € (more likely a loss because of related costs), but because of the time of conversion there is a gain in A$. But this gain only exists on the paper as in fact there is no real gain.

 

So, my question is, can this be correct? Do I have to declare that CG, that doesn't really exists, in my tax return? Doesn't it make more sense, in this case, to calculate the gain/loss in € first and then convert the result in A$?
Sorry, but I can't really find anywhere that it has to be done this way in this (special) case. I'm sorry if I've overseen it.

 

Thank you

 

 

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Community Support

Replies 0

Hi @Sue3

 

If you acquired an overseas asset before you became an Australian resident, you are taken to have acquired the asset at the time you became a resident.

 

Your capital gains on overseas assets are treated in the same way as your capital gains on Australian property. If you make a capital gain that is taxable in Australia and you have paid foreign tax on it, you may be entitled to a foreign income tax offset. See the link above.

 

The following information on Investing overseas goes into greater detail to assist you with your query.

See also:

I hope this clarifies things for you and you remain well,

MariR