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CGT when trading foreign denominated shares

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Hi,

 

I have been trying to understand the implications of CGT when trading shares on USA exchanges.

 

I use a share trading platform the allows me to transfer AUD to an USD denominated account in the USA. Every time I transfer assets to this USD account I incur on foreign exchange fees (and obviously the fx spread).

 

So lets say on the 4 Dec 2018, I  transferred with 511 AUD on a 0.7351 spot rate. I also paid 3.58 USD in fees.

 

By the 6th of December, my account had 372.06 USD available to trade, which I used to buy 1 "XYZ shares" for 372.06 USD.

 

On 14th March 2019 I sold that share for 380 USD.

 

Then, on the 19 March 2019, I used 372.06 USD to buy 2 "ACME Corp shares" that I still hold up to today, leaving the 7.94 USD balance on my FX denominated account.

 

My understanding is that by selling the XYZ shares I triggered a CGT event and in order to figure out the gain/loss associated with the XYZ shares I need to determine:

  • The buy and sell prices for the asset  (as above);
  • The AUD/USD fx rate on the 6th Dec 2018: 0.7620;
  • The AUD/USD fx rate on the 14th Mar 2019: 0.7456, and to calculate the base cost of the ACME shares,
  • The AUD/USD fx rate on the 19th Mar 2019: 0.7460.

The 3 exchange rates above are the ATO daily rates published here

 

As consequence:

  • 1 XZY share base acquisition cost was:  488.2677 AUD <- calculated using (USD 372.06 * (1/0.7620))
  • XZY share disposal price was: AUD509.6566 AUD <- caclulated using (USD 380.00 * (1/0.7456))

As result, that event triggered a 21.3889 AUD capital gain related to the acquisition and disposal of the XZY shares. Furthermore:

  • 2 ACME corp shares base acquisition cost was: AUD 498.6863 <- calculated using (USD 372.06  * (1/0.7460))

My question is, so far, the money never made it back to Australia. But what happens when it does? 

 

To simplify, lets pretend the market and FX went sideways and on the 30th May 2019, I sell the 2 ACME shares for the same AUD 498.6863 I bought them for.

To my complete surprise, between disposing the 2 ACME shares (30th May 19) and giving instructions to transfer the complete balance ( 372.06 USD + 7.94 USD) the FX market goes wild and the AUD/USD rate goes to 0.9301!

 

... I know I could just hold the money in USD and avoid the loss, but I really need that money to buy another smashed avo on toast, therefore I just accept my fate and continue with the transfer...

  • What happens to the 7.94 USD balance? From what I gather the USD gain it has been taxed during the first event, but the FX fluctuations would trigger new CGT events (a loss in this case).
  • What happens to the original 372.06 USD (The original AUD 511 after fx and fees). Given they are now worth approx AUD 400 solely due FX fluctuation, how do I declare that loss?

 

I know the case seem particularly personal and complicated but I suspect a lot of millenials using low cost trading apps are (or will be) facing the same issue... ;-) 

 

I thank you in advance

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Hi @happytopay

 

Welcome to our Community!

 

We can provide general information here on our Community and as you've stated your query is more personal and complex. If you require a more specific response relating to your personal situation, you can contact our Early engagement team by submitting a request for or requesting a call back and an officer will contact you to discuss further. 

 

Thanks, JodieH. 

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1. Yes,you need to declare the captan gain in your Australia tax return, any foreign tax paid in the US will be a credit to offset your Australian tax.
2. I do not think you can claim the FX losses as an individual investor. You may be able to claim the FX loss if you are running a business.Maybe contact your accountant for more advice. :-)
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Most helpful response

ATO Certified Response

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Hi @happytopay

 

Welcome to our Community!

 

We can provide general information here on our Community and as you've stated your query is more personal and complex. If you require a more specific response relating to your personal situation, you can contact our Early engagement team by submitting a request for or requesting a call back and an officer will contact you to discuss further. 

 

Thanks, JodieH.