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Clarifications on gains on foreign stocks and forex conversions after becoming a resident

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Clarification on gains on foreign currency and foreign stocks after becoming a resident

 

Hi there

 

I have recently re-established Australian residency.

- I still have foreign currency (USD) in a US Bank account

- I have US stocks that I purchased prior to returning to Australia (in USD)

- I have also purchased US stocks using foreign currency (USD) since returning to Australia

 

When I ceased being an Australian resident (some years ago), I paid capital gains on a deemed disposal of assets. 

Upon returning, my understanding is that my new cost basis for any assets held when returning to Australia should be the current market value on the date at which I became a tax resident of Australia.

 

I have a few questions

 

My questions are as follows:

 

Regarding Stocks:

 

1:  In recording the cost basis, do I need to convert to AUD at the time? And do I use the  exchange rate on the date of tax residency to do so? or do I use the exchange rate from the date the actual asset was actually purchased  (eg.  Stock XYZ was purchased on 1/1/2020 for $50USD and exchange rate was 0.7.  I became a resident on 1/3/2021. Exchange rate was 0.8  Value of stock was  $75.     - Is my new cost basis $70 / 0.8 = $93.75). 

 

2.  Is the above example, does a CGT event occur for the tax of year of the disposal, even if I do not convert the currency to AUD or transfer it back to an AUD account?  (ie. the sale of US stock results in USD held in a US bank account)

 

Regarding Cash:

 

3. For cash held in a foreign currency.  Does a CGT event arise when that money is transferred and converted back to Australia? (I understand there is a $250,000AUD balance election that may impact this, but assume the conditions are not met)

 

4.  If so, is there a 12 month CGT discount period on cash also?  And if so, is that 12 months calculated from the new tax residency date, or based on the date that the money was deposited into the foreign account and worked out on a first in first out basis.  (example.  If i was paid $30,000 USD in wages in August 2019.  I became a resident of Australia on December 1st 2020. I transferred $30,000 USD back to Australia in Jan 2021.  If there was a gain based on foreign currency fluctuations, would the 12 month discount method apply given the money was deposited in 2019)

 

Combination of CGT events - stock and currency transfer.

5. Finally, and this one may be a little complex.  If both (a) cash conversions (withdrawals) from a foreign account to an AUD, and (b) disposal of stocks (in USD) are both CGT events, how does one handle these in combination with each other.  eg.  If I sell $30,000 USD of stock (whilst exchange rate is say 0.75), receive USD into a bank account, and then transfer this money back to Australia a month later (when exchange rate = 0.8) is this 2 separate events?  And in determining all CGT values, should all values be pre-converted into AUD. (ie. the cost basis of the stocks, the market value of the stock on sale, and the exchange rate on the date of transfer back to Australia.

 

 

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ATO Certified Response

Community Manager

Replies 1

Hi @doctor_b,

 

After having a look at this we'd recommend getting in touch with our early engagement team so they can find out a bit more about your exact circumstances and give you some tailored advice.

 

Thanks, Nate

3 REPLIES 3

Community Manager

Replies 0

Hi @doctor_b,

 

Great questions, we're going to do a bit of research and we'll get back to you on this.

Most helpful response

ATO Certified Response

Community Manager

Replies 1

Hi @doctor_b,

 

After having a look at this we'd recommend getting in touch with our early engagement team so they can find out a bit more about your exact circumstances and give you some tailored advice.

 

Thanks, Nate

Initiate

Replies 0

Thanks @NateATO !  Will do.