Announcements
Read our answers to common questions about JobKeeper, Early release of super and Cash flow boost.

ATO Community

Foreign accounts and the $250,000 balance election

Highlighted

Newbie

Views 822

Replies 1

I'm about to migrate to Australia and intend to keep a bank account denominated in EUR back in my home country. Having read about the $250,000 balance election, I wonder about a few issues:

 

  1. If I make that balance election and then decide to close the EUR account in the future, convert the balance to AUD and wire it to an Australian bank account, will any gains or losses resulting from exchange rate fluctuations since becoming a tax resident in Australia be ignored for tax purposes?

  2. Maybe after a few years I decide to move back to Europe and cease to be an Australian tax resident. In such an event, the ATO normally will deem assets not considered taxable Australian property to have been disposed of for CGT purposes. Does that provision also apply to foreign accounts for which the $250,000 forex election was made? Or will any gains or losses resulting from exchange rate fluctuations still be ignored? Does this provision apply to all other foreign bank accounts for which no forex election was made?

  3. Is it possible to opt for the $250,000 balance election for multiple accounts? If yes, does the sum of all account balances have to be below $250,000 or does that limit apply to each account individually?

I hope someone can clarify.

1 ACCEPTED SOLUTION

Accepted Solutions
Highlighted

Best answer

ATO Certified

Community Support

Replies 0

Hi @CitizenM

 

Welcome to our community and your first post.

 

Thanks for your queries as well. Normally when someone migrates they may have money they bring with them or leave in the country of origin. Once you become an Australian Resident for Tax Purposes however this will mean your world wide income is declared annually in your tax return and any interest or otherwise earned is declared.

 

As the reference you refered to says though the $250,000 balance election broadly enables you to disregard certain foreign currency gains and losses on certain foreign currency denominated bank accounts and credit card accounts (called qualifying forex accounts) with balances below a specified limit.

 

Further the example cited under How do you make a limited balance election? states The limited balance test is passed at a particular time if the total credit balances, and the total debit balances, of all qualifying forex accounts for which an election is in force are each not more than the equivalent of A$250,000.

 

If you’re exchanging currencies in order to make a profit, you may be participating in foreign exchange trading, and different rules will apply. In this situation, we’d suggest you reach out to our early engagement team. Early engagement will contact you to discuss your circumstances, then provide information on how we think tax law applies. You can request a follow up email or call back by completing our online form.

 

I hope that takes you in the right direction.

Kind Regards
MarkA

1 REPLY 1
Highlighted

Best answer

ATO Certified

Community Support

Replies 0

Hi @CitizenM

 

Welcome to our community and your first post.

 

Thanks for your queries as well. Normally when someone migrates they may have money they bring with them or leave in the country of origin. Once you become an Australian Resident for Tax Purposes however this will mean your world wide income is declared annually in your tax return and any interest or otherwise earned is declared.

 

As the reference you refered to says though the $250,000 balance election broadly enables you to disregard certain foreign currency gains and losses on certain foreign currency denominated bank accounts and credit card accounts (called qualifying forex accounts) with balances below a specified limit.

 

Further the example cited under How do you make a limited balance election? states The limited balance test is passed at a particular time if the total credit balances, and the total debit balances, of all qualifying forex accounts for which an election is in force are each not more than the equivalent of A$250,000.

 

If you’re exchanging currencies in order to make a profit, you may be participating in foreign exchange trading, and different rules will apply. In this situation, we’d suggest you reach out to our early engagement team. Early engagement will contact you to discuss your circumstances, then provide information on how we think tax law applies. You can request a follow up email or call back by completing our online form.

 

I hope that takes you in the right direction.

Kind Regards
MarkA