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Re: Moving to Australia from UAE_Need information on tax.

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Newbie

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Hi Guys,

 

Please advice me how I should go about the tax situation in the below cases.

I am currently working in the UAE and plan to move to Australia as a PR in June 2020. I have some investments made in the UAE which I need some help about.

 

I have invested in stocks through Interactive Brokers and Etoro. Do I have to pay tax on the investment if I withdraw the principal + profits to my Australian account?  The principal amount was earned when I was working in the UAE.


I have invested in a business in the UAE from which I get monthly payments. Do I have to pay tax in Australia on this money even if I do not transfer it to my Australian bank account? I plan to keep this in my UAE account for now.

 

thanks

 

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ATO Certified

Master

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Let me start with this - if we are talking about significant amounts - I would strongly recommend you seek professional advice.

 

Change in tax residency and its implications

It is assumed that from June 2020 and onwards - you will be living in Australian permenantly for an extended period of time, and on this basis be considered an Australian tax resident from this point onwards. Once you are considered and Australian tax resident, a few things happen:

  • You are assessed on your world wide income - this means all income earned globally is taxed in Australia. On this basis, income from your business, dividends from shares etc. are generally speaking, taxable in Australia at the individual rates of tax which compared to the UAE may be high
  • All of your assets (eg. property, shares, investments etc.) fall into the Australian tax system. Generally speaking you are deemed to have acquired these at their market value (translated to AUD) on the date you become an Australian tax resident (see s855-45 ITAA97). If at a later point you dispose of these items - it is likely that the proceeds less the aforementioned market value would be treated as a capital gain / loss.
  • As you hold foreign currency and assets in a foreign currency, you will need to consider the foreign exchange gains and loss rules. I note that these rules are complex. With this said, the generaly rule is that principal withdrawals are not subject to income tax in Australia (though if you have a foreign exchange gain - then this would typically be assessed as income). There are a few elections and special rules to consider but again - this is complex and you will need to consider these carefully.
  • If you, after a period of Australian tax residency, cease to be an Australian tax resident, then you are treated as having disposed of your CGT assets (under CGT event I1 unless you undertake an election to defer this gain). This is not withstanding that you may be holding them now and they have never been translated into AUD or been transferred into and Australian bank account.

 

Hopefully this gives you some food for thought.

 

Good luck!

4 REPLIES 4

Best answer

ATO Certified

Master

Replies 0

Let me start with this - if we are talking about significant amounts - I would strongly recommend you seek professional advice.

 

Change in tax residency and its implications

It is assumed that from June 2020 and onwards - you will be living in Australian permenantly for an extended period of time, and on this basis be considered an Australian tax resident from this point onwards. Once you are considered and Australian tax resident, a few things happen:

  • You are assessed on your world wide income - this means all income earned globally is taxed in Australia. On this basis, income from your business, dividends from shares etc. are generally speaking, taxable in Australia at the individual rates of tax which compared to the UAE may be high
  • All of your assets (eg. property, shares, investments etc.) fall into the Australian tax system. Generally speaking you are deemed to have acquired these at their market value (translated to AUD) on the date you become an Australian tax resident (see s855-45 ITAA97). If at a later point you dispose of these items - it is likely that the proceeds less the aforementioned market value would be treated as a capital gain / loss.
  • As you hold foreign currency and assets in a foreign currency, you will need to consider the foreign exchange gains and loss rules. I note that these rules are complex. With this said, the generaly rule is that principal withdrawals are not subject to income tax in Australia (though if you have a foreign exchange gain - then this would typically be assessed as income). There are a few elections and special rules to consider but again - this is complex and you will need to consider these carefully.
  • If you, after a period of Australian tax residency, cease to be an Australian tax resident, then you are treated as having disposed of your CGT assets (under CGT event I1 unless you undertake an election to defer this gain). This is not withstanding that you may be holding them now and they have never been translated into AUD or been transferred into and Australian bank account.

 

Hopefully this gives you some food for thought.

 

Good luck!

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Taxicorn

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@johnmas 

When you become an Australian Resident for tax purposes you will pay tax on all of your worldwide income regardless of where it is.

 

If you withdraw your investment before becoming an Australian Resident for tax purposes and deposit it in a 

bank account then there will be no tax consequences except if you then earn income from that bank account after becoming an Australian Resident for tax purposes.

 

Newbie

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thanks for your answer. 

In addition to the investments mentioned in my original post, I have around 150k AUD in my parent's saving accounts in India which I had sent to them while working in the UAE. If they transfer it to me in parts (20K AUD in one transfer) or all of it together to my Australian bank account, will I have to pay tax on this too?   

ATO Certified

Community Support

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Hi @johnmas

 

Thanks for your post.

 

This is a question that is frequently asked in our Community. There are a number of threads that you can check out here:

 

Hope this helps.

 

Thanks,

 

ChrisR

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