Tax implications of transferring money to Australia

This blog article is about Tax implications of transferring money to Australia.

With the Australian dollar falling recently as a result of the Coronavirus, many Australian expats overseas are looking to transfer money back to Australia to take advantage of the favourable exchange rate and lower Australian dollar.

While this may be a smart financial strategy, it is important to be aware that it may have tax implications. The ATO (through AUSTRAC) now have sophisticated techniques for identifying payments coming into Australia and it is likely that the ATO may question the source of the funds.

Australian Tax Residency

The first key point is to consider is if you are still an Australian tax resident for tax purposes. If you are in fact still Australian tax resident (e.g. you have been living overseas for less than 2 years), your earnings overseas would likely remain subject to Australian tax (subject to the relevant Double Tax Treaty if applicable). In this instance, you will need to evidence to the ATO you are not Australian tax resident.

Section 99B

An Australian tax resident who receives funds from a foreign trust may be required to include the funds in their assessable income under Section 99B of the Income Tax Assessment Act 1996. This is a complex section of the law. The taxpayer will need to show that in fact the money received is not income but corpus of the trust in order for such funds not to be taxable in Australia. Section 99B is often relevant for Australian taxpayers who receive an overseas inheritance in the US (in particular) and UK or have an overseas trust used to accumulate assets during their time living overseas.

TOFA

Considering the complexity of the law, it’s essential to take into account the Taxation of Financial Arrangement (TOFA) rules to avoid subjecting any foreign exchange gain on the transfer of funds back to Australia to Australian tax.

As a final note,  we have seen some Australian expats over recent weeks look to acquire Australian property given the falling Australia dollar. Consider the tax implications carefully to confirm the continued availability of CGT concessions as a non-resident.

Please do not hesitate to get in contact with us if you have any questions and take care all!