Author Topic: Tax treatment of foreign shares  (Read 527 times)

Coco

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Tax treatment of foreign shares
« on: July 31, 2020, 06:16:31 AM »
Hi folks, I've got a question about the tax implications of buying & selling foreign shares. The scenario basically is:

1. Convert some AUD into USD.
2. A few days later, purchase some US shares with the USD.
3. At some point in the future, sell the US shares and receive the USD proceeds.
4. A few days after that, convert the USD proceeds into AUD.

What are the tax implications of this? (Assume the shares don't pay dividends.)

Is it simply a matter of calculating the CGT using the AUD amounts from steps 1 & 4? (i.e. the amounts that left & entered my Australian bank account)?

Or, do I need to perform two separate CGT calculations...one for steps 2 & 3 using the ATO's published exchange rates, and another for the currency gain/loss between steps 3 & 4?

I feel like this must be a really common situation, but I can't for the life of me find a definitive answer. Thanks for any help!

marty998

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Re: Tax treatment of foreign shares
« Reply #1 on: July 31, 2020, 02:54:33 PM »
The answer is “it depends”. It makes it tricky for example if you already hold USD funds as a matter of course in a USD bank account.

I’m not an expert but generally speaking foreign currency holdings qualify as a CGT asset if the purpose of holding it is not domestic in nature (like spending money for travel).

If you’re looking at significant gains it may be worth engaging a tax adviser... but they may well say “fuck it” and go with your shortcut method.

AUD at the end minus AUD at the start equals capital gain. Probably not 100% technically correct but it does reflect the substance of the transaction you engaged in.

Coco

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Re: Tax treatment of foreign shares
« Reply #2 on: July 31, 2020, 08:19:25 PM »
Makes sense, thanks for the pointers marty.