Montfort International Case Studies

Discover why so many people rely on us to provide up-to-date expert advice on migrating finances overseas.

As the longest-established provider of independent financial planning for expatriates we have a proven track record in helping clients to transfer wealth safely and efficiently.

  • FISIC Case Studies

    Fungible Assets, Rights and Obligations Fungibility is a word that could lead to possible tax consequences especially for anyone moving monies between one currency and another. We will be looking in this article at some of the consequences between UK and Australia. Anyone connected to Australia with accounts held in another currency including Current, Savings and Cash ISA’s and Premium Bonds should not be too surprised by often unexpected tax implications. One can even be impacted if you move monies from one account to another, even if you are not bringing monies into Australia or you haven’t even physically moved to Australia. What we are about to explain applies to migrants and nationals and to even those with modest wealth. The surprise element is that for many this creates tax advantages and for many, any tax disadvantages can be dissipated by use of the election concessions as by careful planning tax liabilities can be eliminated. And for others tax advantages can be easily lost by moving monies at the wrong time. Fungibility is actually when a specific good or asset can be exchanged with other individual goods or same type assets. Currency is an example, Australian Dollars can be interchanged \ exchanged with UK Sterling, Euros, US Dollars, etc An asset that is said to be fungible provides simplification of any exchange as well as trade processes. Core to the concept is that for a state of fungibility to exist, demands and implies an equal \ same value between the two assets. By means of example (eliminating exchange rate costs) £1 may equal A$1.6500 but also one Australian Dollar is £0.60606. This helps explain that that if in a bank account there is £100,000 and you make a withdrawal of £1,000, then each and every £1 is the same as any other pound. So how does one identify which pound or any other countries currency has moved, should an account be in credit? We will explain below. This also is an issue when an account is in debit. Australia’s Forex Measures Australian tax rules require one to identify which pound is which pound. And precisely which pound has actually been realised. So, Australia applies the FIFO principle and this stands for First In is First Out. Australia does allow one to use a weighted average which is another option, we prefer FIFO. Here is an example of a Bill and Jane who had a UK savings account and both lived in Australia on permanent visas   Here is a simplified example involving Bill and Jane’s UK savings account: Calculation 1 The first withdrawal of £6,000 on 16 February 2016. Cost of £6,000 A$12,361.20 (02/11/15) Less FIFO A$12,109.20 Forex Loss A$ 252.00 Calculation 2 If, however the first ever deposit had been made on 6 April 2016 of £18,000.00 and the withdrawal made on 7 June 2016 of £16,000, ignoring the previous deposits and withdrawals. Cost of £16,000 A$29,808.00 Less FIFO A$31,257.00 Forex Gain A$ 1,449.60 This simplified example relates to mortgage repayments A mortgage taken out in the UK on the 28 February 2021 for £300,000 on a property, Mike and Sue were renting out. They then moved to Australia the same day. Mike on a permanent visa, Sue as an Australian citizen. The exchange rate was A$1.8045 and the interest only mortgage was for A$541,350. The mortgage allowed occasional capital repayments. Capital repayments from some monies they had on deposit, which of course would have to be considered in relation to the above example, but they had not bargained for this assessment, shown below. Calculation 1 This first repayment has resulted in a tax-deductible loss of A$1,074.00 Calculation 2 This first repayment has resulted in a further tax-deductible loss of A$982.00 Calculation 3 The next repayment has resulted in a taxable gain of A$1,320.00 Some Exemptions Election out of the 12 month rule Short-term transactions are caught in the capital gains tax (CGT) rules with depreciating assets being considered as acquired or disposed of, unless you elect out of the 12 month rule subject to special rules. By making the election any gains and losses otherwise caught will not be folded into the capital treatment of the asset, but will generally be determined to be assessable or deductible under the general provisions of the measures. Elections need to be in writing and cannot be reversed and come into effect from the applicable commencement. Any election out of the 12 month rule has to be written and retained with a tax payers tax records. The ATO may not require sight of the election unless your tax reporting comes under scrutiny. The election must have key details recorded. The A$250,000 Balance Election This election broadly enables a tax payer 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. Conclusion Specialist advice is required when ever wanting to take advantage of an exemption. For example, an election may not always be in one’s best interests. See Calculations above, If in doubt take specialist advice as these calculations are not straightforward.

    Read More
  • UK To US Pension Transfer

    Lorem ipsum dolor sit amet, consectetuer adipiscing elit, sed diam nonummy nibh euismod tincidunt ut laoreet dolore magna aliquam erat volutpat.

    Read More
  • UK To Australia Pension Transfer

    Lorem ipsum dolor sit amet, consectetuer adipiscing elit, sed diam nonummy nibh euismod tincidunt ut laoreet dolore magna aliquam erat volutpat.

    Read More

Thanks to Montfort, we saved a considerable amount of tax when we transferred out of our pension. Dread to think what would have happened without your expert guidance. Thank you.

D. Barnley UK

Ask A Montfort Finacial Planning Expert

Ask an expert

To speak with one of our qualified financial advisers, please do not hesitate to contact us with any queries you may have regarding your financial planning and the services we offer. We would be delighted to be of assistance.

Opening Hours:
Monday to Friday 0900-1730