Foreign income confusion

[Jacques Voogt]

AFAIK - under 4 mil would be considered some investment allowance. And yes, for that you need a tax clearance certificate. It still does not mean you formally immigrated. Just that SARS is happy that you have paid your taxes on the money and may therefore invest it and you are not busy hiding it away in a foreign bank. No worries for us regular folks still with bonds to pay.

Over 4 mil would be when you formally immigrate and intend on moving everything there in one go.

Keep in mind these numbers are per person per year. So you could still move your 40mil over in 4 mil chunks over 10 years without formally immigrating.

I have often hear of other ways to take some value with you. i.e. in the form of jewelry. It is easy to spend a couple of hundred K on some nice jewelry. Just be sure you can sell it there for same price.

Personally, If I had say 2.5 mil, I'd simply take it over in 1 mil chunks over 3 years or just do the TCC and take it all at once. Either way 2.5mil would probably only buy a bedroom in Sydney for AUD250K

[Brad76]

Im taking out less than the allowance. All I wanted to know was will I need to pay any tax on it if it sits and earns interest (be it at a low amount) in an Australian bank account, back in SA, ie. seen as income being generated in a foreign country.

Tax payable is a question of residency and /or source and you could for instance be deemed to be resident in both countries at the same time based on the residency rules / tests in place at the time. If I recall correctly, in terms of the double taxation agreement that exists between the two countries you wouldn't be liable for tax on the interest earned in Aus in SA if you were physically resident in Aus, had a home established there and / or had closer personal / economic relations there irrespective of the normal residency tests that exist in South African tax law.

[Hugo2]

"I am no financial fundi. All I'm trying to get to is to see if the investment would still be sensible and to make sure I do it right and not end up being taxed twice due to some mistake on my part."

The basic investment return calculation is to use the highest tax rate for calculation purposes i.e. as Australian CGT is 18% use the Australian rate and ignore the SA rate as the SA rate will only determine the net tax due in Australia, it will neither increase or decrease your tax exposure as the SA paid tax is a credit to the ATO charge.

For ATO tax immigrants ex SA, do one of the following:

Calculate the SA CGT gain using SA rules and for selling price you convert the ATO "entry" value or base cost / historical value. The CGT in SA deferred until sale, for the period held before the ATO tax charges commence, is added to the cost of holding but does not impact on your Australian CGT calculation as the SARS CGT is a tax credit and not a cost of acquisition. Henceforth you calculate your return on investment using ONLY ATO rates as they are highest. Remember to cost in the estate duty risk or the cost of estate duty mitigation i.e. SA life cover.

OPTION 2:

Use the SA historical cost for ATO calculation. Follow same principle as above but now you do not factor in the 5% CGT rate saving in SA, assuming that SARS rate will catchup with the ATO rate. Once again factor in cost of estate duty and estate administration in SA.

I trust this answers your question. But incase it is a property with specific tax benefits in SA i.e. UDZ wear and tear, may I suggest you ignore that as the ATO will not allow it.

In short plan using the highest rate and the rules of the country collecting highest CGT / tax rate. In both cases it is the ATO.

Hugo

www.thesait.org.za/members/hugovanzyl