Do you have to pay tax on money transferred from overseas?

Multiple factors come into account whether or not you need to pay tax on the money you transfer overseas.

1. The source of the money: gift, inheritance, sale of a home, etc.
2. The tax laws of both countries (where the assets originate from and where they are being sent, e.g. New Zealand to Australia.)
3. The amount of money you’re transferring.
4. Your residency status.

Please be advised that while we do our best to keep this information up to date, OFX does not provide tax advice, and you should always consult a tax professional about your individual circumstances.

Below you will find information on the below:

• What are the tax implications of sending money overseas?
• Transferring large sums of money abroad
• Moving retirement funds overseas
• Sending money or financial support to family overseas
• Making tax payments to foreign governments

What are the tax implications of sending money overseas?

Generally speaking, if you are transferring your own money to yourself, you will probably not be required to pay additional taxes on the money. For example, if you are a New Zealander who has moved to Australia and you want to move your savings to Australia, you will usually not be obliged to pay additional tax, as you have already been taxed on your income. Transferring existing money to your spouse is also not usually taxed in most countries.

Once you become a legal resident of a new country, the income you earn from overseas will often be taxed, and that income can include capital gains, pension payments, and employment income. Because all countries have different tax structures, it’s best to research the specific countries involved before transferring. Here is a good article on tax obligations of Kiwis living in Australia: https://www.beyondaccountancy.com.au/something-every-kiwi-in-australia-needs-to-know/.

Transferring large sums of money abroad

If you’ve received a hefty inheritance or have sold a property overseas and wish to transfer the money, various taxes may apply such as inheritance tax, capital gains tax or gift tax. However, once those taxes are paid in the local jurisdiction where the assets originate and the funds are yours, you may not have to pay tax again to move the money overseas.

Many, but not all, countries have double-taxation treaties in place, which protect citizens from paying tax on money twice. However, you may be required to provide proof that you have paid the tax, e.g. estate or gift tax to the foreign government.

While you may not need to pay tax on large sums of money being sent abroad, some governments will require you to file a declaration that you are bringing the money into the country. Failing to declare the assets could result in a fine. Again, contact a professional or check the websites of the local tax authorities to see what you need to do to comply.

Moving retirement funds overseas

Pension or retirement accounts often have complicated tax limitations regarding early withdrawal or using the money to fund investments. You should check the local tax laws that apply in both jurisdictions when moving your pension overseas.

There may be different limitations depending on the amount you are planning to transfer, e.g. the entire balance of your retirement account or smaller monthly payments of $5,000.

If you are receiving regular payments from a pension abroad and want to reduce the costs associated with converting the money to your local account, use OFX to get better exchange rates and lower fees on recurring transfers.

Sending money or financial support to family overseas

Most countries make a distinction between financial gifts and other types of support for families overseas. For example, when paying tuition for study abroad, it is unlikely that you will be taxed on such an expenditure, especially if the child is considered a dependent for income tax purposes.

However, if you simply want to give your mature son or daughter a lump sum of money, it may be considered a gift and there could be tax implications. We recommend you check with your accountant to determine what if any tax obligations you both have.

If you are transferring money for a medical procedure or other health care costs associated with aging relatives, these are not usually considered gifts, but different governments have different guidelines for determining if tax is required.

Making tax payments to foreign governments

If your residency status changes during the tax year or you need to pay capital gains tax on assets sold overseas, you can use OFX to transfer money swiftly and securely while saving money on bank fees and margins. Banks often charge a margin of up to 5% on the daily exchange rate in addition to hefty transaction fees, so on a $10,000 transfer, you could pay $500 to your bank. This is too much.

When you are ready to make your overseas money transfer, use OFX so you don’t get stung by high bank fees and margins. Their exchange rates are consistently competitive, so you can keep more of your hard-earned cash.

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