If you want to exchange large amounts of money for your trip abroad, it’s natural to wonder whether you’ll be taxed and whether it’s better to exchange your foreign currency overseas.
The good news is that in Australia, you don't have to pay tax on currency exchange if you're simply buying foreign cash for a holiday. That’s because the transaction is a one-off and the money you're buying is for personal use.
But it depends on the circumstances around your foreign exchange. There may be a small tax just on the service fee or commission. And if you're buying traveller's cheques or you're exchanging currency you've received from overseas, you might be taxed.
Paying tax on foreign exchange: Is GST applicable on my travel money?
In Australia, the most common tax is the Goods and Services Tax (GST), which is 10% of the cost added to most goods and services sold in the country.
So do you pay tax on currency exchange transactions? For the purposes of taxation, a foreign currency transaction, including buying travel money, is considered a financial supply. Luckily for you, financial supplies don’t have GST in their price.
That means no GST is charged on any foreign cash exchanges within Australia, whether you’re buying foreign cash before you head overseas or exchanging foreign cash back into AUD on your return home.
In Australia, GST isn’t applied to the amount of money you’re exchanging but it might be applied to the commission or service fee from the exchange provider.
Make sure you get the best deal on your foreign exchange! Receive regular email updates on your exchange rate with our Rate Tracker.
Do I have to pay Capital Gains Tax on my travel money?
Capital Gains Tax, or CGT, is a tax paid when you make a profit from an asset. You need to report capital gains when you’re completing your income tax return.
So if you make a profit when you change foreign currency back into AUD on arrival in Australia, will you be taxed? Usually, no.
As a general rule, all assets are subject to CGT unless they’re for personal use. And short-term forex gains made through travel money usually fit under that 'personal use' category.
Are my traveller’s cheques taxed?
Whether or not your traveller’s cheques are taxed depends on where you bought them from. As with travel money, traveller's cheques are considered a type of 'financial supply'.
GST isn’t added to commissions or fees for traveller’s cheques when they're bought directly from a financial supply provider, such as a bank.
But if you buy your traveller’s cheques from an agent acting on behalf of a financial supply provider, you may be charged GST on their commission. This is because the Australian Taxation Office considers the agent a financial supply facilitator rather than a provider.
Am I taxed if I bring money from overseas into Australia?
If you’re transferring money from overseas, you may be taxed on the sum. But it all depends on a variety of factors, including your residency status, the types of funds, and the tax laws of both Australia and the country the money originated from.
If the amount you’re transferring into Australia is an inheritance, personal gift, or even something like the proceeds from the sale of a home, the sum may not be taxed. In most cases, this is because it’s a one-time occurrence.
That’s just the same if you’re migrating to Australia and bringing your savings with you. You generally won’t need to pay further tax on these amounts.
On the other hand, if you’re an Australian resident, you may need to pay tax if you have:
- a foreign pension or superannuation you’re bringing into Australia
- income or capital gains from the rental or sale of properties overseas
- interest accrued from offshore bank accounts
- overseas business or employment income
These situations are more complex so it’s important to do your own research or take independent advice to find out how taxation might apply to your circumstances.
How much money can I bring into Australia?
There’s no limit to the amount of money you can bring into Australia. But on arrival in the country, you must declare if you’re carrying cash valued at AU$10,000 or more in Australian dollars or a foreign currency equivalent.
If you’re carrying bearer negotiable instruments, including traveller’s cheques, you must declare them if asked to do so at Customs, regardless of their value.
Meanwhile, if you’re transferring money into Australia via a bank transaction, your bank or money transfer company will most likely take care of the details.