Tax Implications: Transferring Money from Overseas from a Friend

LIluvfreebies-freeDel on 04/10/2020 - 13:21
Last edited 04/10/2020 - 13:23

Hello Ozbargainers,

I had transferred about 20K to an overseas friend to help him out of a financial debt 5 years ago. Now he wants to pay me back the full 20k. I was wondering if the ATO is going to view this as foreign income and not as a "gift"? It is just my money that I am going to receive. I have got proof that I had send him the money 5 years ago. What would be best way to receive the money from an overseas friend without getting into too trouble with ATO or AUSTRAC. Is there a process or procedure I need to follow?
Does anyone has any experience when receiving money from overseas?

Thank you.

Financial

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Comments

  • Meho2026 on 04/10/2020 - 13:34
    +2

    Dont worry about it, everything will be OK.
    It is a reportable amount becuase its over $10000 but because you are not using it for terrorism or criminal activity nothing will happen.
    You dont have to do anything, the financial institution that facilitates the transfer is responsible for reporting it.

    • Iluvfreebies-freeDel on 04/10/2020 - 13:39

      Thank you for your reply. Should I get him send the money in small amounts like 5k every year.

      • DingoBilly on 04/10/2020 - 14:09
        +6

        No - if anything that makes it more suspicious/more likely to be flagged as far as I am aware.

        Besides the obvious pain of just having to wait 3 years for you to receive your money.

        • Settero on 04/10/2020 - 14:22
          +1

          one off transactions are much harder to monitor/go after, its patterns that make you stand out

      • Meho2026 on 04/10/2020 - 17:19
        +1

        Get the whole lot in one go

  • oscargamer on 04/10/2020 - 14:23
    +2

    Just get it in one go.
    If your friend wants to write an explanatory letter saying it's a repayment of a debt, then great.
    I assume you can show the original movement of 20k to them?

  • Shleepy on 04/10/2020 - 14:28
    +5

    I think you might be overthinking the whole thing.

    ATO is interested in income. You loaned $20,000 interest free to a friend who is repaying it. Thus, there is no income attached and the ATO will not care. People move large sums internationally all the time in this manner. The point is that you paid tax when you earned the $20,000. It is an asset whether you hold it in your bank account or hold it as a debt receivable. Repayment of debt capital is not revenue/income.

    AUSTRAC. OK, so it gets recorded at AUSTRAC but so what? Again, people legitimately send large SWIFT transfers to each other every day. Breaking up the repayments to circumvent AUSTRAC makes it sound dodgy and is pointless unless you were actually interested in money laundering. If anything, it costs more to send small sums and you carry a risk for three years that your might not receive your money.

  • Iluvfreebies-freeDel on 04/10/2020 - 15:06

    Thank you. This really helped. I just don't want to receive a call from the ATO/AUSTRAC and then waste time trying to prove the transfer.

    • spal on 04/10/2020 - 17:51
      +2

      You will most likely be asked to explain or include the receipt as your income. However, as you have legitimate reasons, you just need to explain. You not wanting to waste your time is not going to be an insurance against the ATO asking you to explain. Getting the amount in small lots means you will need to wait for a long time, and have multiple transactions which are possibly going to be queried by the ATO. Financial institutions would report transactions greater than $10000, but AUSTRAC still gathers information on smaller transactions. If you regularly do not receive remittances from overseas, these transactions will be flagged as suspicious to your profile.
      My advice, it is a genuine transaction, don’t stress, just explain if and when you are asked.
      Also, what you call is wasting time, that is required in the larger public interest to keep integrity of our taxation system.

  • Moneyinthebank on 04/10/2020 - 17:51
    -2

    Get him to give it to you in a pre paid visa gift card and just use that card

  • netjock on 04/10/2020 - 19:19
    +2

    If you got the records from 5 years ago you sent it to name of this person.

    5 years later you get same amount back from name of this person.

    Easy solve.

    Otherwise have your friend sign the equivalent of state dec in their country outlining what is going on.

  • brad1-8tsi on 05/10/2020 - 18:48
    +1

    Do online chat with the ATO and ask them. You can do it anonymously. They are pretty good at giving proper answers

    • Iluvfreebies-freeDel on 05/10/2020 - 22:42

      Thanks, I did read thru some of their forums but all of them were regarding receiving money from family members.
      I will talk to them, good idea.

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