New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003 (Cth)
This compilation was prepared on 19 August 2010
taking into account amendments up to Act No. 75 of 2010
The text of any of those amendments not in force
on that date is appended in the Notes section
The operation of amendments that have been incorporated may be
affected by application provisions that are set out in the Notes section
Prepared by the Office of Legislative Drafting and Publishing,
Attorney‑General’s Department, Canberra
Contents
This Act may be cited as the
New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003 .
This Act commences on the day on which it receives the Royal Assent.
Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.
Insert:
connected entity has the same meaning as in theIncome Tax Assessment Act 1997 .
Add:
(4) Subsection (2) does not apply to a gain on the disposal or redemption of a traditional security if:
(a) the disposal or redemption occurs because the traditional security is converted into ordinary shares in a company that is:
(i) the issuer of the traditional security; or
(ii) a connected entity of the issuer of the traditional security; and
(b) the traditional security was issued on the basis that it will or may convert into ordinary shares in:
(i) the issuer of the traditional security; or
(ii) the connected entity.
(5) Subsection (2) does not apply to a gain on the disposal or redemption of a traditional security if:
(a) the disposal or redemption is in exchange for ordinary shares in a company that is neither:
(i) the issuer of the traditional security; nor
(ii) a connected entity of the issuer of the traditional security; and
(b) in the case of a disposal—the disposal is to:
(i) the issuer of the traditional security; or
(ii) a connected entity of the issuer of the traditional security; and
(c) the traditional security was issued on the basis that it will or may be:
(i) disposed of to the issuer of the traditional security or to the connected entity; or
(ii) redeemed;
in exchange for ordinary shares in the company.
Insert:
(2B) A deduction is not allowable under subsection (2) for a loss on the disposal or redemption of a traditional security if:
(a) the disposal or redemption occurs because the traditional security is converted into ordinary shares in a company that is:
(i) the issuer of the traditional security; or
(ii) a connected entity of the issuer of the traditional security; and
(b) the traditional security was issued on the basis that it will or may convert into ordinary shares in:
(i) the issuer of the traditional security; or
(ii) the connected entity.
(2C) A deduction is not allowable under subsection (2) for a loss on the disposal or redemption of a traditional security if:
(a) the disposal or redemption is in exchange for ordinary shares in a company that is neither:
(i) the issuer of the traditional security; nor
(ii) a connected entity of the issuer of the traditional security; and
(b) in the case of a disposal—the disposal is to:
(i) the issuer of the traditional security; or
(ii) a connected entity of the issuer of the traditional security; and
(c) the traditional security was issued on the basis that it will or may be:
(i) disposed of to the issuer of the traditional security or to the connected entity; or
(ii) redeemed;
in exchange for ordinary shares in the company.
Insert:
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Insert:
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Omit “option or”, substitute “option,”.
Omit “; and”, substitute “or *exchangeable interest; and”.
Add “or in exchange for the disposal or redemption of the exchangeable interest”.
Omit “option or”, substitute “option,”.
Omit “; and”, substitute “or *exchangeable interest; and”.
Add “or in exchange for the disposal or redemption of the exchangeable interest”.
After “134”, insert “, or an *exchangeable interest”.
Add “or in exchange for the disposal or redemption of the exchangeable interest”.
Repeal the section, substitute:
This Division sets out the rules for these kinds of investments:
• bonus shares and units; and
• rights; and
• convertible interests; and
• shares acquired under an employee share scheme; and
• exchangeable interests.
Most are about modifying the cost base and reduced cost base of a CGT asset.
Insert:
130‑100 Exchangeable interest
130‑105 Shares acquired in exchange for the disposal or redemption of an exchangeable interest
An
exchangeable interest is a *traditional security that:
(a) was issued on the basis that it will or may be:
(i) disposed of to the issuer of the traditional security or to a *connected entity of the issuer of the traditional security; or
(ii) redeemed;
in exchange for *shares in a company that is neither:
(iii) the issuer of the traditional security; nor
(iv) a connected entity of the issuer of the traditional security; and
(b) was issued on or after 1 July 2001.
Cost base and reduced cost base
(1) The table has effect:
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(2) An amount is to be added under this subsection if a *capital gain on the disposal or redemption of the exchangeable interest has been reduced under section 118‑20. This is so even though a capital gain that is made on the disposal or redemption of the exchangeable interest is disregarded under subsection (4). The amount to be added is the amount of the reduction.
(3) The payment for the exchange can include giving property (see section 103‑5).
Other CGT consequences
(4) The table has effect:
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Application
(5) This section applies to the disposal or redemption of an *exchangeable interest on or after 1 July 2001.
Insert:
exchangeable interest has the meaning given by section 130‑100.
(1) The amendments of sections 26BB and 70B of the
Income Tax Assessment Act 1936 made by this Schedule apply to the disposal or redemption of a traditional security if the traditional security was issued after 7.30 pm, by legal time in the Australian Capital Territory, on 14 May 2002.(2) The amendments of sections 122‑25, 122‑135 and 126‑50 of the
Income Tax Assessment Act 1997 made by this Schedule apply to the disposal or redemption of an exchangeable interest on or after 1 July 2001.
Omit “*convertible note”, substitute “*convertible interest”.
Omit “convertible note”, substitute “convertible interest”.
Omit “*convertible note”, substitute “*convertible interest”.
Omit “convertible note”, substitute “convertible interest”.
Omit “*convertible note”, substitute “*convertible interest”.
Omit “convertible note”, substitute “convertible interest”.
Repeal the table, substitute:
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Insert:
(1B) The payment to convert the convertible interest can include giving property (see section 103‑5).
The amendments made by this Schedule apply to the conversion of a convertible interest on or after 1 July 2001.
Repeal the table, substitute:
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The amendment made by this Schedule applies to the exercise of a right on or after 1 July 2001.
Omit “, 82Y”.
Omit “or 15‑15”, substitute “, 15‑15 or 775‑15”.
Omit “, 82Z”.
After “8‑1”, insert “or 775‑30”.
Omit “or 82Y”.
Omit “or 15‑15”, substitute “, 15‑15 or 775‑15”.
Omit “or 82Z”.
After “8‑1”, insert “or 775‑30”.
Add:
Note: For transitional provisions about former sections 82Y and 82Z of the
Income Tax Assessment Act 1936 , see Part 2 of Schedule 4 to theNew Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003 .
Omit “or 82Y”.
After “6‑5”, insert “or 775‑15”.
Omit “or 82Z”.
After “8‑1”, insert “or 775‑30”.
Omit “or 82Y”.
After “6‑5”, insert “or 775‑15”.
Omit “or 82Y”.
After “6‑5”, insert “or 775‑15”.
Omit “or 82Z”.
After “8‑1”, insert “or 775‑30”.
Add:
Note: For transitional provisions about former sections 82Y and 82Z of the
Income Tax Assessment Act 1936 , see Part 2 of Schedule 4 to theNew Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003 .
Repeal the section.
Repeal the Division.
Omit “20,”.
Repeal the section.
Omit “, 82SA(2) or 82Z(3) or (4)”, substitute “or 82SA(2)”.
Omit “or 170‑B”, substitute “, 170‑B or 960‑D”.
After “this Act”, insert “or the
Income Tax Assessment Act 1997 , except one under Subdivision 960‑D of theIncome Tax Assessment Act 1997 ”.
Omit “or 170‑B”, substitute “, 170‑B or 960‑D”.
Omit “20,”.
Repeal the section.
31
Subsection 57‑25(6) in Schedule 2D (table item 4) Before “
Division 3B ”, insert “the former ”.
32
Subsection 57‑25(6) in Schedule 2D (table item 6) Before “
subsection 82Z(1) ”, insert “the former ”.
33
Subsection 57‑25(6) in Schedule 2D (at the end of the table) Add:
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Insert:
(6A) For the purposes of the application of subsection (5) to the transition taxpayer, a provision covered by item 7 or 8 of the table in subsection (6) is taken to have commenced at the start of the taxpayer’s applicable commencement date (within the meaning of Division 775 of the
Income Tax Assessment Act 1997 ).Note: For
applicable commencement date , see section 775‑155 of theIncome Tax Assessment Act 1997 .(6B) The rule in subsection (5) does not apply, and is taken never to have applied, to the transition taxpayer in relation to a provision covered by item 7 or 8 of the table in subsection (6) if the taxpayer makes an election under section 775‑150 of the
Income Tax Assessment Act 1997 .
35
Subsection 57‑30(4) in Schedule 2D (table item 1) Before “
Division 3B ”, insert “the former ”.
36
Subsection 57‑30(4) in Schedule 2D (table item 2) Before “
subsection 82Z(1) ”, insert “the former ”.
Add:
(5) A provision listed in subsection (6) only applies to a liability of the transition taxpayer at the transition time if the taxpayer first assumed the liability on or after the taxpayer’s applicable commencement date (within the meaning of Division 775 of the
Income Tax Assessment Act 1997 ).Note: For
applicable commencement date , see section 775‑155 of theIncome Tax Assessment Act 1997 .(6) The provisions are listed in the table below. Provisions of the
Income Tax Assessment Act 1997 are identified in normal text.
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(7) The rule in subsection (5) does not apply, and is taken never to have applied, to the transition taxpayer if the taxpayer makes an election under section 775‑150 of the
Income Tax Assessment Act 1997 .
38
Section 10‑5 (table item headed “foreign exchange”) Omit “
82Y ”, substitute “775‑15”.
39
Section 12‑5 (table item headed “foreign exchange”) Omit “
82U to 82ZB ”, substitute “775‑30”.
Omit “
82U to 82ZB ”, substitute “775‑30”.
Add:
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Repeal the item.
Omit “Division 328”, substitute “Divisions 328 and 775”.
Omit “27‑90(3).”, substitute “27‑90(3); or”.
Insert:
(g) for which there is a reduction in the asset’s opening adjustable value under section 775‑70; or
(h) for which there is an increase in the asset’s opening adjustable value under section 775‑75.
Repeal the note, substitute:
Note: The opening adjustable value of a depreciating asset may be modified by one of these provisions:
• Subdivision 27‑B;
• subsection 40‑90(3);
• subsection 40‑285(4);
• paragraph 40‑365(5)(b);
• section 775‑70;
• section 775‑75.
Repeal the note, substitute:
Note: The cost of a depreciating asset may be modified by one of these provisions:
• Subdivision 27‑B;
• subsection 40‑90(2);
• paragraph 40‑365(5)(a);
• section 775‑70;
• section 775‑75.
Repeal the section.
49
Section 104‑5 (after table item relating to CGT event K9) Insert:
K10 You make a forex realisation gain covered by item 1 of the table in subsection 775‑70(1) | when the forex realisation event happens | the forex realisation gain | ||
K11 You make a forex realisation loss covered by item 1 of the table in subsection 775‑75(1) | when the forex realisation event happens | the forex realisation loss | ||
Insert:
(1)
CGT event K10 happens if:
(a) you make a *forex realisation gain as a result of forex realisation event 2; and
(b) item 1 of the table in subsection 775‑70(1) applies.
(2) The time of the event is when the forex realisation event happens.
(3) You make a
capital gain equal to the *forex realisation gain.Note: You cannot make a capital loss under CGT event K10. However, if you make a forex realisation loss covered by item 1 of the table in subsection 775‑75(1), you will make a capital loss under CGT event K11 (see section 104‑265).
(1)
CGT event K11 happens if:
(a) you make a *forex realisation loss as a result of forex realisation event 2; and
(b) item 1 of the table in subsection 775‑75(1) applies.
(2) The time of the event is when the forex realisation event happens.
(3) You make a
capital loss equal to the *forex realisation loss.Note: You cannot make a capital gain under CGT event K11. However, if you make a forex realisation gain covered by item 1 of the table in subsection 775‑70(1), you will make a capital gain under CGT event K10 (see section 104‑260).
51
Section 110‑10 (after table item relating to CGT event K9) Insert:
K10 | You make a forex realisation gain covered by item 1 of the table in subsection 775‑70(1) | 104‑260 |
K11 | You make a forex realisation loss covered by item 1 of the table in subsection 775‑75(1) | 104‑265 |
Add:
25 | You make a forex realisation gain as a result of forex realisation event 4, and:
| total cost base and reduced cost base | section 775‑70 |
26 | You make a forex realisation loss as a result of forex realisation event 4, and:
| total cost base and reduced cost base | section 775‑75 |
27 | You acquire foreign currency as a result of forex realisation event 2 | first element of cost base and reduced cost base | section 775‑125 |
Omit “and 115‑45”, substitute “, 115‑45 and 775‑70”.
Add:
(i) *CGT event K10.
Add:
(6) This Division does not apply to:
(a) an option to the extent that the option binds the grantor to *dispose of *foreign currency; or
(b) an option to the extent that the option binds the grantor to *acquire *foreign currency.
56
Section 136‑10 (after table item relating to CGT event K8) Insert:
K10 | You make a forex realisation gain covered by item 1 of the table in subsection 775‑70(1) | the CGT asset mentioned in that item | 1 to 9 |
K11 | You make a forex realisation loss covered by item 1 of the table in subsection 775‑75(1) | the CGT asset mentioned in that item | 1 to 9 |
Repeal the section.
58
After Part 4‑5 (heading) (before the link note) Insert:
[The next Division is Division 775]
Guide to Division 775
775‑A Objects of this Division
775‑B Realisation of forex gains or losses
775‑C Roll‑over relief for facility agreements
775‑D Qualifying forex accounts that pass the limited balance test
775‑E Retranslation for qualifying forex accounts
Your assessable income includes a forex realisation gain you make as a result of a forex realisation event.
You can deduct a forex realisation loss that you make as a result of a forex realisation event.
There are 5 main types of forex realisation events:
(a) forex realisation event 1 happens if you dispose of foreign currency, or a right to receive foreign currency, to another entity;
(b) forex realisation event 2 happens if you cease to have a right to receive foreign currency (otherwise than because you disposed of the right to another entity);
(c) forex realisation event 3 happens if you cease to have an obligation to receive foreign currency;
(d) forex realisation event 4 happens if you cease to have an obligation to pay foreign currency;
(e) forex realisation event 5 happens if you cease to have a right to pay foreign currency.
There are special rules for certain short‑term forex realisation gains and losses.
You may choose roll‑over relief for certain facility agreements.
You may elect to receive concessional tax treatment for a qualifying forex account that passes the limited balance test.
You may choose retranslation for a qualifying forex account.
775‑10 Objects of this Division
The objects of this Division are as follows:
(a) to recognise *foreign currency gains and losses for income tax purposes;
(b) to quantify those gains and losses by reference to the change in the Australian dollar value of rights and obligations;
(c) to treat certain foreign currency denominated financing facilities that are the economic equivalent of a loan as if the relevant facility were a loan;
(d) to reduce compliance costs by not requiring the recognition of certain low‑value foreign currency gains and losses that involve substantial calculations.
775‑15 Forex realisation gains are assessable
775‑20 Certain forex realisation gains are exempt income
775‑25 Certain forex realisation gains are non‑assessable non‑exempt income
775‑30 Forex realisation losses are deductible
775‑35 Certain forex realisation losses are disregarded
775‑40 Disposal of foreign currency or right to receive foreign currency—forex realisation event 1
775‑45 Ceasing to have a right to receive foreign currency—forex realisation event 2
775‑50 Ceasing to have an obligation to receive foreign currency—forex realisation event 3
775‑55 Ceasing to have an obligation to pay foreign currency—forex realisation event 4
775‑60 Ceasing to have a right to pay foreign currency—forex realisation event 5
775‑65 Only one forex realisation event to be counted
775‑70 Tax consequences of certain short‑term forex realisation gains
775‑75 Tax consequences of certain short‑term forex realisation losses
775‑80 You may choose not to have sections 775‑70 and 775‑75 apply to you
775‑85 Forex cost base of a right to receive foreign currency
775‑90 Forex entitlement base of a right to pay foreign currency
775‑95 Proceeds of assuming an obligation to pay foreign currency
775‑100 Net costs of assuming an obligation to receive foreign currency
775‑105 Currency exchange rate effect
775‑110 Constructive receipts and payments
775‑115 Economic set‑off to be treated as legal set‑off
775‑120 Non‑arm’s length transactions
775‑125 CGT consequences of the acquisition of foreign currency as a result of forex realisation event 2 or 3
775‑130 Certain deductions not allowable
775‑135 Right to receive or pay foreign currency
775‑140 Obligation to pay or receive foreign currency
775‑145 Application of forex realisation events to currency and fungible rights and obligations
775‑150 Transitional election
775‑155 Applicable commencement date
775‑160 Exception—event happens before the applicable commencement date
775‑165 Exception—currency or right acquired, or obligation incurred, before the applicable commencement date
775‑170 Exemption for ADIs and non‑ADI financial institutions
775‑175 Application to things happening before commencement
Basic rule
(1) Your assessable income for an income year includes a *forex realisation gain you make as a result of a *forex realisation event that happens during that year.
Exceptions
(2) However, your assessable income does not include a *forex realisation gain to the extent that it:
(a) is a gain of a private or domestic nature; and
(b) is not covered by an item of the table:
1 | forex realisation event 1 | *foreign currency or a right, or a part of a right, to receive foreign currency | a gain that would result from the occurrence of a *realisation event in relation to the foreign currency, or to the right, or the part of the right, would, apart from this Division, be taken into account under Part 3‑1 or 3‑3 |
2 | forex realisation event 2 | a right, or a part of a right, created or acquired in return for the occurrence of a *realisation event in relation to a *CGT asset you own, where subparagraph 775‑45(1)(b)(iv) applies | a gain or loss that would result from the occurrence of the realisation event in relation to the CGT asset would be taken into account for the purposes of Part 3‑1 or 3‑3 |
3 | forex realisation event 4 | an obligation, or a part of an obligation, you incurred in return for the acquisition of a *CGT asset | a gain or loss that would result from the occurrence of a *realisation event in relation to the CGT asset would be taken into account for the purposes of Part 3‑1 or 3‑3 |
Note: Parts 3‑1 and 3‑3 deal with capital gains and losses.
(3) Section 775‑70 provides for additional exceptions.
Note: Section 775‑70 is about the tax consequences of certain short‑term forex realisation gains.
No double taxation
(4) To the extent that a *forex realisation gain would be included in your assessable income under this section and another provision of this Act, the gain is only included in your assessable income under this section.
A *forex realisation gain you make is exempt income to the extent that, if it had been a *forex realisation loss, it would have been made in gaining or producing exempt income.
A *forex realisation gain you make is non‑assessable non‑exempt income to the extent that, if it had been a *forex realisation loss, it would have been made in gaining or producing non‑assessable non‑exempt income.
Basic rule
(1) You can deduct from your assessable income for an income year a *forex realisation loss that you make as a result of a *forex realisation event that happens during that year.
Exceptions
(2) However, you cannot deduct a *forex realisation loss under this section to the extent that it:
(a) is a loss of a private or domestic nature; and
(b) is not covered by an item of the table:
1 | forex realisation event 2 | a right, or a part of a right, created or acquired in return for the occurrence of a *realisation event in relation to a *CGT asset you own, where subparagraph 775‑45(1)(b)(iv) applies | a gain or loss that would result from the occurrence of the realisation event in relation to the CGT asset would be taken into account for the purposes of Part 3‑1 or 3‑3 |
2 | forex realisation event 4 | an obligation, or a part of an obligation, you incurred in return for the acquisition of a *CGT asset | a gain or loss that would result from the occurrence of a *realisation event in relation to the CGT asset would be taken into account for the purposes of Part 3‑1 or 3‑3 |
Note: Parts 3‑1 and 3‑3 deal with capital gains and losses.
(3) Section 775‑75 provides for additional exceptions.
Note: Section 775‑75 is about the tax consequences of certain short‑term forex realisation losses.
No double deductions
(4) To the extent that this section and another provision of this Act would allow you a deduction for a *forex realisation loss, you can only deduct the loss under this section.
(1) A *forex realisation loss you make as a result of forex realisation event 1, 2 or 5 is disregarded to the extent that it is made in gaining or producing exempt income.
(2) A *forex realisation loss you make as a result of forex realisation event 3, 4 or 6 is disregarded to the extent that:
(a) it is made in gaining or producing exempt income or non‑assessable non‑exempt income; and
(b) the obligation, or the part of the obligation, does not give rise to a deduction.
Forex realisation event 1
(1)
Forex realisation event 1 is *CGT event A1 that happens if you dispose of:
(a) *foreign currency; or
(b) a right, or a part of a right, to receive foreign currency.
Note: For extended meaning of
right to receive foreign currency , see section 775‑135.
Disposal
(2) For the purposes of this section, use subsection 104‑10(2) to work out whether you have disposed of:
(a) *foreign currency; or
(b) a right, or a part of a right, to receive foreign currency.
Note: Under subsection 104‑10(2), a disposal requires a change of ownership.
Time of event
(3) For the purposes of this section, subsection 104‑10(3) is modified so that the time of the event is when:
(a) the *foreign currency is disposed of; or
(b) the right, or the part of the right, is disposed of.
Forex realisation gain
(4) You make a
forex realisation gain if:
(a) you make a *capital gain from the event; and
(b) some or all of the capital gain is attributable to a *currency exchange rate effect.
The amount of the
forex realisation gain is so much of the capital gain as is attributable to a currency exchange rate effect.Note: For
currency exchange rate effect , see section 775‑105.
(5) For the purposes of paragraph (4)(a), Part 3‑1 is modified so that section 118‑20 is disregarded in working out the *capital gain.
Note: Section 118‑20 deals with reducing capital gains if an amount is otherwise assessable.
Forex realisation loss
(6) You make a
forex realisation loss if:
(a) you make a *capital loss from the event; and
(b) some or all of the capital loss is attributable to a *currency exchange rate effect.
The amount of the
forex realisation loss is so much of the capital loss as is attributable to a currency exchange rate effect.Note: For
currency exchange rate effect , see section 775‑105.
No indexation of cost base
(7) For the purposes of this section, disregard Division 114.
Note: Division 114 deals with indexation of the cost base.
Foreign currency hedging gains and losses
(8) For the purposes of this section, disregard section 118‑55.
Note: Section 118‑55 deals with foreign currency hedging gains and losses.
Capital proceeds
(9) For the purposes of this section, if the *capital proceeds from the event are more or less than the *market value of:
(a) the *foreign currency; or
(b) the right, or the part of the right;
the capital proceeds from the event are taken to be the market value. (The market value is worked out as at the time of the event.)
Forex realisation event 2
(1)
Forex realisation event 2 happens if:
(a) you cease to have a right, or a part of a right, to receive *foreign currency; and
(b) the right, or the part of the right, is one of the following:
(i) a right, or a part of a right, to receive, or that represents, *ordinary income or *statutory income (other than statutory income that is assessable under this Division or Division 102);
(ii) a right, or a part of a right, created or acquired in return for your ceasing to *hold a *depreciating asset;
(iii) a right, or a part of a right, created or acquired in return for your paying, or agreeing to pay, an amount of Australian currency or foreign currency;
(iv) a right, or a part of a right, created or acquired in return for the occurrence of a *realisation event in relation to a *CGT asset you own, and none of subparagraphs (i), (ii) and (iii) applies; and
(c) you did not cease to have the right, or the part of the right, because you disposed of the right or the part of the right (within the meaning of section 775‑40).
Note 1: Disposals are dealt with by section 775‑40 (forex realisation event 1).
Note 2: For extended meaning of
right to receive foreign currency , see section 775‑135.
Time of event
(2) The time of the event is when you cease to have the right or the part of the right.
Forex realisation gain
(3) You make a
forex realisation gain if:
(a) the amount you receive in respect of the event happening exceeds the *forex cost base of the right or the part of the right (the forex cost base is worked out as at the tax recognition time); and
(b) some or all of the excess is attributable to a *currency exchange rate effect.
The amount of the
forex realisation gain is so much of the excess as is attributable to a currency exchange rate effect.Note 1: For
forex cost base , see section 775‑85.Note 2: For
tax recognition time , see subsection (7).Note 3: For
currency exchange rate effect , see section 775‑105.
Forex realisation loss
(4) You make a
forex realisation loss if:
(a) the amount you receive in respect of the event happening falls short of the *forex cost base of the right or the part of the right (the forex cost base is worked out as at the tax recognition time); and
(b) some or all of the shortfall is attributable to a *currency exchange rate effect.
The amount of the
forex realisation loss is so much of the shortfall as is attributable to a currency exchange rate effect.Note 1: For
forex cost base , see section 775‑85.Note 2: For
tax recognition time , see subsection (7).Note 3: For
currency exchange rate effect , see section 775‑105.
(5) You make a
forex realisation loss if:
(a) the event happens because an option to buy *foreign currency expires without having been exercised, or is cancelled, released or abandoned; and
(b) you were capable of exercising the option immediately before the event happened.
The amount of the
forex realisation loss is the amount you paid in return for the grant or acquisition of the option.
Non‑cash benefit
(6) The amount you receive in respect of the event happening can include a *non‑cash benefit. Use the *market value of the benefit to work out the amount you receive.
Tax recognition time
(7) For the purposes of this section, the
tax recognition time is worked out using the table:
1 | a right, or a part of a right, to receive, or that represents, *ordinary income or *statutory income (other than statutory income that is assessable under this Division or Division 102) |
|
2 | a right, or a part of a right, created or acquired in return for your ceasing to *hold a *depreciating asset | when you stop holding the asset. |
3 | a right, or a part of a right, referred to in subsection 775‑165(3) (which deals with extensions of loans) | the extension time referred to in that subsection. |
4 | a right, or a part of a right, created or acquired in return for your paying, or agreeing to pay, an amount of Australian currency, where item 3 does not apply | when the amount is paid. |
5 | a right, or a part of a right, created or acquired in return for your paying, or agreeing to pay, an amount of *foreign currency, where item 3 does not apply | when the amount is paid. |
6 | a right, or a part of a right, created in return for the occurrence of a *realisation event in relation to a *CGT asset you own, and none of the above items apply | when the realisation event occurs. |
Note: Subsection 775‑260(1) modifies the tax recognition time if forex realisation event 2 happens in relation to a qualifying forex account that has ceased to pass the limited balance test.
Forex realisation event 3
(1)
Forex realisation event 3 happens if:
(a) you cease to have an obligation, or a part of an obligation, to receive *foreign currency; and
(b) the obligation, or the part of the obligation, is one of the following:
(i) an obligation, or a part of the obligation, incurred in return for the creation or acquisition of a right to pay foreign currency;
(ii) an obligation, or a part of the obligation, incurred in return for the creation or acquisition of a right to pay Australian currency.
Note 1: For extended meaning of
obligation to receive foreign currency , see section 775‑140.Note 2: For extended meaning of
right to pay foreign currency , see section 775‑135.
Time of event
(2) The time of the event is when you cease to have the obligation or the part of the obligation.
Forex realisation gain
(3) You make a
forex realisation gain if:
(a) the amount you receive in respect of the event happening exceeds the net costs of assuming the obligation or the part of the obligation (the net costs are worked out as at the tax recognition time); and
(b) some or all of the excess is attributable to a *currency exchange rate effect.
The amount of the
forex realisation gain is so much of the excess as is attributable to a currency exchange rate effect.Note 1: For
net costs of assuming the obligation , see section 775‑100.Note 2: For
tax recognition time , see subsection (7).Note 3: For
currency exchange rate effect , see section 775‑105.
(4) You make a
forex realisation gain if:
(a) the event happens because an option to sell *foreign currency expires without having been exercised, or is cancelled, released or abandoned; and
(b) if the option had been exercised immediately before the event, you would have been obliged to buy the foreign currency.
The amount of the
forex realisation gain is the amount you received in return for granting or assuming obligations under the option.
Forex realisation loss
(5) You make a
forex realisation loss if:
(a) the amount you receive in respect of the event happening falls short of the net costs of assuming the obligation or the part of the obligation (the net costs are worked out as at the tax recognition time); and
(b) some or all of the shortfall is attributable to a *currency exchange rate effect.
The amount of the
forex realisation loss is so much of the shortfall as is attributable to a currency exchange rate effect.Note 1: For
net costs of assuming the obligation , see section 775‑100.Note 2: For
tax recognition time , see subsection (7).Note 3: For
currency exchange rate effect , see section 775‑105.
Non‑cash benefit
(6) The amount you receive in respect of the event happening can include a *non‑cash benefit. Use the *market value of the benefit to work out the amount you receive.
Tax recognition time
(7) For the purposes of this section, the
tax recognition time is the time when you received an amount in respect of the event happening.
Right to pay Australian currency
(8) To avoid doubt, for the purposes of this section, a
right to pay Australian currency includes a right to pay Australian currency, where the right is subject to a contingency.
Forex realisation event 4
(1)
Forex realisation event 4 happens if:
(a) you cease to have an obligation, or a part of an obligation, to pay *foreign currency; and
(b) any of the following applies:
(i) the obligation, or the part of the obligation, is an expense or outgoing that you deduct;
(ii) the obligation, or the part of the obligation, is an element in the calculation of a net amount included in your assessable income (other than under this Division or Division 102 of this Act or Division 5 or 6 of Part III of the
Income Tax Assessment Act 1936 );(iii) the obligation, or the part of the obligation, is an element in the calculation of a net amount that is deductible (other than under Division 5 of Part III of the
Income Tax Assessment Act 1936 );(iv) you incurred the obligation, or the part of the obligation, in return for the acquisition of a *CGT asset;
(v) you incurred the obligation, or the part of the obligation, as the second, third, fourth or fifth element of the *cost base of a CGT asset;
(vi) you incurred the obligation, or the part of the obligation, in return for your starting to hold a *depreciating asset, and you deduct an amount under Division 40 or 328 for the depreciating asset;
(vii) you incurred the obligation, or the part of the obligation, as the second element of the *cost of a depreciating asset, and you deduct an amount under Division 40 or 328 for the depreciating asset;
(viii) you incurred the obligation, or the part of the obligation, as a *project amount;
(ix) you incurred the obligation, or the part of the obligation, in return for receiving an amount of Australian currency or foreign currency;
(x) you incurred the obligation, or the part of the obligation, in return for the creation or acquisition of a right to receive an amount of Australian currency or foreign currency.
Note: For extended meaning of
obligation to pay foreign currency , see section 775‑140.
Time of event
(2) The time of the event is when you cease to have the obligation or the part of the obligation.
Forex realisation gain
(3) You make a
forex realisation gain if:
(a) the amount you paid in respect of the event happening falls short of the proceeds of assuming the obligation or the part of the obligation (the proceeds are worked out as at the tax recognition time); and
(b) some or all of the shortfall is attributable to a *currency exchange rate effect.
The amount of the
forex realisation gain is so much of the shortfall as is attributable to a currency exchange rate effect.Note 1: For
proceeds of assuming the obligation , see section 775‑95.Note 2: For
tax recognition time , see subsection (7).Note 3: For
currency exchange rate effect , see section 775‑105.
(4) You make a
forex realisation gain if:
(a) the event happens because an option to sell *foreign currency expires without having been exercised, or is cancelled, released or abandoned; and
(b) if the option had been exercised immediately before the event, you would have been obliged to sell the foreign currency.
The amount of the
forex realisation gain is the amount you received in return for granting or assuming obligations under the option.
Forex realisation loss
(5) You make a
forex realisation loss if:
(a) the amount you paid in respect of the event happening exceeds the proceeds of assuming the obligation or the part of the obligation (the proceeds are worked out as at the tax recognition time); and
(b) some or all of the excess is attributable to a *currency exchange rate effect.
The amount of the
forex realisation loss is so much of the excess as is attributable to a currency exchange rate effect.Note 1: For
proceeds of assuming the obligation , see section 775‑95.Note 2: For
tax recognition time , see subsection (7).Note 3: For
currency exchange rate effect , see section 775‑105.
Non‑cash benefit
(6) The amount you paid in respect of the event happening can include a *non‑cash benefit. Use the *market value of the benefit to work out the amount you paid.
Tax recognition time
(7) For the purposes of this section, the
tax recognition time is worked out using the table:
1 |
| the time when the expense or outgoing became deductible. |
2 |
| the time when the item becomes part of your trading stock on hand. |
3 | the obligation, or the part of the obligation, is an
element in the calculation of a net amount included in your assessable income
(other than under this Division or Division 102 of this Act or Division 5
or 6 of Part III of the | the time of the determination of the exchange rate used to translate the element for the purpose of calculating the net amount. |
4 | the obligation, or the part of the obligation, is an
element in the calculation of a net amount that is deductible (other than
under Division 5 of Part III of the | the time of the determination of the exchange rate used to translate the element for the purpose of calculating the net amount. |
5 |
|
|
6 | you incurred the obligation, or the part of the obligation, as a *project amount | the first time when any part of the amount became deductible. |
7 | the obligation, or the part of the obligation, is referred to in subsection 775‑165(5) (which deals with extension of loans) | the extension time referred to in that subsection. |
8 | you incurred the obligation, or the part of the obligation, in return for:
where item 7 does not apply | the time when you received the currency. |
9 |
(b) none of the above items apply | the time when you acquired the CGT asset (worked out under Division 109). |
10 |
(b) none of the above items apply | the time of the transaction under which you incurred the obligation. |
Note 1: Foreign currency is a CGT asset. If you acquire foreign currency as the borrower under a loan, item 8 will apply to your obligation to repay the foreign currency borrowed under the loan.
Note 2: If you have made a choice for roll‑over relief for a facility agreement, and forex realisation event 7 (material variation of a facility agreement) happens, subsection 775‑220(6) modifies the tax recognition time for an obligation under a security that was in existence under the agreement at the time of that event.
Note 3: Subsection 775‑260(2) modifies the tax recognition time if forex realisation event 4 happens in relation to a qualifying forex account that has ceased to pass the limited balance test.
Note 4: If you have made a choice for roll‑over relief for a facility agreement, a forex realisation gain or forex realisation loss you make under the agreement as a result of forex realisation event 4 is disregarded—see section 775‑200.
Forex realisation event 5
(1)
Forex realisation event 5 happens if:
(a) you cease to have a right, or a part of a right, to pay *foreign currency; and
(b) the right, or the part of the right, is one of the following:
(i) a right, or a part of a right, created or acquired in return for the assumption of an obligation to pay foreign currency;
(ii) a right, or a part of a right, created or acquired in return for the assumption of an obligation to pay Australian currency.
Note 1: For extended meaning of
right to pay foreign currency , see section 775‑135.Note 2: For extended meaning of
obligation to pay foreign currency , see section 775‑140.
Time of event
(2) The time of the event is when you cease to have the right or the part of the right.
Forex realisation gain
(3) You make a
forex realisation gain if:
(a) the amount you pay in respect of the event happening falls short of the *forex entitlement base of the right or the part of the right (the forex entitlement base is worked out as at the tax recognition time); and
(b) some or all of the shortfall is attributable to a *currency exchange rate effect.
The amount of the
forex realisation gain is so much of the shortfall as is attributable to a currency exchange rate effect.Note 1: For
forex entitlement base , see section 775‑90.Note 2: For
tax recognition time , see subsection (7).Note 3: For
currency exchange rate effect , see section 775‑105.
Forex realisation loss
(4) You make a
forex realisation loss if:
(a) the amount you pay in respect of the event happening exceeds the *forex entitlement base of the right or the part of the right (the forex entitlement base is worked out as at the tax recognition time); and
(b) some or all of the excess is attributable to a *currency exchange rate effect.
The amount of the
forex realisation loss is so much of the excess as is attributable to a currency exchange rate effect.Note 1: For
forex entitlement base , see section 775‑90.Note 2: For
tax recognition time , see subsection (7).Note 3: For
currency exchange rate effect , see section 775‑105.
(5) You make a
forex realisation loss if:
(a) the event happens because an option to sell *foreign currency expires without having been exercised, or is cancelled, released or abandoned; and
(b) you were capable of exercising the option immediately before the event happened.
The amount of the
forex realisation loss is the amount you paid in return for the grant or acquisition of the option.
Non‑cash benefit
(6) The amount you pay in respect of the event happening can include a *non‑cash benefit. Use the *market value of the benefit to work out the amount you pay.
Tax recognition time
(7) For the purposes of this section, the
tax recognition time is the time when you pay an amount in respect of the event happening.
Obligation to pay Australian currency
(8) To avoid doubt, for the purposes of this section, an
obligation to pay Australian currency includes an obligation to pay Australian currency, where the obligation is subject to a contingency.
Option to buy foreign currency
(1) The following table applies to an option to buy a particular *foreign currency if the exercise price is payable in another foreign currency:
1 | the entity who is capable of exercising the option | (a) forex realisation event 1; (b) forex realisation event 4 | ignore forex realisation event 4. |
2 | the entity who is capable of exercising the option | (a) forex realisation event 2; (b) forex realisation event 4 | ignore forex realisation event 4. |
3 | the entity who granted the option | (a) forex realisation event 3; (b) forex realisation event 4 | ignore forex realisation event 3. |
Option to sell foreign currency
(2) The following table applies to an option to sell a particular *foreign currency if the exercise price is payable in another foreign currency:
1 | the entity who is capable of exercising the option | (a) forex realisation event 3; (b) forex realisation event 5 | ignore forex realisation event 3. |
2 | the entity who granted the option | (a) forex realisation event 3; (b) forex realisation event 4 | ignore forex realisation event 3. |
Forward contracts
(3) The following table applies to a contract to buy a particular *foreign currency in return for another foreign currency:
1 | (a) forex realisation event 1; (b) forex realisation event 4 | ignore forex realisation event 4. |
2 | (a) forex realisation event 2; (b) forex realisation event 4 | ignore forex realisation event 4. |
Residual rule
(4) If:
(a) 2 or more of forex realisation events 1, 2, 3, 4 and 5 happen to you at the same time in relation to the same rights and/or obligations; and
(b) none of the above subsections applies;
apply the forex realisation event that is most appropriate, and ignore the remaining event or events.
(1) The following table has effect unless you have made a choice under section 775‑80:
1 | you make a *forex realisation gain as a result of forex realisation event 2, and:
|
(b) CGT event K10 happens. |
2 | you make a *forex realisation gain as a result of forex realisation event 4, and:
|
|
3 | you make a *forex realisation gain as a result of forex realisation event 4, and: | |
|
(b) if:
(c) if:
| |
4 | you make a *forex realisation gain as a result of forex realisation event 4, and:
|
|
Additional result where forex realisation gain exceeds cost etc.
(2) The following table has effect:
1 | item 3 of the table in subsection (1) applies in relation to a *depreciating asset |
| the excess is included in your assessable income. |
2 | item 3 of the table in subsection (1) applies in relation to a *depreciating asset |
| the excess is included in your assessable income. |
3 | item 3 of the table in subsection (1) applies in relation to a *depreciating asset |
| the excess is included in your assessable income. |
4 | item 4 of the table in subsection (1) applies in relation to a project amount | the forex realisation gain exceeds the pool value of the project pool for the income year in which you incurred the project amount | the excess is included in your assessable income. |
(3) To the extent that a *forex realisation gain:
(a) would have been included in your assessable income under section 775‑15 if this section had not been enacted; and
(b) would, apart from this subsection, be included in your assessable income under another provision of this Act;
the gain is not included in your assessable income under that other provision.
(1) The following table has effect unless you have made a choice under section 775‑80:
1 | you make a *forex realisation loss as a result of forex realisation event 2, and:
|
(b) CGT event K11 happens. |
2 | you make a *forex realisation loss as a result of forex realisation event 4, and:
|
|
3 | you make a *forex realisation loss as a result of forex realisation event 4, and:
|
(b) if:
(c) if:
|
4 | you make a *forex realisation loss as a result of forex realisation event 4, and:
|
|
(2) To the extent that:
(a) section 775‑30 would have allowed you a deduction for a *forex realisation loss if this section had not been enacted; and
(b) apart from this subsection, another provision of this Act would allow you a deduction for the loss;
you cannot deduct the loss under that other provision.
(1) You may choose not to have sections 775‑70 and 775‑75 apply to you.
(2) A choice must be in writing.
(3) A choice must be made:
(a) if you were in existence at the start of the applicable commencement date:
(i) within 90 days after the applicable commencement date; or
(ii) within 30 days after the commencement of this subsection; or
(b) if you came into existence within 90 days after the start of the applicable commencement date:
(i) within 90 days after you came into existence; or
(ii) within 30 days after the commencement of this subsection; or
(c) if the Commissioner allows a longer period—within that longer period.
Note: For
applicable commencement date , see section 775‑155.(4) A choice has effect from the start of the applicable commencement date.
(5) A choice may not be revoked.
The
forex cost base of a right, or a part of a right, to receive *foreign currency is the total of:
(a) the money you:
(i) paid; or
(ii) are required to pay; or
(iii) would be required to pay in the event of the exercise of an option;
in respect of acquiring the right or part of the right; and
(b) the *market value of any *non‑cash benefit you:
(i) provided; or
(ii) are required to provide; or
(iii) would be required to provide in the event of the exercise of an option;
in respect of acquiring the right or part of the right;
reduced by any amounts that are deductible under a provision of this Act other than this Division.
The
forex entitlement base of a right, or a part of a right, to pay *foreign currency is the total of:
(a) the money you:
(i) are entitled to receive; or
(ii) would be entitled to receive in the event of the exercise of an option;
in respect of the discharge or satisfaction of the right or the part of the right; and
(b) the *market value of any *non‑cash benefit you:
(i) are entitled to acquire or obtain; or
(ii) would be entitled to acquire or obtain in the event of the exercise of an option;
in respect of the discharge or satisfaction of the right or the part of the right;
reduced by:
(c) any amounts that you paid to acquire the right or the part of the right, where the amounts are not deductible under a provision of this Act other than this Division; and
(d) the market value of any non‑cash benefit that you provided to acquire the right or the part of the right, where the market value is not deductible under a provision of this Act other than this Division.
For the purposes of this Division, the
proceeds of assuming an obligation, or a part of an obligation, to pay *foreign currency are the total of:
(a) the money you:
(i) received; or
(ii) are entitled to receive; or
(iii) would be entitled to receive in the event of the exercise of an option;
in return for incurring the obligation or the part of the obligation; and
(b) the *market value of any *non‑cash benefit you:
(i) acquired or obtained; or
(ii) are entitled to acquire or obtain; or
(iii) would be entitled to acquire or obtain in the event of the exercise of an option;
in return for incurring the obligation or the part of the obligation;
reduced by any amounts that are included in assessable income under a provision of this Act other than this Division.
(1) For the purposes of this Division, the
net costs of assuming an obligation, or a part of an obligation, to receive *foreign currency are the total of:
(a) the money you:
(i) are required to pay; or
(ii) would be required to pay in the event of the exercise of an option;
in respect of the fulfilment of the obligation or the part of the obligation; and
(b) the *market value of any *non‑cash benefit you:
(i) are required to provide; or
(ii) would be required to provide in the event of the exercise of an option;
in respect of the fulfilment of the obligation or the part of the obligation;
reduced by the amount worked out under subsection (2).
(2) The amount worked out under this subsection is the total of:
(a) the money you:
(i) received; or
(ii) are entitled to receive;
because you incurred the obligation or the part of the obligation; and
(b) the *market value of any *non‑cash benefit you:
(i) received or obtained; or
(ii) are entitled to receive or obtain;
because you incurred the obligation or the part of the obligation;
reduced by any amounts that are included in assessable income under a provision of this Act other than this Division.
(3) To avoid doubt, paragraphs (2)(a) and (b) do not apply to money or a *non‑cash benefit that you:
(a) received or obtained; or
(b) are entitled to receive or obtain;
because of the fulfilment of the obligation or the part of the obligation.
(1) A
currency exchange rate effect is:
(a) any currency exchange rate fluctuations; or
(b) a difference between:
(i) an expressly or implicitly agreed currency exchange rate for a future date or time; and
(ii) the applicable currency exchange rate at that date or time.
(2) To work out whether there is a currency exchange rate effect and (if so), the extent of that effect, use whichever of the following translation rules is applicable to you:
(a) the translation rules in section 960‑50 (the standard rules);
(b) the translation rules in section 960‑80 (the functional currency rules).
For the purposes of this Subdivision, if an entity (the
payer ) did not actually pay an amount to another entity (therecipient ), but the amount was applied or dealt with in any way on the recipient’s behalf or as the recipient directs (including by discharging all or a part of an obligation owed by the recipient), then:
(a) the payer is taken to have paid the amount as soon as it is applied or dealt with; and
(b) the recipient is taken to have received the amount as soon as it is applied or dealt with.
Note: The set‑off of an obligation to pay an amount against a right to receive an amount is an example of how this section would operate.
If the economic effect of an *arrangement is to provide for the set‑off, in whole or in part, of one or more amounts against one or more other amounts, this Subdivision applies as if:
(a) the parties to the arrangement had the respective rights and obligations that they would have had if the provision for economic set‑off were structured as a provision for legal set‑off of rights and obligations; and
(b) if the economic set‑off happens—the parties were taken, under section 775‑110, to have paid and received the respective amounts that they would have paid and received if the economic set‑off were structured as a legal set‑off of rights and obligations.
If:
(a) you and another entity did not deal with each other at arm’s length in connection with a transaction that is relevant to working out:
(i) whether you make a *forex realisation gain or a *forex realisation loss; or
(ii) the amount of any *forex realisation gain or a *forex realisation loss made by you; and
(b) apart from this section, a particular amount is more or less than it would have been if you and the other entity had been dealing with each other at arm’s length;
this Subdivision applies to you as if that amount were the amount it would have been if you and the other entity had been dealing with each other at arm’s length.
If you acquire *foreign currency as a result of forex realisation event 2 or 3:
(a) the first element of the foreign currency’s *cost base is replaced by the foreign currency’s *market value at the time you received the foreign currency; and
(b) the first element of the foreign currency’s *reduced cost base is replaced by the foreign currency’s market value at the time you received the foreign currency.
If:
(a) an amount is included in your assessable income under this Division; and
(b) if this Division had not been enacted, the amount would not have been included in your assessable income under any other provision of this Act (other than Division 102); and
(c) if this section had not been enacted, a deduction would be allowable to you under a provision listed in the table in subsection 51AAA(2) of the
Income Tax Assessment Act 1936 ; and(d) if the amount had not been included in your assessable income under this Division, the deduction would not be allowable;
the deduction is not allowable.
Extended meaning of right to receive foreign currency
(1) For the purposes of this Division, a
right to receive foreign currency includes a right to receive an amount calculated by reference to a currency exchange rate effect, even if that amount is not an amount of *foreign currency.(2) To avoid doubt, for the purposes of this Division, a
right to receive foreign currency includes a right to receive *foreign currency, where the right is subject to a contingency.
Extended meaning of right to pay foreign currency
(3) For the purposes of this Division, a
right to pay foreign currency includes a right to pay an amount calculated by reference to a currency exchange rate effect, even if that amount is not an amount of *foreign currency.(4) To avoid doubt, for the purposes of this Division, a
right to pay foreign currency includes a right to pay *foreign currency, where the right is subject to a contingency.
Extended meaning of obligation to pay foreign currency
(1) For the purposes of this Division, an
obligation to pay foreign currency includes an obligation to pay an amount calculated by reference to a currency exchange rate effect, even if that amount is not an amount of *foreign currency.(2) To avoid doubt, for the purposes of this Division, an
obligation to pay foreign currency includes an obligation to pay *foreign currency, where the obligation is subject to a contingency.
Extended meaning of obligation to receive foreign currency
(3) For the purposes of this Division, an
obligation to receive foreign currency includes an obligation to receive an amount calculated by reference to a currency exchange rate effect, even if that amount is not an amount of *foreign currency.(4) To avoid doubt, for the purposes of this Division, an
obligation to receive foreign currency includes an obligation to receive *foreign currency, where the obligation is subject to a contingency.
(1) Forex realisation event 1, 2 or 4 applies in relation to:
(a) *foreign currency; or
(b) a fungible right, or a part of a fungible right, to receive foreign currency; or
(c) a fungible obligation, or a part of a fungible obligation, to pay foreign currency;
on a first‑in first‑out basis.
(2) The regulations may provide that any or all of forex realisation events 1, 2 and 4 apply, or apply in specified circumstances, to:
(a) *foreign currency; or
(b) a fungible right, or a part of a fungible right, to receive foreign currency; or
(c) a fungible obligation, or a part of a fungible obligation, to pay foreign currency;
on a weighted average basis (despite subsection (1)).
(3) The circumstances that may be specified for the purposes of subsection (2) include the circumstance that you have made an election to use a weighted average basis.
(4) Subsection (3) does not limit subsection (2).
(i) reflect an appropriate prevailing exchange rate; and
(ii) take into account, as appropriate, commercial practices for the translation of foreign currency amounts into Australian dollars.
(1) For the purposes of this Act, an amount in a *foreign currency is to be translated into Australian currency.
Examples of an amount
(2) The following are examples of an amount:
(a) an amount of *ordinary income;
(b) an amount of an expense;
(c) an amount of an obligation;
(d) an amount of a liability;
(e) an amount of a receipt;
(f) an amount of a payment;
(g) an amount of consideration;
(h) a value.
(3) The amounts set out in paragraphs (2)(b) to (h) may be amounts on revenue account, capital account or otherwise.
Amounts that are elements in the calculation of other amounts
(4) In applying this section:
(a) first, translate any amounts that are elements in the calculation of other amounts (except *special accrual amounts); and
(b) then, calculate the other amounts.
Special accrual amounts
(5) In applying this section:
(a) calculate a *special accrual amount without translation; and
(b) then, translate the special accrual amount.
Special translation rules
(6) The table has effect:
1 | forex realisation event 4 happens when you cease to have an obligation, or a part of an obligation, to pay *foreign currency, and neither of subparagraphs 775‑55(1)(b)(ii) and (iii) applies | for the purposes of section 775‑55, the amount of the obligation, or the part of the obligation, at the tax recognition time (see subsection 775‑55(7)) is to be translated to Australian currency at the exchange rate applicable at that time. |
2 | cost of a *depreciating asset |
|
3 | value of an item of *trading stock on hand at the end of an income year, where you have elected to use its *cost | the value is to be translated to Australian currency at the exchange rate applicable at the time when the item became on hand. |
4 | value of an item of *trading stock on hand at the end of an income year, where you have elected to use: (a) its market selling value; or (b) its replacement value | the value is to be translated to Australian currency at the exchange rate applicable at the end of the income year. |
5 | a transaction or event that:
to the extent to which the amount or value is relevant for the purposes of Part 3‑1 or 3‑3 | the amount or value is to be translated, for the purposes of Part 3‑1 or 3‑3, to Australian currency at the exchange rate applicable at the time of the transaction or event. |
6 | an amount of *ordinary income |
|
7 | an amount of *statutory income (other than an amount included in assessable income under Division 102) |
|
8 | an amount that you deduct (other than under Division 40) |
|
9 | an amount that is relevant for the purposes of quantifying:
to the extent to which the amount is relevant for the purposes of Division 376 | the amount is to be translated to Australian currency at the average of the exchange rates applicable from time to time during the period that: (a) starts on the earliest day on which:
(b) ends when the film is *completed. |
10 | an amount that Division 12 of Part 2.5 in
Schedule 1 to the | the amount is to be translated to Australian currency at the exchange rate applicable at the time when the amount is required to be withheld under that Division. |
11 | an amount of a receipt or a payment, where none of the above items apply | the amount is to be translated to Australian currency at the exchange rate applicable at the time of the receipt or payment. |
(7) Subsection (6) has effect subject to any modifications made by the regulations. For this purpose,
modifications includes additions, omissions and substitutions.
Regulations about translation
(8) An entity must comply with the regulations (if any) in translating an amount into Australian currency.
Note: For example, the regulations could require the use of a particular translation method and require consistency in the use of the translation method.
(9) Regulations made for the purposes of subsection (8) may make provision in relation to a matter by applying, adopting or incorporating (with or without modifications) matter contained in any of the *accounting standards:
(a) as in force or existing at a particular time; or
(b) as in force or existing from time to time.
Operation of certain provisions unaffected
(10) This section does not affect the operation of the following provisions:
(a) section 775‑210 (notional loans under *facility agreements);
(b) Subdivision 960‑D (functional currency);
(c) subsection 974‑35(6) (valuation of financial benefits for the purposes of the debt/equity provisions);
(d) Part XI of the
Income Tax Assessment Act 1936 (about foreign investment funds and life assurance).
(1) Section 960‑50 applies to:
(a) a transaction, event or thing that:
(i) involves an amount in a *foreign currency; and
(ii) occurs on or after the applicable commencement date (within the meaning of Division 775); or
(b) a transaction, event or thing that:
(i) involves an amount in a foreign currency; and
(ii) occurs before the applicable commencement date (within the meaning of Division 775);
to the extent to which the transaction, event or thing is relevant for the purposes of Division 775; or
(c) an amount that Division 12 of Part 2‑5 in Schedule 1 to the
Taxation Administration Act 1953 requires to be withheld from a payment, if the time when the amount is required to be withheld occurs on or after 1 July 2003; or(d) a payment that Part 5‑30 in Schedule 1 to the
Taxation Administration Act 1953 requires to be reported, if the amount is paid on or after 1 July 2003.Note: For
applicable commencement date , see section 775‑155.
Exceptions
(2) Despite subsection (1), section 960‑50 does not apply to a transaction, event or thing that involves:
(a) an amount covered by subsection 775‑165(1); or
(b) a right, or a part of a right, covered by subsection 775‑165(2); or
(c) an obligation, or a part of an obligation, covered by subsection 775‑165(4).
Note: Subsections 775‑165(1), (2) and (4) are transitional provisions relating to forex realisation events.
(3) Despite subsection (1), section 960‑50 does not apply for the purposes of working out the assessable income, deductions or tax offsets of:
(a) an *ADI; or
(b) a *non‑ADI financial institution.
The net income of any of the following entities (or parts of entities) that keeps its accounts solely or predominantly in a particular foreign currency can be worked out in that currency, with the net amount being translated into Australian currency:
(a) an Australian resident who is required to prepare financial reports under section 292 of the
Corporations Act 2001 ;(b) a permanent establishment;
(c) an offshore banking unit;
(d) a controlled foreign company (CFC);
(e) a transferor trust.
Operative provisions 960‑59 Object of this Subdivision
960‑60 You may choose a functional currency
960‑65 Backdated startup choice
960‑70 What is the
applicable functional currency ?960‑75 What is a
transferor trust ?960‑80 Translation rules
960‑85 Special rule about translation—events that happened before the current choice took effect
960‑90 Withdrawal of choice
[This is the end of the Guide.]
The object of this Subdivision is, for the purposes of reducing compliance costs and reflecting commercial practice, to allow certain entities (or parts of entities) whose accounts are kept solely or predominantly in a particular *foreign currency (the
functional currency ) to calculate their net incomes by reference to the functional currency.
(1) The table has effect:
1 | an *Australian
resident who is required to prepare financial reports under section 292
of the | work out so much of your taxable income or tax loss as is not subject to a choice made by you under any of the other items of this table |
|
2 |
| work out the taxable income or tax loss derived from the activity or business carried on at or through the permanent establishment |
|
3 | an *offshore banking unit | work out your total assessable OB income (within the
meaning of Division 9A of Part III of the |
|
4 | an attributable taxpayer (within the meaning of Part X
of the | work out the *attributable income of the CFC |
|
5 | a *transferor trust | work out your attributable income (within the meaning of
Division 6AAA of Part III of the |
|
Note: The attributable income of a controlled foreign company is calculated separately for each attributable taxpayer—see section 381 of the
Income Tax Assessment Act 1936 .
(2) A choice must be in writing.
(3) A choice under item 1 of the table in subsection (1) continues in effect until:
(a) a withdrawal of the choice takes effect (see section 960‑90); or
(b) immediately after the end of the income year in which you cease to be subject to a requirement to prepare financial reports under section 292 of the
Corporations Act 2001 ;whichever happens first.
(4) A choice under item 2, 3, 4 or 5 of the table in subsection (1) continues in effect until a withdrawal of the choice takes effect (see section 960‑90).
(5) An *ADI or a *non‑ADI financial institution is not entitled to make a choice under this section.
The table has effect:
1 | you make a choice under item 1 of the table in subsection 960‑60(1) | (a) both:
(b) both:
|
2 | you make a choice under item 2 of the table in subsection 960‑60(1) | (a) both:
(b) both:
|
3 | you make a choice under item 3 of the table in subsection 960‑60(1) | (a) both:
(b) both:
|
4 | you make a choice under item 4 of the table in subsection 960‑60(1) | (a) both:
(b) both:
|
5 | you make a choice under item 5 of the table in subsection 960‑60(1) | you make the choice within 90 days after the beginning of an income year or within 30 days after the commencement of this section. |
Australian resident required to prepare financial reports under section 292 of the Corporations Act 2001
(1) If you make a choice under item 1 of the table in subsection 960‑60(1) with effect from the start of a particular income year, your
applicable functional currency for:
(a) that income year; and
(b) each later income year for which the choice is in effect;
is the sole or predominant *foreign currency in which you kept your accounts at the time when you made the choice.
Permanent establishment, offshore banking unit or transferor trust
(2) If you make a choice under item 2, 3 or 5 of the table in subsection 960‑60(1) in relation to a *permanent establishment, an *offshore banking unit or a *transferor trust with effect from the start of a particular income year, the
applicable functional currency of the establishment, unit or trust for:
(a) that income year; and
(b) each later income year for which the choice is in effect;
is the sole or predominant *foreign currency in which the establishment, unit or trust kept its accounts at the time when you made the choice.
Controlled foreign company
(3) If you make a choice under item 4 of the table in subsection 960‑60(1) in relation to a *controlled foreign company (CFC) with effect from the start of a particular statutory accounting period (within the meaning of Part X of the
Income Tax Assessment Act 1936 ), theapplicable functional currency of the CFC for:
(a) that statutory accounting period; and
(b) each later statutory accounting period for which the choice is in effect;
is the sole or predominant *foreign currency in which the CFC kept its accounts at the time when you made the choice.
Note: The attributable income of a controlled foreign company is calculated separately for each attributable taxpayer—see section 381 of the
Income Tax Assessment Act 1936 .
Accounts (4) For the purposes of this section,
accounts means:
(a) ledgers; and
(b) journals; and
(c) statements of financial performance; and
(d) profit and loss accounts; and
(e) balance‑sheets; and
(f) statements of financial position;
and includes statements, reports and notes attached to, or intended to be read with, any of the foregoing.
A
transferor trust is a trust where, having regard to all relevant circumstances, it would be reasonable to conclude that another entity is, or is likely to be, an attributable taxpayer in relation to the trust for the purposes of Division 6AAA of Part III of theIncome Tax Assessment Act 1936 .
(1) The table has effect:
1 |
|
|
2 | (a) you are:
|
|
3 | (a) you are an *offshore banking unit (OBU); and
|
|
4 |
|
|
5 | (a) you are a *transferor trust; and
|
|
Note: The attributable income of a controlled foreign company is calculated separately for each attributable taxpayer—see section 381 of the
Income Tax Assessment Act 1936 .
Examples of an amount
(2) The following are examples of an amount:
(a) an amount of *ordinary income;
(b) an amount of an expense;
(c) an amount of an obligation;
(d) an amount of a liability;
(e) an amount of a receipt;
(f) an amount of a payment;
(g) an amount of consideration;
(h) a value;
(i) a monetary limit or other amount set out in this Act or any other law of the Commonwealth.
(3) The amounts set out in paragraphs (2)(b) to (i) may be amounts on revenue account, capital account or otherwise.
Amounts that are elements in the calculation of other amounts
(4) In applying this section:
(a) first, translate any amounts that are elements in the calculation of other amounts (except *special accrual amounts); and
(b) then, calculate the other amounts.
Special accrual amounts
(5) In applying this section:
(a) calculate a *special accrual amount without translation and without applying the first rule set out in the relevant item of the table in subsection (1); and
(b) then, translate the special accrual amount to Australian currency for the purposes of applying the second rule set out in the relevant item of the table in subsection (1).
Special translation rules
(6) Subsection 960‑50(6) has effect, in relation to the translation of an amount into the *applicable functional currency, as if each reference in that subsection to Australian currency were a reference to the applicable functional currency.
Regulations about translation
(7) An entity must comply with the regulations (if any) in translating an amount into:
(a) the *applicable functional currency; or
(b) Australian currency.
Note: For example, the regulations could require the use of a particular translation method and require consistency in the use of the translation method.
(8) Regulations made for the purposes of subsection (7) may make provision in relation to a matter by applying, adopting or incorporating (with or without modifications) matter contained in any of the *accounting standards:
(a) as in force or existing at a particular time; or
(b) as in force or existing from time to time.
Australian resident required to prepare financial reports under section 292 of the Corporations Act 2001
(1) If:
(a) as the result of a choice (the
current choice ) made by you under item 1 of the table in subsection 960‑60(1), subsection 960‑80(1) requires that an amount be translated to the *applicable functional currency; and(b) the amount is attributable to an event that happened, or a state of affairs that came into existence, at a time (the
event time ) before the current choice took effect;the table has effect:
1 | at the event time, no previous choice made by you under item 1 of the table in subsection 960‑60(1) was in effect | the amount is to be translated first to Australian currency at the exchange rate applicable at the event time, and then to the *applicable functional currency at the exchange rate applicable when the current choice took effect. |
2 | at the event time, a previous choice made by you under item 1 of the table in subsection 960‑60(1) was in effect | the amount is to be translated first to the previous *applicable functional currency at the exchange rate applicable at the event time, and then to the current applicable functional currency at the exchange rate applicable when the current choice took effect. |
Permanent establishment, offshore banking unit, CFC or transferor trust
(2) If:
(a) as the result of a choice (the
current choice ) made by you under item 2, 3, 4 or 5 of the table in subsection 960‑60(1), subsection 960‑80(1) requires that an amount be translated to the *applicable functional currency; and(b) the amount is attributable to an event that happened, or a state of affairs that came into existence, at a time (the
event time ) before the current choice took effect;the table has effect:
1 | at the event time, no previous choice made by you under section 960‑60 in relation to the establishment, unit, CFC or trust was in effect | the amount is to be translated first to Australian currency at the exchange rate applicable at the event time, and then to the *applicable functional currency at the exchange rate applicable when the current choice took effect. |
2 | at the event time, a previous choice made by you under section 960‑60 in relation to the establishment, unit, CFC or trust was in effect | the amount is to be translated first to the previous *applicable functional currency at the exchange rate applicable at the event time, and then to the current applicable functional currency at the exchange rate applicable when the current choice took effect. |
(1) The table has effect if you have made a choice under section 960‑60:
1 |
| the income year in which you withdraw your choice. |
2 |
| the income year in which you withdraw your choice. |
3 | (a) you are an *offshore banking unit (OBU); and
| the income year in which you withdraw your choice. |
4 |
| the CFC’s statutory accounting period (within the meaning
of Part X of the |
5 | (a) you are a *transferor trust; and
| the income year in which you withdraw your choice. |
(2) A withdrawal must be in writing.
(3) Withdrawing a choice does not prevent you from making a fresh choice under section 960‑60.
Insert:
applicable functional currency has the meaning given by section 960‑70.
Insert:
currency exchange rate effect has the meaning given by section 775‑105.
Insert:
eligible security has the meaning given by section 775‑190.
Insert:
facility agreement has the meaning given by section 775‑185.
Insert:
forex cost base has the meaning given by section 775‑85.
Insert:
foreign currency means a currency other than Australian currency.
Insert:
forex entitlement base has the meaning given by section 775‑90.
Insert:
forex realisation event means any of the forex realisation events described in Division 775.
Insert:
forex realisation gain : for each *forex realisation event aforex realisation gain is worked out in the way described in the event.
Insert:
forex realisation loss : for each *forex realisation event aforex realisation loss is worked out in the way described in the event.
Insert:
offshore banking unit has the meaning given by section 128AE of theIncome Tax Assessment Act 1936 .
Insert:
non‑ADI financial institution has the meaning given by subsection 128A(1) of theIncome Tax Assessment Act 1936 .
Insert:
qualifying forex account means an account that:
(a) is denominated in a particular *foreign currency; and
(b) is:
(i) maintained in Australia, or in a foreign country, with an *ADI; or
(ii) maintained in a foreign country with a financial institution similar to an *ADI; and
(c) either:
(i) has the primary purpose of facilitating transactions; or
(ii) is a credit card account.
Insert:
special accrual amount means an amount that is included in assessable income, or an amount that is a deduction from assessable income, under any of the following:
(a) Division 42A in Schedule 2E of the
Income Tax Assessment Act 1936 ;(b) Division 240 of this Act;
(c) Division 16D of Part III of the
Income Tax Assessment Act 1936 ;(d) Division 16E of Part III of the
Income Tax Assessment Act 1936 .
Insert:
transferor trust has the meaning given by section 960‑75.
Repeal the section.
Repeal the section.
77
Transitional—Division 3B of Part III of the Income Tax Assessment Act 1936 (1) Despite the repeal of Division 3B of Part III of the
Income Tax Assessment Act 1936 by this Schedule, that Division continues to apply:
(a) in relation to an eligible contract entered into before the applicable commencement date (within the meaning of Division 775 of the
Income Tax Assessment Act 1997 ); or(b) for the purposes of working out the assessable income or allowable deductions of:
(i) an ADI or a non‑ADI financial institution (within the meaning of the
Income Tax Assessment Act 1997 ); or(ii) a securitisation vehicle (within the meaning of that Act); or
(iii) an entity that satisfies the requirements of subsection 820‑39(3) of that Act;
as if that repeal had not happened.
Note: For
applicable commencement date , see section 775‑155 of theIncome Tax Assessment Act 1997 .
(2) Despite the following amendments:
(a) the amendment of subsection 20‑30(2) of the
Income Tax Assessment Act 1997 by this Schedule;(b) the amendment of subsection 170(10) of the
Income Tax Assessment Act 1936 by this Schedule;subsection 20‑30(2) of the
Income Tax Assessment Act 1997 and subsection 170(10) of theIncome Tax Assessment Act 1936 continue to apply, in relation to the former Division 3B of Part III of theIncome Tax Assessment Act 1936 , as if those amendments had not been made.(3) Despite the amendments made by this Schedule that omit references to sections 82Y and 82Z of the
Income Tax Assessment Act 1936 from sections 15 and 16 of theFinancial Corporations (Transfer of Assets and Liabilities) Act 1993 , sections 15 and 16 of theFinancial Corporations (Transfer of Assets and Liabilities) Act 1993 continue to apply, in relation to the former sections 82Y and 82Z of theIncome Tax Assessment Act 1936 , as if those amendments had not been made.
78
Transitional—sections 20, 102AAX and 391 of the Income Tax Assessment Act 1936 and sections 103‑20 and 376‑60 of the Income Tax Assessment Act 1997 (1) Despite the repeals of sections 20, 102AAX and 391 of the
Income Tax Assessment Act 1936 and sections 103‑20 and 376‑60 of theIncome Tax Assessment Act 1997 by this Schedule, those sections continue to apply, in relation to a transaction, event or thing:
(a) that involves an amount in a foreign currency; and
(b) to which section 960‑50 of the
Income Tax Assessment Act 1997 does not apply;as if those repeals had not happened.
(2) Despite the following amendments:
(a) the amendment of section 102AAW of the
Income Tax Assessment Act 1936 by this Schedule;(b) the amendment of section 389 of the
Income Tax Assessment Act 1936 by this Schedule;sections 102AAW and 389 of the
Income Tax Assessment Act 1936 continue to apply, in relation to the former section 20 of theIncome Tax Assessment Act 1936 , as if those amendments had not been made.
79
Transitional—sections 12‑15 and 425‑30 in Schedule 1 to the Taxation Administration Act 1953 Despite the repeals of sections 12‑15 and 425‑30 in Schedule 1 to the
Taxation Administration Act 1953 by this Schedule, those sections continue to apply, in relation to an amount:
(a) that is in a foreign currency; and
(b) to which section 960‑50 of the
Income Tax Assessment Act 1997 does not apply;as if those repeals had not happened.
The
For all relevant information pertaining to application, saving
or transitional provisions
Act | Number and year | Date of Assent | Date of commencement | Application, saving or transitional provisions |
133, 2003 | 17 Dec 2003 | 17 Dec 2003 | ||
15, 2009 | 26 Mar 2009 | Schedule 1 (items 113, 114): | Sch. 1 (item 114) | |
75, 2010 | 28 June 2010 | Schedule 6 (item 19): 29 June 2010 | — |
(a) Subsection 2(1) (item 3) of theTax Laws Amendment (Taxation of Financial Arrangements) Act 2009 provides as follows:
(1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.
Schedule 1, Part 4 | Immediately
after the commencement of the | 17 December 2003 |
| |
Provision affected | How affected |
S. 4......................................... | rep. No. 75, 2010 |
Item 77................................... | am. No. 15, 2009 |
Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 (No. 15, 2009)
The amendments made by this Part apply on and after 17 December 2003.
0
0
0