Forex realisation event 3 occurs when you cease to have an obligation, or part of an obligation, to receive foreign currency if the obligation was assumed in return for the creation or acquisition of a right to pay either foreign currency or Australian currency, or is an obligation under an option to sell foreign currency.
An obligation to receive foreign currency includes an obligation to receive an amount of Australian currency that is calculated by reference to an exchange rate. The term 'obligation' includes an obligation that is contingent upon something happening.
The event happens when you cease to have the obligation - commonly when an obligation to receive foreign currency is satisfied by the actual receipt of that currency.
Broadly, you make a forex realisation gain to the extent that the value of the foreign currency bought exceeds the amounts expended to acquire it because of a currency exchange rate effect. Generally, the amounts expended to acquire the foreign currency are referred to as the net costs of assuming the obligation. In the case of an option issued by you that is not ultimately exercised, the gain is the amount you received for issuing the option.
For most taxpayers, the values of the foreign exchange at the relevant times will be measured in Australian dollars.
The net costs of assuming the obligation are, broadly speaking, any consideration you must provide to fulfil the obligation, less any consideration received for assuming the obligation that has not already been brought to account as assessable income.
The value of the consideration to be provided by you to fulfil the obligation is measured at the time you receive an amount in satisfaction of the obligation.
Broadly, you make a forex realisation loss to the extent that the value of the foreign currency bought is less than the amount expended to acquire it because of a currency exchange rate effect. The amounts expended (the net costs of assuming the obligation) are calculated as for forex realisation gains.
A currency exchange rate effect occurs when either currency exchange rates fluctuate, or when an agreed exchange rate differs from an actual exchange rate.
For more information, visit Foreign exchange (forex) or refer to:
- Forex realisation event 1
The first of the specified forex events by which foreign exchange gains and losses are brought to account due to disposal between entities.
- Forex realisation event 2
The second of the specified forex events by which forex gains and losses are brought to account due to the cessation of rights to receive.
- Forex realisation event 4
The fourth of the specified forex events by which forex gains and losses are brought to account due to the cessation of obligations to pay.
- Forex realisation event 5
The fifth of the specified forex events by which forex gains and losses are brought to account due to cessation of rights to pay.
Last Modified: Tuesday, 21 May 2013