• General information on average rates

    Foreign exchange (forex) regulations have been made which may allow for the translation of foreign currency amounts into Australian currency or an applicable functional currency using:

    • average rates
    • daily rates, or
    • rates consistent with the rates used in the preparation of an audited financial report.

    Average rates: questions and answers

    When can I use average rates?

    As a taxpayer you can translate an amount into Australian currency using an exchange rate that is an average of the exchange rates applicable during a period (which may be less than, but not exceeding, 12 months) chosen by you.

    However, an average rate cannot be used unless the average rate is a reasonable approximation of the exchange rates that would otherwise be applicable if you had used spot rates at the specific translation times provided for by the forex legislation. You should consider whether the use of an average rate is reasonably likely to approximate the use of spot rates. The examples below provide more detail.

    Where can I obtain average rates?

    Average rates are published to the Tax Office website. Here you can find lists of exchange rates for selected countries including average monthly and yearly rates.

    Alternatively, you can use appropriate exchange rates provided by a banking institution operating in Australia including, where relevant, the banking institution through which your foreign income is received. You can also use rates published by another reliable external source. The rate used and the source of rates should be kept with your records.

    You cannot obtain an average rate (or rates) of exchange from an associate, or from yourself, unless otherwise notified by the Commissioner.

    When can I start to use average rates?

    The regulations which allow the use of average rates have effect from 1 July 2003.

    If you have previously prepared your tax returns in anticipation of the making of these regulations you should refer to Administrative treatment of retrospective legislation.

    Similarly, if you have already prepared a tax return using spot rates of exchange, and did not anticipate the regulations, you are entitled to review your position in light of the regulations now in force.

    Can I still use an end of year rate for translation of foreign income that is derived overseas but that is not received in Australia until the next income year?

    No. Under the regulations, you can no longer use an end of year rate (ie the rate applying on the last day of the income year) for the translation of foreign income which is not actually received in Australia in the same year as it is derived. In this case, the spot rate at the time the income is derived, or an appropriate average rate, may be used to translate the relevant amounts into Australian dollars.


    1. Maria is an Australian resident who receives a foreign age pension from Italy. The pension is paid to her fortnightly in Euros. Maria may translate her total assessable Italian pension amounts for the income year by using an average annual exchange rate. She does not have to translate the pension into Australian dollars at the exchange rate prevailing at each time the pension payment is received.
    2. Veronica receives a fortnightly British age pension. While the pension is paid in pounds sterling, the Australian bank into which her pension is paid converts her pension payments into Australian dollars at the time of each payment. Veronica chooses to translate her assessable British pension into Australian dollars using the rate applied by her Australian bank. That is, Veronica adds up the Australian dollar value of her pension as converted by her bank, rather than choosing to use an average annual exchange rate.
    3. Oz Retail & Sales acquires goods regularly for its trading activities from various retailers in Germany. Goods are ordered in Euros from eight regular suppliers, and Oz Retail makes about six foreign currency payments each month when stock is ordered. Payment is due 30 days from the date of shipment. The goods are considered to be trading stock of Oz Retail.

      In this case, Oz Retail could use an appropriate average rate of exchange when translating the cost of the acquisition of trading stock for income tax purposes.
    4. Peter, an accruals-based taxpayer, is a consultant engineer. He provides professional services to clients in Australia as well as New York. In respect of the New York based clients, fees are written in US dollars at the end of each month, and payment is required within 30 days. The fees are around US$80,000 each month. It would be a reasonable approximation for Peter to translate the US dollar amounts into Australian dollars using an exchange rate based on a yearly average - or perhaps, a monthly average.
    5. Peter (from example 4 above) had also bought an office building in New York for US$3 million during the income year. In this case, it would not be a reasonable approximation to translate the purchase price of the office building using an average yearly rate.
    6. John has a rental property in the United Kingdom from which he receives fortnightly rent which is deposited into a bank account in the UK. Throughout the year, he pays miscellaneous expenses such as maintenance and minor repairs, and agent's fees, in respect of the property. It would be reasonable for John to choose to use an average rate of exchange in respect of the rental income and deductions when translating these amounts into Australian currency.
    7. John (from example 6 above) sells the rental property in the following year, and receives a sum as consideration. As this is a one-off sale of a large capital asset, it would not be appropriate for John to use an average rate of exchange when translating this amount into Australian currency.
    End of example
      Last modified: 01 Mar 2016QC 18020