Transaction category groupings

The information provided in Part A for an IRP transaction/RAS includes indicating the relevant transaction category for the IRP transaction/RAS. These instructions for completing Part A of the local file are based on the following transaction category groupings:

• IRPDs in tangible property of a revenue nature
• IRPD service arrangements
• IRPD use rights
• IRPD share based employment remuneration
• Other revenue (non-financial) IRPDs – including IRPD cost contribution arrangements
• IRPD derivative transactions
• IRPD debt interests (including ordinary loans and borrowings)
• IRPD debt factoring or debt securitisation
• Other kinds of IRPDs of a financial nature
• IRPDs involving disposal or acquisition of tangible property of a non-revenue (capital) nature
• IRPDs involving disposal or acquisition of intangible property or rights of a non-revenue (capital) nature

The values shown in Part A for an IRP transaction/RAS are based on accounting records or income tax records as summarised in Appendix 2, and as indicated in the specific instructions for the particular groups of transaction categories.

For avoidance of doubt, we confirm IRPD transactions involving recharge or reimbursement of costs are also categorised by the nature of what is obtained or provided under the IRPD in exchange for the recharged or reimbursed amounts. For example:

• An IRPD recharge or reimbursement arrangement involving 'recharge' of your costs for insurance you provide to your IRP is treated as an IRPD Insurance transaction. Consistent with the rules for completing Question 11e in Section A of the IDS, you would show the premiums or other revenue for the Insurance Services transaction including any reimbursed costs.
• An IRPD recharge or reimbursement arrangement involving 'recharge' of your IRP's costs for services provided by the IRP to you in connection with the IRP organising or managing your third party insurance contracts is treated as an Insurance Services transaction. Consistent with the rules for completing Question 8 in Section A of the IDS, you would show the fees or other expenditure for the Insurance Services transaction including any recharged costs.

See also:

• Local file / master file 2017 – Appendix B: Transaction categories for a full list of transaction categories.

Reporting foreign exchange gains and losses

The local file requires you to provide details of FX gains you have returned and FX losses you have deducted on a per transaction/RAS basis in relation to IRPDs.

In this guidance, for reporting entities that have made an election under Subdivision 960–D of the Income Tax Assessment Act 1997 (ITAA 1997) to adopt a functional currency for Australian tax purpose that is not Australian dollars, then the reference to ‘foreign currency’ may include Australian dollars.

The instructions for completing the local file confirm the amounts to be shown are the amounts returned or deducted for Australian income tax purposes:

• where the taxation of financial arrangements (TOFA) provisions in Division 230 of the ITAA 1997 do not apply – under Subdivisions 775–A to 775–E of the ITAA 1997, as applicable
• where TOFA provisions in Division 230 do apply – under Division 230 and Subdivisions 775–F of the ITAA 1997, as applicable.

We are seeking this information because:

• FX gains and losses on foreign currency denominated IRPDs can be an important component of revenue and expenditure for IRPDs
• we cannot reliably undertake high level risk assessment of foreign currency denominated IRPDs, including foreign currency denominated borrowings and derivatives, unless we know the amount of FX gains returned and FX losses deducted for the IRPDs for Australian tax purposes
• net FX losses deducted for IRPDs may be a feature of international profit shifting arrangements eroding Australia’s tax base.

FX gains and losses for transactions on capital account

We expect FX gains and losses for transactions on capital account for income tax purposes to be reported for the particular transaction/RAS you show at Part A as outlined in the local file instructions.

Even if your current accounting systems do not produce the amounts of the FX gains and losses for tax purposes for the particular transaction/RAS you show at Part A, make a best effort to determine and report the FX gains returned and the FX losses deducted for the transaction/RAS based on the values for the relevant foreign currency denominated liabilities or receivables in your accounting systems.

FX gains and losses for transactions on revenue account

Part B requires reporting of any FX gains returned or FX losses deducted for the transaction/RAS shown in Part A of the local file.

However, we understand you may not have accounting systems which collect all the information required for the first reporting year at the level of the individual transaction/RAS based on the outputs from your accounting system alone.

 For FX gains and losses associated with transactions that are on revenue account, the following approach can be taken:

1. If your current accounting system outputs include the relevant FX gains and losses for the transaction/RAS as outlined in the local file instructions, show these for the transaction/RAS.
2. If your current accounting system outputs only include the relevant FX gains and losses on an aggregated basis, make a best effort to report the FX gains or losses on an aggregated basis, per transaction type for this first reporting year. This same aggregated amount would be reported at LCMSF87 and LCMSF43 for every transaction/RAS included in calculating the aggregated FX gain or loss amount.
3. If your current accounting system outputs only include the relevant FX gains and losses on an aggregated basis and you cannot reasonably determine or estimate the aggregated amount of the FX gains or losses per transaction type, show the aggregated amount of the FX gains or losses for all the relevant transaction types of a revenue nature. This aggregated amount would be reported at LCMSF87 and LCMSF43 for every transaction/RAS included in calculating the aggregated FX gain or loss amount.
4. If this information is not available and you are not able to provide aggregate figures for all your transactions of a revenue nature, then you may report zero at LCMSF87 and LCMSF43 for the first reporting year.

For options 1, 2 and 3, if you are using the administrative concession and lodging Part A of the local file with your return and IDS by 15 August 2017, you may initially report zero at LCMSF87 and LCMSF43 in the local file. You will then have until 31 December 2017 to submit an amended Part A of the local file with these fields completed in accordance with the guidelines outline above.

Reporting foreign exchange gains and foreign exchange losses in year 2

Based on feedback that FX gains and FX losses are not always recorded on a transaction or RAS basis, further guidance has been developed on how FX gains returned and FX losses deducted should be reported for a transaction/RAS in subsequent reporting years.

Examples

Examples of transactions which are on capital account for income tax purposes are:

• IRP borrowings, excluding borrowings arising under deferred payment terms for IRP transactions of a non-capital nature such as IRP trading stock purchases or IRP acquisition of services
• IRP derivative transactions hedging or offsetting IRP borrowings or other IRP transactions of a capital nature.