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  • Reporting foreign exchange gains and losses in Local File – Part A

    We have finalised the rules (shown in Appendix A) for reporting foreign exchange gains and losses in the second year of reporting, after considering feedback provided during consultation, which took place in 2017.

    We continue to consult with significant global entities in the banking sector

    Representatives of significant global entities (SGEs) in the regulated banking sector have raised issues affecting the determination of amount of foreign exchange (FX) gains returned and FX losses deducted for:

    • international related party (IRP) financial arrangements for which mark-to-market elections have been made under the TOFA rules in Division 230 of the Income Tax Assessment Act 1997 (ITAA 1997)
    • loans and derivatives held for trading purposes.

    We have requested more information and are meeting with representatives at their invitation to ensure we sufficiently understand the relevant specific issues affecting the sector.

    We will consider the need for any special reporting rules for SGEs in the regulated banking sector after the above ongoing consultation has occurred.

    Appendix A

    Appendix A outlines our approach to reporting FX gains and losses in Local File – Part A – in the second year of reporting.

    Glossary of terms

    AUD

    Australian dollars

    Foreign currency

    For SGEs which have not made a functional currency choice in accordance with subdivision 960-D of the ITAA 1997, any non-Australian dollar currency.

    For SGEs which have made a functional currency choice in accordance with subdivision 960-D of the ITAA 1997, AUD and any other currency other than the foreign currency chosen in accordance with that subdivision.

    IRP

    International related party as the term is used in the IDS instructions.

    IRPD

    International related party dealings as the term is used in the IDS instructions.

    Irregular

    Foreign currency deferred payment arrangements are treated as irregular where both of the following conditions are satisfied:

    • more than one payment becomes payable or receivable by the SGE under the IRP transaction/RAS during the income year
    • the liability for the amounts payable or receivable are paid or otherwise satisfied in a significantly irregular pattern.

    RAS

    Relevant Agreement Series in accordance with the Local File – Part B: Guidance on providing International Related Party agreements.

    SGE or SGEs

    Significant Global Entities under subdivision 960-U of the ITAA 1997.

    Significantly irregular pattern

    • In the case of amounts due and payable on demand – the deferred payment period varies by more than 1 month.
    • In the case of amounts due and payable under an agreement that payment be deferred for a specified period – the specified period varies by more than 1 month or the payment is actually made or otherwise satisfied not on the agreed date.

    Special reporting rules

    Special reporting rules apply to IRPDs involving deferred foreign currency payment arrangements for the following kinds of local file Transaction categories:

    The special reporting rules are:

    Regular short term deferred foreign currency payment arrangements

    If

    both of the following conditions are met for the foreign currency deferred payment arrangements for the IRP transaction/RAS:

    • the deferred payment arrangements are not irregular
    • the deferred payment arrangements do not involve payment or other satisfaction of the amounts more than 12 months after the date the amounts become due

    then:

    • the following codes are shown for the relevant IRP transaction/RAS
      • a code indicating regular/short term foreign currency deferred payment arrangements
      • a code indicating the relevant foreign currency, for example USD.

    There is no requirement to show the amount of FX gains returned or FX losses deducted for the relevant IRP transaction/RAS in Part A of the Local File.

    Irregular or longer term deferred foreign currency payment arrangements

    If

    the foreign currency deferred payment arrangements for the IRP transaction/RAS are either:

    • irregular
    • involve payment or other satisfaction of the relevant amounts more than 12 months after the date the amounts become due

    then:

    • the following codes are shown for the relevant IRP transaction/RAS
      • code indicating irregular or longer term foreign currency deferred payment arrangements or,
      • code indicating the relevant foreign currency.

    The amount of the FX gains returned or FX losses deducted for the relevant transaction/RAS for Australian income tax is shown at whichever of the following (new) Transaction Categories are applicable:

    • Foreign currency deferred payment arrangement for sale of Tangible Trading Stock (FCDSTTS)
    • Foreign currency deferred payment arrangement for purchase of Tangible Trading Stock (FCDPTTS)
    • Foreign currency deferred payment arrangement for provision of Services (FCDAPS)
    • Foreign currency deferred payment arrangement for acquisition of Services (FCDAAS)
    • Foreign currency deferred payment arrangement for rent of real property to IRP (FCDRRP)
    • Foreign currency deferred payment arrangement for rent of real property from IRP (FCDRRPI)
    • Foreign currency deferred payment arrangement for hire or lease of plant or equipment to IRP (FCDHLP)
    • Foreign currency deferred payment arrangement for hire or lease of plant or equipment from IRP (FCDHLPE)
    • Foreign currency deferred payment arrangement for share based employment recharge to IRP (FCDSBER)
    • Foreign currency deferred payment arrangement for share based employment recharge from IRP (FCDSBERI).

    FX gains and losses in other scenarios

    For any IRP transaction/RAS in the following Transaction categories or Transaction category groupings:

    The following is shown for the relevant IRP transaction/RAS:

    • the amount of any FX gains returned and FX losses deducted for the IRP transaction/RAS for Australian income tax
    • code indicating the relevant foreign currency.

    If the SGE’s accounting records do not produce the separate amount of FX gains or losses for the relevant IRP transaction/RAS for Australian income tax, then the amount is to be reasonably determined based on either:

    • the values for the amount of the relevant foreign currency liabilities, or
    • receivables in your accounting systems for the IRP transaction/RAS at the relevant times during the income year.
      Last modified: 19 Jun 2018QC 55187