Tax-timing method elections
What are these elections?
You can elect to apply one or more of the following tax-timing methods to calculate your gains and losses under the TOFA rules:
- fair value
- foreign exchange retranslation
- reliance on financial reports.
To be eligible to make one or more of the tax-timing method elections, you must prepare financial reports in accordance with the relevant accounting standards and have these reports audited in accordance with the relevant auditing standards. There are also other eligibility criteria for each of the tax-timing method elections that you may need to satisfy.
If the tax-timing method elections are not made, then the default methods - realisation and accruals - will apply. Even if you choose to have one or more of the tax-timing method elections apply, there may still be certain financial arrangements to which the default methods will apply.
How do you make these elections?
You can download and complete the TOFA 3 & 4 tax-timing method elections form (NAT 73324).
You do not have to notify us of these elections, but should keep a copy of them with your tax records.
You can make each of these elections separately at any time. The time at which you make a particular tax-timing method election will affect which of your financial arrangements will be subject to that tax-timing method election.
If you make a particular tax-timing method election, then that tax-timing method will apply to *relevant financial arrangements you start to have:
- during the income year in which you make the election
- in later income years.
You make the hedging tax-timing method election in the 2011 income year
The hedging tax-timing method election will apply to relevant hedging financial arrangements that you start to have in the 2011 income year or a later income year.
You make the foreign exchange retranslation tax-timing method election in the 2012 income year.
The foreign exchange retranslation tax-timing method election will apply to relevant financial arrangements that you start to have in the 2012 income year or a later income year.
End of example
Once made, the tax-timing method elections are irrevocable - however, they may cease to apply if your circumstances change.
Relevant financial arrangements are those that are subject to the particular tax-timing method elections that you make.
Explains the different tax-timing method elections available under the TOFA rules, the eligibility requirements, and how to make the elections.