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  • Converting foreign currency

    If the figures you use to calculate the producer rebate are not in Australian dollars, you must convert the figures to Australian currency before making your claim.

    There are three methods for converting currency depending if you're converting from New Zealand or foreign currency. Whatever method you choose, you must apply the same method consistently during a financial year.

    You have two methods for converting foreign currency to Australian currency:

    If you are converting New Zealand currency to Australian currency, there's a third method:

    Method 1 – RBA rate

    Method 1 uses the Reserve Bank of Australia (RBA) rate. The RBA rate is the exchange rate expressed as a unit of foreign currency per Australian dollar as calculated by the Reserve Bank of Australia.

    The following formula may be used for the RBA rate:

    Value of component in NZ$ × (1 ÷ the RBA rate on conversion day)

    The conversion day is the earlier of:

    • the day any payment for the supply of wine is received by the New Zealand participant
    • the invoice date.

    Method 2 – agreed rate

    This uses the exchange rate that you agreed to with the Australian purchaser for sales of wine. In this case, it is being used to convert New Zealand currency; however it can be used for other foreign currencies.

    The following formula may be used for the agreed rate:

    Value of component in NZ$ × (1 ÷ the agreed rate on conversion day)

    Method 3 – average RBNZ rate

    Method 3 uses the average Reserve Bank of New Zealand (RBNZ) rate. The average RBNZ rate is the exchange rate expressed as a unit of Australian currency per New Zealand dollar for the Australian financial year in which the conversion day occurs.

    This method is only available if you're converting New Zealand currency to Australian currency. If you're converting a different currency, you need to use one of the other two methods.

    The following formula may be used for the average RBNZ rate:

    Value of component in NZ$ × the average RBNZ rate for the Australian financial year of the conversion day

    Table 1: The average Reserve Bank of New Zealand exchange rate by Australian financial year

    Australian financial year

    Average RBNZ exchange rate

    2017-18

    NZ$1 = A$0.9220

    2016–17

    NZ$1 = A$0.9448

    2015–16

    NZ$1 = A$0.9172

    2014–15

    NZ$1 = A$0.9305

     

    Example: Calculation of approved selling price

    Kiwi Wines Pty Ltd is a wine producer manufacturing wine in New Zealand. Several shipments of wine are sold to an Australian importer during the 2017–18 financial year.

    The invoice prices, expressed in NZD, include expenses for freight and insurance to transport the wine to the New Zealand shipping dock.

    The importer meets the shipping costs to Australia.

    Kiwi Wines invoices the Australian importer for the wine.

    Table 2: Kiwi Wines invoice

    Invoice date

    Invoice amount (NZ$) including shipping costs

    Transport costs to shipping dock

    Invoice amount (NZ$) excluding transport costs

    Date of payment

    20 Jul 2017

    $26,500

    $500

    $26,000

    21 Aug 2017

    13 Sep 2017

    $69,000

    $1,000

    $68,000

    21 Oct 2017

    04 Dec 2017

    $126,000

    $2,000

    $124,000

    21 Jan 2018

    05 Apr 2018

    $22,500

    $500

    $22,000

    21 May 2018

    There are three options for converting the invoice amounts to Australian dollars:

    Method 1 – the RBA rate

    The invoice date for each sale must be used as the conversion day as the invoice date occurs before the date of payment.

    Table 3: RBA exchange rates that apply for a unit of New Zealand currency per Australian dollar

    Invoice date

    Conversion rate

    20 Jul 2017

    1.0803

    13 Sep 2017

    1.1016

    05 Dec 2017

    1.1085

    05 Apr 2018

    1.0556

    Table 4: Conversion to Australian currency

    Invoice date

    Invoice amount (NZ$) excluding transport costs

    Conversion rate

    Invoice amount (A$)

    20 Jul 2017

    $26,000

    1.0803

    $24,067.39

    13 Sep 2017

    $68,000

    1.1016

    $61,728.40

    05 Dec 2017

    $124,000

    1.1085

    $111,862.88

    05 Apr 2018

    $22,000

    1.0556

    $20,841.23

    Total

    $240,000

    n/a

    $218,499.90

    Using Method 1, the resulting total amount in Australian dollars is $218,499.90.

    Method 2 – the agreed rate

    All sales were made under the same agreement. For the period of the agreement in which the sales were made, the agreed exchange rate for a unit of New Zealand currency per Australian dollar was 1.0577.

    Table 5: Conversion to Australian currency

    Invoice date

    Invoice amount (NZ$) excluding transport costs

    Conversion rate

    Invoice amount (A$)

    20 Jul 2017

    $26,000

    1.0577

    $24,581.64

    13 Sep 2017

    $68,000

    1.0577

    $64,290.44

    05 Dec 2017

    $124,000

    1.0577

    $117,235.51

    05 Apr 2018

    $22,000

    1.0577

    $20,799.85

    Total

    $240,000

    n/a

    $226,907.44

    Using Method 2, the resulting total amount in Australian dollars is $226,907.44.

    Method 3 – the average RBNZ rate

    The average RBNZ rate for a unit of Australian currency per New Zealand dollar for the 2017–18 financial year is 0.9220

    Table 6: Conversion to Australian currency

    Invoice date

    Invoice amount (NZ$) excluding transport costs

    Conversion rate

    Invoice amount (A$)

    20 Jul 2017

    $26,000

    0.9220

    $23,972.00

    13 Sep 2017

    $68,000

    0.9220

    $62,696.00

    05 Dec 2017

    $124,000

    0.9220

    $114,328.00

    05 Apr 2018

    $22,000

    0.9220

    $20,284.00

    Total

    $240,000

    0.9220

    $221,280.00

    Using Method 3, the resulting total invoice amount in Australian dollars is $221,280.00.

    Option chosen:

    Kiwi Wines chooses to use option 1 – the RBA rate – to maximise their rebate claim.

    End of example
      Last modified: 10 Jul 2018QC 18716