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Under the foreign exchange (forex) measures, forex gains and losses are generally brought to account, as assessable income or allowable deductions. The measures cover both foreign currency denominated arrangements, and broadly, arrangements to be cash-settled in Australian currency with reference to a currency exchange rate. Some forex gains and losses of a private or domestic nature, or in relation to exempt income or non-assessable non-exempt income, are not brought to account under the forex measures.
If a forex gain or loss is brought to account under the forex measures and under another provision of the tax law, it is assessable or deductible only under the forex measures.
In general, these gains and losses will not be assessable or deductible under the forex measures if they arise from certain acquisitions or disposals of capital assets, or acquisitions of depreciating assets, and the time between the acquisition or disposal and payment is no more than 12 months. Instead, any forex gain or loss is usually matched with or integrated into the tax treatment of the underlying asset. In addition, if a financial arrangement of a trust is subject to the TOFA rules, those foreign exchange gains and losses will generally be brought to account under those TOFA rules instead of the forex measures.
The general translation rule requires all tax-relevant amounts to be expressed in Australian currency regardless of whether there is an actual conversion of that foreign currency into Australian dollars.
The tax consequences of gains or losses on existing foreign currency assets, rights and obligations that were acquired or assumed before 1 July 2003 are determined under the law as it was before that date unless:
- you have made a transitional election that brings these arrangements under the forex measures, or
- there is an extension of an existing loan (for example, an extension by a new contract or a variation to an existing contract) that brings the arrangement within these measures.
Last modified: 13 Aug 2014QC 22968
See Forexfor more information about these measures and how to calculate your foreign exchange realisation gains and losses.
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