Reporting during the year

Business activity statements

When completing a business activity statement (BAS):

1. calculate your instalment income in the applicable functional currency
2. translate your instalment income into Australian dollars at the appropriate rate
3. complete label T1 of the BAS accordingly.

Company tax return

The functional currency rules allow some taxpayers to choose to work out their taxable income or tax loss by using a non-A$ currency as their applicable functional currency (FC).

All amounts disclosed on the company tax return must be disclosed in A$.

When a label amount is accounted for in a non-A$ FC, that sum should be translated into A$ using the same functional currency translation rate (shown at label 8N of the company tax return) used to translate the taxable income or tax loss figure.

The following amounts are always accounted for in A$, and not in the FC:

The following amounts do not need to be translated into A$ before completion of the return:

Tax losses are allowable deductions from taxable income. If you carry forward losses, you should account for and claim them in your FC. Report any losses used during the income year at label 7R by translating the value of the loss used into A$ at the FC translation rate.

As mentioned above, label 8N is where you show the exchange rate used to translate the FC taxable income figure (and many other figures on the company tax return) into A$.

At label 8N, show the translation rate the company used to translate the taxable income figure from the FC into A$. The translation rate is the amount the FC amount is divided by to get an equivalent amount of A$ – that is, the number of non-A$ currency units that equal one A$ rounded to 4 significant figures – see Examples.

Label 8O – functional currency chosen

Label 8O is where you show your chosen FC using the 3-letter code from the international standard ISO 4217 – 'Currency codes'. See the list of commonly used currencies and their ISO standard codes.

Labels 8N and 8O must be completed by:

• Australian resident taxpayers who use FC to work out their taxable income or tax loss
• foreign residents carrying on an activity or business at, or through, an Australian permanent establishment, who use FC to work out their taxable income or tax loss.

You should not complete labels 8N and 8O if you are an Australian resident taxpayer using FC only to work out the attributable income of a controlled foreign company (CFC) or transferor trust.

Examples for labels 8N and 8O

The following are examples of correctly completed labels 8N and 8O. The exchange rates used are from 26 September 2003.

As mentioned previously, if you choose to use FC, you should account for the value of any carry-forward losses using that FC.

The value of those tax losses and net capital losses carried forward to later income years should be reported in A$ at 'Losses information' – labels 13U and 13V – on the company tax return.

Calculation statement

The calculation statement on the company tax return shows you how to work out the amount of tax payable or refundable. It starts with the 'Taxable income' figure at label A. This figure should have been worked out earlier, using the applicable FC and then translated into A$.

Other figures in the calculation statement are either of the following:

• A$ amounts, such as pay as you go (PAYG) instalments raised
• amounts translated into A$ previously, such as any foreign income tax offset.