When to make a functional currency choice

The functional currency rules started to apply on 1 July 2003.

Ordinarily, if you choose to use a foreign currency as your applicable functional currency to work out your taxable income or tax loss, your choice will take effect after the end of the tax year during which you made it.

You must make your functional currency choice in writing.

In some circumstances, you can make your functional currency choice after the start of the tax year in which you intend it to take effect. This is referred to as a 'backdated start up choice'. You must make a 'backdated start up choice' within 90 days of either of the following:

• the start of the tax year, if your entity existed at that time
• the day your entity came into existence, if it did not exist at the start of the tax year.

See details on:

• when your choice takes effect in subsection 960-60(1) of the ITAA 1997
• making your choice in writing in subsection 960-60(2) of the ITAA 1997
• making a backdated start up choice in section 960-65 of the ITAA 1997.

Withdrawing an existing functional currency choice and substituting a new choice

You can withdraw your existing functional currency choice if the functional currency you are using ceases to be the sole or predominant currency in which you keep your 'accounts'. Your functional currency choice withdrawal will take effect from the end of the tax year in which you withdraw it.

Your withdrawal:

• cannot be backdated
• must be made in writing
• should be available as part of the business's tax records.

After your previous functional currency choice is withdrawn, you can make a choice to use the new sole or predominant currency in which you keep your accounts, to work out your taxable income or tax loss. You must make this choice in writing. If you don't make a new functional currency choice, the core foreign currency translation rules will apply, which means that all amounts must be translated into A$.

See details on:

• when your choice of currency ceases to be your main currency for accounts in subsection 960-90 of the ITAA 1997
• when your functional currency choice withdrawal will take effect in items 1 and 2 of subsection 960-90(1) of the ITAA 1997
• making a choice to use the new sole or predominant currency in which you keep your accounts in subsection 960-90(3) of the ITAA 1997.