• 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 options for converting New Zealand currency and two options for other foreign currency. Whatever method you choose, you must apply the same method consistently during a financial year.

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

    However, if you are converting New Zealand currency to Australian currency, you have a third option:

    Option 1 – RBA rate

    Option 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.

    In this case, it is being used to convert New Zealand currency; however it can be used for other foreign currencies.

    Option 1 formula: Value of component expressed in NZ currency times (one divided by the RBA rate on the conversion day)

    Option 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.

    Option 2 formula: Value of component expressed in NZ currency times (one divided by the agreed rate on the conversion day

    Option 3 – average RBNZ rate

    Option 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.

    The conversion day is the earlier of the:

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

    This option is only available if you are converting New Zealand currency to Australian. If you are converting a different currency, you need to use Option 1 or Option 2.

    Option 3 formula: Value of component expressed in NZ currency times the average rate that relates to the Australian financial year in which the conversion day occurs

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

    Australian financial year

    Average RBNZ exchange rate

    2015–16

    NZ$1 = A$0.9172

    2014–15

    NZ$1 = A$0.9305

    2013–14

    NZ$1 = A$0.9050

    2012–13

    NZ$1 = A$0.8010

    2011–12

    NZ$1 = A$0.7796

     

    Example: Calculation of approved selling price

    Kiwi Wines Pty Ltd is a wine producer that manufactures wine in New Zealand. Several shipments of wine are sold to an Australian importer during the 2012–13 financial year.

    The invoice prices, expressed in New Zealand dollars 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.

    Invoice date

    Invoice amount (NZ$) including shipping costs

    Transport costs to shipping dock

    Invoice amount (NZ$) excluding transport costs

    Date of payment

    20 July 12

    $26,500

    $500

    $26,000

    21 Aug 12

    13 Sept 12

    $69,000

    $1,000

    $68,000

    21 Oct 12

    04 Dec 12

    $126,000

    $2,000

    $124,000

    21 Jan 13

    05 April 13

    $22,500

    $500

    $22,000

    21 May 13

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

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

    20 July 12

    1.2976

    13 Sept 12

    1.2746

    04 Dec 12

    1.2690

    05 April 13

    1.2392

    Table: Conversion to Australian currency

    Invoice date

    Invoice amount (NZ$) excluding transport costs

    Conversion rate

    Invoice amount (A$)

    20 July 12

    $26,000

    1.2976

    $20,036.99

    13 Sept 12

    $68,000

    1.2746

    $53,350.07

    04 Dec 12

    $124,000

    1.2690

    $97,714.73

    05 April 13

    $22,000

    1.2392

    $17,753.38

     

     

    Total of invoices

    A$188,855.17

    Using option 1, the resulting total amount in Australian dollars is A$188,855.17.

    Option 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 1.2600.

    Table: Conversion to Australian currency

    Invoice date

    Invoice amount (NZ$) excluding transport costs

    Conversion rate

    Invoice amount (A$)

    20 July 12

    $26,000

    1.2600

    $20,634.92

    13 Sept 12

    $68,000

    1.2600

    $53,968.25

    04 Dec 12

    $124,000

    1.2600

    $98,412.69

    05 April 13

    $22,000

    1.2600

    $17,460.31

     

    Total $240,000

     

    A$190,476.17

    Using option 2, the resulting total amount in Australian dollars is A$190,476.17.

    Option 3 – the average RBNZ rate

    The average RBNZ rate for a unit of Australian currency per New Zealand dollar for the 2012–13 financial year is 0.8010.

    Table: Conversion to Australian currency

    Invoice date

    Invoice amount (NZ$) excluding transport costs

    Conversion rate

    Invoice amount (A$)

    20 July 12

    $26,000

    0.8010

    $20,826

    13 Sept 12

    $68,000

    0.8010

    $54,468

    04 Dec 12

    $124,000

    0.8010

    $99,324

    05 April 13

    $22,000

    0.8010

    $17,622

     

    Total $240,000

     

    A$192,240

    Using option 3, the resulting total invoice amount in Australian dollars is A$192,240.

    Option chosen:

    Kiwi Wines chooses to use option 3 – the average RBNZ rate – to maximise their rebate claim.

    End of example
      Last modified: 01 Jul 2016QC 18716