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Reporting foreign exchange gains and losses

Last updated 7 April 2021

The local file requires you to provide details of FX gains you have returned and FX losses you have deducted on a per transaction/RAS basis in relation to IRPDs.

In this guidance, for reporting entities that have made an election under Subdivision 960–D of the Income Tax Assessment Act 1997 (ITAA 1997) to adopt a functional currency for Australian tax purpose that is not Australian dollars, then the reference to ‘foreign currency’ may include Australian dollars.

The instructions for completing the local file confirm the amounts to be shown are the amounts returned or deducted for Australian income tax purposes:

  • where the taxation of financial arrangements (TOFA) provisions in Division 230 of the ITAA 1997 do not apply – under Subdivisions 775–A to 775–E of the ITAA 1997, as applicable
  • where TOFA provisions in Division 230 do apply – under Division 230 and Subdivisions 775–F of the ITAA 1997, as applicable.

We are seeking this information because:

  • FX gains and losses on foreign currency denominated IRPDs can be an important component of revenue and expenditure for IRPDs
  • we cannot reliably undertake high level risk assessment of foreign currency denominated IRPDs, including foreign currency denominated borrowings and derivatives, unless we know the amount of FX gains returned and FX losses deducted for the IRPDs for Australian tax purposes
  • net FX losses deducted for IRPDs may be a feature of international profit shifting arrangements eroding Australia’s tax base.

Refer to Appendix 7 for the overall approach to reporting FX gains and losses in Part A of the local file.