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Foreign exchange (forex) gains and losses

Last updated 28 July 2020

Under the forex measures, forex gains and losses are generally brought to account as assessable income or allowable deductions, when realised. 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 foreign exchange 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, forex gains and losses will not be assessable or deductible under these 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 foreign exchange gain or loss is usually matched with or integrated into the tax treatment of the underlying asset.

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 the commencement date (generally 1 July 2003, but this may be a later date for funds with a substituted accounting period) are generally to be determined under the law as it was before these measures came into effect, unless:

  • the fund has made a transitional election that brings these gains and losses within the new forex measures, or
  • there is an extension of an existing loan (for example, an extension by new contract or a variation to an existing contract) that brings the arrangement within these measures.

For more information about these measures and how to calculate your forex realisation gains and losses, refer to Foreign exchange gains and losses.