• Foreign currency gains and losses

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    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    If you purchased a depreciating asset in foreign currency, the first element of the asset's cost is converted to Australian currency at the exchange rate applicable when you began to hold the asset, or when the obligation was satisfied, whichever occurred first. From 1 July 2003, if the foreign currency amount became due for payment within the 24-month period that began 12 months before the time when you began to hold the depreciating asset, any realised foreign currency gain or loss (referred to as a forex realisation gain or a forex realisation loss) can modify the asset's cost, opening adjustable value, or the opening balance of your low-value pool (as the case may be). Otherwise, that gain or loss is included in assessable income or allowed as a deduction, respectively.

    Similar consequences apply for second element of cost amounts involving foreign currency. However, the translation to Australian currency is made at the exchange rate applicable at the time you incurred the relevant expenditure and a 12-month rule instead of a 24-month rule applies. The 12-month rule requires that the foreign currency became due for payment within 12 months after the time you incurred the relevant expenditure. In some circumstances you may be able to elect that forex gains and losses do not modify the asset's cost, opening adjustable value or the opening balance of your low-value pool. For more information, see Forex - election out of the 12 month rule on our website.

    Last modified: 27 Aug 2007QC 27892