• Legal database
Legal database

ATO Interpretative Decision

ATO ID 2013/53

Income Tax

Foreign exchange (forex) gains and losses: Commissioner's discretion under paragraph 775-80(3)(c) of the ITAA 1997 to allow a longer period to elect out of the short term rules

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Can the Commissioner exercise the discretion under paragraph 775-80(3)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow a taxpayer that was not in existence at the start of the applicable commencement date, and that did not come into existence within 90 days after the start of the applicable commencement date, a longer period to choose not to have sections 775-70 and 775-75 of the ITAA 1997 (the short term rules) apply to the taxpayer?

Decision

No. Paragraph 775-80(3)(c) of the ITAA 1997 does not empower the Commissioner to exercise the discretion to allow a longer period for the taxpayer to choose not to have the short term rules apply to it.

Facts

The taxpayer is an Australian resident company.

The taxpayer's applicable commencement date, under section 775-155 of the ITAA 1997, is 1 July 2003.

The taxpayer was not in existence at the start of the applicable commencement date or within 90 days after the start of the applicable commencement date.

The taxpayer does not wish to have sections 775-70 and 775-75 of the ITAA 1997 apply to it.

Reasons for Decision

Sections 775-70 and 775-75 of the ITAA 1997 (the short term rules) are an exception to the general rule under Division 775 of the ITAA 1997 that forex realisation gains are included in assessable income, and forex realisation losses are deductible.

Where the short term rules apply, forex realisation gains and losses on the acquisition or disposal of certain CGT assets and depreciating assets are integrated into the tax treatment of, or draw their character from, the asset to which those gains and losses relate.

Under subsection 775-80(1) of the ITAA 1997, taxpayers may make a written, irrevocable choice not to have the short term rules apply to them.

Subsection 775-80(3) of the ITAA 1997 specifies when the choice under subsection 775-80(1) of the ITAA 1997 must be made. It states:

775-80(3)
A choice must be made:

(a)
if the taxpayer was in existence at the start of the applicable commencement date:

(i)
within 90 days after the applicable commencement date; or
(ii)
within 30 days after the commencement of this subsection;

(b)
if the taxpayer came into existence within 90 days after the start of the applicable commencement date:

(i)
within 90 days after you came into existence; or
(ii)
within 30 days after the commencement of this subsection; or

(c)
if the Commissioner allows a longer period - within that longer period.

The longer period mentioned in paragraph 775-80(3)(c) of the ITAA 1997 is a reference to the 90 or 30 day periods of time within which a choice must be made to elect out of the short term rules under subparagraphs 775-80(3)(a)(i) or (ii) and subparagraphs 775-80(3)(b)(i) or (ii) of the ITAA 1997. Those periods apply only in relation to entities that were in existence at the start of the applicable commencement date or that came into existence within 90 days after the start of the applicable commencement date.

Under paragraph 775-80(3)(c) of the ITAA 1997, the Commissioner can allow a longer period of time to make the choice than the 90 or 30 day periods prescribed, but only for entities that were in existence at the start of the applicable commencement date or that came into existence within 90 days after the start of the applicable commencement date.

Paragraph 775-80(3)(c) of the ITAA 1997 does not allow the Commissioner to modify the substantive law by extending eligibility to make the choice under section 775-80 of the ITAA 1997 to entities that do not otherwise qualify.

Paragraph 775-80(3)(c) of the ITAA 1997 does not therefore empower the Commissioner to allow a longer period for a choice to be made for entities that were not in existence at the start of the applicable commencement date or that did not come into existence within 90 days after the start of the applicable commencement date.

Date of decision:  17 September 2013

Year of income:  Year ended 30 June 2014

Legislative References:
Income Tax Assessment Act 1997
   Division 775
   Section 775-70
   Section 775-75
   Subsection 775-80(1)
   Paragraph 775-80(3)(a)
   Subparagraph 775-80(3)(a)(i)
   Subparagraph 775-80(3)(a)(ii)
   Paragraph 775-80(3)(b)
   Subparagraph 775-80(3)(b)(i)
   Subparagraph 775-80(3)(b)(ii)
   Paragraph 775-80(3)(c)
   Section 775-155

Keywords
Commissioner's discretion
Foreign exchange gains and losses
Forex realisation gain
Forex realisation loss

Siebel/TDMS Reference Number:  1-4ZAS140

Business Line:  Public Groups and International

Date of publication:  27 September 2013

ISSN: 1445-2782


Back to top