ATO Interpretative Decision

ATO ID 2004/156 (Withdrawn)

Income Tax

Is a term deposit a qualifying forex account?
FOI status: may be released

This ATO ID is withdrawn and has been replaced by ATO ID 2014/32.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Is a term deposit account a qualifying forex account, for the purposes of Division 775 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. A term deposit is not a qualifying forex account for the purposes of Division 775 of the ITAA 1997.

Facts

The taxpayer is an Australian resident for income tax purposes.

They open a term deposit account in New Zealand on 1 August 2003 with a New Zealand bank.

The bank is an Authorised Deposit-Taking Institution (ADI).

The account is denominated in New Zealand currency.

They deposit NZD20,000 in the account for a period of six months at an interest rate of 3%.

Under the terms of the account with the bank, he they cannot withdraw this money until 1 February 2004 without incurring a financial penalty.

Reasons for Decision

A 'Qualifying forex account' is an account that is denominated in a particular foreign currency, and is maintained in Australia or a foreign country with an ADI, or is maintained in a foreign country with a financial institution similar to an ADI. The account must either have the primary purpose of facilitating transactions, or must be a credit card account (subsection 995-1(1) of the ITAA 1997).

The taxpayer's account is denominated in a foreign currency (New Zealand currency), and is maintained in a foreign country with a New Zealand bank which is an ADI. However, it is not a credit card account and does not have the primary purpose of facilitating transactions. The primary purpose of the account is to hold the taxpayer's money with the bank as an investment for a period of time, and not to facilitate transactions.

Therefore, the account is not a 'qualifying forex account' under Division 775 of the ITAA 1997.

Date of decision: 9 February 2004

Year of income: Year ended 30 June 2004

Legislative References:
Income Tax Assessment Act 1997
   subsection 995-1(1)
   Subdivision 775-D
   Subdivision 775-E

Keywords
Foreign exchange gains and losses
Qualifying Forex Account

Business Line: Private Groups and High Wealth Individuals

Date of publication: 20 February 2004

ISSN: 1445-2782

history

	Date:	Version:
	9 February 2004	Original statement
You are here	31 October 2014	Archived

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