Taxation Determination

TD 92/108

Income tax: foreign income: application of currency conversion rules to foreign exchange gains and losses of a controlled foreign company (CFC).

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FOI status:

may be releasedFOI number: I 1212751

This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953 , is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, the Determination applies to transactions entered into both before and after its date of issue.

1. Foreign exchange gains and losses of a CFC may be calculated by reference to the currency in which it generally transacts business and keeps accounts. The net gain or loss would then be translated into Australian currency on the basis of the rules provided in section 391 of the Income Tax Assessment Act 1936.

Example:

(i)
On 1/1/91, a CFC in country X borrows $US1m. On that date, country X's exchange rate is 100 florins to $US1.
(ii)
The CFC keeps its accounts in the currency of country X, i.e., florins.
(iii)
On 1/4/92, the $US1m loan is repaid at an exchange rate of 90 florins.
(iv)
This results in an exchange gain of 10,000,000 florins.
(v)
The exchange gain of 10,000,000 florins is converted into Australian dollars using the relevant rate of exchange in section 391.

Commissioner of Taxation
1 July 1992

References

ATO references:
NO 92/3745-3

ISSN 1038 - 3158

Subject References:
CFCs
foreign exchange gains and losses
currency conversion

Legislative References:
ITAA 391

TD 92/108 history
  Date: Version: Change:
You are here 1 July 1992 Original ruling  
  28 July 1999 Withdrawn  

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