Draft Taxation Determination
TD 93/D227
Income tax: do forward foreign currency exchange contracts constitute trading stock as defined in subsection 6(1) of the Income Tax Assessment Act 1936?
-
Please note that the PDF version is the authorised version of this draft ruling.This document has been Withdrawn.View the Withdrawal notice for this document.
FOI status:
draft only - for commentPreamble
| Draft Taxation Determinations (TDs) present the preliminary, though considered, views of the ATO. Draft TDs may not be relied on; only final TDs are authoritative statements of the ATO. |
2. A forward foreign currency exchange contract is an agreement between parties to exchange an amount of one currency for an amount of another on a specific future date. The rate at which the exchange is made on a forward deal is called the forward exchange rate.
3. A purchaser under these contracts has three options:
- (i)
- To take delivery of the currency on maturity of the contract.
- (ii)
- To rollover the contract on maturity by entering into a further contract.
- (iii)
- To close out the contract.
4. We do not consider that these contracts are trading stock as defined in subsection 6(1) as they do not constitute "... anything produced, manufactured, acquired or purchased for purposes of manufacture, sale or exchange ..." but are entered into to enable the purchaser to hedge a foreign currency exposure.
Commissioner of Taxation
2/9/93