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Edited version of your private ruling
Authorisation Number: 1011974266948
This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
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Ruling
Subject: Overseas investments
Question 1
Are your investments with an overseas bank subject to the Foreign Investment Funds (FIF) provisions?
Withdrawn.
Question 2
Are you entitled to a FIF exemption if the value of your FIF interests does not exceed $50,000?
Withdrawn.
Question 3
Are you entitled to claim a Division 775 foreign exchange loss for the movement in the value of your overseas investments?
No.
This ruling applies for the following periods:
Year ended 30 June 2008
Year ended 30 June 2009
Year ended 30 June 2010
The scheme commences on:
1 July 2007
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You are an Australian resident for taxation purposes.
You have investments in Country X with a foreign bank.
You earn interest from these investments.
In the 2011 income year, you received a Notice of amended assessment for the 2007 income year increasing your taxable income by an amount of money - interest earned upon your foreign investments.
In the 2012 income year, during a telephone conversation with a taxation officer you withdrew the first two questions from your Private Binding Ruling application, and requested that your last two questions be combined as one.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 6-5(2).
Income Tax Assessment Act 1997 subsection 6-5(3).
Reasons for decision
These reasons for decision accompany the Notice of private ruling.
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
(1) Are your Investments with a foreign bank subject to the Foreign Investment Funds (FIF) provisions?:
Paragraph 359-35(2)(b) of the Taxation Administration Act 1953 (TAA 1953) says that the Commissioner may decline to make a Private Binding Ruling if the matter sought to be ruled on has already been considered by the Commissioner. In your case, you were subject to an audit for the 2007 income year. The Commissioner has already considered your investments with the foreign bank.
Please note - In accordance with paragraph 47 of Taxation Ruling TR 98/1, investment income, namely interest, is only derived when it is received or credited. In your case, although you have not physically received the interest income, it has been credited to your account. Accordingly, you derived the income when it was credited to your account.
(2) Are you entitled to a FIF exemption if the value of your FIF interests does not exceed $50,000?:
Paragraph 359-35(2)(b) of the Taxation Administration Act 1953 (TAA 1953) says that the Commissioner may decline to make a Private Binding Ruling if the matter sought to be ruled on has already been considered by the Commissioner. In your case, you were subject to an audit for the 2007 income year. The Commissioner has already considered your investments with the foreign bank.
(3) Are you entitled to claim a Division 775 foreign exchange loss for the movement in the value of your overseas investments?:
In order to be able to claim a foreign exchange loss in accordance with Division 775 there must be a foreign exchange event. A foreign exchange event occurs whenever you lose / gain the right to receive foreign currency or you lose / gain the obligation to pay foreign currency, actually ceases. Foreign exchange gains and losses only arise on realization. In your case, the mere movement in the value of your overseas investments from one income year to the next does not give rise to a foreign exchange event.