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Edited version of your written advice
Authorisation Number: 1012766807110
Ruling
Subject: GST and currency conversions
Question
Are you entitled to use a conversion rate based on the average of the a XYZ's last price exchange rate from the five working days prior to the last day of the previous calendar month for the purpose of working out the value of a taxable supply under subsection 9-85(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes. You are entitled to use a conversion rate based on the average of the XYZ's last price exchange rate from the five working days prior to the last day of the previous calendar month, for the purpose of working out the value of a taxable supply under subsection 9-85(2) of the GST Act, where the consideration for the supply is expressed in foreign currency.
In Goods and services tax ruling, Goods and Services Tax: foreign exchange conversions, (GSTR 2001/2) the Commissioner has determined that you can convert foreign currency into Australian currency using the formula set out in paragraph 19. This formula requires that you identify 'your particular exchange rate on the conversion day'.
In paragraph 21 of GSTR 2001/2 it explains that you can choose a particular exchange rate from the publically available rates of a foreign organisation. Further it provides an example where an exchange rate can be based on an averaging of a foreign currency exchange rate if it conforms with the relevant accounting standard or you use that rate for income tax, for the purposes of converting foreign currency into Australian Dollars.
In this case;
• your foreign exchange calculation and the relevant rate is applied consistently by all entities in your group for both tax and accounting purposes; and
• the monthly average exchange rates are consistently applied to all tax invoices in the relevant months.
Accordingly, your calculation of the exchange rate which is based on the average of XYZ's last price exchange rate from the five working days prior to the last day of the previous calendar month accords with the Commissioners' determination under GSTR 2001/2.
Relevant facts and circumstances
You are an Australian resident entity that is registered for the goods and services tax (GST).
You are part of an international group.
You account for GST on an accruals/non-cash basis.
You anticipate that most of the tax invoices and adjustment notes that you issue for supplies will be issued in foreign currencies. However, the tax invoices and adjustment notes will also show a conversion rate to Australian currency.
This ruling response does address or apply to foreign currency conversions for taxable importations by you.
Your tax invoices will be issued by a central service team in an overseas country which is operated by your group.
How the exchange rate is calculated
In accordance with your group's practices, your accounting system uses exchange rates from XYZ's for foreign currency conversion purposes.
XYZ's is a provider of financial news and information, including real-time and historic pricing data, financial data and trading news.
The exchange rate used by you is an average of XYZ's last price exchange rate from the five working days prior to the last day of the previous calendar month. This average rate is calculated by you one day prior to the last day of each calendar month to allow for month end close and to allow enough time for the rate to be uploaded into your systems.
This foreign exchange calculation and rate is applied consistently by all entities in your group for both tax and accounting purposes, and the monthly average exchange rates are consistently applied to all tax invoices and adjustment notes issued by the entities in the relevant months.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 9-85
A New Tax System (Goods and Services Tax) Act 1999 9-85(2)