Australia Finalises Rules On Reporting Foreign Exchange Gains And Losses In Local File

; posted on
June 21st, 2018

The Australian Taxation Office finalised the rules for reporting foreign exchange gains and losses in Local File – Part A in the second year of reporting, after considering the feedback from consultation in 2017.

Local File Transaction Categories involved

Special reporting rules apply to International related party dealings (IRPDs) involving deferred foreign currency payment arrangements for the following kinds of local file transaction categories:

  • Sale of tangible property of a revenue nature to the International related party (IRP)
  • Purchase of property of a revenue nature from the IRP
  • Provision of services to the IRP
  • Acquisition of services from the IRP
  • Rent of real property to an IRP
  • Rent of real property from an IRP
  • Hire or lease of plant or equipment to an IRP
  • Hire or lease of plant or equipment from an IRP
  • Share based employment recharge to an IRP
  • Share based employment recharge from an IRP

Special Reporting Rules

Category of Arrangement Conditions to fall in Category Special Reporting Rules

Regular short term deferred foreign currency payment arrangements

  • the deferred payment arrangements are not irregular; and
  • the deferred payment arrangements do not involve payment or other satisfaction of the amounts more than 12 months after the date the amounts become due.
  • The following codes are shown for the relevant IRP transaction/RAS*:
    • Code indicating regular/short term foreign currency deferred payment arrangements;
    • Code indicating the relevant foreign currency, for example USD.
  • No requirement to show the amount of FX gains returned or FX losses deducted for the relevant IRP transaction/RAS in Part A of the Local File

Irregular or longer term deferred foreign currency payment arrangements

Either:

  • irregular; or
  • involve payment or other satisfaction of the relevant amounts more than 12 months after the date the amounts become due
  • The following codes are shown for the relevant IRP transaction/RAS:
    • Code indicating irregular or longer term foreign currency deferred payment arrangements or,
    • Code indicating the relevant foreign currency.
  • Require to show the amount of the FX gains returned or FX losses deducted for the relevant IRP transaction/RAS for Australian income tax is shown

FX gains and losses in other scenarios

Any IRP transaction/RAS in the following Transaction categories or Transaction category groupings:

  • IRPD debt interests (including ordinary loans and borrowings);
  • IRP derivatives transactions;
  • IRPD debt factoring or debt securitisation;
  • Other kinds of IRPDs of a financial nature;
  • IRPD Royalties (including Rights to use IP and Other rights to use, supply orreceive where consideration is royalty under section 6(1)), IRPD Licence feesand IRPD Lease or hire of other property or rights) ;
  • Other revenue non-financial IRPDs – including IRPD cost contributionarrangements;
  • IRPDs involving disposal or acquisition of tangible property of a non-revenue(capital) nature;
  • IRPDs involving disposal or acquisition of intangible property of a non-revenue(capital) nature.
  • The following codeis shown for the relevant IRP transaction/RAS:
    • Code indicating the relevant foreign currency.
  • Require to show the amount of any FX gains returned and FX losses deducted for the IRP transaction/RAS for Australian income tax.
 

* RAS: Relevant Agreement Series in accordance with the Local File – Part B: Guidance on providing International Related Party agreements.

If the SGE’s accounting records do not produce the separate amount of FX gains or losses for the relevant IRP transaction/RAS for Australian income tax, then the amount is to be reasonably determined based on either:

  • the values for the amount of the relevant foreign currency liabilities, or
  • receivables in your accounting systems for the IRP transaction/RAS at the relevant times during the income year.

Australian government will further the consultation with significant global entities (SGEs) in the banking sector to figure out whether there is a need for any special reporting rules for SGEs in the regulated banking sector.

Sources: ATO

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