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ATO Announces New Tax Regime For Foreign Currency Gains/Losses

by Mary Swire, Tax-News.com, Hong Kong

23 December 2003


New regulations concerning the tax treatment of foreign currency gains and losses came into effect in Australia last week, after Royal Assent was given to the Taxation of Financial Arrangements Act (No 1) 2003.

According to the ATO, taxpayers potentially affected by these laws include those who:

- receive foreign income

- have foreign currency bank accounts

- sell trading stock, other assets or services overseas

- buy trading stock, other assets or services from an overseas provider.

The measures contain six elections principally designed to minimise compliance costs for taxpayers. Broadly speaking, taxpayers can choose to:

• Have the measures apply to existing arrangements that were entered into before the Commencement Date.

• Choose optional treatment of certain short term gains and losses from dealings with capital assets.

• Elect rollover relief on certain securities issued under a facility agreement.

• Have certain capital gains tax and foreign exchange related gains and losses ignored if they come from foreign currency denominated bank and credit card accounts that have a combined balance equal to no more than AUD$250,000.

• Have certain gains and losses from foreign currency denominated bank and credit card accounts calculated on a retranslation basis.

• Tax-account in a foreign currency for individual transactions in certain circumstances, and then convert the net consequences of transactions into Australian currency.

Most taxpayers who want the benefits of any elections to apply from 1 July 2003 will have to make them no later than 16 January 2004.


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