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INCOME TAX ASSESSMENT ACT 1997 - SECT 775.50

Ceasing to have an obligation to receive foreign currency--forex realisation event 3

Forex realisation event 3

             (1)  Forex realisation event 3 happens if:

                     (a)  you cease to have an obligation, or a part of an obligation, to receive * foreign currency; and

                     (b)  the obligation, or the part of the obligation, is one of the following:

                              (i)  an obligation, or a part of the obligation, incurred in return for the creation or acquisition of a right to pay foreign currency;

                             (ii)  an obligation, or a part of the obligation, incurred in return for the creation or acquisition of a right to pay Australian currency;

                            (iii)  an obligation, or a part of an obligation, under an option to sell foreign currency.

Note 1:       For extended meaning of obligation to receive foreign currency , see section 775-140.

Note 2:       For extended meaning of right to pay foreign currency , see section 775-135.

Time of event

             (2)  The time of the event is when you cease to have the obligation or the part of the obligation.

Forex realisation gain

             (3)  You make a forex realisation gain if:

                     (a)  the amount you receive in respect of the event happening exceeds the net costs of assuming the obligation or the part of the obligation (the net costs are worked out as at the tax recognition time); and

                     (b)  some or all of the excess is attributable to a * currency exchange rate effect.

The amount of the forex realisation gain is so much of the excess as is attributable to a currency exchange rate effect.

Note 1:       For net costs of assuming the obligation , see section 775-100.

Note 2:       For tax recognition time , see subsection (7).

Note 3:       For currency exchange rate effect , see section 775- 105.

             (4)  You make a forex realisation gain if:

                     (a)  the event happens because an option to sell * foreign currency expires without having been exercised, or is cancelled, released or abandoned; and

                     (b)  if the option had been exercised immediately before the event, you would have been obliged to buy the foreign currency.

The amount of the forex realisation gain is the amount you received in return for granting or assuming obligations under the option.

Forex realisation loss

             (5)  You make a forex realisation loss if:

                     (a)  the amount you receive in respect of the event happening falls short of the net costs of assuming the obligation or the part of the obligation (the net costs are worked out as at the tax recognition time); and

                     (b)  some or all of the shortfall is attributable to a * currency exchange rate effect.

The amount of the forex realisation loss is so much of the shortfall as is attributable to a currency exchange rate effect.

Note 1:       For net costs of assuming the obligation , see section 775-100.

Note 2:       For tax recognition time , see subsection (7).

Note 3:       For currency exchange rate effect , see section 775- 105.

Non-cash benefit

             (6)  The amount you receive in respect of the event happening can include a * non-cash benefit. Use the * market value of the benefit to work out the amount you receive.

Tax recognition time

             (7)  For the purposes of this section, the tax recognition time is the time when you received an amount in respect of the event happening.

Right to pay Australian currency

             (8)  To avoid doubt, for the purposes of this section, a right to pay Australian currency includes a right to pay Australian currency, where the right is subject to a contingency.



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