A derivative is a contract providing for future payments or financial rights and obligations determined by, or deriving their value from, a benchmark or other value independent of the contract.
Payments under derivatives can include payments determined by currency exchange rates, interest rate benchmarks, commodity price benchmarks or income from specified securities or other assets. Unlike traditional debt and equity securities, derivatives generally do not involve a return on an initial investment under the contract.
Common kinds of derivatives are swaps, forwards, futures and options.
Derivatives are often entered into for the commercial purpose of hedging or otherwise offsetting a liability or exposure of other contracts or assets. Derivatives may also be entered into for speculative or trading purposes, that is, for the purpose of making a future profit or gain from the net amounts payable under the derivative contract itself or from the disposal of the derivative contract prior to its settlement or expiry.
The derivative transaction categories are primarily based on the nature of the benchmark or value from which the payments under the derivative are derived or determined. For example, where the derivative is not a cross currency interest rate swap but the payments under the derivative are determined by reference to fixed or future currency exchange rates, the applicable derivative transaction category will be ‘Currency derivative’.
Code |
Description of transaction category |
|---|---|
CCIRS |
Cross currency interest rate swap Any IRPDs in the nature of cross currency interest rate swap or other agreement involving exchange of nominal or periodical interest payments in two or more currencies. |
CDCSFFO |
Currency derivative (not cross currency interest rate swap), including currency swap, forward, future or option Any IRPDs in the nature of currency derivatives (not cross currency interest rate swaps) including:
|
FFIRS |
Fixed for floating interest rate swap (not cross currency) Any IRPDs in the nature of a fixed for floating interest rate swap (not cross currency) such as an agreement to exchange future fixed interest on a notional principal amount for floating rate interest on a notional principal amount. |
OIRD |
Other interest rate derivative (not cross currency) Any IRPDs in the nature of an interest rate derivative (not cross currency) other than a fixed for floating interest rate swap (not cross currency). |
CDS |
Credit default swap Any IRPDs in the nature of a credit default swap that is intended to transfer the credit exposure of fixed income products including sovereign debts, government bonds, emerging market bonds, mortgage-backed securities or corporate bonds. |
CDCS |
Commodity derivative, including commodity swap, forward, future or option Any IRPDs in the nature of a commodity derivative where amounts payable are determined by reference to a value or benchmark for commodities including:
Commodity derivatives, including:
|
AS |
Other asset swap Any IRPDs in the nature of an asset swap that exchanges fixed amounts payable in respect of an asset or investment (for example, a corporate bond with guaranteed coupon payments) for a floating amounts payable in respect of an asset or investment (for example, shares, an index) or vice versa, excluding interest rate derivatives and commodity derivatives. |
OD |
Other derivative Any IRPDs in the nature of a derivative that is not covered by any of the following transaction categories:
|
- What is the transaction category?
Select the transaction category for the IRPD transaction.
(LCMSF32)
- Is this transaction part of a RAS?
If this transaction is covered by an IRPD agreement in a RAS, indicate True.
Otherwise indicate False.
(LCMSF33)
- How many transactions are part of the RAS?
If the transaction is part of a RAS, indicate the applicable range for the number of the transactions in the same RAS that were current during the income year:
- Low (1–5)
- Moderate (6–50)
- High (51 or more)
(LCMSF35)
- ABN or TFN of the Australian counterparty to the transaction/RAS
Show the ABN or TFN of the Australian counterparty (which may be the reporting entity itself) to the transaction/RAS.
(LCMSF83 and LCMSF84)
- Name of the IRP non-resident counterparty to the transaction/RAS
Show the full name of the IRP non-resident counterparty to this transaction/RAS.
The full name to be shown is the complete name of the IRP non-resident counterparty entity. While this would be expected to usually correspond with the name of the relevant party in any associated written agreement documentation, the full correct name of the entity should be shown at Part A even if this is not exactly the same as the name used in any associated written agreement documentation.
(LCMSF37)
- Tax residency of the IRP non-resident counterparty to the transaction/RAS
Show the country codeExternal Link for the country of tax residence of the IRP non-resident counterparty to this transaction/RAS.
(LCMSF38)
- Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS
If an amount of a capital nature was paid by the reporting entity in connection with this transaction/RAS during the income year, show this amount based on the reporting entity’s income tax records.
If no amount of a capital nature was paid by the reporting entity in connection with this transaction/RAS during the income year, show zero.
(LCMSF39)
- Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS
If an amount of a capital nature was received by the reporting entity in connection with this transaction/RAS during the income year, show this amount based on the reporting entity’s income tax records.
If no amount of a capital nature was received by the reporting entity in connection with this transaction/RAS during the income year, show zero.
(LCMSF40)
- Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS?
If non-monetary consideration of a capital nature was provided by the reporting entity in connection with this transaction/RAS during the income year, indicate True.
Otherwise indicate False.
(LCMSF85)
- Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS?
If non-monetary consideration of a capital nature was obtained by the reporting entity in connection with this transaction/RAS during the income year, indicate True.
Otherwise indicate False.
(LCMSF86)
- Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS
Show the amount of expenditure not of a capital nature for income tax purposes in connection with this transaction/RAS during the income year based on the reporting entity’s accounting records.
If there was no amount of expenditure not of a capital nature in connection with this transaction/RAS during the income year, show zero.
(LCMSF41)
- Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS
Show the amount of revenue not of a capital nature for income tax purposes in connection with this transaction/RAS during the income year show this amount based on the reporting entity’s accounting records.
If there was no amount of revenue not of a capital nature in connection with this transaction/RAS during the income year, show zero.
(LCMSF42)
- Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS?
If non-monetary consideration not of a capital nature for income tax purposes was provided by the reporting entity in connection with this transaction/RAS during the income year, indicate True.
Otherwise indicate False.
(LCMSF44)
- Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS?
If non-monetary consideration not of a capital nature was obtained by the reporting entity in connection with this transaction/RAS during the income year, indicate True.
Otherwise indicate False.
(LCMSF45)
- Amount of foreign exchange losses deducted for the transaction/RAS
Show the amount of foreign exchange losses deducted for income tax purposes by the reporting entity in connection with this transaction/RAS under Division 775 of the ITAA 1997 or, if applicable, the taxation of financial arrangements (TOFA) provisions in Division 230 of the ITAA 1997 for the income year.
For more information about the circumstances in which foreign exchange gains are assessable and foreign exchange losses are deductible for Australian income tax purposes, refer to Appendix 3.
If there was no foreign exchange loss deducted for income tax purposes in connection with this transaction/RAS for the income year, show zero.
(LCMSF87)
- Amount of foreign exchange gains returned for the transaction/RAS
Show the amount of foreign exchange gains assessable for income tax purposes in connection with this transaction/RAS under Division 775 of the ITAA 1997 or, if applicable, the TOFA provisions in Division 230 of the ITAA 1997 for the income year.
For more information about the circumstances in which foreign exchange gains are assessable and foreign exchange losses are deductible for Australian income tax purposes, refer to Appendix 3.
If there was no foreign exchange gain assessable for income tax purposes in connection with this transaction/RAS for the income year, show zero.
(LCMSF43)
- What transfer pricing / capital asset pricing methodology has been applied to this transaction/RAS?
If the reporting entity does not know which transfer pricing methodology has been applied to this transaction/RAS, select the code, UNKT (Unknown TP Method).
If the reporting entity does not know which capital asset pricing methodology has been applied to this transaction/RAS, select the code, UNKC (Unknown (CAP Method).
- (LCMSF46)
- What level of transfer pricing documentation has been prepared for this transaction/RAS?
The level of transfer pricing documentation refers to the aggregate dollar amount of this transaction/RAS for which the reporting entity has prepared relevant transfer pricing documentation, expressed as a percentage of total dollar value of this type of IRPD.
1 = 0%
2 = 1% to less than 25%
3 = 25% to less than 50%
4 = 50% to less than 75%
5 = 75% to less than 100%
6 = 100%
If this transaction/RAS meets the conditions for the Simplified Transfer Pricing Record Keeping (STPRK) option relating to Materiality in PCG 2017/2 Simplified Transfer Pricing Record Keeping Options, show code 7 to indicate that this option has been applied to the transaction/RAS.
(LCMSF47)
- If the reporting entity is a bank and this transaction is in a RAS, has the special short term tenor rule for ordinary borrowings and ordinary loans been applied to this RAS?
Always indicate False if the transaction type is not ordinary borrowings or ordinary loans.
(LCMSF88)
- If the reporting entity is a bank and this transaction is in a RAS, has the special short term tenor rule for short term derivatives been applied to this RAS?
If the reporting entity has an unconditional or conditional Australian banking licence and has applied the special short term tenor rule for short term derivatives for the RAS, indicate True.
Otherwise indicate False.
(LCMSF128)
- If the reporting entity is a bank and this transaction is in a RAS, has the special rule for FX derivatives been applied to this RAS?
If the reporting entity has an unconditional or conditional Australian banking licence and has applied the special rule for FX derivatives for the RAS, indicate True.
(LCMSF129)
- If the reporting entity is an OBU, is this transaction/RAS an OB activity?
If the reporting entity is an OBU and this transaction/RAS is an OB activity under sections 121D and 121EAA of the ITAA 1936, indicate True.
Otherwise indicate False.
(LCMSF63)
- Is this transaction/RAS covered by a category on the Exclusions List?
Indicate False, since none of the categories on the exclusions list can apply to derivatives.
(LCMSF48)
- What category of the Exclusions List applies to this transaction/RAS?
Not applicable.
(LCMSF49)
Reporting examples: IRPD Derivative transactions
Example 10: Currency forward contracts with UK IRP (no OBU or Australian banking licence)
Aus Co is a company that is resident in Australia for tax purposes.
Aus Co has an income tax year ending 30 June.
Aus Co’s functional currency for Australian tax purposes is Australian dollars.
Aus Co is not an OBU. Aus Co does not have a conditional or unconditional Australian banking licence.
Aus Co is subject to the TOFA rules in Division 230 of the ITAA 1997.
Aus Co entered into AUD/USD and AUD/GBP currency forward contracts with an IRP resident for tax purposes in the UK (UK Co). The currency forwards that were current in the income year as recorded in Aus Co’s accounting records are indicated in the tables below.
Table 19: USD/AUD/USD and AUD/USD/AUD currency forwards with UK Co
Party delivering USD |
Party delivering AUD |
Amount / currency payable (to be delivered) under forward |
Amount / currency receivable (to be obtained) under forward |
Tenor of forward |
When forward entered into |
|---|---|---|---|---|---|
Aus Co |
UK Co |
US$5m |
A$6.5m |
3 months |
Before income year |
Aus Co |
UK Co |
US$12m |
A$15m |
3 months |
During income year |
Aus Co |
UK Co |
US$40m |
A$50m |
12 months |
During income year |
Aus Co |
UK Co |
US$75m |
A$100m |
10 years |
Before income year |
UK Co |
Aus Co |
AU$10m |
U$7m |
3 months |
During income year |
Table 20: GBP/AUD currency forwards with UK Co
Party delivering GBP |
Party delivering AUD |
Amount/ currency payable (to be delivered) under forward |
Amount/ currency receivable (to be obtained) under forward |
Tenor of forward |
When forward entered into |
|---|---|---|---|---|---|
Aus Co |
UK Co |
GB£10m |
A$17m |
3 months |
During income year |
Aus Co |
UK Co |
GB£5m |
A$8m |
3 months |
During income year |
Aus Co |
UK Co |
GB£30m |
A$50m |
6 months |
Before income year |
The two three-month USD/AUD forwards with UK Co are with same IRP on the same terms except for date, volume, price and delivery. These two forwards are not hedging specific exposures or liabilities arising in connection with Aus Co’s related party dealings. Accordingly, these two currency forwards are in the same RAS with the result that the values for the two forwards can be aggregated in Part B of the local file.
The USD/AUD forwards with UK Co with tenors of 12 months and 10 years are not on the same terms except for date, volume, price and delivery as the two three-month USD/AUD forwards with UK Co because financial arrangements with different express tenors cannot be included in the same RAS. For more information about how financial agreements with different tenors cannot be included in the same RAS, refer to paragraphs 4(a) and 27 of Local file – Part B: Guidance on providing international related party agreements.
The three-month AUD/USD forward with UK Co is not on the same terms except for date, volume, price and delivery as the two three-month USD/AUD forwards with UK Co because a transaction under which the reporting entity provides Australian dollars in exchange for US dollars is not on the same terms (except for date, volume, price and delivery) as a transaction under which the reporting entity provides US dollars in exchange for Australian dollars. For more about how agreements on reverse or opposite terms cannot be included in the same RAS, refer to paragraph 30 of Local file – Part B: Guidance on providing international related party agreements.
The three-month GBP/AUD forwards with UK Co are not on the same terms except for date, volume, price and delivery as the two three-month USD/AUD forwards with UK Co because a transaction under which the reporting entity provides pounds sterling in exchange for Australian dollars is not on the same terms (except for date, volume, price and delivery) as a transaction under which the reporting entity provides US dollars in exchange for Australian dollars. For more information refer to paragraphs 4(a) and 31(c) of Local file – Part B: Guidance on providing international related party agreements.
For the income year, Aus Co has deducted foreign exchange losses and returned foreign exchange gains for the currency forwards as indicated in the table below (figures are provided for reporting illustration purposes only, and are not intended to reflect accurate or precisely calculated FX gains or losses for the income year).
Table 21: Assessable FX gains returned and deductible FX losses deducted for currency forwards for income year
FX Type |
USD/AUD (three month) forwards in RAS |
USD/AUD (12 month) forward |
USD/AUD (10 year) forward |
AUD/USD (three month) forward |
GBP/AUD (three month) forwards in RAS |
GBP/AUD (six month) forwards |
|---|---|---|---|---|---|---|
FX gains returned |
400,000 |
2m |
0 |
$80,000 |
$140,000 |
$200,000 |
FX gains deducted |
0 |
0 |
$700,000 |
0 |
0 |
0 |
Aus Co has applied the transfer pricing methodology ‘Comparable uncontrolled price method’ to all its currency forwards with UK Co.
Aus Co has prepared relevant contemporaneous transfer pricing documentation for 100% of its currency forwards with UK Co.
Aus Co completes the questions for the six IRP transactions/RASs in this example based on its accounting records as shown in the following tables.
Table 22: Completed entry – USD/AUD (three month) forwards (in RAS) with UK Co (currency derivative)
Question no. |
Question label |
Response |
|---|---|---|
na |
Local file – Part A Transaction Identifier |
[Transaction ID] |
1 |
Transaction category |
CDCSFFO |
2 |
Is this transaction part of a RAS? |
True |
3 |
How many transactions are part of the RAS? |
Low |
4 |
ABN or TFN of the Australian counterparty to the transaction/RAS |
[ABN or TFN] |
5 |
Name of the IRP non-resident counterparty to the transaction/RAS |
UK Co |
6 |
Tax residence of the IRP non-resident counterparty to the transaction/RAS |
GB |
7 |
Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS |
AUD equiv. of USD 17000000 |
8 |
Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS |
215000000 |
9 |
Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS? |
False |
10 |
Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS? |
False |
11 |
Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS |
0 |
12 |
Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS |
0 |
13 |
Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS? |
False |
14 |
Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS? |
False |
15 |
Amount of foreign exchange losses deducted for the transaction/RAS |
0 |
16 |
Amount of foreign exchange gains returned for the transaction/RAS |
400000 |
17 |
What transfer pricing / capital asset pricing methodology has been applied to the transaction/RAS? |
CUP |
18 |
What level of transfer pricing documentation has been prepared for this transaction/RAS? |
6 |
19 |
If the reporting entity is a bank and transaction is in a RAS, has the special short term tenor rule for ordinary borrowings and ordinary loans been applied to this RAS? |
False |
20 |
If the reporting entity is a bank and this transaction is in a RAS, has the special short term tenor rule for short term derivatives been applied to this RAS? |
False |
21 |
If the reporting entity is a bank and this transaction is in a RAS, has the special rule for FX derivatives been applied to this RAS? |
False |
22 |
If the reporting entity is an OBU, is this transaction/RAS an OB activity? |
False |
23 |
Is this transaction/RAS covered by a category on the Exclusions List? |
False |
24 |
What category of the Exclusions List applies to this transaction/RAS? |
na |
Table 23: Completed entry – AUD/USD (3 month) forward with UK Co (currency derivative)
Question no. |
Question label |
Response |
|---|---|---|
na |
Local file – Part A Transaction Identifier |
[Transaction ID] |
1 |
Transaction category |
CDCSFFO |
2 |
Is this transaction part of a RAS? |
False |
3 |
How many transactions are part of the RAS? |
na |
4 |
ABN or TFN of the Australian counterparty to the transaction/RAS |
[ABN or TFN] |
5 |
Name of the IRP non-resident counterparty to the transaction/RAS |
UK Co |
6 |
Tax residence of the IRP non-resident counterparty to the transaction/RAS |
GB |
7 |
Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS |
10000000 |
8 |
Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS |
AUD equiv. of USD 7000000 |
9 |
Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS? |
False |
10 |
Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS? |
False |
11 |
Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS |
0 |
12 |
Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS |
0 |
13 |
Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS? |
False |
14 |
Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS? |
False |
15 |
Amount of foreign exchange losses deducted for the transaction/RAS |
0 |
16 |
Amount of foreign exchange gains returned for the transaction/RAS |
80000 |
17 |
What transfer pricing / capital asset pricing methodology has been applied to the transaction/RAS? |
CUP |
18 |
What level of transfer pricing documentation has been prepared for this transaction/RAS? |
6 |
19 |
If the reporting entity is a bank and transaction is in a RAS, has the special short term tenor rule for ordinary borrowings and ordinary loans been applied to this RAS? |
False |
20 |
If the reporting entity is a bank and this transaction is in a RAS, has the special short term tenor rule for short term derivatives been applied to this RAS? |
False |
21 |
If the reporting entity is a bank and this transaction is in a RAS, has the special rule for FX derivatives been applied to this RAS? |
False |
22 |
If the reporting entity is an OBU, is this transaction/RAS an OB activity? |
False |
23 |
Is this transaction/RAS covered by a category on the Exclusions List? |
False |
24 |
What category of the Exclusions List applies to this transaction/RAS? |
na |
Table 24: Completed entry – USD/AUD (12 month) forward with UK Co (currency derivative)
Question no. |
Question label |
Response |
|---|---|---|
na |
Local file – Part A Transaction Identifier |
[Transaction ID] |
1 |
Transaction category |
CDCSFFO |
2 |
Is this transaction part of a RAS? |
False |
3 |
How many transactions are part of the RAS? |
na |
4 |
ABN or TFN of the Australian counterparty to the transaction/RAS |
[ABN or TFN] |
5 |
Name of the IRP non-resident counterparty to the transaction/RAS |
UK Co |
6 |
Tax residence of the IRP non-resident counterparty to the transaction/RAS |
GB |
7 |
Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS |
AUD equiv. of USD 40000000 |
8 |
Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS |
50000000 |
9 |
Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS? |
False |
10 |
Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS? |
False |
11 |
Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS |
0 |
12 |
Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS |
0 |
13 |
Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS? |
False |
14 |
Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS? |
False |
15 |
Amount of foreign exchange losses deducted for the transaction/RAS |
0 |
16 |
Amount of foreign exchange gains returned for the transaction/RAS |
2000000 |
17 |
What transfer pricing / capital asset pricing methodology has been applied to the transaction/RAS? |
CUP |
18 |
What level of transfer pricing documentation has been prepared for this transaction/RAS? |
6 |
19 |
If the reporting entity is a bank and transaction is in a RAS, has the special short term tenor rule for ordinary borrowings and ordinary loans been applied to this RAS? |
False |
20 |
If the reporting entity is a bank and this transaction is in a RAS, has the special short term tenor rule for short term derivatives been applied to this RAS? |
False |
21 |
If the reporting entity is a bank and this transaction is in a RAS, has the special rule for FX derivatives been applied to this RAS? |
False |
22 |
If the reporting entity is an OBU, is this transaction/RAS an OB activity? |
False |
23 |
Is this transaction/RAS covered by a category on the Exclusions List? |
False |
24 |
What category of the Exclusions List applies to this transaction/RAS? |
na |
Table 25: Completed entry – USD/AUD (10 year) forward with UK Co (currency derivative)
Question no. |
Question label |
Response |
|---|---|---|
na |
Local file – Part A Transaction Identifier |
[Transaction ID] |
1 |
Transaction category |
CDCSFFO |
2 |
Is this transaction part of a RAS? |
False |
3 |
How many transactions are part of the RAS? |
na |
4 |
ABN or TFN of the Australian counterparty to the transaction/RAS |
[ABN or TFN] |
5 |
Name of the IRP non-resident counterparty to the transaction/RAS |
UK Co |
6 |
Tax residence of the IRP non-resident counterparty to the transaction/RAS |
GB |
7 |
Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS |
AUD equiv. of USD 75000000 |
8 |
Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS |
100000000 |
9 |
Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS? |
False |
10 |
Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS? |
False |
11 |
Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS |
0 |
12 |
Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS |
0 |
13 |
Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS? |
False |
14 |
Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS? |
False |
15 |
Amount of foreign exchange losses deducted for the transaction/RAS |
700000 |
16 |
Amount of foreign exchange gains returned for the transaction/RAS |
0 |
17 |
What transfer pricing / capital asset pricing methodology has been applied to the transaction/RAS? |
CUP |
18 |
What level of transfer pricing documentation has been prepared for this transaction/RAS? |
6 |
19 |
If the reporting entity is a bank and transaction is in a RAS, has the special short term tenor rule for ordinary borrowings and ordinary loans been applied to this RAS? |
False |
20 |
If the reporting entity is a bank and this transaction is in a RAS, has the special short term tenor rule for short term derivatives been applied to this RAS? |
False |
21 |
If the reporting entity is a bank and this transaction is in a RAS, has the special rule for FX derivatives been applied to this RAS? |
False |
22 |
If the reporting entity is an OBU, is this transaction/RAS an OB activity? |
False |
23 |
Is this transaction/RAS covered by a category on the Exclusions List? |
False |
24 |
What category of the Exclusions List applies to this transaction/RAS? |
na |
Table 26: Completed entry – GBP/AUD (3 month) forwards (in RAS) with UK Co (currency derivative)
Question no. |
Question label |
Response |
|---|---|---|
na |
Local file – Part A Transaction Identifier |
[Transaction ID] |
1 |
Transaction category |
CDCSFFO |
2 |
Is this transaction part of a RAS? |
True |
3 |
How many transactions are part of the RAS? |
Low |
4 |
ABN or TFN of the Australian counterparty to the transaction/RAS |
[ABN or TFN] |
5 |
Name of IRP the non-resident counterparty to the transaction/RAS |
UK Co |
6 |
Tax residence of the IRP non-resident counterparty to the transaction/RAS |
GB |
7 |
Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS |
AUD equiv. of GBP 15000000 |
8 |
Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS |
25000000 |
9 |
Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS? |
False |
10 |
Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS? |
False |
11 |
Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS |
0 |
12 |
Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS |
0 |
13 |
Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS? |
False |
14 |
Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS? |
False |
15 |
Amount of foreign exchange losses deducted for the transaction/RAS |
0 |
16 |
Amount of foreign exchange gains returned for the transaction/RAS |
140000 |
17 |
What transfer pricing / capital asset pricing methodology has been applied to the transaction/RAS? |
CUP |
18 |
What level of transfer pricing documentation has been prepared for this transaction/RAS? |
6 |
19 |
If the reporting entity is a bank and transaction is in a RAS, has the special short term tenor rule for ordinary borrowings and ordinary loans been applied to this RAS? |
False |
20 |
If the reporting entity is a bank and this transaction is in a RAS, has the special short term tenor rule for short term derivatives been applied to this RAS? |
False |
21 |
If the reporting entity is a bank and this transaction is in a RAS, has the special rule for FX derivatives been applied to this RAS? |
False |
22 |
If the reporting entity is an OBU, is this transaction/RAS an OB activity? |
False |
23 |
Is this transaction/RAS covered by a category on the Exclusions List? |
False |
24 |
What category of the Exclusions List applies to this transaction/RAS? |
na |
Table 27: Completed entry – GBP/AUD (6 month) forwards with UK Co (currency derivative)
Question no. |
Question label |
Response |
|---|---|---|
na |
Local file – Part A Transaction Identifier |
[Transaction ID] |
1 |
Transaction category |
CDCSFFO |
2 |
Is this transaction part of a RAS? |
False |
3 |
How many transactions are part of the RAS? |
na |
4 |
ABN or TFN of the Australian counterparty to the transaction/RAS |
[ABN or TFN] |
5 |
Name of the IRP non-resident counterparty to the transaction/RAS |
UK Co |
6 |
Tax residence of the IRP non-resident counterparty to the transaction/RAS |
GB |
7 |
Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS |
AUD equiv. of GBP 30000000 |
8 |
Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS |
50000000 |
9 |
Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS? |
False |
10 |
Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS? |
False |
11 |
Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS |
0 |
12 |
Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS |
0 |
13 |
Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS? |
False |
14 |
Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS? |
False |
15 |
Amount of foreign exchange losses deducted for the transaction/RAS |
0 |
16 |
Amount of foreign exchange gains returned for the transaction/RAS |
200000 |
17 |
What transfer pricing / capital asset pricing methodology has been applied to the transaction/RAS? |
CUP |
18 |
What level of transfer pricing documentation has been prepared for this transaction/RAS? |
6 |
19 |
If the reporting entity is a bank and transaction is in a RAS, has the special short term tenor rule for ordinary borrowings and ordinary loans been applied to this RAS? |
False |
20 |
If the reporting entity is a bank and this transaction is in a RAS, has the special short term tenor rule for short term derivatives been applied to this RAS? |
False |
21 |
If the reporting entity is a bank and this transaction is in a RAS, has the special rule for FX derivatives been applied to this RAS? |
False |
22 |
If the reporting entity is an OBU, is this transaction/RAS an OB activity? |
False |
23 |
Is this transaction/RAS covered by a category on the Exclusions List? |
False |
24 |
What category of the Exclusions List applies to this transaction/RAS? |
na |
End of example
Example 11: Currency forward contracts with UK IRP (Aus Co is an OBU and has Australian banking licence)
The facts are the same as the facts in Example 10 except for the following:
- Aus Co is an OBU.
- Aus Co has an unconditional Australian banking licence.
- All the currency forwards are OB activities under sections 121D and 121EAA of the ITAA 1997.
- Under the internal rules of the Aus Co’s global group, Aus Co is responsible for pooling and externally hedging the banking group’s FX risk.
- With the exception of the 10 year USD/AUD forward, all the forwards effectively hedge, and do not deliberately or materially over-hedge, third-party customer exposures of UK Co.
UK Co is eligible to use, and applies, both of the following special rules for banks:
As a result, except for the 10 year USD/AUD forward, all of the following forwards which are OB activities under sections 121D and 121EAA of the ITAA 1997 may be included in the same RAS:
- The USD/AUD forwards
- The AUD/USD forward
- The GBP/AUD forwards
The amounts of each currency payable (to be delivered) and receivable (to be obtained) under the forwards as recorded in Aus Co’s accounting records, after aggregating the values for the forwards in the RAS, are shown in the following table.
Australian dollar equivalent figures are provided for reporting illustration purposes only and not intended to reflect accurate or precise figures calculated on relevant settlement dates.
Table 28: USD/AUD, AUD/USD and GBP/AUD currency forwards with UK Co
Derivatives |
USD/AUD (three month) & AUD/USD (three month) & USD/AUD (12 month) & GBP/AUD (three month) & GBP/AUD (6 month) forwards in RAS |
USD/AUD (10 year) forward |
||
|---|---|---|---|---|
Amounts payable/receivable |
Amount / currency (payable) / receivable under forward |
AUD equivalent |
Amount / currency (payable) / receivable under forward |
AUD equivalent |
AUD receivable |
A$246.5m |
A$246.5m |
A$100m |
A$100m |
USD payable |
US$132m |
A$174.24m |
US$75m |
A$99m |
AUD payable |
A$10m |
A$10m |
0 |
0 |
USD receivable |
US$7m |
A$9.24m |
0 |
0 |
GBP payable |
GB£45m |
A$75m |
0 |
0 |
Total AUD equivalent (receivable) |
0 |
A$255.74m |
na |
A$100m |
Total AUD equivalent (payables) |
0 |
A$259.24m |
na |
A$99m |
For the income year, Aus Co has deducted foreign exchange losses and returned foreign exchange gains for the currency forwards as indicated in the table below. Figures are provided for reporting illustration purposes only and not intended to reflect accurate or precisely calculated FX gains or losses for the income year.
Table 29: Assessable FX gains returned and deductible FX losses deducted for currency forwards for income year
FX Type |
USD/AUD (three month) & AUD/USD (three month) & USD/AUD (12 month) & GBP/AUD (three month) & GBP/AUD (six month) forwards in RAS |
USD/AUD (10 year) forward |
|---|---|---|
FX gains returned |
$2.82m |
0 |
FX losses deducted |
0 |
$700,000 |
Aus Co has applied the transfer pricing methodology ‘Comparable uncontrolled price method’ to all its currency forwards with UK Co.
Aus Co has prepared relevant contemporaneous transfer pricing documentation for 100% of its currency forwards with UK Co.
Aus Co completes the questions for the IRP transactions/RAS in this example based on its accounting records as shown in the following tables.
Table 30: Completed entry – USD/AUD, AUD/USD & GBP/AUD forwards (in RAS) with UK Co (currency derivative)
Question no. |
Question label |
Response |
|---|---|---|
na |
Local file – Part A Transaction Identifier |
[Transaction ID] |
1 |
Transaction category |
CDCSFFO |
2 |
Is this transaction part of a RAS? |
True |
3 |
How many transactions part of the RAS? |
Moderate |
4 |
ABN or TFN of the Australian counterparty to the transaction/RAS |
[ABN or TFN] |
5 |
Name of the IRP non-resident counterparty to the transaction/RAS |
UK Co |
6 |
Tax residence of the IRP non-resident counterparty to the transaction/RAS |
GB |
7 |
Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS |
259240000 |
8 |
Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS |
255740000 |
9 |
Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS? |
False |
10 |
Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS? |
False |
11 |
Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS |
0 |
12 |
Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS |
0 |
13 |
Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS? |
False |
14 |
Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS? |
False |
15 |
Amount of foreign exchange losses deducted for the transaction/RAS |
0 |
16 |
Amount of foreign exchange gains returned for the transaction/RAS |
2820000 |
17 |
What transfer pricing / capital asset pricing methodology has been applied to the transaction/RAS? |
CUP |
18 |
What level of transfer pricing documentation has been prepared for this transaction/RAS? |
6 |
19 |
If the reporting entity is a bank and transaction is in a RAS, has the special short term tenor rule for ordinary borrowings and ordinary loans been applied to this RAS? |
False |
20 |
If the reporting entity is a bank and this transaction is in a RAS, has the special short term tenor rule for short term derivatives been applied to this RAS? |
True |
21 |
If the reporting entity is a bank and this transaction is in a RAS, has the special rule for FX derivatives been applied to this RAS? |
True |
22 |
If the reporting entity is an OBU, is this transaction/RAS an OB activity? |
True |
23 |
Is this transaction/RAS covered by a category on the Exclusions List? |
False |
24 |
What category of the Exclusions List applies to this transaction/RAS? |
na |
Table 31: Completed entry – USD/AUD (10 year) forward with UK Co (currency derivative)
Question no. |
Question label |
Response |
|---|---|---|
na |
Local file – Part A Transaction Identifier |
[Transaction ID] |
1 |
Transaction category |
CDCSFFO |
2 |
Is this transaction part of a RAS? |
False |
3 |
How many transactions are part of the RAS? |
na |
4 |
ABN or TFN of the Australian counterparty to the transaction/RAS |
[ABN or TFN] |
5 |
Name of the IRP non-resident counterparty to the transaction/RAS |
UK Co |
6 |
Tax residence of the IRP non-resident counterparty to the transaction/RAS |
GB |
7 |
Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS |
99000000 |
8 |
Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS |
100000000 |
9 |
Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS? |
False |
10 |
Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS? |
False |
11 |
Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS |
0 |
12 |
Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS |
0 |
13 |
Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS? |
False |
14 |
Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS? |
False |
15 |
Amount of foreign exchange losses deducted for the transaction/RAS |
700000 |
16 |
Amount of foreign exchange gains returned for the transaction/RAS |
0 |
17 |
What transfer pricing / capital asset pricing methodology has been applied to the transaction/RAS? |
CUP |
18 |
What level of transfer pricing documentation has been prepared for this transaction/RAS? |
6 |
19 |
If the reporting entity is a bank and transaction is in a RAS, has the special short term tenor rule for ordinary borrowings and ordinary loans been applied to this RAS? |
False |
20 |
If the reporting entity is a bank and this transaction is in a RAS, has the special short term tenor rule for short term derivatives been applied to this RAS? |
False |
21 |
If the reporting entity is a bank and this transaction is in a RAS, has the special rule for FX derivatives been applied to this RAS? |
False |
22 |
If the reporting entity is an OBU, is this transaction/RAS an OB activity? |
True |
23 |
Is this transaction/RAS covered by a category on the Exclusions List? |
False |
24 |
What category of the Exclusions List applies to this transaction/RAS? |
na |
End of example