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IRPD derivative transactions

Last updated 8 August 2022

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 derivatives transaction category is 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’.

Table 21: IRPD Derivative transactions

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:

  • currency swaps (an agreement to exchange interest and/or principal on an actual or notional loan in one currency for interest and/or principal on an actual or notional loan in another currency)
  • currency forwards (an over-the-counter contract that locks in the exchange rateExternal Link for the purchase or sale of a currencyExternal Link on a future date)
  • currency futures (a contract generally made via a futures exchange, to exchange one currency for another at a specified date in the future at a fixed exchange rate)
  • currency options (a contract that grants the buyer the right, but not the obligation, to buy or sell a specified currency at a specified exchange rateExternal Link on or before a specified date).    

 

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:

  • chemicals
  • energy
  • base and precious metals
  • livestock
  • grains
  • softs (commodities that are grown, rather than mined such as coffee, cocoa, sugar, corn, wheat, soybean, fruit).

Commodity derivatives, including:

  • commodity swaps (a fixed price for a commodity is swapped for a floating commodity value or benchmark)
  • commodity forwards (an over-the-counter contract that locks in the price for the purchase or sale of a commodity on a future date)
  • commodity futures (a contract generally made via an exchange, to buy or sell a commodity at a specified date in the future at a fixed price)
  • commodity options (a contract that grants the buyer the right, but not the obligation, to buy or sell a commodity at a specified price on or before a specified date).    

 

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:

  • Cross currency interest rate swap
  • Currency derivative (not cross currency interest rate swap), including currency swap, forward, future or option
  • Fixed for floating interest rate swap (not cross currency)
  • Other interest rate derivative (not cross currency)
  • Credit default swap
  • Asset swap
  • Commodity derivative, including commodity swap, forward, future or option.     

 

Any amounts provided at any of the below questions should be reported in whole dollars and cents.

  1. Transaction ID

Show the Transaction ID for the transaction being reported.

(LCMSF31)

  1. Related Transaction Identifier(s)

Show all Transaction IDs that are related or directly connected to the transaction being reported.

(LCMSF206)

  1. What is the transaction category?

Select the transaction category for the IRPD transaction.

(LCMSF32)

  1. 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)

  1. 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)

  1. Australian counterparty name

Show the full name of the Australian counterparty (which may be the reporting entity itself) to this transaction/RAS.

(LCMSF207)

  1. ABN or TFN of the Australian counterparty to the transaction/RAS

Show the ABN or TFN or both of the Australian counterparty (which may be the reporting entity itself) to the transaction/RAS.

(LCMSF83 and LCMSF84)

  1. 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)

  1. Tax residency of the IRP non-resident counterparty to the transaction/RAS

Show the country code for the country of tax residence of the IRP non-resident counterparty to this transaction/RAS.

(LCMSF38)

  1. Was the transaction/RAS entered into by the non-resident counterparty in the course of its business operations carried on through a permanent establishment in a different country to its country of tax residence?

Indicate True if the transaction/RAS was entered into by the non-resident counterparty in the course of its business operations carried on through a PE in a different country to its country of tax residence.

Otherwise indicate False.

(LCMSF208)

  1. Country of permanent establishment of non-resident counterparty

This question applies only if you answer True to Question 10.

Show the country code of the PE through which the non-resident counterparty entered into the transaction/RAS. This code must not be the same as the code reported at Question 9 (LCMSF38) for the country of tax residence of the non-resident counterparty.

(LCMSF209)

  1. 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.

Show zero if no amount of a capital nature was paid by the reporting entity in connection with this transaction/RAS during the income year.

Principal or notional principal amounts paid by the reporting entity under a derivative during the income year should be shown here. This applies regardless of whether the derivative transaction itself is on revenue account.

(LCMSF39)

  1. 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.

Show zero if no amount of a capital nature was received by the reporting entity in connection with this transaction/RAS during the income year.

Principal or notional principal amounts received by the reporting entity under a derivative during the income year should be shown here. This applies regardless of whether the derivative transaction itself is on revenue account.

(LCMSF40)

  1. Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS?

Indicate True if non-monetary consideration of a capital nature was provided by the reporting entity in connection with this transaction/RAS during the income year.

Otherwise indicate False.

(LCMSF85)

  1. Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS?

Indicate True if non-monetary consideration of a capital nature was obtained by the reporting entity in connection with this transaction/RAS during the income year.

Otherwise indicate False.

(LCMSF86)

  1. 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.

For derivatives for which you use mark-to-market or fair value accounting for financial accounting purposes, the amount of expenditure (not of a capital nature for income tax purposes) includes the total value of any fair value loss recorded in your financial statements for the relevant income year.

For derivatives where the parties make regular payments (for example interest rate swaps), gross payments (excluding principal amounts) made by the reporting entity would be expected to be expenditure for accounting purposes and included here.

For derivatives where the payments due under the agreement are calculated as a net amount, any net amount paid (excluding principal amounts) by the reporting entity would be expected to be expenditure for accounting purposes and included here.

Do not include here any principal or notional principal amounts paid by the reporting entity under a derivative during the income year.

Principal or notional principal amounts paid should instead be shown at Question 12 'Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS' (LCMSF39).

Show zero if there was no amount of expenditure not of a capital nature in connection with this transaction/RAS during the income year.

(LCMSF41)

  1. 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 based on the reporting entity’s accounting records.

For derivatives for which you use mark-to-market or fair value accounting for financial accounting purposes, the amount of revenue (not of a capital nature for income tax purposes) includes the total value of any fair value gains recorded in your financial statements for the relevant income year.

For derivatives where the parties make regular payments (for example interest rate swaps), gross payments (excluding principal amounts) received by the reporting entity would be expected to be revenue for accounting purposes and included here.

For derivatives where the payments due under the agreement are calculated as a net amount, any net amount received (excluding principal amounts) by the reporting entity would be expected to be revenue for accounting purposes and included here.

Do not include here any principal or notional principal amounts received by the reporting entity under a derivative during the income year.

Principal or notional principal amounts received should instead be shown at Question 13 'Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS' (LCMSF40).

Show zero if there was no amount of revenue not of a capital nature in connection with this transaction/RAS during the income year.

(LCMSF42)

  1. Average balance of debt interests issued (Inbound Borrowings)

Not applicable.

(LCMSF210)

  1. Capitalised interest deducted

Not applicable.

(LCMSF211)

  1. Average balance of debt interests held (Outbound Loans)

Not applicable.

(LCMSF212)

  1. Capitalised interest returned

Not applicable.

(LCMSF213)

  1. Book values

Not applicable.

(LCMSF214)

  1. Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS?

Indicate True 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.

Otherwise indicate False.

(LCMSF44)

  1. Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS?

Indicate True if non-monetary consideration not of a capital nature for income tax purposes was obtained by the reporting entity in connection with this transaction/RAS during the income year.

Otherwise indicate False.

(LCMSF45)

  1. Is the debt interest (including borrowing/loan) interest-free?

Not applicable

(LCMSF237)

  1. Did you enter into a deferred foreign currency payment arrangement in relation to this transaction?

Not applicable for this transaction category.

(LCMSF215)

  1. Foreign Currency Reporting Type

Not applicable for this transaction category.

(LCMSF216)

  1. Foreign Currency Code

Not applicable for this transaction category.

(LCMSF217)

  1. 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 6.

Show zero if there was no foreign exchange loss deducted for income tax purposes in connection with this transaction/RAS for the income year.

(LCMSF87)

  1. Foreign Currency Code

Show the Foreign Currency CodeExternal Link in relation to foreign exchange losses deducted for the transaction/RAS

(LCMSF219)

  1. 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 6.

Show zero if there was no foreign exchange gain assessable for income tax purposes in connection with this transaction/RAS for the income year.

(LCMSF43)

  1. Foreign Currency Code

Show the Foreign Currency CodeExternal Link in relation to assessable foreign exchange gains for the transaction/RAS.

(LCMSF221)

  1. What transfer pricing/capital asset pricing methodology has been applied to this transaction/RAS?

Select the code UNKT (Unknown TP Method) if the reporting entity does not know which transfer pricing methodology has been applied to this transaction/RAS.

Select UNKC (Unknown CAP Method) if the reporting entity does not know which capital asset pricing methodology has been applied to this transaction/RAS.

(LCMSF46)

  1. 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 Green Zone (PCG 2017/4), show code 16 to indicate that this option has been applied to the transaction/RAS.

(LCMSF47)

  1. 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)

  1. 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?

Indicate True 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.

Otherwise indicate False.

(LCMSF128)

  1. 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?

Indicate True if the reporting entity has an unconditional or conditional Australian banking licence and has applied the special rule for FX derivatives for the RAS.

Otherwise indicate False.

(LCMSF129)

  1. If the reporting entity is an OBU, is this transaction/RAS an OB activity?

Indicate True if the reporting entity is an OBU and this transaction/RAS is an OB activity under sections 121D and 121EAA of the ITAA 1936.

Otherwise indicate False.

(LCMSF63)

  1. 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)

  1. What category of the Exclusions List applies to this transaction/RAS?

Not applicable.

(LCMSF49)

  1. Transaction Comments

Provide any relevant comments in respect of the transaction/RAS.

You must provide a short description if the kind of transaction being reported is OD (Other derivative).

(LCMSF222)

Reporting examples: IRPD Derivative transactions

Example 11: 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 22: 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

A$10m

U$7m

3 months

During income year

 

Table 23: 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 Appendix 8.

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 Appendix 8.

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 Appendix 8.

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 24: Assessable FX gains returned and deductible FX losses deducted for currency forwards for income year

FX Type

USD/AUD (3 month) forwards in RAS

USD/AUD (12 month) forward

USD/AUD (10 year) forward

AUD/USD (3 month) forward

GBP/AUD (3 month) forwards in RAS

GBP/AUD (6 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.

UK Co does not carry on its business operations through a permanent establishment.

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 25: Completed entry for Example 11 – USD/AUD (3 month) forwards (in RAS) with UK Co (currency derivative)

Question no.

Question label

Response

1

Transaction Identifier

[Transaction ID]

2

Related Transaction Identifier(s)

[Transaction IDs]

3

Transaction category

CDCSFFO

4

Is this transaction part of a RAS?

True

5

How many transactions are part of the RAS?

Low

6

Australian counterparty name

[Australian counterparty name]

7

ABN or TFN of the Australian counterparty to the transaction/RAS

[ABN or TFN]

8

Name of the IRP non-resident counterparty to the transaction/RAS

UK Co

9

Tax residence of the IRP non-resident counterparty to the transaction/RAS

GB

10

Was the transaction/RAS entered into by the non-resident counterparty in the course of its business operations carried on through a permanent establishment in a different country to its country of tax residence?

False

11

Country of permanent establishment counterparty

Na

12

Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS

AUD equiv. of USD 17000000

13

Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS

21500000

14

Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS?

False

15

Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS?

False

16

Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS

0

17

Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS

0

18

Average balance of debt interests issued (Inbound Borrowings)

Na

19

Capitalised interest deducted

Na

20

Average balance of debt interests held (Outbound Loans)

Na

21

Capitalised interest returned

Na

22

Book values

Na

23

Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS?

False

24

Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS?

False

25

Is the debt interest (including borrowing/loan) interest-free?

Na

26

Did you enter into a deferred foreign currency payment arrangement in relation to this transaction

Na

27

Foreign Currency Reporting Type

Na

28

Foreign Currency Code

Na

29

Amount of foreign exchange losses deducted for the transaction/RAS

0

30

Foreign Currency Code

Na

31

Amount of foreign exchange gains returned for the transaction/RAS

400000

32

Foreign Currency Code

USD

33

What transfer pricing/capital asset pricing methodology has been applied to the transaction/RAS?

CUP

34

What level of transfer pricing documentation has been prepared for this transaction/RAS?

6

35

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

36

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

37

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

38

If the reporting entity is an OBU, is this transaction/RAS an OB activity?

False

39

Is this transaction/RAS covered by a category on the Exclusions List?

False

40

What category of the Exclusions List applies to this transaction/RAS?

Na

41

Transaction Comments

[Comments]

 

Table 26: Completed entry for Example 11 – AUD/USD (3 month) forward with UK Co (currency derivative)

Question no.

Question label

Response

1

Transaction Identifier

[Transaction ID]

2

Related Transaction Identifier(s)

[Transaction IDs]

3

Transaction category

CDCSFFO

4

Is this transaction part of a RAS?

False

5

How many transactions are part of the RAS?

Na

6

Australian counterparty name

[Australian counterparty name]

7

ABN or TFN of the Australian counterparty to the transaction/RAS

[ABN or TFN]

8

Name of the IRP non-resident counterparty to the transaction/RAS

UK Co

9

Tax residence of the IRP non-resident counterparty to the transaction/RAS

GB

10

Was the transaction/RAS entered into by the non-resident counterparty in the course of its business operations carried on through a permanent establishment in a different country to its country of tax residence?

False

11

Country of permanent establishment counterparty

Na

12

Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS

10000000

13

Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS

AUD equiv. of USD 7000000

14

Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS?

False

15

Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS?

False

16

Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS

0

17

Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS

0

18

Average balance of debt interests issued (Inbound Borrowings)

Na

19

Capitalised interest deducted

Na

20

Average balance of debt interests held (Outbound Loans)

Na

21

Capitalised interest returned

Na

22

Book values

Na

23

Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS?

False

24

Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS?

False

25

Is the debt interest (including borrowing/loan) interest-free?

Na

26

Did you enter into a deferred foreign currency payment arrangement in relation to this transaction

Na

27

Foreign Currency Reporting Type

Na

28

Foreign Currency Code

Na

29

Amount of foreign exchange losses deducted for the transaction/RAS

0

30

Foreign Currency Code

Na

31

Amount of foreign exchange gains returned for the transaction/RAS

80000

32

Foreign Currency Code

USD

33

What transfer pricing/capital asset pricing methodology has been applied to the transaction/RAS?

CUP

34

What level of transfer pricing documentation has been prepared for this transaction/RAS?

6

35

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

36

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

37

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

38

If the reporting entity is an OBU, is this transaction/RAS an OB activity?

False

39

Is this transaction/RAS covered by a category on the Exclusions List?

False

40

What category of the Exclusions List applies to this transaction/RAS?

Na

41

Transaction Comments

[Comments]

 

Table 27: Completed entry for Example 11 – USD/AUD (12 month) forward with UK Co (currency derivative)

Question no.

Question label

Response

1

Transaction Identifier

[Transaction ID]

2

Related Transaction Identifier(s)

[Transaction IDs]

3

Transaction category

CDCSFFO

4

Is this transaction part of a RAS?

False

5

How many transactions are part of the RAS?

Na

6

Australian counterparty name

[Australian counterparty name]

7

ABN or TFN of the Australian counterparty to the transaction/RAS

[ABN or TFN]

8

Name of the IRP non-resident counterparty to the transaction/RAS

UK Co

9

Tax residence of the IRP non-resident counterparty to the transaction/RAS

GB

10

Was the transaction/RAS entered into by the non-resident counterparty in the course of its business operations carried on through a permanent establishment in a different country to its country of tax residence?

False

11

Country of permanent establishment counterparty

Na

12

Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS

AUD equiv. of USD 40000000

13

Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS

50000000

14

Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS?

False

15

Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS?

False

16

Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS

0

17

Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS

0

18

Average balance of debt interests issued (Inbound Borrowings)

Na

19

Capitalised interest deducted

Na

20

Average balance of debt interests held (Outbound Loans)

Na

21

Capitalised interest returned

Na

22

Book values

Na

23

Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS?

False

24

Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS?

False

25

Is the debt interest (including borrowing/loan) interest-free?

Na

26

Did you enter into a deferred foreign currency payment arrangement in relation to this transaction

Na

27

Foreign Currency Reporting Type

Na

28

Foreign Currency Code

Na

29

Amount of foreign exchange losses deducted for the transaction/RAS

0

30

Foreign Currency Code

Na

31

Amount of foreign exchange gains returned for the transaction/RAS

2000000

32

Foreign Currency Code

USD

33

What transfer pricing/capital asset pricing methodology has been applied to the transaction/RAS?

CUP

34

What level of transfer pricing documentation has been prepared for this transaction/RAS?

6

35

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

36

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

37

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

38

If the reporting entity is an OBU, is this transaction/RAS an OB activity?

False

39

Is this transaction/RAS covered by a category on the Exclusions List?

False

40

What category of the Exclusions List applies to this transaction/RAS?

 Na

41

Transaction Comments

[Comments]

 

Table 28: Completed entry for Example 11 – USD/AUD (10-year) forward with UK Co (currency derivative)

Question no.

Question label

Response

1

Transaction Identifier

[Transaction ID]

2

Relate Transaction Identifier(s)

[Transaction IDs]

3

Transaction category

CDCSFFO

4

Is this transaction part of a RAS?

False

5

How many transactions are part of the RAS?

Na

6

Australian counterparty name

[Australian counterparty name]

7

ABN or TFN of the Australian counterparty to the transaction/RAS

[ABN or TFN]

8

Name of the IRP non-resident counterparty to the transaction/RAS

UK Co

9

Tax residence of the IRP non-resident counterparty to the transaction/RAS

GB

10

Was the transaction/RAS entered into by the non-resident counterparty in the course of its business operations carried on through a permanent establishment in a different country to its country of tax residence?

False

11

Country of permanent establishment counterparty

Na

12

Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS

Australian dollar equivalent of USD 75000000

13

Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS

100000000

14

Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS?

False

15

Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS?

False

16

Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS

0

17

Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS

0

18

Average balance of debt interests issued (Inbound Borrowings)

Na

19

Capitalised interest deducted

Na

20

Average balance of debt interests held (Outbound Loans)

Na

21

Capitalised interest returned

Na

22

Book values

Na

23

Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS?

False

24

Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS?

False

25

Is the debt interest (including borrowing/loan) interest-free?

Na

26

Did you enter into a deferred foreign currency payment arrangement in relation to this transaction

Na

27

Foreign Currency Reporting Type

Na

28

Foreign Currency Code

Na

29

Amount of foreign exchange losses deducted for the transaction/RAS

700000

30

Foreign Currency Code

USD

31

Amount of foreign exchange gains returned for the transaction/RAS

0

32

Foreign Currency Code

Na

33

What transfer pricing/capital asset pricing methodology has been applied to the transaction/RAS?

CUP

34

What level of transfer pricing documentation has been prepared for this transaction/RAS?

6

35

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

36

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

37

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

38

If the reporting entity is an OBU, is this transaction/RAS an OB activity?

False

39

Is this transaction/RAS covered by a category on the Exclusions List?

False

40

What category of the Exclusions List applies to this transaction/RAS?

 Na

41

Transaction Comments

[Comments]

 

Table 29: Completed entry for Example 11 – GBP/AUD (3 month) forwards (in RAS) with UK Co (currency derivative)

Question no.

Question label

Response

1

Transaction Identifier

[Transaction ID]

2

Related Transaction Identifier(s)

[Transaction IDs]

3

Transaction category

CDCSFFO

4

Is this transaction part of a RAS?

True

5

How many transactions are part of the RAS?

Low

6

Australian counterparty name

[Australian counterparty name]

7

ABN or TFN of the Australian counterparty to the transaction/RAS

[ABN or TFN]

8

Name of IRP the non-resident counterparty to the transaction/RAS

UK Co

9

Tax residence of the IRP non-resident counterparty to the transaction/RAS

GB

10

Was the transaction/RAS entered into by the non-resident counterparty in the course of its business operations carried on through a permanent establishment in a different country to its country of tax residence?

False

11

Country of permanent establishment counterparty

Na

12

Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS

AUD equivalent of GBP 15000000

13

Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS

25000000

14

Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS?

False

15

Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS?

False

16

Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS

0

17

Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS

0

18

Average balance of debt interests issued (Inbound Borrowings)

Na

19

Capitalised interest deducted

Na

20

Average balance of debt interests held (Outbound Loans)

Na

21

Capitalised interest returned

Na

22

Book values

Na

23

Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS?

False

24

Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS?

False

25

Is the debt interest (including borrowing/loan) interest-free?

Na

26

Did you enter into a deferred foreign currency payment arrangement in relation to this transaction

Na

27

Foreign Currency Reporting Type

Na

28

Foreign Currency Code

Na

29

Amount of foreign exchange losses deducted for the transaction/RAS

0

30

Foreign Currency Code

Na

31

Amount of foreign exchange gains returned for the transaction/RAS

140000

32

Foreign Currency Code

Na

33

What transfer pricing/capital asset pricing methodology has been applied to the transaction/RAS?

CUP

34

What level of transfer pricing documentation has been prepared for this transaction/RAS?

6

35

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

36

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

37

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

38

If the reporting entity is an OBU, is this transaction/RAS an OB activity?

False

39

Is this transaction/RAS covered by a category on the Exclusions List?

False

40

What category of the Exclusions List applies to this transaction/RAS?

Na

41

Transaction Comments

[Comments]

 

Table 30: Completed entry for Example 11 – GBP/AUD (6 month) forwards with UK Co (currency derivative)

Question no.

Question label

Response

1

Transaction Identifier

[Transaction ID]

2

Related Transaction Identifier(s)

[Transaction IDs]

3

Transaction category

CDCSFFO

4

Is this transaction part of a RAS?

False

5

How many transactions are part of the RAS?

Na

6

Australian counterparty name

[Australian counterparty name]

7

ABN or TFN of the Australian counterparty to the transaction/RAS

[ABN or TFN]

8

Name of the IRP non-resident counterparty to the transaction/RAS

UK Co

9

Tax residence of the IRP non-resident counterparty to the transaction/RAS

GB

10

Was the transaction/RAS entered into by the non-resident counterparty in the course of its business operations carried on through a permanent establishment in a different country to its country of tax residence?

False

11

Country of permanent establishment counterparty

Na

12

Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS

AUD equiv. of GBP 30000000

13

Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS

50000000

14

Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS?

False

15

Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS?

False

16

Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS

0

17

Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS

0

18

Average balance of debt interests issued (Inbound Borrowings)

Na

19

Capitalised interest deducted

Na

20

Average balance of debt interests held (Outbound Loans)

Na

21

Capitalised interest returned

Na

22

Book values

Na

23

Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS?

False

24

Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS?

False

25

Is the debt interest (including borrowing/loan) interest-free?

Na

26

Did you enter into a deferred foreign currency payment arrangement in relation to this transaction

Na

27

Foreign Currency Reporting Type

Na

28

Foreign Currency Code

Na

29

Amount of foreign exchange losses deducted for the transaction/RAS

0

30

Foreign Currency Code

Na

31

Amount of foreign exchange gains returned for the transaction/RAS

200000

32

Foreign Currency Code

GBP

33

What transfer pricing/capital asset pricing methodology has been applied to the transaction/RAS?

CUP

34

What level of transfer pricing documentation has been prepared for this transaction/RAS?

6

35

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

36

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

37

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

38

If the reporting entity is an OBU, is this transaction/RAS an OB activity?

False

39

Is this transaction/RAS covered by a category on the Exclusions List?

False

40

What category of the Exclusions List applies to this transaction/RAS?

Na

41

Transaction Comments

[Comments]

 

End of example

 

Example 12: 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 11 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 31: USD/AUD, AUD/USD and GBP/AUD currency forwards with UK Co

Derivatives

USD/AUD (3 month) & AUD/USD (3 month) & USD/AUD (12 month) & GBP/AUD (3 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 32: Assessable FX gains returned and deductible FX losses deducted for currency forwards for income year

FX Type

USD/AUD (3 month) & AUD/USD (3 month) & USD/AUD (12 month) & GBP/AUD (3 month) & GBP/AUD (6 month) forwards in RAS

USD/AUD (10 year) forward

FX gains returned

$2.82m

0

FX losses deducted

0

A$0.7m

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 33: Completed entry for Example 12 – USD/AUD, AUD/USD & GBP/AUD forwards (in RAS) with UK Co (currency derivative)

Question no.

Question label

Response

1

Transaction Identifier

[Transaction ID]

2

Related Transaction Identifier(s)

[Transaction IDs]

3

Transaction category

CDCSFFO

4

Is this transaction part of a RAS?

True

5

How many transactions part of the RAS?

Moderate

6

Australian counterparty name

[Australian counterparty name]

7

ABN or TFN of the Australian counterparty to the transaction/RAS

[ABN or TFN]

8

Name of the IRP non-resident counterparty to the transaction/RAS

UK Co

9

Tax residence of the IRP non-resident counterparty to the transaction/RAS

GB

10

Was the transaction/RAS entered into by the non-resident counterparty in the course of its business operations carried on through a permanent establishment in a different country to its country of tax residence?

False

11

Country of permanent establishment counterparty

Na

12

Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS

259240000

13

Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS

255740000

14

Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS?

False

15

Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS?

False

16

Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS

0

17

Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS

0

18

Average balance of debt interests issued (Inbound Borrowings)

Na

19

Capitalised interest deducted

Na

20

Average balance of debt interests held (Outbound Loans)

Na

21

Capitalised interest returned

Na

22

Book value

Na

23

Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS?

False

24

Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS?

False

25

Is the debt interest (including borrowing/loan) interest-free?

Na

26

Did you enter into a deferred foreign currency payment arrangement in relation to this transaction

Na

27

Foreign Currency Reporting Type

Na

28

Foreign Currency Code

Na

29

Amount of foreign exchange losses deducted for the transaction/RAS

0

30

Foreign Currency Code

Na

31

Amount of foreign exchange gains returned for the transaction/RAS

2820000

32

Foreign Currency Code

USD

33

What transfer pricing/capital asset pricing methodology has been applied to the transaction/RAS?

CUP

34

What level of transfer pricing documentation has been prepared for this transaction/RAS?

6

35

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

36

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

37

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

38

If the reporting entity is an OBU, is this transaction/RAS an OB activity?

True

39

Is this transaction/RAS covered by a category on the Exclusions List?

False

40

What category of the Exclusions List applies to this transaction/RAS?

Na

41

Transaction Comments

[Comments]

 

Table 34: Completed entry for Example 12 – USD/AUD (10 year) forward with UK Co (currency derivative)

Question no.

Question label

Response

1

Transaction Identifier

[Transaction ID]

2

Related Transaction Identifier(s)

[Transaction IDs]

3

Transaction category

CDCSFFO

4

Is this transaction part of a RAS?

False

5

How many transactions are part of the RAS?

Na

6

Australian counterparty name

[Australian counterparty name]

7

ABN or TFN of the Australian counterparty to the transaction/RAS

[ABN or TFN]

8

Name of the IRP non-resident counterparty to the transaction/RAS

UK Co

9

Tax residence of the IRP non-resident counterparty to the transaction/RAS

GB

10

Was the transaction/RAS entered into by the non-resident counterparty in the course of its business operations carried on through a permanent establishment in a different country to its country of tax residence?

False

11

Country of permanent establishment counterparty

Na

12

Amount of consideration paid (of a capital nature for income tax purposes) for the transaction/RAS

99000000

13

Amount of consideration received (of a capital nature for income tax purposes) for the transaction/RAS

100000000

14

Was non-monetary consideration provided (of a capital nature for income tax purposes) for the transaction/RAS?

False

15

Was non-monetary consideration obtained (of a capital nature for income tax purposes) for the transaction/RAS?

False

16

Amount of expenditure (not of a capital nature for income tax purposes) for the transaction/RAS

0

17

Amount of revenue (not of a capital nature for income tax purposes) for the transaction/RAS

0

18

Average balance of debt interests issued (Inbound Borrowings)

Na

19

Capitalised interest deducted

Na

20

Average balance of debt interests held (Outbound Loans)

Na

21

Capitalised interest returned

Na

22

Book values

Na

23

Was non-monetary consideration provided (not of a capital nature for income tax purposes) for the transaction/RAS?

False

24

Was non-monetary consideration obtained (not of a capital nature for income tax purposes) for the transaction/RAS?

False

25

Is the debt interest (including borrowing/loan) interest-free?

Na

26

Did you enter into a deferred foreign currency payment arrangement in relation to this transaction

Na

27

Foreign Currency Reporting Type

Na

28

Foreign Currency Code

Na

29

Amount of foreign exchange losses deducted for the transaction/RAS

700000

30

Foreign Currency Code

USD

31

Amount of foreign exchange gains returned for the transaction/RAS

0

32

Foreign Currency Code

 

33

What transfer pricing/capital asset pricing methodology has been applied to the transaction/RAS?

CUP

34

What level of transfer pricing documentation has been prepared for this transaction/RAS?

6

35

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

36

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

37

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

38

If the reporting entity is an OBU, is this transaction/RAS an OB activity?

True

39

Is this transaction/RAS covered by a category on the Exclusions List?

False

40

What category of the Exclusions List applies to this transaction/RAS?

Na

41

Transaction Comments

[Comments]

 

End of example

QC70149