The key provisions of the TOFA rules are found in Division 230 of the ITAA 1997, which generally provides for:
- methods of taking into account gains and losses from financial arrangements, being accruals and realisation, fair value, foreign exchange retranslation, hedging, reliance on financial reports and balancing adjustment
- the time at which the gains and losses from financial arrangements will be brought to account.
Which funds are affected?
The TOFA rules apply to a fund where the value of the fund's assets is $100 million or more. For the purposes of this test, the value of the fund's assets is worked out at the end the immediately preceding income year (being the fund's income year ending 30 June 2010 or a later income year). If the fund came into existence during the current income year, the value of the fund's assets is worked out at the end of this income year.
Once the TOFA rules apply to a fund, they will continue to apply to that fund, even if its value of assets later falls below $100 million.
A fund that does not meet these requirements can elect to have the TOFA rules apply to it.
Which financial arrangements will the TOFA rules apply to?
The TOFA rules apply to all financial arrangements that the affected fund starts to have during income years commencing on or after 1 July 2010. In addition, a fund may have elected to have the TOFA rules apply to its financial arrangements for income years commencing on or after 1 July 2009.
A fund may have also separately made a transitional election to apply the TOFA rules to their existing financial arrangements.