FOREX 2016/30 - Explanatory statement
COMMONWEALTH OF AUSTRALIA
A New Tax System (Goods and Services Tax) Act 1999
Explanatory Statement
General outline of determination1. This determination is made under subsection 9-85(2) of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act).
2. This determination sets out the method to convert amounts of consideration that are expressed in foreign currency into Australian currency for the purposes of working out the value of a taxable supply.
3. The determination is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Date of effect4. The determination commences on the day after registration.
What is this determination about5. Subsection 9-85(1) of the GST Act requires that the value of a taxable supply be expressed in Australian currency. An entity must report the GST payable for taxable supplies in Australian currency on their activity statements.
6. In the determination, the Commissioner sets out a method a taxpayer must use to convert foreign currency to Australian currency when working out the value of a taxable supply.
What is the effect of this determination7. In working out the value of a taxable supply, an entity must convert any amount of consideration expressed in foreign currency using the following formula:
Amount expressed in a foreign currency * (1 / your particular exchange rate on the conversion day)
where,
your particular exchange rate is the rate from a foreign exchange organisation, the RBA rate, or the agreed rate, whichever the entity has chosen; and
conversion day is the date that the foreign currency is converted into Australian currency as set out in Clause 7 of the determination.
8. Compliance cost impact: minor- there will be no or minimal impacts for both implementation and ongoing compliance costs. The legislative instrument is minor or machinery in nature.
Background9. The determination replaces the A New Tax System (Goods and Services Tax) Act Foreign Exchange Conversion Determination (No. 1) 2001 (the previous determination)- F2006B00096. The replaced instrument is repealed on commencement of this determination.
Consultation:10. Section 18 of the Legislative Instruments Act 2003 specifically provides for circumstances where consultation may not be necessary or appropriate. One of those circumstances is where the instrument is considered minor or machinery in nature, and does not substantially change the law.
11. In this case, no further consultation has been undertaken in the development of this determination because there is no substantive change from the previous determination and it is considered minor or machinery in nature.
Statement of Compatibility with Human Rights
This statement is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Goods and Services Tax: Foreign Conversion Determination (No. 30) 2016This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative InstrumentThis Legislative Instrument prescribes the manner in which consideration expressed in a foreign currency must to be converted into Australian currency when working out the value of a taxable supply for the purposes of the A New Tax System (Goods and Services Tax) Act 1999.
Human rights implicationsThis Legislative Instrument does not engage any of the applicable rights or freedoms as it is considered to be minor or machinery in nature and does not substantially change the law.
ConclusionThis Legislative Instrument is compatible with human rights as it does not raise any human rights issues.
24 February 2016
Timothy Dyce
Deputy Commissioner of Taxation
Legislative References:
A New Tax System (Goods And Services Tax) Act 1999
123-5(1)
Legislative Instruments Act 2003
the Act
Human Rights (Parliamentary Scrutiny) Act 2011
the Act
FOREX 2016/30