Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 775 - Foreign currency gains and losses  

Subdivision 775-B - Realisation of forex gains or losses  

SECTION 775-45   Ceasing to have a right to receive foreign currency - forex realisation event 2  

Forex realisation event 2

775-45(1)    
Forex realisation event 2 happens if:

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

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

(i) a right, or a part of a right, to receive, or that represents, *ordinary income or *statutory income (other than statutory income that is assessable under this Division or Division 102 );

(ii) a right, or a part of a right, created or acquired in return for your ceasing to *hold a *depreciating asset;

(iii) a right, or a part of a right, created or acquired in return for your paying, or agreeing to pay, an amount of Australian currency or foreign currency;

(iv) a right, or a part of a right, created or acquired in return for the occurrence of a *realisation event in relation to a *CGT asset you own, and none of subparagraphs (i), (ii) and (iii) applies; and

(c) you did not cease to have the right, or the part of the right, because you disposed of the right or the part of the right (within the meaning of section 775-40 ).

Note 1:

Disposals are dealt with by section 775-40 (forex realisation event 1).

Note 2:

For extended meaning of right to receive foreign currency , see section 775-135 .

Time of event

775-45(2)    
The time of the event is when you cease to have the right or the part of the right.

Forex realisation gain

775-45(3)    
You make a forex realisation gain if:

(a) the amount you receive in respect of the event happening exceeds the *forex cost base of the right or the part of the right (the forex cost base is worked out as at the tax recognition time); and

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

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

Note 1:

For forex cost base , see section 775-85 .

Note 2:

For tax recognition time , see subsection (7).

Note 3:

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

Forex realisation loss

775-45(4)    
You make a forex realisation loss if:

(a) the amount you receive in respect of the event happening falls short of the *forex cost base of the right or the part of the right (the forex cost base is worked out as at the tax recognition time); and

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

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

Note 1:

For forex cost base , see section 775-85 .

Note 2:

For tax recognition time , see subsection (7).

Note 3:

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

775-45(5)    
You make a forex realisation loss if:

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

(b) you were capable of exercising the option immediately before the event happened.

The amount of the forex realisation loss is the amount you paid in return for the grant or acquisition of the option.

Non-cash benefit

775-45(6)    
The amount you receive in respect of the event happening can include a *non-cash benefit. Use the *market value of the benefit to work out the amount you receive.

Tax recognition time

775-45(7)    

For the purposes of this section, the tax recognition time is worked out using the table:

Tax recognition time
Item	If the right, or part of the right, is …	the tax recognition time is …
1	a right, or a part of a right, to receive, or that represents, *ordinary income or *statutory income (other than statutory income that is assessable under this Division or Division 102)	(a) in the case of ordinary income - when the ordinary income is *derived; or (b) in the case of statutory income - when the requirement first arose to include the statutory income in your assessable income.
2	a right, or a part of a right, created or acquired in return for your ceasing to *hold a *depreciating asset	when you stop holding the asset.
3	a right, or a part of a right, referred to in subsection 775-165(3) (which deals with extensions of loans)	the extension time referred to in that subsection.
4	a right, or a part of a right, created or acquired in return for your paying, or agreeing to pay, an amount of Australian currency, where item 3 does not apply	when the amount is paid.
5	a right, or a part of a right, created or acquired in return for your paying, or agreeing to pay, an amount of *foreign currency, where item 3 does not apply	when the amount is paid.
6	a right, or a part of a right, created in return for the occurrence of a *realisation event in relation to a *CGT asset you own, and none of the above items apply	when the realisation event occurs.

Note:

Subsection 775-260(1) modifies the tax recognition time if forex realisation event 2 happens in relation to a qualifying forex account that has ceased to pass the limited balance test.