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 775-60   Ceasing to have a right to pay foreign currency - forex realisation event 5  

Forex realisation event 5

775-60(1)    
Forex realisation event 5 happens if:

(a) you cease to have a right, or a part of a right, to pay *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, created or acquired in return for the assumption of an obligation to pay foreign currency;

(ii) a right, or a part of a right, created or acquired in return for the assumption of an obligation to pay Australian currency;

(iii) a right, or a part of a right, under an option to sell foreign currency.

Note 1:

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

Note 2:

For extended meaning of obligation to pay foreign currency , see section 775-140 .

Time of event

775-60(2)    
The time of the event is when you cease to have the right or the part of the right.

Forex realisation gain

775-60(3)    
You make a forex realisation gain if:

(a) the amount you pay in respect of the event happening falls short of the *forex entitlement base of the right or the part of the right (the forex entitlement 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 gain is so much of the shortfall as is attributable to a currency exchange rate effect.

Note 1:

For forex entitlement base , see section 775-90 .

Note 2:

For tax recognition time , see subsection (7).

Note 3:

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

Forex realisation loss

775-60(4)    
You make a forex realisation loss if:

(a) the amount you pay in respect of the event happening exceeds the *forex entitlement base of the right or the part of the right (the forex entitlement 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 loss is so much of the excess as is attributable to a currency exchange rate effect.

Note 1:

For forex entitlement base , see section 775-90 .

Note 2:

For tax recognition time , see subsection (7).

Note 3:

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

775-60(5)    
You make a forex realisation loss if:

(a) the event happens because an option to sell *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

775-60(6)    
The amount you pay 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 pay.

Tax recognition time

775-60(7)    
For the purposes of this section, the tax recognition time is the time when you pay an amount in respect of the event happening.

Obligation to pay Australian currency

775-60(8)    
To avoid doubt, for the purposes of this section, an obligation to pay Australian currency includes an obligation to pay Australian currency, where the obligation is subject to a contingency.