Australian tax payers & multiple currency transactions
Budgets GetReal is well suited to the handling the accounting of multiple currency transactions for Australian small tax payers. This is particularly so where your financial affairs allow you to comply with the following Australian Tax Office (ATO) exemptions on record keeping and accounting for forex capital gains.
The following is prepared to assist in determining if Budgets GetReal can satisfy your multiple currency needs. The basic determinant is what type of exchange rate conversion is allowable. If you have had accounts prepared previously, you can look at the type of conversion permitted or you may discuss the issue with the tax office directly or go to their website as detailed below.
Where average exchange rates are acceptable
In calculating foreign exchange obligations all transactions must be converted to Australian Dollars for calculation. In certain cases the ATO permits a yearly average exchange rate to be used rather than daily rates.
Where averaging is allowed the calculation is very easy:
- Print the Profit & Loss and Balance Sheet reports from Budgets GetReal for each foreign currency. You will need this to submit the overseas tax return anyhow.
- Determine the appropriate average exchange rate for the financial year. Apply this to the Net Profit (in each currency) to determine the obligation in the Australian tax return.
The ATO details a wide range of examples where 12 month average rates are allowable. Significantly one-off major purchases or sales cannot be treated this way and require the application of daily rates. Refer http://www.ato.gov.au/corporate/content.asp?doc=/content/57624.htm for details.
Note: Should calculation by daily rates be required, these can be handled by exporting the relevant transactions from Budgets GetReal to a spreadsheet / other program and applying the exchange rate applicable for that day to the calculation. Alternatively if only a few transactions require daily rates, you can use the average rate overall to prepare your reports and then adjust the result by the differential rate (between daily and average rate) applying to these transactions.
Foreign account currency gains and losses
There is also a need to bring to account foreign currency gains and losses as assessable income or allowable deductions on ATO defined forex exchange events.
Where forex exchange obligations exist and must be calculated using the “First-in first-out” rule or “weighted average basis” you will not be able to easily use Budgets GetReal to calculate these obligations.
Where the “retranslation election” is applicable you may be able to use Budgets Get Real if the number of forex transactions is limited. Simply export the relevant transactions from Budgets Get Real to a spreadsheet / other program and apply the exchange rate applicable for that day to the calculation.
Where the “$250,000 balance election” applies Budgets Get Real results are applicable without further calculation. This election, broadly speaking, enables taxpayers to disregard specified foreign currency gains and losses on certain foreign currency denominated bank and credit card accounts with balances below a specified threshold.
For details on forex treatments see: http://www.ato.gov.au/corporate/content.asp?doc=/content/34034.htm
Disclaimer
Informed Choices Pty. Ltd. (ICH) are not accountants and do not provide taxation or accounting advice. The above guide should not be interpreted as advice in any form. ICH provides no warranties or representations that the information provided is correct, complete or reliable, or appropriate to your circumstances. You should obtain independent advice on any specific issues concerning you.
