ÑÇÖÞÉ«ÇéÍø

Contributed by: Naomi Smith, Tax Partner at Nexia Australia

The local currency in Australia is the Australian Dollar ('AUD').

A foreign exchange gain occurs in Australia where an Australian tax resident (taxpayer) obtains a foreign currency or the right to foreign currency and subsequently converts that amount to Australian dollars or another currency.

There are two regimes that can apply to tax foreign exchange gains – the taxation of financial arrangements regime in Division 230 and the foreign currency gains and losses regime in Division 775.

The taxation of financial arrangements regime in Division 230 is aimed at entities with more complex financial arrangements and normally does not apply to individuals unless they specifically elect into it. However, if an individual does elect into Division 230, Division 230 will apply to calculate all their foreign exchange gains and losses. If an individual does not elect into Division 230, the foreign currency gains and losses regime in Division 775 will apply – this is the base case.