Issue
Can there be more than one retranslation period under Subdivision 775E of the Income Tax Assessment Act 1997 (ITAA 1997) for a qualifying forex account in one income year?
Decision
Yes. There can be more than one retranslation period under Subdivision 775E of the ITAA 1997 in one income year for a qualifying forex account.
Facts
On 1 July 2004 an entity elects to have the retranslation rules in Subdivision 775-E of the ITAA 1997 apply to an account that is a Qualifying Forex Account (QFA), as defined at subsection 995-1(1) of the ITAA 1997. For accounting purposes the entity undertakes retranslation activities on a monthly basis and wishes to have the tax retranslation periods aligned with the accounting periods.
Reasons for Decision
In determining whether an entity can have multiple retranslation periods in a single income year it is necessary to consider the following: • Can a retranslation period be for part of an income year? • Can an entity revoke and remake an election in relation to the same account or accounts?
Paragraph 775-285(1)(b) of the ITAA 1997 defines a retranslation period to be a continuous period consisting of an income year or a particular part of an income year during which a choice to retranslate a QFA was in effect. So a retranslation period can be for a continuous part of an income year.
Subsection 775-270(3) of the ITAA 1997 provides that a taxpayer's choice continues in effect until: (a) the taxpayer ceases to hold the account; or (b) the account ceases to be a QFA; or (c) the taxpayer's withdrawal of the choice takes effect.
Where a retranslation choice in relation to one or more QFAs is made and that choice remains in effect for successive retranslation periods, the retranslation period will cease at the end of each period (income year or particular part of income year) and a new retranslation period will commence immediately after the end of the previous period. The opening balance of the new period will be translated using the same exchange rate that is used to translate the closing balance of the previous period (paragraph 775-285(9)(b) of the ITAA 1997).
Where a taxpayer wishes to translate on a monthly basis, the taxpayer may do so provided the choice continues in effect under section 775-270(3). Accordingly, there can be more than one retranslation period in one income year for a qualifying forex account under Subdivision 775E of the ITAA 1997.
Therefore provided a taxpayer remains eligible for a retranslation choice and does not withdraw that choice it will continue to be in place.
Withdrawing an election and making a fresh election
Section 775-275 of the ITAA 1997 allows the withdrawal in writing of the retranslation choice.
Withdrawing a choice does not preclude the taxpayer from making a fresh choice in the future for retranslation treatment in relation to the same account or accounts.
Amendment History
Date of Amendment Part Comment 7 August 2015 Facts Removed paragraph Reasons for Decision Alterations to paragraphs Part year retranslation period Removed heading Withdrawing an election and making a fresh election Alterations to paragraphs Legislative reference Include reference to subsection 775-270(3) and paragraphs 775-285(1)(b) and 775-285(9)(b) of the ITAA 1997.
Date of Amendment | Part | Comment
7 August 2015 | Facts | Removed paragraph
Reasons for Decision | Alterations to paragraphs
Part year retranslation period | Removed heading
Withdrawing an election and making a fresh election | Alterations to paragraphs
Legislative reference | Include reference to subsection 775-270(3) and paragraphs 775-285(1)(b) and 775-285(9)(b) of the ITAA 1997.