What sections of the ATO tax acts is foreign currency trading? That is cash base online trading with no physical goods exchange?
The tax treatment of foreign currency gains and losses is discussed in Division 775 of the Income Tax Assessment Act 1997. The Division effectively caters for all types of foreign currency transactions including having a foreign currency denominated bank accounts and shares, overseas rental properties, trading stock, hedging transactions as well as the purchase and subsequent disposal of capital assets.
Section 775-15 states that foreign gains are assessable when they are realised unless it is a gain of a domestic or private nature, such as when you go travelling overseas on holidays or purchase goods for personal use.
If you are merely depositing money and make withdrawals from a foreign currency denominated bank account this can give rise to a gain or loss being made but it would only be assessable if your account balance was more than $250,000. However to take advantage of this exemption you must make an election to disregard any realised foreign currency gains or losses for accounts with a balance under this threshold.
Sub-division 960C of the Income Tax Assessment Act 1997 sets out the rules for foreign currency to be translated into an Australian dollar amount including the use of an appropriate prevailing exchange rate for the translation.
This article first appeared in the Nov/Dec 2011 issue of YTE Magazine www.YTEmagazine.com. Copyright Your Media Edge Pty Ltd 2011.