POWERED BY MOMENTUM MEDIA
ATO warned on FX draft ruling
The Australian Taxation Office (ATO) has been warned that a Draft Ruling it has issued covering the treatment of foreign exchange hedging losses incurred by superannuation funds needs to be amended because it could give rise to significant unintended consequences.
The Association of Superannuation Funds of Australia (ASFA) has used a submission to the ATO on the Draft Ruling to warn that, “if finalised in its present form, [it] may have significant and unwarranted detrimental effects on the entitlement of superannuation funds to foreign income tax offsets (FITOs).
“ASFA submits that the denial of FITOs as a consequence of a fund’s specific arrangements in respect of foreign exchange (FX) hedging gains and losses is inconsistent with the policy intentions underpinning Division 770,” the ASFA submission said. It claimed the object of the Division was “to relieve double taxation where a taxpayer has paid foreign income tax on amounts included as assessable income and would, apart from Division 770, pay Australian income tax on the same amounts”.
The submission said that ASFA believed the FITO limit rules in section 770-75 should be interpreted, as far as possible, to be consistent with this stated object.
“In practice, superannuation funds rarely, if ever, pay foreign income tax on FX hedging gains and losses,” it said. “Rather, they generally pay foreign income tax primarily on foreign dividend income, foreign interest income, on distributions from foreign entities (such as limited partnerships), or on the income from foreign entities that is assessable pursuant to the foreign hybrid rules in Division 830.”
The submission said that, on rare occasions, superannuation funds might also pay foreign tax on capital gains.
Recommended for you
Economists from the big four banks have all predicted the RBA to deliver another rate cut during its July meeting; however, some admit the decision will be a close call.
Morningstar believes there is still further to run with the potential takeover of Insignia Financial even with original bidder Bain Capital walking away.
Insignia Financial has announced the status of the two private equity bidders as due diligence comes to an end.
The future of superannuation policy remains uncertain, with further reforms potentially on the horizon as the Albanese government seeks to curb the use of superannuation as a bequest vehicle.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom 465 Calder Road Calder
99.46 3 y p.a(%)
2
DomaCom DFS Mortgage
95.46 3 y p.a(%)
3
Global X 21Shares Bitcoin ETF
78.55 3 y p.a(%)
4
BetaShares Crypto Innovators ETF
50.39 3 y p.a(%)
5
Global X GlobalX FANG+ ETF
47.50 3 y p.a(%)
