ATO warned on FX draft ruling

8 May 2014
| By Mike |
image
image image
expand image

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.   

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest developments in Super Review! Anytime, Anywhere!

Grant Banner

From my perspective, 40- 50% of people are likely going to be deeply unhappy about how long they actually live. ...

1 year 10 months ago
Kevin Gorman

Super director remuneration ...

1 year 10 months ago
Anthony Asher

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money ...

1 year 10 months ago

Ethical super fund Australian Ethical has announced the appointment of Anthony Lane as chief operating officer....

16 hours 50 minutes ago

Cbus CEO Kristian Fok has criticised lead generators promoting superannuation switches, with the Shield and First Guardian problems being the “tip of the iceberg” for sup...

15 hours ago

A global report from Mercer shows that pension systems with no or limited restrictions tend to perform better, while sharing recommendations on how Australia can improve ...

18 hours 12 minutes ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND