ATO ID 2004/157: Can there be more than one retranslation period in an income year for a qualifying forex account?
Date of decision: 9 February 2004
Year of income: Year ended 30 June 2004
Business line: Private Groups and High Wealth Individuals

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
Summary: In determining whether an entity can have multiple retranslation periods in a single income year it is necessary to consider the following: 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: 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. 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.

Legislative references: Income Tax Assessment Act 1997 subsection 995-1(1) Subdivision 775-E subsection 775-270(3) paragraph 775-270(3)(a) paragraph 775-270(3)(b) paragraph 775-270(3)(c) section 775-275 section 775-285 paragraph 775-285(1)(b) paragraph 775-285(9)(b)
Subject references: Retranslation period Retranslation election Qualifying forex account