Private ruling: Taxation of financial arrangements - hedging financial arrangement
Date of advice: 10 March 2026
Published: 28 April 2026
Ruling period: Income Tax Year Ending 30 June 2026 | Income Tax Year Ending 30 June 2027 | Income Tax Year Ending 30 June 2028

Ruling: Q1: Will the Fund's hedging process as set out in the Draft Tax Recognition Policy and the Draft Hedge Accounting Documentation satisfy the recording requirements in subsections 230-355(1) and (4) of the ITAA 1997? | A1: Yes. | Q2: Will the Fund's basis for the allocation of hedging gains and losses from forward foreign exchange contracts (FFX contracts) satisfy the requirements in subsection 230-360(2) of the ITAA 1997? | A2: Yes

Relevant facts and circumstances: Fund X uses FFX contracts to hedge the foreign currency risk arising from its unit holdings in Fund Y. The FFX contracts are designated from inception as hedges for accounting purposes. Fund X documents its hedging process and its basis for allocating hedging gains and losses. The allocation process is predetermined and cannot be changed to suit particular results.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 230-355(1) | Income Tax Assessment Act 1997 subsection 230-355(4) | Income Tax Assessment Act 1997 subsection 230-360(2)


Does IVA apply to this private ruling?: Part IVA of the Income Tax Assessment Act 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement. | If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise allowable) or you or another taxpayer could be liable to the diverted profits tax. | We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. | If you want us to rule on whether Part IVA applies, we will need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply. | For more information on Part IVA, go to our website ato.gov.au/gaar .