Private ruling: Taxation of financial arrangements (TOFA) – hedging financial arrangement
Date of advice: 11 December 2018
Published: April 2019
Ruling period: 1 July 2018 to 30 June 2021
Date scheme commenced: 1 July 2018

Ruling: Q1: Will Fund X’s hedging process satisfy the recording requirements in subsections 230-355(1) and (4) of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. | Q2: Will Fund X’s basis for the allocation of hedging gains and losses from the 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.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 230-E