FED: Euro swap not taxable: ATO rules

AAP General News (Australia)
04-06-1999
FED: Euro swap not taxable: ATO rules

CANBERRA, April 6 AAP - Currency swaps and financial transactions caused by the
introduction of the Euro were not liable for taxation nor eligible to be claimed as tax
deductions, the Australian Taxation Office (ATO) ruled today.

The redenomination of financial arrangements caused by the replacement of 11 European
currencies with the Euro beginning this year could technically have rendered Australian
companies and individuals liable for tax on the exchange.

However, the ATO's draft ruling today found the currency exchange did not cause income to
be earned or lost, and did not cause a capital gain to be accrued or lost.

"Provided the effect of redenomination of a financial arrangement to the Euros is solely to
change the monetary measurement of the financial arrangement, it is a minor alteration and
does not alter the substance of the arrangement," the ruling stated.

"Redenomination, of itself, does not cause assessable income to be derived or an allowable
deduction to be incurred."

On capital gains, the ATO ruled that a currency exchange gain or loss could only be
realised when the transaction was discharged.

"A redenomination of a financial arrangement to Euros does not constitute the realisation
of a currency exchange gain or currency exchange loss," it ruled.

AAP ss/mfh/bm/br

KEYWORD: TAX EURO

1999 AAP Information Services Pty Limited (AAP) or its Licensors.