Is a loss on foreign currency conversion tax deductible?

(Newbie)Newbie

7 May 2026

Hi, I am completing an assessment and need some guidance on the tax treatment of a foreign currency loss.

The client held US dollars in an overseas bank account. When the Australian dollar increased in value, the client made a loss when converting the unused US dollars back into Australian dollars.

Would this loss on foreign currency variation be tax deductible in Australia?

Would the answer depend on whether the US dollars were held for business purposes, private purposes, or income-producing activities? Also, does the loss only become deductible when it is realised, meaning when the money is converted back to Australian dollars?

Any guidance or links to the relevant ATO rules would be appreciated.

Thank you.

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