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Using average exchange rate for two dividends in USD

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I work for an Australian organisation with a USA basest parent organisation. I own shares in USA based parent, which I received as part of an employee share scheme. During the financial year I received dividends for these shares in USD on two occasions, totalling less than $100. 15% was withheld for the USA’s tax authority. I have two questions:
1) My tax agent used the ATOs average annual rate to convert these dividends to AUD in preparing a draft of my tax return. However, since it’s only two discrete events, and the examples on the ATO website refer to fortnightly activity, I suspect that using the daily rates would be more appropriate. Is it okay to use the average for the year in this situation?

2) That money is still in the form of USD held in an account with the USA based broker. At a later date I will ask them to wire it to me. Since the exchange rate may have fluctuated in the meantime, do I need to declare a capital gain/loss event when I withdraw the funds as AUD?
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Hi @GregOwl,

 

Thanks for your patience while we checked this for you.

 

You can only use an average exchange rate if it is a reasonable approximation of the applicable spot exchange rates. The option to use average rates allows people with numerous or regular transactions during an income year to simplify the calculations involved; however, you do not appear to be in this situation. For two transactions, it is just as easy to obtain a daily rate as it is to obtain an average rate. You can read about exchange rates here.

 

The later wire of the money to you is a Forex realisation event (event 2) and a currency fluctuation may generate either additional income as a forex gain or a deduction as a forex loss (not a capital gain or loss). You can read about this here. In certain situations, an account denominated in foreign currency may qualify for the $250,000 balance election which has the effect of disregarding forex gains or losses. This election can only be made for ‘qualifying forex accounts’. You can read about this here.

 

Hope this helps! Thanks, NateH

 

3 REPLIES 3

Community Moderator

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Hi @GregOwl,

 

We have sent your question to a specialist area to get an answer for you and we'll get back to you soon.

 

Thanks, NateH

Community Moderator

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Hi @GregOwl,

 

We haven't forgotten you, will get back to you ASAP.

 

Thanks

 

KylieS

Most helpful response

ATO Certified Response

Community Moderator

Replies 0

Hi @GregOwl,

 

Thanks for your patience while we checked this for you.

 

You can only use an average exchange rate if it is a reasonable approximation of the applicable spot exchange rates. The option to use average rates allows people with numerous or regular transactions during an income year to simplify the calculations involved; however, you do not appear to be in this situation. For two transactions, it is just as easy to obtain a daily rate as it is to obtain an average rate. You can read about exchange rates here.

 

The later wire of the money to you is a Forex realisation event (event 2) and a currency fluctuation may generate either additional income as a forex gain or a deduction as a forex loss (not a capital gain or loss). You can read about this here. In certain situations, an account denominated in foreign currency may qualify for the $250,000 balance election which has the effect of disregarding forex gains or losses. This election can only be made for ‘qualifying forex accounts’. You can read about this here.

 

Hope this helps! Thanks, NateH