Foreign exchange forex regulations have been made which may allow for the translation of foreign currency amounts into Australian currency or an applicable functional currency using:. However, an average rate cannot be used unless the average rate is a reasonable approximation of the exchange rates that would otherwise be applicable if you had used spot rates at the specific translation times provided for by the forex legislation.

You should consider whether the use of an average rate is reasonably likely to approximate the use of spot rates. The examples below provide more detail. Average rates are published to the Tax Office website. Here you can find lists of exchange rates for selected countries including average monthly and yearly rates.

Alternatively, you can use appropriate exchange rates provided by a banking institution operating in Australia including, where relevant, the banking institution through which your foreign income is received. You can also use rates published by another reliable external source. The rate used and the source of rates should be kept with your records.

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You cannot obtain an average rate or rates of exchange from an associate, or from yourself, unless otherwise notified by the Commissioner. If you have previously prepared your tax returns in anticipation of the making of these regulations you should refer to Administrative treatment of retrospective legislation. Similarly, if you have already prepared a tax return using spot rates of exchange, and did not anticipate the regulations, you are entitled to review your position in light of the regulations now in force.

Under the regulations, you can no longer use an end of year rate ie the rate applying on the last day of the income year for the translation of foreign income which is not actually received in Australia in the same year as it is derived.

In this case, the spot rate at the time the income is derived, or an appropriate average rate, may be used to translate the relevant amounts into Australian dollars. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. If you follow our information and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take.

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Show print controls Print this page Print entire document. Toggle List dropdown button. General information on average rates. General information on average rates Foreign exchange forex regulations have been made which may allow for the translation of foreign currency amounts into Australian currency or an applicable functional currency using: Where can I obtain average rates?

When can I start to use average rates? Can I still use an end of year rate for translation of foreign income that is derived overseas but that is not received in Australia until the next income year?

Examples Maria is an Australian resident who receives a foreign age pension from Italy. The pension is paid to her fortnightly in Euros. Maria may translate her total assessable Italian pension amounts for the income year by using an average annual exchange rate.

She does not have to translate the pension into Australian dollars at the exchange rate prevailing at each time the pension payment is received. Veronica receives a fortnightly British age pension.

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While the pension is paid in pounds sterling, the Australian bank into which her pension is paid converts her pension payments into Australian dollars at the time of each payment. Veronica chooses to translate her assessable British pension into Australian dollars using the rate applied by her Australian bank. That is, Veronica adds up the Australian dollar value of her pension as converted by her bank, rather than choosing to use an average annual exchange rate.

Goods are ordered in Euros from eight regular suppliers, and Oz Retail makes about six foreign currency payments each month when stock is ordered. The goods are considered to be trading stock of Oz Retail. In this case, Oz Retail could use an appropriate average rate of exchange when translating the cost of the acquisition of trading stock for income tax purposes. Peter, an accruals-based taxpayer, is a consultant engineer. He provides professional services to clients in Australia as well as New York.

It would be a reasonable approximation for Peter to translate the US dollar amounts into Australian dollars using an exchange rate based on a yearly average - or perhaps, a monthly average. In this case, it would not be a reasonable approximation to translate the purchase price of the office building using an average yearly rate. John has a rental property in the United Kingdom from which he receives fortnightly rent which is deposited into a bank account in the UK.

Throughout the year, he pays miscellaneous expenses such as maintenance and minor repairs, and agent's fees, in respect of the property. It would be reasonable for John to choose to use an average rate of exchange in respect of the rental income and deductions when translating these amounts into Australian currency. John from example 6 above sells the rental property in the following year, and receives a sum as consideration.

As this is a one-off sale of a large capital asset, it would not be appropriate for John to use an average rate of exchange when translating this amount into Australian currency.

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