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Category Archives: TOFA
Tax avoidance and after-tax hedging
Will the elective hedging method available in TOFA encourage companies to engage in after-tax hedging with the view to tax benefit? The OECD in its Report “Aggressive Tax Planning based on After-Tax Hedging” highlights schemes designed to allow tax benefits to be made by after -tax hedging. An example in the report : a company purchases shares in a foreign company denominated in foreign currency. To hedge against fluctuations in foreign exchange rates at the time when the shares will … Continue reading
Edged out of hedges
In an earlier blog, the question was raised as to how TOFA would react if there is an opting or legging out of a hedging arrangement (see Hedge Accounting -”Legging-out” in US, what would TOFA do?). Paragraphs 91 and 101 of AASB 139 refer to such a generic cialis no prescription situation and provide that the opting out entity will have to cease hedge accounting if it revokes a hedge designation made at commencement. The recently released exposure draft goes … Continue reading
Hedging -"Legging-out" in US, what would TOFA do?
“Legging-out” in the US refers to a situation where an entity is permitted to partially opt out of an “qualified hedging transaction”. To be a qualified hedging transaction it must be made of a non-functional currency denominated debt together with one or more related hedging transactions. A qualified hedging transaction will be treated as a synthetic debt instrument denominated in the functional currency of the taxpayer and there will be no recognition of any foreign exchange gain or loss. Consequently, … Continue reading
Emissions trading- taxation aspects
It will no doubt be a very long time before the dust settles on the carbon tax debate. The furore will go unabated as long as proponents abound and sceptics linger. Call it by any name, last of the twin certainties of life, death and taxes never had a closer companion. The most significant change from the earlier launched and later dumped Carbon Pollution Reduction Scheme (“CPRS”) is in GST ( proposed Division 420 in ITAA 1997 in the Carbon … Continue reading
TOFA – turning capital to revenue
Ever since it came into force a couple of years, TOFA has never failed to confound and confuse. The underlying push of the amending law was to tax income from financial arrangements on revenue account (not capital). Similarly losses are revenue deductions. However financial arrangements held by individuals, as a rule, do not fall under the income/loss recognition under TOFA. But the individual could elect to be subject to TOFA rules and therefore treat any outgoings on revenue account, subject … Continue reading
