This TD, released on Wed 6.6.2012, provides clarification on the appropriate tax treatment of the gain/loss from a hedging financial arrangement when a cessation event happens to the arrangement.
The TD says that a gain or loss resulting from the expiration, sale, termination or exercise (collectively “Cessation Events”) of a hedging financial arrangement to which a hedging financial arrangement election applies, is determined and allocated in accordance with the TOFA rules in subss 230-300(2) and (3) of the ITAA 1997.
Under those subsections, a gain/loss from a hedging financial arrangement to which a hedging financial arrangement applies is the overall gain/loss made from the arrangement allocated over the income years specified in a determination made under s 230-360 at or soon after the arrangement was created or acquired.
The TD was previously released as Draft TD 2011/D5.
DATE OF EFFECT: the TD applies both before and after its date of issue.
[LTN 108, 6/6]