Foreign Exchange

Foreign exchange involves the trading or simple exchange of currencies internationally. An SMSF is permitted to engage in this form of investment. Please be mindful that all investments of the SMSF should be in the name of the SMSF. 

The ATO provides a list of exchange rates that we use for accounting purposes. You can refer to the rates here. If your SMSF has overseas assets, please use the nearest actual exchange rate at year end. If your SMSF has overseas income, please use the average rate at year end. 

You may be interested in investing in the foreign exchange market if you speculate a particular currency will increase in value. If a currency is bought at a lower rate and sold at a higher rate, the SMSF can profit from the trade. 

Risks

The risks involved in trading with foreign exchange should be understood. Some of the risks are:

  • Exchange rates are volatile. There can be big movements in currencies within a short period of time. This can result in large losses. 
  • Hard to predict. There are many factors that affect exchange rates. Thus, your speculation may not be a reality. 

Investment Strategy

It is important to ensure that foreign exchange is allowed in your SMSF’s investment strategy. The investment strategy specifically allows this. You can access our investment strategy here.

International transfers

Alternative to trading, your SMSF may engage in foreign exchange if you intend to purchase assets overseas and you require funds in another currency. 

Platform

If you would like assistance with international transfers, you may consider using TorFX. They can assist with transactions such as: 

  • Repatriation of overseas pensions (SIPP, ROPS/QROPS)
  • Purchasing overseas assets, such as overseas property.

Click here to see more information on what TorFX can offer. 

What is our accounting approach for overseas cash or trading accounts?

The AUD serves as the currency of presentation for SMSF financial reports. All valuation and transactions involving overseas assets must be converted into AUD. Typically, any gains or losses resulting from foreign exchange are documented as assessable income or general deductions.

Given the large number of transactions involved, our accounting method involves referencing the ATO website for daily exchange rates. Additionally, for year-end valuation and calculation of FX gains and losses for the fiscal year, we utilize the rate on 30 June. While this approach deviates slightly from the tax regulations, it is considered insignificant in terms of its impact.

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