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Information for reporting foreign exchange gains and losses for royalty.
Minerals disposed of in a foreign currency will have foreign exchange gain or loss implications for the seller and buyer.
A foreign exchange gain or loss occurs when an invoiced amount that is in a foreign currency, is converted into Australian dollars. It is the difference between the Australian dollar value of the invoice at the time of disposal and the Australian dollar amount at the time of payment.
Leaseholders must only report the realised gain or loss in the month that payment of the invoice is made.
Recognising the gain or loss
When a disposal occurs and settles in the same reporting period, the realised foreign exchange gain or loss is to be recognised in that same period.
When a disposal is settled in a subsequent reporting period to which it occurred, then the realised foreign exchange gain or loss is recognised in the period in which settlement occurred.
You must consistently use a foreign exchange rate that has been obtained from a reasonable external source, such as from the rate published daily at 4:00pm by the Reserve Bank of Australia, the WM/Reuters Australian Dollar Fix 4:00pm rate or a rate published by a major Australian commercial bank or financial institution.
Gain and loss examples
The following examples relate to the calculation of foreign exchange gains and losses and how they are included in monthly coal royalty return.
Note: For minerals (other than coal) that have a different royalty return period (quarterly or yearly) the foreign exchange gain or loss is calculated using the same methodology that is shown in the following examples.
A disposal of coal occurred on 5 July 2024, for an invoice value of $100,000 USD. The customer paid the invoice on 27 July 2024.
The USD invoice amount of $100,000 is converted to AUD at the 5 July 2024 exchange rate of 0.7619. This equates to $131,250.82 AUD and would be recorded in the July 2024 royalty return as a disposal in AUD.
The payment is received on 27 July 2024. The invoice amount of $100,000 USD is converted to AUD at the 27 July 2024 exchange rate of 0.8046. This equates to $124,285.35 AUD which is the amount that the customer paid.
This results in a realised foreign exchange loss of -$6,965.47 ($124,285.35 - $131,250.82).
Therefore, in the July 2024 royalty return, the invoice amount of $131,250.82 AUD is recorded as a disposal and the amount of -$6,965.47 AUD is separately recorded in the return as a realised foreign exchange loss.
A disposal of coal occurred on 27 July 2024, for an invoice value of $100,000 USD. Payment for the disposal was received on 10 August 2024.
July 2024 Royalty Return
The USD invoice amount of $100,000 is converted to AUD at the 27 July 2024 exchange rate of 0.8046. This equates to $124,285.35 AUD and would be recorded as a disposal in the July 2024 royalty return.
August 2024 Royalty Return
The sale value of $124,285.35 AUD has already been recorded in the July 2024 royalty return. The foreign exchange gain or loss, which is calculated on the date of payment (payment made on 10 August 2024), is to be included in the August 2024 royalty return.
The payment is made on 10 August 2024. The exchange rate on 10 August 2024 is 0.7873, which equates to $127,016.38 AUD being the amount paid by the customer. A foreign exchange gain of $2,731.03 ($127,016.38 - $124,285.35) is recorded in the August 2024 return.
In the July 2024 royalty return, the invoice amount of $124,285.35 AUD is recorded as a disposal.
The August 2024 royalty return records the realised foreign exchange gain of $2,731.03 AUD.
Note: If in the above example, payment of the invoice was received in October 2024, the disposal value is still returned in the July 2024 royalty return and the realised foreign exchange gain or loss would need to be calculated in the same manner for the October 2024 royalty return (when the payment was received).
You report the disposal value as assessable revenue in the return period in which the invoice issued, and you report the realised gain or loss in the return period in which payment occurred.
