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Regulations have been made extending the time for recording details of the basis for allocating gains and losses from hedging financial arrangements for income tax purposes until 30 June 2011. See TaxVine Issue 22, 10 June 2011.

The ATO advises that it will not undertake compliance activities on these record requirements before 30 June 2011. However, it is expected that if a taxpayer elects to use the hedging financial arrangements method, the taxpayer will have the appropriate records in place by 30 June 2011 for the hedging financial arrangements.

After this date, the ATO will undertake compliance activities on TOFA taxpayers, which may include reviewing their compliance with these record requirements.

Under s 230-380 ITAA 1997, the ATO has the discretion to determine that the taxpayer has the required hedging documentation in place. When the ATO exercises this discretion, it considers several factors. However, where a taxpayer has made no reasonable attempts to put the records in place by 30 June 2011, it is unlikely that the discretion would be exercised.

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