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  • 6. Income

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    B - Gross payments subject to foreign resident withholding

    You only complete this label if the company is a foreign resident. An Australian resident should not include an amount, such as, foreign sourced income, at this label.

    Foreign resident withholding applies to payments made to foreign residents where the payment is:

    • for promoting or organising casino gaming junket activities
    • for entertainment or sports activities, or
    • under contract for the construction, installation and upgrading of buildings, plant and fixtures, and for associated activities.

    This withholding is not a final tax. A credit can be claimed at H2 Credit for tax withheld – foreign resident withholding in the Calculation statement.

    Write at B the gross payments made to the company that were subject to foreign resident withholding. Gross payments include amounts of tax withheld, or that should have been withheld.

    Do not include at this label amounts subject to foreign resident withholding that were distributed to the company from a partnership or trust. Include these at D Gross distribution from partnerships or E Gross distribution from trusts.

    Do not include at this label amounts that are subject to a final withholding tax, for example, amounts subject to withholding tax under section 128B of the ITAA 1936. Include these amounts at F Gross interest or H Total dividends or R Other gross income in item 6 Income and Q Other income not included in assessable income in the Reconciliation to taxable income or loss at item 7. A final withholding tax cannot be claimed at H2 Credit for tax withheld – foreign resident withholding in the Calculation statement.

    If an amount is written at B, complete and attach a Non-individual PAYG payment summary schedule 2016. For instructions on completing this schedule, see Non-individual PAYG payment summary schedule.

    Any income included at B that is not assessable in Australia should also be included at V Exempt income item 7.

    A - Gross payments where ABN not quoted

    Write at A the gross payments made to the company that were subject to withholding where an ABN was not quoted. Gross payments include amounts of tax withheld.

    If you write an amount at A:

    • complete a Non-individual PAYG payment summary schedule 2016. For instructions on completing this schedule, see Non-individual PAYG payment summary schedule.
    • ensure that you write the corresponding amount of tax withheld at H3 Credit for tax withheld where ABN is not quoted in the Calculation statement.

    C - Other sales of goods and services

    Write at C the gross sales of trading stock including wool, produce and livestock, including the assessable value, for income tax purposes, of forced disposal, manufactured goods, goods taken ex-stock, livestock killed for rations or exchanged for other goods or services, gross income from sale of goods not treated as trading stock and gross earnings from services. Gross income is to be shown before any legal set off or other netting off between amounts.

    Do not include at C:

    • any payments where tax has been withheld for failure to quote an ABN (include these amounts at A Gross payments where ABN not quoted)
    • any amounts subject to foreign resident withholding (include these amounts at B Gross payments subject to foreign resident withholding)
    • sales of shares and land that are not held as trading stock for income tax purposes.

    D - Gross distribution from partnerships

    Write at D the gross distribution from all partnerships, including any share of franking credits attributable to dividends paid by an Australian company.

    Include any amounts subject to foreign resident withholding in Australia that were distributed to the company from a partnership. Also include the company’s share of credit from foreign resident withholding. A credit can be claimed for the company’s share of credit from foreign resident withholding at H2 Credit for tax withheld – foreign resident withholding in the Calculation statement.

    If the TOFA rules apply to the company, show at D all distributions from partnerships. This includes amounts from financial arrangements subject to the TOFA rules.

    Do not include at D:

    • distributions from a corporate limited partnership (unless that distribution is attributable to profits made before it became a corporate limited partnership). Include these amounts at H Total dividends item 6
    • any amount referable to Australian franking credits received indirectly from a New Zealand franking company through a partnership. Include these amounts at C Australian franking credits from a New Zealand company item 7.

    Include any adjustment for taxation purposes at B Other assessable income item 7 or X Other deductible expenses item 7.

    Special rules apply if an entity is a partner in a partnership and joins a consolidated or MEC group part way through an income year. For more information, see the Consolidation reference manual.

    Also include the company’s share of franking credits included in the gross distribution from the partnership at C Non-refundable non-carry forward tax offsets in the Calculation statement.

    However, the company is not entitled to a franking tax offset if the relevant interest is not held at risk as required under the holding period and related payments rules, if there is some other manipulation of the imputation system or if the gross distribution from the partnership is exempt income or non-assessable non-exempt income (other than because of certain provisions mentioned in section 207-110 of the ITAA 1997). Do not write the amount of franking credit attached to these distributions at C Non-refundable non-carry forward tax offsets. Instead, the company is entitled to a deduction under section 207-150 or section 207-95 of the ITAA 1997 equal to its share of the franking credit, and this is included at X Other deductible expenses item 7.

    If the amount at D is a loss, print L in the box at the right of the amount.

    To the extent that FTDT has been paid on income received by the company from partnerships, that amount is excluded from the assessable income of the company under section 271-105 of Schedule 2F to the ITAA 1936.

    If the company’s share of partnership income includes an amount received indirectly from a closely held trust on which trustee beneficiary non-disclosure tax (TBNT) has been paid, you do not need to include the amount in the company’s assessable income.

    Any losses or outgoings incurred in deriving an amount that is excluded from assessable income because FTDT or TBNT has been paid are not deductible. The company cannot claim a tax offset for any franking credits attributable to the whole or a part of a dividend that is excluded from assessable income under these provisions.

    Record keeping

    Keep a record of the following:

    • full name of the partnership
    • TFN of the partnership, if known
    • amount of income
    • deductible expenses relating to the amount of income that were not claimed in the partnership tax return but are claimed on the company tax return.

    Include expenses incurred by the company as a partner at S All other expenses item 6.

    Add back non-deductible expenses at W Non-deductible expenses item 7.

    E - Gross distribution from trusts

    Write at E the total amount of gross distributions received from trusts, including any share of franking credits attributable to dividends paid by an Australian company as advised by the trustee.

    Include any amounts subject to foreign resident withholding in Australia that were distributed to the company from a trust. Also include the company’s share of credit from foreign resident withholding. A credit can be claimed for the company’s share of credit from foreign resident withholding at H2 Credit for tax withheld – foreign resident withholding in the Calculation statement.

    If the TOFA rules apply to the company, show at E all distributions from trusts. This includes amounts from financial arrangements subject to the TOFA rules.

    Do not include at E:

    • distributions from a public trading trust or corporate unit trust. Include these amounts at H Total dividends item 6
    • capital gains received from a trust. Include these at A Net capital gain item 7. For information on how to include an amount of a capital gain received from a trust at A (for example, how to gross-up a capital gain from a trust) see the Guide to capital gains tax 2016
    • any amount referable to Australian franking credits received indirectly from a New Zealand franking company through a trust. Include these amounts at C Australian franking credits from a New Zealand company item 7.

    The amount at E cannot be a loss.

    Also write the company’s share of the franking credits included in the gross distribution from the trust at C Non-refundable non-carry forward tax offsets in the Calculation statement. However, if the relevant interest is not held at risk as required under the holding period and related payments rules, or there is some other manipulation of the imputation system, or if the gross distribution from the trust is exempt income or non-assessable non-exempt income (other than because of certain provisions mentioned in section 207-110 of the ITAA 1997), the company is not entitled to a franking tax offset. Do not write the amount of franking credit attached to these distributions at C Non-refundable non-carry forward tax offsets.

    Instead, the company is entitled to a deduction under section 207-150 or section 207-95 of the ITAA 1997, and this is included at X Other deductible expenses item 7.

    Include any part of a distribution in the gross amount, for example, a part of a distribution that is not taxable income. Write any adjustment for taxation purposes at item 7. In the example mentioned, include that part of the distribution at Q Other income not included in assessable income item 7, to ensure that the amount is not included in taxable income.

    Special rules apply if an entity is a beneficiary or object of a trust and joins a consolidated or MEC group part way through an income year. For more information, see the Consolidation reference manual.

    To the extent that FTDT has been paid on income or capital of a trust to which the company is presently entitled or which has been distributed to the company, that income or capital is excluded from the assessable income of the company under section 271-105 of Schedule 2F to the ITAA 1936.

    If the company’s share of trust income includes an amount received indirectly from a closely held trust on which TBNT has been paid, you do not need to include the amount in the company’s assessable income.

    Any losses or outgoings incurred in deriving an amount that is excluded from assessable income because FTDT or TBNT has been paid are not deductible. The company cannot claim a tax offset for any franking credits attributable to the whole or a part of a dividend that is excluded from assessable income under these provisions.

    In the CODE box, print the code from table 2 that best describes the type of trust for the amount of income written at E. If this amount is from more than one type of trust, print the code that represents the trust for the greatest amount of income. Descriptions of the types of trusts listed in table 2 are in table 3.

    If the type of trust making the distribution is unknown, contact the trustee of that trust.

    Table 2: Trust codes

    Code

    Type

    D

    Deceased estate

    F

    Fixed trust, other than a fixed unit trust or a public unit trust shown at U, P or Q of this table

    H

    Hybrid trust

    S

    Discretionary trust, where the main source of income of the trust is from service and/or management activities

    T

    Discretionary trust, where the main source of income of the trust is from trading activities

    I

    Discretionary trust, where the main source of income of the trust is from investment activities

    M

    Cash management unit trust

    U

    Fixed unit trust, other than a public trust described in P or Q of this table

    P

    Public unit trust (listed), other than a cash management unit trust

    Q

    Public unit trust (unlisted), other than a cash management unit trust

    Table 3: Descriptions of trusts

    Fixed trust

    A trust in which persons have fixed entitlements (as defined in section 272-5 of Schedule 2F to the ITAA 1936) to all of the income and capital of the trust at all times during the income year

    Hybrid trust

    A trust that is not a fixed trust but in which persons have fixed entitlements (as defined in section 272-5 of Schedule 2F to the ITAA 1936) to income or capital of the trust during the income year

    Discretionary trust

    A trust that is neither a fixed trust nor a hybrid trust and under which persons benefit from income or capital of the trust upon the exercise of a discretion by persons, usually the trustee.

    Fixed unit trust

    A fixed trust in which interest in the income and capital of the trust are represented by units.

    Public unit trust

    A fixed unit trust that is a widely held unit trust (as defined in section 272-105 of Schedule 2F to the ITAA 1936) at all times during the income year.

    Public unit trust, listed

    A public unit trust in which any of its units were listed for quotation in the official list of a stock exchange in Australia or elsewhere during the income year.

    Public unit trust, unlisted

    A public unit trust in which none of its units were listed for quotation in the official list of a stock exchange in Australia or elsewhere during the income year.

    Record keeping

    Keep a record of the following:

    • full name of the trust
    • TFN of the trust, if known
    • amount of income
    • deductible expenses relating to the amount of income.

    Include expenses incurred by the company as a beneficiary at Expenses, S All other expenses item 6.

    Add back non-deductible expenses at W Non-deductible expenses item 7.

    X - Forestry managed investment scheme income

    Definitions

    A company is an initial participant in a forestry managed investment scheme (FMIS) if:

    • it obtained its forestry interest in the FMIS from the forestry manager of the scheme, and
    • its payment to obtain the forestry interest in an FMIS results in the establishment of trees.

    A company is a subsequent participant in an FMIS if it acquired its interest through secondary market trading. This means it acquired its interest other than as an initial participant, usually by purchasing that interest from an initial participant.

    The forestry manager of an FMIS is the entity that manages, arranges or promotes the FMIS.

    A forestry interest in an FMIS is a right to benefits produced by the FMIS (whether the right is actual, prospective or contingent, and whether it is enforceable or not).

    The amount of the company’s total forestry scheme deductions is the total of all the amounts that it can deduct or has deducted for each income year that it held its forestry interest. See U Forestry managed investment scheme deduction or more information on amounts that you can deduct.

    The amount of the company’s incidental forestry scheme receipts is the total of all the amounts that it received from the FMIS in each income year that it held its forestry interest, other than amounts received because of a CGT event, that is, a sale or a harvest.

    Write at X the total income from the following activities for each FMIS in which the company holds a forestry interest.

    Do not include capital gains from an FMIS; show these at A Net capital gain item 7. For more information on the CGT treatment of the company’s forestry interests, see the Guide to capital gains tax 2016. If the company is a member of a collapsed agribusiness managed investment scheme, see Collapse of agribusiness managed investment schemes: participant information for information on calculating your income and deductions.

    Participants in an FMIS

    For an initial participant

    Thinning receipts

    If the company received thinning proceeds from its forestry interest, include the actual amount received at X.

    Sale and harvest receipts – forestry interest no longer held

    If:

    • the company ceased holding its forestry interest as a result of a CGT event (because it sold its interest or it received harvest proceeds), and
    • the company has claimed a deduction, or can claim a deduction, or would be entitled to deduct such amounts but for a CGT event happening within 4 years after the end of the income year in which the company first pays an amount under the FMIS

    include the market value of the forestry interest at the time of the CGT event at X.

    Sale and harvest receipts – forestry interest still held

    If:

    • a CGT event happened and the company still held its forestry interest (because it sold part of its interest or there was a partial harvest), and
    • the company has claimed a deduction, or can claim a deduction, or would be entitled to deduct such amounts but for a CGT event happening within 4 years after the end of the income year in which the company first pays an amount under the FMIS

    include at X the amount by which the market value of the forestry interest was reduced as a result of the CGT event.

    For a subsequent participant

    Thinning receipts

    If the company received thinning proceeds from its forestry interest, include the actual amount received at X.

    Sale and harvest receipts – forestry interest no longer held

    If:

    • the company ceased holding its forestry interest as a result of a CGT event (because it sold its interest or it received harvest proceeds), and
    • the company has deducted, or can deduct, or could have deducted, an amount if the company had paid the amount under the FMIS in relation to the forestry interest,

    include at X the lesser of the following two amounts:

    • the market value of the forestry interest at the time of the CGT event, or
    • the amount (if any) by which the total forestry scheme deductions exceeded the incidental forestry scheme receipts.

    Sale and harvest receipts – forestry interest still held

    If:

    • a CGT event happened and the company still held its forestry interest (because it only sold part of its interest or there was a partial harvest), and
    • the company can deduct, or has deducted, or could have deducted, an amount if the company had paid the amount under the FMIS in relation to the forestry interest,
    • work out the following two amounts:
    • the market value of the forestry interest at the time of the CGT event, and
    • the amount (if any) by which the total forestry scheme deductions exceeded the incidental forestry scheme receipts.

    Use the lesser of the two amounts above in the following formula:

    The amount worked out above multiplied by the decrease, if any, in the market value of the forestry interest (as a result of the CGT event) divided by the market value of the forestry interest just before the CGT event.

    Include at X the amount calculated using the formula. The remainder of the net deductions will be claimed in a future income year in which the company receives further proceeds from a harvest or the sale of its forestry interest.

    To complete this item

    Add up all the amounts you worked out for the company’s FMIS income and write the total at X.

    See examples 7 and 8 for how to calculate the amount you show at X where the company is a subsequent participant that holds the forestry interest on capital account.

    For more information on the CGT treatment of a company’s forestry interest, see the Guide to capital gains tax 2016.

    Example 7 - Sale receipts: forestry interest no longer held

    Cedar Pty Ltd is a subsequent participant in an FMIS. It sold its forestry interest at the market value of $20,000. The sale of the forestry interest is a CGT event. The original cost base was $14,000.

    In the time that the company held the forestry interest, it claimed $4,000 in deductions (its total forestry scheme deductions) for lease fees, annual management fees and the cost of felling that it paid to the forestry manager. In an earlier period, it received $1,500 from thinning proceeds (its incidental forestry scheme receipts).

    Cedar Pty Ltd will need to include $2,500 (that is, $4,000 minus $1,500) at X, because this amount is less than the market value of its forestry interest at the time of the CGT event.

    CGT Notes:

    • Cedar Pty Ltd will take the amount that it included at X into account when working out the amount to include at A Net capital gain item 7.
    • The capital gain would be $3,500 (capital proceeds of $20,000 less cost base of $16,500 (made up of $14,000 plus $2,500 that was included in assessable income)).

    Example 8 - Harvest receipts: forestry interest still held

    Oakey Pty Ltd is a subsequent participant in an FMIS. It received harvest proceeds over two income years. It received the first harvest payment of $5,000 in the 2015–16 income year.

    The market value of its forestry interest is $20,000 just before it received its payment for the first harvest (which is a CGT event). After it received this first harvest payment, the market value of its forestry interest was reduced to $15,000. Its original cost base was $14,000.

    In the time that it has held its interest, Oakey Pty Ltd claimed $4,000 in deductions (its total forestry scheme deductions) for lease fees, annual management fees and the cost of felling that it paid to the forestry manager. In an earlier period, it received $1,500 from thinning proceeds (its incidental forestry scheme receipts).

    Step 1: The market value of the forestry interest (at the time of the CGT event) is $20,000.

    The amount by which the total forestry scheme deductions exceed the incidental forestry scheme receipts is $2,500 (that is, $4,000 minus $1,500).

    The amount to use in step 2 is $2,500.

    Step 2: Using the formula above:

    $2,500 multiplied by $5,000 divided by $20,000 equals $625.

    Step 3: The company will need to include $625 at X.

    CGT Notes:

    • Oakey Pty Ltd has disposed of 25% of its forestry interest. The company will take the amount that it included at X into account when working out the amount to include at A Net capital gain item 7.
    • For 2015–16 the capital gain would be $875 (capital proceeds of $5,000 less apportioned original cost base of $4,125 (made up of $3,500 (25% of $14,000) plus $625 that is included in assessable income)).
    End of example

    F - Gross interest

    Write at F the total interest from all sources, including interest received from or credited by an associate, a shareholder or an associate of a shareholder. The amount at this label cannot be a loss.

    If the TOFA rules apply to the company, show at F all interest received or credited to it. This includes interest from financial arrangements subject to the TOFA rules.

    Record keeping

    Keep a record of the following:

    • name and address of the borrower
    • amount received or credited.

    G - Gross rent and other leasing and hiring income

    Write at G the company’s total income from leasing and hiring activities. The amount at this label cannot be a loss.

    H - Total dividends

    Write at H the total dividends, including all dividends and non-share dividends franked and unfranked, foreign source dividends (including New Zealand dividends and supplementary dividends, bonus shares), deemed dividends, and liquidators’ and other company distributions. The amount at this label cannot be a loss.

    If the TOFA rules apply to the company, show at H all unfranked dividends that were paid or credited to it from all sources. This includes unfranked dividends from financial arrangements subject to the TOFA rules.

    Do not include at H:

    • a dividend received under a demerger unless the head entity of the demerger group has elected under subsection 44(2) of the ITAA 1936 that the dividend be treated as an assessable dividend
    • any franking credits that were attached to dividends received from an Australian company; include these amounts at J Franking credits item 7
    • any Australian franking credits from a New Zealand franking company; include them at C Australian franking credits from a New Zealand company item 7.

    All transactions that occur between members of a consolidated or MEC group, including distributions between group members, are not recognised for income tax purposes. Do not include at H distributions between members of the same consolidated or MEC group.

    To the extent that FTDT has been paid on a dividend (including a non-share dividend) paid or credited to the company by another company that has made an interposed entity election, that amount is excluded from the assessable income of the company under section 271-105 of Schedule 2F to the ITAA 1936.

    Any losses or outgoings incurred in deriving an amount that is excluded from assessable income under section 271-105 of Schedule 2F to the ITAA 1936 are not deductible. The company cannot claim a tax offset for any franking credit attributable to the whole or a portion of a dividend that is excluded from assessable income under section 271-105 of Schedule 2F to the ITAA 1936.

    Record keeping

    Keep a record of the following for dividends and non-share dividends:

    • name of the payer
    • date received or credited
    • franked amount
    • unfranked amount
    • franking credit allocated
    • franking percentage
    • gross amount
    • type of distribution, for example, foreign source dividend, bonus shares, phasing-out dividend, liquidator’s distribution.

    I - Fringe benefit employee contributions

    Write at I all payments that the company has received from recipients of fringe benefits.

    Employee contributions form part of the employer’s or associate’s assessable income if employees make payments for fringe benefits that they have received.

    If you are the head company of a consolidated or MEC group, include all fringe benefit employee contributions received by you or by an entity that was a subsidiary member of the group when the contribution was received.

    Q - Assessable government industry payments

    Generally, government credits, grants, rebates, benefits, bounties and subsidies are assessable income in the hands of the recipient if they are received in, or for, the carrying on of a business. This generally includes payments of a capital nature. However, payments relating to the commencement or cessation of a business may not be assessable income but may give rise to a capital gain.

    Write at Q all assessable government industry payments, including:

    • bounties
    • cleaner fuels grants
    • drought relief
    • employee subsidies
    • export incentive grants
    • industry assistance grants including grants relating to R&D
    • producer rebate (wine equalisation tax)
    • product stewardship for oil program benefit.

    If this amount includes a cleaner fuels grant or a product stewardship for oil program benefit, print D in the CODE box.

    For more information on fuel schemes, phone 13 28 66.

    For more information on government industry payments, see Taxation Ruling TR 2006/3 – Income tax: government payments to industry to assist entities (including individuals) to continue, commence or cease business.

    J - Unrealised gains on revaluation of assets to fair value

    Write at J the amount (if any) of any unrealised gains made on the revaluation of assets and liabilities to fair value that may arise as a result of the adoption of Australian equivalents to the international financial reporting standards.

    • Include any unrealised gain on the revaluation of a financial arrangement to fair value assessable under the TOFA rules.
    • Adjustments for tax purposes are made at item 7.
    • An unrealised gain that is not assessable income is included at Q Other income not included in assessable income item 7.
    • Any net capital gain for taxation purposes is written at A Net capital gain item 7.
    • Any net capital loss is included with any unapplied capital losses carried forward to later income years and is written at V Net capital losses carried forward to later income years item 13.

    R - Other gross income

    Write at R other gross income, royalties, insurance recoveries, bad debt recoveries, life insurance premiums, fuel tax credits, non-government subsidies and assessable non-government assistance from all sources and profit on sale of depreciating assets (including assets used in R&D activities subject to the R&D tax incentive).

    Include at R any gains from the company’s financial arrangements to which the TOFA rules apply, except where they have already been included at item 6.

    Also include at R any extraordinary revenue (that is, revenue or gains from events outside the ordinary operations of the company and not of a recurring nature, including work-in-progress amounts assessable under section 15-50 of the ITAA 1997). An extraordinary gain that is not assessable income is included at Q Other income not included in assessable income item 7.

    This label excludes amounts included at Income, B to J item 6. If this amount is a loss, print L in the box at the right of the amount.

    Record keeping

    Keep a record of the following:

    • types of income, for example, sales, commissions
    • amount derived for each type of income.

    If various profit and loss account balances are combined when calculating R, keep a list of the names and amounts of those accounts.

    S - Total income

    Write at S the total of all income items written at B to R item 6. If this amount is a loss, print L in the box at the right of the amount.

    Last modified: 12 Feb 2019QC 48080