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An exemption applies for CFCs in listed countries if the total of:
- eligible designated concession income
- low-taxed third country income (of a kind specified in the regulations), and
- FIF income is not greater than a threshold amount.
There is no similar exemption for a CFC that is a resident of an unlisted country.
If the CFC has a gross turnover of $1 million or more, the threshold amount is $50,000 - that is, the exemption will only apply if the total of the amounts is $50,000 or less.
If a CFC has a gross turnover of less than $1 million, the threshold amount is 5% of the CFC's gross turnover - that is, the exemption will only apply if the sum of the amounts is less than or equal to 5%.
How does the exemption operate?
If the threshold is not exceeded, a CFC's eligible designated concession income, low-taxed foreign source income and FIF income are not included in the notional assessable income of the CFC. The general anti-avoidance provisions of the Act may apply where attempts are made to split income among a number of CFCs to take advantage of the exemption.
Last modified: 05 Dec 2006QC 18000