Exemption for an interest in a FIF that is trading stock



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If an interest in a FIF forms part of your trading stock and you elect, under the trading stock provisions of the ITAA 1936 or section 70-70 of the Income Tax Assessment Act 1997 (ITAA 1997) to bring those interests to account at market value, you are not subject to FIF taxation on income accruing from that interest. [section 521]

If you bring an interest in a FIF to account as trading stock but do not make the election to use market value, you must value your interest at the FIF cost [section 70-70 of the ITAA 1997].

This exemption is not available to a CFC that has an interest in a FIF as part of its trading stock. This is because a CFC cannot elect to value its trading stock at anything but cost when working out its attributable income under Part X of the ITAA 1936. For more information, see Taxation Determination TD96/39 - Foreign income: can a controlled foreign company (CFC) obtain the benefit of the trading stock exemption under section 521 of the Income Tax Assessment Act 1936. [section 397]

Last modified: 27 May 2005QC 17512