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  • Notional accounting period of an FLP

    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

    The FIF income that is included in your assessable income is calculated for a 'notional accounting period' of the FLP.

    A notional accounting period of your FLP will generally coincide with your income year - that is, a 12-month period ending 30 June each year.

    If the FLP existed before 1 January 1993, the first notional accounting period of the FLP commences on 1 January 1993 and ends on 30 June 1993. If the policy came into existence on or after 1 January 1993, the first notional accounting period commences on the day that it came into existence and ends on the following 30 June [subsection 487(7)].

    Electing a notional accounting period

    You may elect a different notional accounting period if a cash surrender value of your FLP is available in the same month of each year. This election is irreversible for as long as you hold an interest in that particular FLP.

    Your FLP's new notional accounting period will begin:

    • on the first day of the month following the last day of the month in which the cash surrender value of your FLP is available in each year, and
    • in the month immediately prior to your electing a new notional accounting period in which the cash surrender value of your FLP is available each year. [subsections 487(3) and (7)]

    Example

    The current notional accounting period of Judith's FLP is 1 July to 30 June each year. In November of each year a cash surrender value will be available for her FLP. In September 2003 she elects to use a different notional accounting period for her FLP. The new notional accounting period will begin on the first day of the month following November - that is, 1 December - and end 12 months later on 30 November each year.

    However, the first new notional accounting period of Judith's FLP does not begin in the December following the election (December 2003) but begins in the December before the election is made (December 2002). Therefore, the first new notional accounting period for Judith's FLP is 1 December 2002 to 30 November 2003.

    The months between the start of her old notional accounting period (1 July 2002) to the start of her new notional accounting period (1 December 2002) are also a notional accounting period - that is, 1 July 2002 to 30 November 2002. [section 487]

    The FIF income for the period 1 July 2002 to 30 November 2002 will be returned in the 2002-03 income year. The FIF income for the period 1 December 2002 to 30 November 2003 will be included in the 2003-04 income year.

    End of example
    Last modified: 27 May 2005QC 17512