• Question 22

    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

    Complete by placing an 'X' in the applicable box. If you were a registered OBU or the head company of a consolidated group that included a registered OBU during the income year, answer 'yes' and complete the remaining labels as appropriate.

    We are seeking further information to determine:

    • the extent of use of the OBU provisions and the types of OBU activities undertaken
    • to help in assessing your level of compliance with these provisions; for example, the correct classification of OBU activities.

    To examine and quantify these risks we need to identify the nature and significance of the activities undertaken by OBUs.

    At the labels for Gross OB income, you need to show the amounts of your assessable OB income worked out in accordance with section 121EE of the ITAA 1936.

    At the labels for Net OB income/loss, you need to show the amounts of your assessable OB income worked out in accordance with section 121EE of the ITAA 1936 less the amount of your exclusive OB deductions within the meaning of subsection 121EF(3) of the ITAA 1936.

    Where it is not possible for you to provide the amount of assessable OB income and allowable OB deductions for each relevant kind of OB activity, provide the best level of information about your gross income and net income based on your accounting records. If this applies to you, you are also required to record as reconciliation adjustments:

    • the difference between the amounts you must show at the labels for each OB activity type based on your accounting records
    • the amount of your total assessable OB income and allowable OB deductions for the income year worked out in accordance with sections 121EE and 121EF of the ITAA 1936.

    If it is possible for you to provide the amount of your assessable OB income under section 121EE and exclusive OB deductions under subsection 121EF(3) of the ITAA 1936 for each relevant kind of OB activity, the amount you show for total assessable OB income and net OB income/loss will be the sum of the amounts you have written in the respective labels for each OB activity type. You do not need to complete the reconciliation adjustment label.

    For the purposes of providing information at this question regarding your OB activities with related parties, treat related party as having the same meaning as it has in determining your international related parties.

    To complete this question, you need to:

    • for each OB activity type listed in the schedule
      • work out the (gross) amount of your assessable OB income in accordance with section 121EE of the ITAA 1936
      • calculate your net OB income/loss in accordance with sections 121EE and 12EF of the ITAA 1936 (by subtracting exclusive OB deductions for the OB activity type from the assessable OB income for the activity)
      • identify your OB activities undertaken with related parties
      • calculate the amount of your (gross) assessable OB income, within the meaning of section 121EE of the ITAA 1936, for the OB activities you have undertaken with related parties
       
    • work out the amount of your general OB deduction and apportionable OB deductions for the income year in accordance with section 12EF of the ITAA 1936.

    In the first column:

    • write at C, F, I, L, O, R, U and X, the amount of your assessable OB income for the income year worked out in accordance with section 121EE of the ITAA 1936, for each specified OB activity type
    • at AB, write the sum of the amounts you have written at C, F, I, L, O, R, U and X
    • where it is not possible for you to provide the amount of assessable OB income for each relevant kind of OB activity, write at AE the total gross income reconciliation adjustment for the income year (reconciling the gross income you must write for each OB activity at C, F, I, L, O, R, U and X based on your accounting records with your total assessable OB income worked out under section 121EE of the ITAA 1936 for the income year that you must write at AH)
    • write at AH the amount of your total assessable OB income for the income year worked out under section 121EE.

    In the second column:

    • write at D, G, J, M, P, S, V and Y, the amount of your net OB income/loss for each specified OB activity type (calculated by subtracting the amount of your exclusive OB deductions for the income year, within the meaning of subsection 121EF(3), for the OB activity type, from the amount of assessable OB income which you have written at C, F, I, L, O, R, U or X in the first column for that activity type).
    • at AA, write the sum of the amount of your general OB deduction and the amount of your apportionable deductions worked out under section 121EF of the ITAA 1936 for all your OB activities for the income year
    • at AC, write the sum of the amounts you have written at D, G, J, M, P, S, V and Y less the amount of your general OB deduction and apportionable OB deductions you have written at AA
    • where it is not possible for you to provide the amount of exclusive OB deductions, within the meaning of subsection 121EF(3), for each relevant kind of OB activity, write at AF the total net income/loss reconciliation adjustment for the income year (reconciling the net income/loss you must write for each OB activity at D, G, J, M, P, S, V and Y based on your accounting records with the amount of your total assessable OB income less allowable OB deductions that you must write at AI)
    • write at AI the amount of your total assessable OB income, subject to subsection 121EG(1), less allowable OB deductions, subject to subsection 121EG(2), for the income year.

    In the third column:

    • write at E, H, K, N, Q, T, W and Z, the amount of your assessable OB income for the income year, determined in accordance with section 121EE of the ITAA 1936, for each specified OB activity type for OB activities undertaken with related parties
    • at AD, write the sum of the amounts you have written at E, H, K, N, Q, T, W and Z
    • where it is not possible for you to provide the amount of assessable OB income for each relevant kind of OB activity undertaken with related parties, write at AG the total gross income reconciliation adjustment for related party OB activities (reconciling the gross income amounts you must write at E, H, K, N, Q, T, W and Z for each OB activity undertaken with related parties based on your accounting records with your total assessable OB income for all your OB activities undertaken with related parties that you must write at AJ)
    • write at AJ the amount of your total assessable OB income for the income year, determined under section 121EE, for all your OB activities undertaken with related parties.

    Example

    During the income year, XYZ Co, an Australian taxpayer with an OBU, extracted the following information from its tax records (that is all figures are as worked out for tax purposes) for its financial services activities.

    Activity type

    Related party

    Total assessable income

    Assessable OB income

    Assessable non-OB income

    Exclusive deductions

    Borrowing & lending

    Yes

    100,000

    100,000

     

    25,000

    Borrowing & lending

    Yes

    150,000

     

    150,000

    45,000

    Borrowing & lending

    No

    125,000

    125,000

     

    40,000

    Guarantee-type

    Yes

    90,000

    90,000

     

    10,000

    Guarantee-type

    No

    110,000

     

    110,000

    30,000

    Trading

    Yes

    250,000

    250,000

     

    200,000

    Trading

    Yes

    140,000

     

    140,000

    30,000

    Trading

    No

    300,000

    300,000

     

    120,000

    Eligible contract

    No

    210,000

    210,000

     

    60,000

    Advisory

    No

    80,000

    80,000

     

    10,000

    Advisory

    Yes

    100,000

    100,000

     

    25,000

    Hedge

    Yes

    390,000

     

    390,000

    270,000

    Total

     

    2,045,000

    1,255,000

    790,000

    865,000

    The OB income can be summarised as follows.

    Activity type

    Assessable OB income

    Net OB income/loss (assessable OB income - exclusive OB deductions)

    Assessable OB income from related parties

    Borrowing & lending

    225,000

    160,000

    100,000

    Guarantee-type

    90,000

    80,000

    90,000

    Trading

    550,000

    230,000

    250,000

    Eligible contract

    210,000

    150,000

     

    Advisory

    180,000

    145,000

    100,000

    Total

    1,255,000

    765,000

    540,000

    Additional information:

    • XYZ Co has total allowable deductions of $100,000, within the meaning of subsection 121EF(4), attributable to both their OB activities and non-OB activities.
    • XYZ Co did not incur any apportionable deductions, within the meaning of subsection 121EF(5), during the income year.
    • All of XYZ Co's exclusive OB deductions and exclusive non-OB deductions, within the meaning of subsections 121EF(3) and (6), for its borrowing and lending activities were for expenses in the nature of interest.
    • None of XYZ Co's exclusive deductions for any other kinds of activities were for expenses in the nature of interest.
     

    In accordance with subsection 121EF(4), XYZ Co works out the proportion of their $100,000 of deductions attributable to both their OB activities and non-OB activities - that is their general OB deduction amount under the following equation:

    Deduction

    X

      Adjusted assessable OB income  
    Adjusted total assessable income

    Adjusted assessable OB income is the amount of the OBU's assessable OB income less the amount of the OBU's exclusive OB deductions for interest (including discounts in the nature of interest).

    Adjusted total assessable income is the amount of the OBU's total assessable income less the sum of the OBU's exclusive OB deductions for interest and the OBU's exclusive non-OB deductions for interest (including discounts in the nature of interest).

    Accordingly, the amount of XYZ Co's general OB deduction equals

    $100,000

    X

              $1,255,000 - ($25,000 + $40,000)          
    $2,045,000 - ($25,000 + $40,000 + $45,000)

    = $100,000

    X

    $1,190,000
    $1,935,000

    = $61,498

       

    With this information XYZ Co completes question 23 as follows.

    Example of question 22 completed

    Last modified: 09 Nov 2011QC 24292