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  • Question 41

    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

    If you are an offshore banking unit (OBU), what you show at this question helps in assessing your level of compliance with the OBU tax provisions.

    To complete this question you need to undertake the following steps:

    • 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 (gross) amount of your assessable OB income, within the meaning of section 121EE of the ITAA 1936, for the OB activities you have undertaken with related parties. We understand that some taxpayer's records currently report an aggregate OB income amount for tax purposes and do not keep tax figures for each of the OB activity types. Therefore, for this first year only, the dollar amounts or values asked for in this question may be based on your accounting records.
    • Work out the amount of your general OB deduction and apportionable OB deductions for the income year in accordance with section 121EF of the ITAA 1936.
    • Work out the amount of your eligible fraction of foreign income tax you claimed as a foreign tax offset under Division 770 of the ITAA 1997.

    If you were an OBU or the head company of a consolidated group that include an OBU, answer 'Yes' at label A of question 41 and complete the required labels.

    At label B of items 41a, 41b, 41c, 41d, 41e, 41f, 41g, 41h and 41i, write 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.

    At label B of item 41k, write the sum of the amounts you have written at items 41a to 41i. This amount will be the same as the amount shown at label B of item 41m if you do not need to complete label B of item 41l.

    Where it is not possible for you to provide the amount of assessable OB income for each relevant kind of OB activity write the gross income for each OB activity at label B of items 41a to 41i based on your accounting records and write the sum of the gross income for each OB activity (items 41a to 41i) at item 41k, then write at item 41l the total gross income reconciliation adjustment for the income year (reconciling the sum of the gross income for each OB activity that you must write at label B of item 41k based on your accounting records, with your total assessable OB income determined under section 121EE of the ITAA 1936 for the income year that you must write at label B of item 41m).

    At label B of item 41m, write the amount of your total assessable OB income for the income year determined under section 121EE of the ITAA 1936.

    If the amount at any of these labels is a loss, write 'L' in the box at the right of the amount.

    At label C of items 41a, 41b, 41c, 41d, 41e, 41f, 41g, 41h and 41i, write 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) of the ITAA 1936, for the OB activity type, from the amount of assessable OB income which you have written at label B of items 41a to 41i for that activity type). If this amount is a net loss, write L in the box at the right of the amount.

    At label C of item 41j, write the sum of the amount of your general OB deduction and the amount of your apportionable OB deductions determined under section 121EF of the ITAA 1936 for all your OB activities for the income year.

    At label C of item 41k, write the sum of the amounts you have written at label C of items 41a to 41i, less the sum of the amount of your general OB deduction and apportionable OB deductions you have written at label C of item41j. If this amount is a net loss, write 'L' in the box at the right of the amount. This amount will be the same as the amount shown at label C of item 41m if you do not need to complete label C of item 41l.

    Where it is not possible for you to provide the amount of exclusive OB deductions (within the meaning of subsection 121EF(3) of the ITAA 1936) for each relevant kind of OB activity, write the net income/loss for each kind of OB activity at label C of items 41a to 41i based on your accounting records, and write the sum of the net income/loss for each OB activity (you wrote at label C of items 41a to 41i) at label C of item 41k, then write at label C of item 41l the total net income/loss reconciliation adjustment for the income year (reconciling the sum of the net income/loss for each OB activity that you must write at label C of item 41k based on your accounting records, with the amount of your total assessable OB income less OB deductions that you must write at label C of item 41m). If this amount is a net loss, write 'L' in the box at the right of the amount.

    Attention

    Note that label C of item 41j must be completed as the amount of your general OB deduction and apportionable OB deductions determined under section 121EF of the ITAA 1936 is not dependent on your accounting records.

    End of attention

    At label C of item 41m, write the amount of your total assessable OB income, subject to subsection 121EG(1) of the ITAA 1936 less allowable OB deductions, subject to subsection 121EG(2) of the ITAA 1936, for the income year. If this amount is a net loss, write 'L' in the box at the right of the amount.

    For the purposes of providing information at label D (Assessable OB income from related parties), treat the term 'related party' as having the same meaning as it has in determining whether you have international related party dealings.

    At label D of items 41a, 41b, 41c, 41d, 41e, 41f, 41g, 41h and 41i, write 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 label D of item 41k, write the sum of the amounts you have written at label D of items 41a to 41i. This amount will be the same as the amount shown at label D of item 41m if you do not need to complete D of item 41l.

    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 the gross income for each OB activity undertaken with related parties at label D of items 41a to 41i based on your accounting records, and write the sum of the gross income for each OB activity (you wrote at label D of items 41a to 41i) at label D of item 41k, then write at label D of item 41l the total gross income reconciliation adjustment for related party OB activities for the income year (reconciling the sum of the gross income amounts for each OB activity undertaken with related parties that you must write at label D of item 41k based on your accounting records, with your total assessable OB income determined under section 121EE of the ITAA 1936 for all your OB activities undertaken with related parties for the income year that you must write at label D of item 41m). If this amount is a net loss, write 'L' in the box at the right of the amount.

    Write at label D of item 41m 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. If this amount is a net loss, write 'L' in the box at the right of the amount.

    At label E of item 41n, write the eligible fraction of foreign income tax on OB income you claimed under Division 770 of the ITAA 1936.

    The foreign income tax paid on the offshore banking income of an OBU is taken to be one-third (the current offshore banking eligible fraction) of the amount of foreign income tax actually paid (see subsection 121EG(3A) of the ITAA 1936).

    Attention icon

    We understand that some taxpayer's records currently report an aggregate OB income amount for tax purposes and do not keep tax figures for each of the OB activity types. Therefore, for this first year only, we have provided for this question to be completed based on your accounting records.

    For the 2013 income year onwards, this question will require the reporting of tax figures, determined in accordance with sections 121EE and 121EF, for each of the OB activity types (with the schedule and instructions updated accordingly).

    Direction icon

    For this year only, if you are completing this question based on your accounting records and those records reflect a net OB loss amount for a particular OB activity type, you should report nil in the Assessable OB income label for the relevant OB activity type and reflect the net loss in the Net OB income/loss label for the relevant OB activity type.

    Example

    During the income year, XYZ Co, an Australian taxpayer which was an OBU, extracted the following information from its tax records for its financial services activities.

    Activity type

    Related party

    Total assessable income

    Assessable OB income

    Assessable non-OB income

    Exclusive deductions

    Lending

    Yes

    100,000

    100,000

     

    25,000

    Lending

    Yes

    150,000

     

    150,000

    45,000

    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

    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 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.
    • XYZ Co did not claim an eligible fraction of foreign income tax as an offset.
     

    In accordance with subsection 121EF(4), XYZ Co works out its general OB deduction amount for its $100,000 of deductions attributable to both their OB activities and non-OB activities 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

     

    XYZ Co writes:

    XYZ Co writes

    Last modified: 08 Aug 2014QC 26054