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  • Section C: Interests in foreign entities

    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

    Question 21

    This question is one of a number dealing with controlled foreign companies (CFCs) and controlled foreign trusts (CFTs). These questions are for the purpose of understanding your interests in and dealings with these overseas entities and assessing compliance with the relevant tax legislation.

    21a Did you have any interests in CFCs or CFTs?

    An interest in a CFC or CFT may be either direct or indirect, and has the same meaning as given in Division 3 of Part X of the ITAA 1936.

    To complete this question, you must identify whether you had an interest in any CFCs or CFTs at the end of 2019–20. If you had an interest in a CFC or CFT, answer Yes at A item 21a and complete items 21b, 21c, 21d, 21e, 21f and questions 22, 22a, 22b, 23a and 23b.

    21b Specify the number of CFCs and CFTs in which you had an interest at the end of your income year

    At B, C and D of 21b:

    • Identify the CFCs and CFTs in which if you had an interest at the end of your income year. Then, referring to the tables at Appendix 1 and Appendix 3, identify the category of the country of residency of each CFC or CFT.
    • At B, write the number of your CFCs and CFTs identified as residents of listed countries.
    • At C, write the number of your CFCs and CFTs identified as residents of specified countries or jurisdictions.
    • At D, write the number of your CFCs and CFTs identified as residents of other unlisted countries or jurisdictions.

    If the number of CFCs and CFTs is:

    • less than 10, write zero zero as the first two digits and then write the number, for example, write 009
    • less than 100, write zero as the first digit and then write the number, for example, write 083
    • more than 999, write 999
    • zero, leave the relevant answer blank.

    Example 20

    Jack Brothers & Co had at the end of their income year the following:

    • two German resident CFTs
    • three Japanese resident CFCs
    • one Cayman Islands resident CFT.

    As Germany and Japan are listed countries, they wrote 005 at B to record its five listed country CFTs and CFCs at the end of its income year.

    At C they wrote 001 to record its specified country or jurisdiction CFT.

    They left the remaining box blank.

    This image shows an example of how to complete Question 21.

Question 21
Number of CFCs and CFTs
Label B Listed countries: 005
Label C Specified countries: 001
Label D Other unlisted countriles: nil

    End of example

    21c Did you acquire any interests in CFCs or CFTs during 2019–20?

    If you acquired any associate-inclusive control interest in a CFC or CFT during 2019–20, answer Yes at A item 21c.

    The associate-inclusive control interest has the meaning given by section 349 of the ITAA 1936.

    At B, C and D of 21c:

    • Identify the CFCs and CFTs in which you acquired any associate-inclusive control interest during 2019–20. Then, referring to the tables at Appendix 1 and Appendix 3, identify the category of the country of residency of each CFC or CFT.
    • At B, write the number of CFCs and CFTs resident in listed countries in which you acquired any associate-inclusive control interest during 2019–20.
    • At C, write the number of CFCs and CFTs resident in specified countries or jurisdictions in which you acquired any associate-inclusive control interest during 2019–20.
    • At D, write the number of CFCs and CFTs resident in other unlisted countries or jurisdictions in which you acquired any associate-inclusive control interest during 2019–20.

    If the number of CFCs and CFTs in which you acquired any associate-inclusive control interest during 2019–20 is:

    • less than 10, write zero zero as the first two digits and then write the number, for example, if the number is 9 write 009
    • less than 100 but not less than 10, write zero as the first digit and then write the number, for example, if the number is 83 write 083
    • more than 999, write 999.

    If you did not acquire any interests in CFCs or CFTs of any of the three categories of the country of residency during 2019–20, write zero for that category.

    Example 21

    During the income year, an Australian resident taxpayer (attributable taxpayer) acquired associate-inclusive control interest in following CFCs and CFTs:

    CFC or CFT

    Country of residence

    Section 349 associate-inclusive control interest

    Transaction dates

    CFC

    Canada

    100% direct control interest

    2 July

    CFT

    USA

    65% indirect control interest

    1 October

    CFC

    UK

    85% direct control interest held by an associate of the attributable taxpayer

    15 January

    CFC

    Singapore

    additional 70% direct control interest (the attributable taxpayer already held 20% direct control interest)

    7 November

    CFT

    Belgium

    100% direct control interest

    3 February

    CFC

    South Africa

    35% direct control interest

    16 April

    21c Did you acquire any interests in CFCs or CFTs during the income year?  Items completed, Yes with X for Specify the number of CFS or CFTs of which you acquired any interests during the income year, B Listed countries 003, C Specified countries 001 and D Other unlisted countries 002.

    End of example

    21d Did you dispose of any interests in CFCs or CFTs during 2019–20?

    If you disposed of any associate-inclusive control interest in a CFC or CFT during 2019–20, answer Yes at A item 21d.

    The associate-inclusive control interest has the meaning given by section 349 of the ITAA 1936.

    At B, C and D of item 21d:

    • Identify the CFCs and CFTs in which you disposed of any associate-inclusive control interest during 2019–20. Then, referring to the tables at Appendix 1 and Appendix 3, identify the category of the country of residency of each CFC or CFT.
    • At B, write the number of CFCs and CFTs resident in listed countries in which you disposed of any associate-inclusive control interest during 2019–20.
    • At C, write the number of CFCs and CFTs resident in specified countries or jurisdictions in which you disposed of any associate-inclusive control interest during 2019–20.
    • At D, write the number of CFCs and CFTs resident in other unlisted countries or jurisdictions in which you disposed of any associate-inclusive control interest during 2019–20.

    If the number of CFCs and CFTs is:

    • less than 10, write zero zero as the first two digits and then write the number, for example, if the number is 9 write 009
    • less than 100 but not less than 10, write zero as the first digit and then write the number, for example, if the number is 83 write 083
    • more than 999, write 999.

    If you did not dispose of any interests in CFCs or CFTs of any of the three categories of the country of residency during the income year, write zero).

    Example 22

    During the income year, an Australian resident taxpayer (the attributable taxpayer) disposed of associate-inclusive control interest in following CFCs and CFTs:

    CFC or CFT

    Country of residence

    Section 349 associate-inclusive control interest

    Transaction dates

    CFC

    Canada

    100% direct control interest (the CFC in Canada, in which the attributable taxpayer acquired 100% direct control interest on 2 July)

    31 May

    CFC

    New Zealand

    The CFC ceased to exist (the attributable taxpayer held the 100% direct control interest for the last 5 years)

    20 September

    CFC

    Sweden

    17% indirect control interest held by the attributable taxpayer ((the attributable taxpayer held a total of 85% indirect control interest for the last 3 years)

    30 November

    21d Did you dispose of any interests in CFCs or CFTs during the income year?  Items completed, Yes with X for Specify the number of CFS or CFTs of which you disposed any interests during the income year, B Listed countries 002, C Specified countries 000 and D Other unlisted countries 001.

    End of example

    21e Have your CFCs in the following countries satisfied the active income test for their statutory accounting period(s) under section 432 of ITAA 1936?

    The active income test has the meaning given by section 432 of the ITAA 1936.

    The statutory accounting period has the meaning given by section 319 of the ITAA 1936.

    If your CFCs in listed countries have satisfied the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer Yes at A item 21e.

    If your CFCs in listed countries have failed the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer No at A item 21e.

    If some of your CFCs in listed countries have satisfied, and some of your CFC in listed countries have failed, the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer Yes at A item 21e and No at A item 21e.

    If your CFCs in specified countries or jurisdictions have satisfied the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer Yes at B item 21e.

    If your CFCs in specified countries or jurisdictions have failed the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer No at B item 21e.

    If some of your CFCs in specified countries or jurisdictions have satisfied, and some of your CFC in specified countries or jurisdictions have failed, the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer Yes at B item 21e and No at B item 21e.

    If your CFCs in other unlisted countries or jurisdictions have satisfied the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer Yes at C item 21e.

    If your CFCs in other unlisted countries or jurisdictions have failed the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer No at C item 21e.

    If some of your CFCs in other unlisted countries or jurisdictions have satisfied, and some of your CFC in other unlisted countries or jurisdictions have failed, the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer Yes at C item 21e and No at C item 21e.

    To help work out whether your CFCs have passed or failed the relevant tests, see:

    21f Did you exclude tainted interest income from the passive income of a CFC which was an AFI subsidiary?

    If you excluded tainted interest income from the passive income of a CFC which was an AFI subsidiary under section 326 of the ITAA 1936, answer Yes at A item 21f and provide the following information.

    If all of your AFI subsidiary CFCs have banking licences in their countries, you still need to answer Yes at B item 21f if you excluded tainted interest income from their passive income, however if all of your AFI subsidiary CFCs have banking licences in their countries, you do not need to specify any amounts at D, E, F or G.

    If not all, or none, of your AFI subsidiary CFCs have banking licences in their countries, answer No at B item 21f.

    Answer Yes at C item 21f if the income of any of your AFI subsidiary CFCs which did not have banking licences in their countries was principally derived from the lending of money within the meaning of the definition of financial intermediary business under section 317 of the ITAA 1936.

    Financial intermediary business means:

    • bankingExternal Link business, or
    • a business whose income is principally derived from the lending of money.

    At D, write the total amount of tainted interest income excluded from passive income of your financial intermediary subsidiary CFCs of listed countries for 2019–20 (excluding CFCs with banking licences in their country).

    At E, write the total amount of tainted interest income excluded from passive income of your financial intermediary subsidiary CFCs of specified countries or jurisdictions for 2019–20 (excluding CFCs with banking licences in their country).

    At F, write the total amount of tainted interest income excluded from passive income of your financial intermediary subsidiary CFCs of other unlisted countries or jurisdictions for 2019–20 (excluding CFCs with banking licences in their country).

    At G, write the total amount of tainted interest income excluded from passive income of your financial intermediary subsidiary CFCs (excluding CFCs with banking licences in their country).

    At H, write the number of your financial intermediary CFCs identified as residents of listed countries which excluded tainted interest income from passive income for 2019–20 (excluding any CFCs with banking licences).

    At I, write the number of your financial intermediary CFCs identified as residents of specified countries or jurisdictions which excluded tainted interest income from passive income for 2019–20 (excluding any CFCs with banking licences).

    At J, write the number of your financial intermediary CFCs s identified as residents of other unlisted countries or jurisdictions which excluded tainted interest income from passive income for 2019–20 (excluding any CFCs with banking licences).

    If the number of CFCs and CFTs is:

    • less than 10, write zero as the first two digits and then write the number, for example, if the number is 9 write 009
    • less than 100 but not less than 10, write zero as the first digit and then write the number, for example, if the number is 83 write 083
    • more than 999, write 999
    • zero, write zero .

    To help work out the amounts to include, see:

    • the exclusion of tainted interest income from passive income under subsection 449(1) of the ITAA 1936
    • the meaning of AFI subsidiary given by section 326 of the ITAA 1936
    • the meaning of AFI given by section 317 of the ITAA 1936
    • the meaning of financial intermediary business given by section 317 of the ITAA 1936
    • the meaning of tainted interest income given by section 317 of the ITAA 1936
    • the meaning of passive income given by section 446 of the ITAA 1936.

    Example 23

    Bank Co is an Australian authorised deposit-taking institution. It has AFI subsidiary CFCs in the following countries or jurisdictions:

    Listed countries

    Country of residence

    Banking licence in residence country

    Principally derives income from the lending of money

    Tainted interest income excluded from passive income

    UK

    Yes

    Yes

    $1,329,000

    New Zealand

    Yes

    No

    $714,000

    -

    -

    Total

    $2,043,000

    Specified countries or jurisdictions

    Country of residence

    Banking licence in residence country

    Principally derives income from the lending of money

    Tainted interest income excluded from passive income

    Netherlands

    Yes

    No

    $623,000

    Hong Kong

    Yes

    No

    $387,000

    British Virgin Islands

    No

    Yes

    $451,000

    -

    -

    Total

    $1,461,000

    Other unlisted countries or jurisdictions

    Country of residence

    Banking licence in residence country

    Principally derives income from the lending of money

    Tainted interest income excluded from passive income

    Malaysia

    No

    Yes

    $508,000

    Fiji

    No

    Yes

    $863,000

    -

    -

    Total

    $1,371,000

    With this information, the taxpayer completes item 21f as follows:

    A

    Yes

    B

    No

    C

    Yes

    D

    (blank)

    E

    451,000

    F

    1,371,000

    G

    1,822,000

    H

    0

    I

    001

    J

    002

     

    End of example
    Last modified: 28 May 2020QC 62599