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  • 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.

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    This question assesses the risk of assessable foreign income for CFCs and CFTs not being correctly accounted for under the relevant tax legislation.

    The dollar amounts or values asked for in this question are all based on your tax records.

    Section 456 of the ITAA 1936 includes attributable income of a CFC in the assessable income of an Australian resident taxpayer that is an attributable taxpayer.

    Section 457 of the ITAA 1936 includes in the assessable income of a resident taxpayer, who is an attributable taxpayer in relation to a CFC, certain amounts in respect of a change of residence of the CFC from an unlisted country or jurisdiction to a listed country or to Australia.

    Section 459A of the ITAA 1936 includes amounts in a taxpayer's assessable income where the taxpayer is an attributable taxpayer for a CFC or CFT, and the amount of net income of an Australian partnership or trust includes attributable income which accrues to the benefit of the CFC or CFT, and is not otherwise taxed in Australia.

    To complete this question, if you have an amount of foreign income that is assessable under sections 456, 457 or 459A of the ITAA 1936, write the total amount assessable under each of the sections.

    To complete A, B and C, you must identify the residency of each CFC or CFT for which you included attributable income in assessable income under section 456 of the ITAA 1936 for 2019–20. Work out the attributable income amounts referrable to those entities in each of the following location categories:

    • listed country
    • specified country or jurisdiction
    • other unlisted country or jurisdiction.

    At A, write the total amount of attributable income included in your assessable income under section 456 for CFCs and CFTs of listed countries.

    At B, write the total amount of attributable income included in your assessable income under section 456 for CFCs and CFTs of specified countries or jurisdictions.

    At C, write the total amount of attributable income included in your assessable income under section 456 for CFCs and CFTs of other unlisted countries or jurisdictions. Include any attributable income included in your assessable income under section 456 of the ITAA 1936 for the income year that you have not already included at A and B.

    At D, write the total of the amounts written at A, B and C.

    You must complete E if your assessable income for 2019–20included an amount assessable under section 457 of the ITAA 1936. At E, write the total amount included in your assessable income under section 457 of the ITAA 1936.

    F item 22
    You must complete F if your assessable income for 2019–20included an amount assessable under section 459A of the ITAA 1936. At F, write the total amount included in your assessable income under section 459A of the ITAA 1936 for 2019–20.

    For more information about working out if these provisions apply to you, including an overview of calculations, see the Foreign income return form guide 2020.

    For companies conducting banking or insurance activities (AFI or Australian financial institutions), there are special rules that apply. These rules are not discussed in the guide. See Subdivision F of Division 8 of Part X of the ITAA 1936.

    To help work out the amounts to include, see:

    Example 24

    An Australian resident shareholder (attributable taxpayer) includes section 456 attributable income in its assessable income from CFCs and CFTs which are resident in countries set out in the following table.

    CFC or CFT country of residence

    Section 456 attributable income amount

    Canada

    $1,010,000

    Niue

    $501,000

    Panama

    $629,000

    Italy

    $459,000

    Total

    $2,599,000

    As Canada is a listed country, the section 456 amount written at A is $1,010,000.

    As Niue and Panama are specified countries or jurisdictions, the section 456 amount written at B is:

    Specified countries or jurisdictions

    Section 456 attributable income amount

    Niue

    $501,000

    Panama

    $629,000

    Total written at B

    $1,130,000

    As Italy is an "other unlisted country or jurisdiction", the section 456 amount written at C is $459,000.

    The total amount of section 456 attributable income written at D is $2,599,000. 

    This image shows an example of how to complete Question 22.

Question 22
Section 456 - CFCs attributable income
Label A Listed countries: $1,010,000
Label B Specified countries: $1,130,000
Label C Other unlisted countries: $459,000
Label D Total: $2,599,000

    End of example

    Question 22a and 22b

    The 2018 International dealings schedule did not include items 22a and 22b (gross revenue included in the gross turnover of your CFCs that have satisfied the active income test and gross revenue included in the gross turnover of your CFCs that have not satisfied the active income test). If you have interests in CFCs, we understand that you may not have accounting systems which automatically collected and aggregated all the information required to complete all parts of items 22a and 22b for the first year based on the outputs from your accounting system alone.

    If this is the case, complete items 22a and 22b using your current systems and make a best effort to estimate figures where you do not have records of the actual data.

    Keep a record of:

    • your determination of the best efforts figures provided at items 22a and 22b
    • what data you used to make this estimate.

    You are not required to send the record of your workings to us, however you must keep the record with other documentation for your tax return. For further information on record keeping, see Keeping your tax records.

    Specify the gross revenue included in the gross turnover of your CFCs that have and have not satisfied the active income test

    The gross revenue included in the gross turnover of your CFCs is the same as the amount of gross revenue included under subsection 434(1)(a) of the ITAA1936, before excluding the amounts specified in subparagraphs (i) to (iv) of that paragraph or any other amounts. The gross revenue included in the gross turnover of your CFCs is the sum of amounts shown in the accounts of a CFC as gross revenue before any subtractions or deductions are taken into account. The gross revenue amount derived by your CFC must be in accordance with commercially accepted accounting principles, and give a true and fair view of the CFC's financial position.

    For the purpose of questions 22a and 22b, the gross revenue derived by your CFC is as shown in the recognised accounts of the CFC for its statutory accounting period, in accordance with section 434(1)(a) of the ITAA1936 before excluding any of the following amounts in accordance with section 434(1)(a)(i) to (v) of the ITAA 1936:

    • an amount derived through a branch in a listed country if the amount is taxed in that country
    • a franked dividend
    • an amount arising from the disposal of an asset that is taxable Australian property
    • a non-portfolio dividend paid to the CFC by a company that is a resident of a listed or unlisted country
    • trust amounts arising to the CFC that are attributed
    • an amount that is an attribution account payment to the extent that the profits from which the payment was made have been previously attributed to you
    • an amount included in the CFC’s assessable income in any year of income, unless the amount is only subject to dividend or interest withholding tax or is not fully taxed, for example, certain shipping or insurance premiums
    • amounts that are shown in those recognised accounts as revenue in respect of the disposal of assets
    • amounts that are shown in those recognised accounts as revenue from disposing of commodity futures contracts, commodity forward contracts or rights or options in respect of such contracts
    • amounts that are shown in those recognised accounts as revenue from currency exchange rate fluctuations

    For the purpose of questions 22a and 22b only, if the recognised accounts of your CFC are prepared in a foreign currency and have not already been converted into Australian dollars as part of your general accounting reporting processes:

    • Apply the average foreign exchange rate for calendar year ended 31 December 2019 as per the published at Foreign exchange rates, if your CFC’s statutory accounting period ended on or before 31 March 2020.
    • Apply the average foreign exchange rate for financial year ended 30 June 2020 as per the published at Foreign exchange rates, if your CFC’s statutory accounting period ended after 31 March 2020.

    If you need a foreign exchange rate for a currency not listed in the schedule, you may use any reasonable externally-sourced exchange rate for that currency.

    To complete question 22a, you must separately work out the amounts of gross revenue included in the gross turnover for your CFCs referrable to those CFCs that have satisfied the active income test in each of the following location categories:

    • listed country
    • specified country or jurisdiction
    • other unlisted country or jurisdiction.

    At A, write the total amounts of gross revenue included in the gross turnover for your CFCs in listed countries for the CFC's income year that have satisfied the active income test.

    At B, write the total amounts of gross revenue included in the gross turnover for your CFC's in specified countries or jurisdictions for the CFC's income year that have satisfied the active income test.

    At C, write the total amounts of gross revenue included in the gross turnover for your CFC's in other unlisted countries or jurisdictions for the CFC's income year that have satisfied the active income test.

    At D, write the total of the amounts at A, B and C.

    To complete question 22b, you must separately work out the amounts of gross revenue included in the gross turnover for your CFCs referrable to those CFCs that have not satisfied the active income test in each of the following location categories:

    • listed country
    • specified country or jurisdiction
    • other unlisted country or jurisdiction

    At A, write the total amounts of gross revenue included in the gross turnover for your CFCs in listed countries for the CFC's income year that have not satisfied the active income test.

    At B, write the total amounts of gross revenue included in the gross turnover for your CFC's in specified countries or jurisdictions for the CFC's income year that have not satisfied the active income test.

    At C, write the total amounts of gross revenue included in the gross turnover for your CFCs in other unlisted countries or jurisdictions for the CFC's income year that have not satisfied the active income test.

    At D, write the total of the amounts at A, B and C.

    To help work out the amounts to include, see section 434(1)(a) of the ITAA 1936

    Last modified: 28 May 2020QC 62599