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  • Question 23

    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

    This question assesses the risk of notional assessable income and notional allowable deductions for CFCs 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.

    23a Specify the amounts of notional assessable income

    To complete question 23a, you must work out the notional assessable income amounts for 2019–20 for your CFCs 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 adjusted tainted income that is eligible designated concession income under section 385 of the ITAA 1936for your CFCs of listed countries.

    At B, write the total amount of adjusted tainted income not treated as derived from sources in listed countries under section 385 of the ITAA 1936 for your CFCs of listed countries.

    At C, write the total amount of other notional assessable income under section 385 of the ITAA 1936 for your CFCs of listed countries. Include any notional assessable income under section 385 for CFCs of listed countries that you have not already included at A and B.

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

    At E, write the total amount of adjusted tainted income under section 384 for your CFCs of specified countries or jurisdictions.

    At F, write the total amount of other notional assessable income under section 384 for your CFCs of specified countries or jurisdictions. Include any notional assessable income under section 384 of the ITAA 1936 for CFCs of specified countries or jurisdictions that you have not already included at E.

    At G, write the total of the amounts at E and F.

    At H, write the total amount of adjusted tainted income under section 384 for CFCs of other unlisted countries or jurisdictions.

    At I, write the total amount of other notional assessable income under section 384 for CFCs of other unlisted countries or jurisdictions. Include any notional assessable income under section 384 of the ITAA 1936 for CFCs of other unlisted countries or jurisdictions that you have not already included at H.

    At J, write the total of the amounts at H and I.

    At K, write the total of the amounts at D, G and J.

    To help work out the amounts to include, see:

    • section 384 of the ITAA 1936
    • section 385 of the ITAA 1936
    • adjusted tainted income under section 386 of the ITAA 1936
    • adjusted tainted income that is eligible designated concession income under section 385 of the ITAA 1936, which types of eligible designated concession income are set out in Part 8, regulation 17 of the Income Tax Assessment (1936 Act) Regulation 2015
    • notional assessable income under subsection 382(2) of the ITAA 1936
    • other relevant provisions in Part X of the ITAA 1936.

    Example 25

    Listed countries CFC

    Listed countries

    Adjusted tainted income that is eligible designated concession income

    Adjusted tainted income not treated as derived from sources in listed countries

    Other notional assessable income

    UK

    $2,000,000

    $0

    $0

    Japan

    $0

    $0

    $300,000

    New Zealand

    $2,600,000

    $1,800,000

    $0

    France

    $0

    $0

    $1,800,000

    Total

    $4,600,000

    $1,800,000

    $2,100,000

    A total notional assessable income amount of $8,500,000 is referrable to the CFCs in listed countries.

    Specified countries or jurisdictions CFC

    Specified countries or jurisdictions

    Adjusted tainted income

    Other notional assessable income

    Hong Kong

    $3,500,000

    $1,600,000

    Switzerland

    $2,000,000

    $0

    Singapore

    $1,600,000

    $0

    Total

    $7,100,000

    $1,600,000

    A total notional assessable income amount of $8,700,000 is referrable to the CFCs in specified countries or jurisdictions.

    Other unlisted countries or jurisdictions CFC

    Other unlisted countries or jurisdictions

    Adjusted tainted income

    Other notional assessable income

    Denmark

    $1,700,000

    $0

    Portugal

    $1,200,000

    $0

    Total

    $2,900,000

    $0

    Total notional assessable income amount of $2,900,000 is referrable to the CFCs in other unlisted countries or jurisdictions.

    The attributable taxpayer's total notional assessable income amount for all their CFCs is $20,100,000.

    The Australian resident taxpayer (the attributable taxpayer) completes question 23a.

    23a Specify the amounts of notional assessable income under the following sections of the ITAA 1936. Listed countries CFC (Section 385) completed items: A $4,600,000, B $1,800,000, C $2,100,000 Subtotal (Add A, B and C) D $8,500,000. Specified countries CFC (Section 284): E $7,100,000, F $1,600,000, Subtotal (Add E and F) G $8,700,000. Other unlisted countres CFC (Section 384): H $2,9000,000, Subtotal (Add H and J) J $2,900,000. Total notional assessable income: Add subtotals D, G and J, K $20,100,000.

    End of example

    23b Specify the amounts of notional allowable deductions

    To complete question 23b, you must work out the 2019–20 amounts of notional allowable deductions from the notional assessable income of CFCs (in accordance with general modification rules to calculation of attributable income of CFC under Subdivision B of Division 7 of Part X of the ITAA 1936) for your CFCs 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 notional allowable deductions from the notional assessable income of CFCs (in accordance with general modification rules to calculation of attributable income of CFC under Subdivision B of Division 7 of Part X of the ITAA 1936) for CFCs of listed countries.

    At B, write the total amounts of notional allowable deductions from the notional assessable income of CFCs (in accordance with general modification rules to calculation of attributable income of CFC under Subdivision B of Division 7 of Part X of the ITAA 1936) for CFCs of specified countries or jurisdictions.

    At C, write the total amounts of notional allowable deductions from the notional assessable income of CFCs (in accordance with general modification rules to calculation of attributable income of CFC under Subdivision B of Division 7 of Part X of the ITAA 1936) for CFCs of other unlisted countries or jurisdictions.

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

    To help work out the amounts to include, see for example:

    • notional allowable deductions under subsection 382(2) of the ITAA 1936; notional allowable deductions also include your share of CFC losses, if any, that have been claimed as notional allowable deductions in calculating your CFC's attributable income
    • subdivision B of division 7 of Part X of the ITAA 1936
    • section 393 of the ITAA 1936
    • section 394 of the ITAA 1936
    • section 399A of the ITAA 1936
    • other relevant provisions in Part X of the ITAA 1936.

    Example 26

    An Australian resident taxpayer (attributable taxpayer) includes notional allowable deductions from the notional assessable income of CFCs in its calculation of attributable income of CFCs which are resident of countries set out in the following table

    CFC country of residence

    Total amounts of notional allowable deductions from the notional assessable income of CFCs

    Listed countries

    $600,000

    Specified countries or jurisdictions

    $200,000

    Other unlisted countries or jurisdictions

    $0

    Total

    $800,000

    The total amount of notional allowable deductions from the notional assessable income of the CFCs in calculating the attributable income of all the CFCs is $800,000.

    The Australian resident taxpayer (the attributable taxpayer) completes question 23b.

    23b Specify the amounts of attribution income modifications, completed items are $600,000 at A Listed countries, $200,000 at B Specified countries and $800,000 at D Total attribution income modifications.

    End of example
    Last modified: 28 May 2020QC 62599