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Taxation of financial arrangements – items 31 to 32

Last updated 26 May 2021

In this section:

31. Taxation of financial arrangements (TOFA)

The key provisions of the TOFA rules are found in Division 230 of the ITAA 1997, which generally provides for:

  • methods of taking into account gains and losses from financial arrangements, being accruals and realisation, fair value, foreign exchange retranslation, hedging, reliance on financial reports and balancing adjustment, and
  • the time at which the gains and losses from financial arrangements will be brought to account.

The TOFA rules apply to the following partnerships:

  • authorised deposit-taking institutions, securitisation vehicles and financial sector entities with an aggregated annual turnover of $20 million or more
  • managed investment schemes, or entities with a similar status under foreign law relating to corporate regulation with assets of $100 million or more
  • any other partnership which satisfies one or more of the following      
    • an aggregated turnover of $100 million or more
    • assets of $300 million or more
    • financial assets of $100 million or more.
     

An entity that does not meet these requirements can elect to have the TOFA rules apply to it.

The aggregated turnover tests may mean that the TOFA rules will apply to partnerships that do not meet the thresholds in their own right. Aggregated turnover includes the annual turnover of any entity a partnership is connected with, or any affiliate of the partnership (including overseas entities).

Once the TOFA rules apply to a partnership, they will continue to apply to that partnership, even if its aggregated turnover, value of assets or value of financial assets subsequently falls below the requisite threshold.

There are a number of elections available to partnerships under the TOFA rules. Elections under the TOFA rules are irrevocable, and should be carefully considered before being made.

See also:

Total TOFA gains

Show at M the partnership’s total assessable TOFA gains from financial arrangements.

Total TOFA losses

Show at N the partnership's total deductible TOFA losses from financial arrangements.

Ensure you take into account at M and N any amount for a TOFA financial arrangement that you have shown elsewhere such as:

  • item 5S Net income or loss from business
  • item 8AZSBR or T Partnerships and trusts
  • item 9G Interest deductions
  • item 11J Gross interest
  • item 12K Unfranked dividend amount
  • item 14O Other Australian income
  • item 18Q Other deductions
  • item 23B Gross other assessable foreign source income.

32. Non-concessional MIT income (NCMI)

A MIT is a managed investment trust, and an amount is NCMI if it is any of the following:

  • MIT cross staple arrangement income
  • MIT trading trust income
  • MIT residential housing income, or
  • MIT agricultural income.

Business Income

Primary production

A Non-concessional MIT income (NCMI)

Show at A the total NCMI amount in relation to primary production income, for example, income attributable to agricultural land held for rent.

B Excluded from NCMI

Show at B the total Excluded from NCMI amount in relation to primary production income, that is, income from transitional arrangements or approved economic infrastructure facilities.

Amounts shown at A and B must be shown at 5G Primary production – Other business income.

Non-primary production

C Non-concessional MIT income (NCMI)

Show at C the total NCMI amount in relation to non-primary production income, that is, cross staple income, trading trust income and residential housing income.

D Excluded from NCMI

Show at D the total Excluded from NCMI amount in relation to non-primary production income, that is, income from transitional arrangements or approved economic infrastructure facilities.

Amounts shown at C and D must be shown at 5H Non-Primary production – Other business income.

Partnerships and trusts

Primary production

E Non-concessional MIT income (NCMI)

Show at E the total NCMI amount distributed from partnerships categorised as primary production income.

F Excluded from NCMI

Show at F the total Excluded from NCMI amount distributed from partnerships categorised as primary production income.

Amounts shown at E and F must be shown at item 8A Distribution from partnerships.

G Non-concessional MIT income (NCMI)

Show at G the total NCMI amount distributed from a trust categorised as primary production income.

H Excluded from NCMI

Show at H the total Excluded from NCMI amount distributed from trusts categorised as primary production income.

Amounts shown at G and H must be shown at item 8Z Share of net income from trusts.

Non-primary production

I Non-concessional MIT income (NCMI)

Show at I the total NCMI amount distributed from partnerships categorised as Non- primary production.

J Excluded from NCMI

Show at J the total Excluded from NCMI amount distributed from partnerships categorised as Non-primary production.

Amounts shown at I and J must be shown at item 8B Distribution from partnerships, less foreign income.

K Non-concessional MIT income (NCMI)

Show at K the total NCMI amount distributed from trusts categorised as Non-primary production.

L Excluded from NCMI

Show at L the total Excluded from NCMI amount distributed from trusts categorised as Non-primary production.

Amounts shown at K and L must be shown at item 8R Share of net income from trusts, less capital gains, foreign income and franked distributions.

If any NCMI capital gains or Excluded from NCMI capital gains is received during the year, each partner must include their share of the capital gain or capital loss on their own tax return.

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