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Non or under-reporting attributable foreign income

Australian entities who fail to report or incorrectly report attributable foreign income.

Last updated 30 April 2023

What we focus on

We focus on Australian entities that have failed to report or incorrectly reported attributable foreign income. See our foreign income return form guide. This includes Australian corporate tax entities with offshore activities that have repatriated their income as a foreign equity distribution that is non-assessable non-exempt income (NANE). See section 768-5 of the ITAA 1997.

Our concerns with reporting attributable foreign income

Situations that attract our attention include where:

  • the controlled foreign company (CFC) or transferor trust (TT) is in an unlisted country
  • there is a failure to disclose all interests in CFCs, TTs or other foreign entities
  • there is a failure to lodge an international dealings schedule, despite disclosing an interest in a CFC, TT or another foreign entity in the tax return
  • there is inconsistent or incomplete information disclosed regarding CFCs and details of CFC attribution and calculation amounts in the tax return, the international dealings schedule and other tax return schedules
  • the income being generated through a CFC is tainted
  • fund movements are contrary to where the CFC or TT is located
  • there is a sudden drop in attributable foreign income without a change in the number of CFCs or TTs
  • the amount of NANE income reported has increased from the previous year but no attributable foreign income has been reported for the current and prior years
  • entities have large claims for deductions, under section  25-90 of the ITAA 1997, for outgoings incurred in deriving NANE income
  • a CFC in an unlisted country provides benefits (including non-arm’s length loans or waiver of a debt) to its shareholders or associates in a form other than dividends. Section 47A of ITAA 1936 may apply to deem these benefits as dividends.

For information on completing foreign source income questions on your tax return, see Foreign source income and foreign assets or property 2022 (for individuals).