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# Step 2: Working out the amount to include in assessable income

Last updated 26 May 2005

This step works out the amount of FIF income by subtracting the total of any 'unapplied previous FIF losses' from the gross FIF income calculated in step 1. [section 600]

## Unapplied previous FIF losses

An unapplied previous FIF loss represents an amount equal to the losses you have incurred from the FLP in respect of previous notional accounting periods that exceeds the gross FIF income from the FLP in respect of those periods.

You may still have an unapplied previous FIF loss even if the operative provision did not apply because of the exemption for interests less than \$50,000 discussed in chapter 3. [subsection 600(5)]

When working out the unapplied previous FIF losses, the undeducted amount of a FIF loss is that part of a FIF loss that has not been allowed as a deduction from your assessable income in a previous income year. [subsection 600(6)]

Once you have used a FIF loss to work out if there was, for any notional accounting period, an unapplied previous FIF loss, you cannot use that loss again in later notional accounting periods. [subsection 600(7)]

Also, in determining the gross FIF income to use to work out the unapplied previous FIF losses, apply only that gross FIF income accruing after the notional accounting period in which you incurred the loss and before the current notional accounting period in which you have a gross FIF income. [subsection 600(5)]

## Box H

Insert the total of any unapplied previous FIF losses for your FLP. [subsection 600(2)]

If it is not already the case, convert the unapplied previous FIF loss to the same currency as the gross FIF income in box G. [subsection 600(8)]

## Box I

Take away the amount in H from the amount in G. This will give you your FIF income.

## Box J

Convert your FIF income to Australian dollars at the rate of exchange that applies at the end of the relevant notional accounting period. Insert the converted amount at J. [subsections 600 (3) & (4)]

The amount at J is your FIF income. Include it in your assessable income after allowing for a reduction for certain assessable distributions from the FLP. Read Chapter 6: Avoiding double taxation for more information.

## Boxes K, L and M

If any of the distributions referred to above are payments made by the entity which issued the FLP to you, use K, L and M to arrive at the amount to include in your assessable income.

You must read the next chapter, Chapter 6: Avoiding double taxation, as the reduction of your FIF income cannot be more than the total of your FIF income for the current income year. [sections 530 and 603]

Start of example

Example: Increase in cash surrender value

The opening cash surrender value of an interest in an FLP at 1 July was \$HK50,000 (E).

At the end of the notional accounting period, 30 June, the closing value of the interest was \$HK53,000 (A).

There were no brought forward losses and no acquisitions, disposals or distributions (B, C, D and F) during the notional accounting period.

The increase in cash surrender value, the FIF amount, is \$HK3,000, worked out as follows:

\$HK53,000 (A) + nil (B) + nil (C) + nil (D) − \$HK50,000 (E) - nil (F) = \$HK3,000

End of example

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