FIF attributed tax accounts ensure that a credit you can claim for foreign tax paid by a FIF when an amount is included in your assessable income under the calculation method cannot be claimed again when you receive a distribution from the FIF. In other words, they ensure that you cannot claim a foreign tax credit twice for the same amount of foreign tax paid by a FIF. [sections 608 to 612]
There are no foreign tax credits for foreign taxes where FIF income is worked out under the market value and deemed rate of return methods. In practice, you will need to maintain FIF attributed tax accounts only where you use the calculation method for working out the amount to include in your assessable income under the FIF measures and either:
- the FIF is a company which is related to the company taxpayer [sections 160AFCE and 160AFCF], or
- you are a beneficiary of a FIF which is a trust estate. [sections 160AFCG and 160AFCH]
The system for the maintenance of FIF attributed tax accounts parallels that for FIF attribution accounts. That is, when income which has been previously attributed is distributed to you, the foreign tax credit you can claim is initially worked out on the basis that no foreign tax credit was allowed for foreign tax paid on the attributed income at the time it was attributed. The foreign tax credit worked out in this way is then reduced by the foreign tax credit allowed at the time the attributable income of the FIF - that is, FIF income - was included in your assessable income.
The FIF attributed tax accounts trace the foreign tax credit that was allowed at the attribution stage so that this reduction may be made.