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Exemption for an interest in a FIF that is trading stock

Last updated 14 May 2020

If an interest in a FIF forms part of your trading stock and you elect, under subsection 70-70(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to bring those interests to account at market value, you are not subject to FIF taxation on income accruing from that interest. [section 521]

If you bring an interest in a FIF to account as trading stock but do not make the election to use market value, you must value your interest at the FIF cost for the purposes of the trading stock provisions in the ITAA 1997 [section 70-70 of the ITAA 1997].

This exemption is not available to a CFC that has an interest in a FIF as part of its trading stock. This is because a CFC cannot elect to value its trading stock at anything but cost when working out its attributable income under Part X of the ITAA 1936. For more information, see Taxation Determination TD 96/39 Income tax: foreign income: can a controlled foreign company (CFC) obtain the benefit of the trading stock exemption under section 521 of the Income Tax Assessment Act 1936 [section 397]