Key provisions of the TOFA rules
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 entities:
- 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 entity 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.
A trust 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 trusts that do not meet the thresholds in their own right. Aggregated turnover includes the annual turnover of any entity a trust is connected with, or any affiliate of the trust, including overseas entities. Once the TOFA rules apply to a trust, they will continue to apply to that trust, 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 trusts under the TOFA rules. Elections under the TOFA rules are irrevocable, and should be carefully considered before being made.
For more information, see Guide to the taxation of financial arrangements (TOFA).
Total TOFA gains
Print at label M Total TOFA gains the trust’s total assessable TOFA gains from financial arrangements.
Total TOFA losses
Print at label N Total TOFA losses the trust's total deductible TOFA losses from financial arrangements.
Ensure you take into account at label M and N any amount in relation to a TOFA financial arrangement that you have shown at items such as:
- Item 5 Business income and expenses – label S Net income or loss from business
- Item 8 Partnerships and trusts – label A, Z, S, B, R or T
- Item 9 Rent – label G Interest deductions
- Item 11 Gross interest – label J
- Item 12 Dividends – label K Unfranked amount
- Item 14 Other Australian income – label O
- Item 18 Other deductions – label Q
- Item 23 Other assessable foreign source income – label B Gross.
Continue to: Non-concessional MIT income – item 32
Return to: Instructions to complete the Trust tax return 2023