ato logo
Search Suggestion:

Foreign investment funds guide 2003-04

This guide will help you work out how to include your foreign investment funds (FIF) income in your assessable income.

Last updated 26 May 2005

About this publication

This publication is designed to help you work out how to include your foreign investment fund (FIF) income in your assessable income. It does not include all the qualifications and conditions of the FIF measures that may affect how you work out the amount of FIF income to include in your assessable income for a particular year.

If you need more information, phone the Personal Tax Infoline on 13 28 61 or consult a registered tax adviser.

New legislation

In June 2004 Parliament passed legislation to change some of the FIF rules. The Tax Office is now updating the Foreign investment fund guide to reflect those changes in further detail. In the meantime, if you would like more information, phone the Business Tax Reform Infoline on 13 28 66.

Abbreviations

CFC

controlled foreign company

CFT

controlled foreign trust

FIF

foreign investment fund

FLP

foreign life assurance policy

ITAA 1936

Income Tax Assessment Act 1936

ITAA 1997

Income Tax Assessment Act 1997

Note: Unless indicated otherwise, throughout this guide all sections and subsections in square brackets refer to the Income Tax Assessment Act 1936 (ITAA 1936).

Summary of how the foreign investment funds legislation could affect you

Did you have interests in a foreign company, a foreign trust or a foreign life assurance policy? (Read chapter 2 and chapter 5.)

NO

The foreign investment fund (FIF) measures do not apply to you. You do not need to use this guide.

YES

Read on.

If you were a resident at any time during the year of income, did you:

  • have an interest in a FIF at the end of the income year, or
  • have an interest in a foreign life assurance policy (FLP) at any time during the income year?

(Read chapter 2 and chapter 5.)

NO

The FIF measures do not apply to you. You do not need to use this guide.

YES

Read on.

Does an exemption apply to your interest in a FIF or FLP? (Read chapter 3.)

NO

Read on.

YES

Do not include any amount in your assessable income from the interests in that FIF. Read chapter 8 to work out the records that you need to keep, then read on.

Determining the amount of foreign investment fund income to include in your assessable income

There are three methods for working out taxation for an interest in a FIF and two methods for an interest in an FLP, depending on your access to certain information on the FIF or FLP.

Interest in a FIF - read chapter 4

  • Most taxpayers liable to tax under the FIF measures will use the market value method.
  • Use the deemed rate of return method if you are unable to establish a market value for your FIF interest and you have not elected to use the calculation method.
  • Use the calculation method if you have access to the financial accounts of the FIF and you are able to determine your choice of the FIF's calculated profit or calculated loss.

Interest in an FLP - read chapter 5

If you have invested in a foreign life assurance policy, you can use:

  • the deemed rate of return method or
  • the cash surrender method.

QC17512