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End of attention
The FIF income that is included in your assessable income is calculated for a 'notional accounting period' of the FLP.
A notional accounting period of your FLP will generally coincide with your income year - that is, a 12-month period ending 30 June each year.
If the FLP existed before 1 January 1993, the first notional accounting period of the FLP commences on 1 January 1993 and ends on 30 June 1993. If the policy came into existence on or after 1 January 1993, the first notional accounting period commences on the day that it came into existence and ends on the following 30 June. [subsection 487(7)]
Electing a notional accounting period
You may elect a different notional accounting period if a cash surrender value of your FLP is available on a day in the same month of each calendar year ('the relevant day'). This election is irreversible for as long as you hold an interest in that particular FLP.
If you elect a different notional accounting period, your FLP's new notional accounting period will begin on the first day of the month following the last day of the month in which the relevant day occurs, and ends at the end of the month in which the next relevant day occurs.
The current notional accounting period of Judith's FLP is 1 July to 30 June each year. In November of each year a cash surrender value becomes available for her FLP. In September 2004 she elected to use a different notional accounting period for her FLP. The new notional accounting period will begin on the first day of the month following November - that is, 1 December - and end 12 months later on 30 November each year.
However, the first new notional accounting period of Judith's FLP did not begin in the December following the election (December 2004) but in the December before the election was made (December 2003). Therefore, the first new notional accounting period for Judith's FLP was 1 December 2003 to 30 November 2004.
The months between the start of her old notional accounting period (1 July 2003) and the start of her new notional accounting period (1 December 2003) are also a notional accounting period - that is, 1 July 2003 to 30 November 2003. [section 487]
Judith's FIF income for the period 1 July 2003 to 30 November 2003 was returned in the 2003-04 income year. Her FIF income for the period 1 December 2003 to 30 November 2004 was included in the 2004-05 income year.
Last modified: 01 Jul 2006QC 18507