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If at the end of an income year you have an interest in a FIF that is a corporate limited partnership for the purposes of Division 5A of Part III of the ITAA 1936, you may elect to exclude the FIF measures from applying to that interest. [subsection 485AA(1)].
In order to make the election, the limited partnership must satisfy the requirements contained in paragraphs 830-10(1)(a) to (d) of the Income Tax Assessment Act 1997 (ITAA 1997). These conditions include:
- the entity must not be an Australian resident
- it must be treated as a partnership under the tax laws of its country of formation, and
- must not be treated as a resident entity by any foreign country. [subsections 485AA(1) and (2)]
If at the end of an income year you have an interest in a FIF that is a foreign hybrid company under the provisions of section 830-15 of the ITAA 1997, you may elect to exclude the FIF measures from applying to that interest. [subsection 485AA(2)]
If you choose to make an election under subsection 485AA(1) or (2) you must do so on or before lodgment of the tax return for the income year (subject to any deferrals allowed by the Commissioner) so that no income is attributed from the FIF under Part XI of the ITAA 1936. The election is irrevocable and applies to that income year and all future income years during which you have the FIF interest.
The effect of the election is not to attribute any income from your interest in the FIF to you for that and future income years. [subsection 485AA(5)] Because of this election, the interest in the limited partnership or company becomes an interest in a foreign hybrid. [subsections 830-10(2) and 830-15(5) of the ITAA 1997] However, the election in relation to a particular interest by a taxpayer does not have any effect, including for the purposes of Part XI of the ITAA 1936, in relation to any other interest of the taxpayer or any other taxpayer in a FIF. [subsection 485AA(6)]
For more information on how the foreign hybrid rules affect your interest in a FIF see the publication Foreign hybrids - information guide (NAT 11619)
Last modified: 04 Feb 2010QC 21777