Determining market value



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You determine market value by referring to the quoted market values for the FIF interests. Only quotations from an approved stock exchange will be accepted. See Appendix 1: Approved stock exchanges. [section 539]

If you have interests in certain FIFs that are not listed on an approved stock exchange, you may be able to use:

  • a buy-back, offer or redemption price, or
  • the price of an offer to purchase a particular FIF by an associate of that FIF.

The buy-back, offer or redemption price must be:

  • publicly available
  • offered to all persons having an interest of that class in the FIF
  • worked out by reference to the market value of the assets of the company or trust, and
  • representing an arm's length valuation of the interest on that day. [subsection 539(3)]

Worksheet 1: Market value method will help you to understand the following examples. The letters in brackets refer to the boxes on worksheet 1.

Example: FIF income included in assessable income

The opening value of a FIF interest at 1 July 2005 was HK$50,000 (C).

At the end of the notional accounting period, 30 June 2005, the closing value of the interest was HK$53,000 (A).

There were no brought forward losses or acquisitions or disposals during the notional accounting period (D).

On 30 April 2005, during the notional accounting period, there was a distribution - an interim dividend - of HK$1,000 (B).

The FIF amount, as worked out in step 1 is:

[HK$53,000 (A) + HK$1,000 (B)] - [HK$50,000 (C) - nil (D)] = HK$4,000 (E)

This amount is converted to Australian currency, using the rate of exchange that applied at the end of the notional accounting period (30 June 2005). Assuming that the exchange rate is A$1.00 = HK$5.00, the FIF income is A$800 - that is, HK$4,000 divided by five.

The distribution of HK$1,000 = A$200 and is assessable under section 44 of the ITAA 1936.

Because the distribution received was a distribution to which subsection 530(1) applies, the FIF income of A$800 (H) is reduced by the amount of the distribution: A$200 (J). Therefore, your assessable income would include A$600 FIF income. Write the dividend amount (A$200) at (J). Subtract (J) from (H) and write the answer at (K).

Example: Unapplied previous FIF loss

The opening value of a FIF interest was HK$50,000 (C) and at the end of the notional accounting period (30 June) the closing value of the interest was HK$45,000 (A).

There were no brought forward losses or acquisitions, disposals (D) or distributions (B) during the accounting period.

The decrease in market value - that is, the FIF amount - would be:

[HK$45,000 (A) + nil (B)] - [HK$50,000 (C) - nil (D)] = - HK$5,000 (E)

This FIF loss of HK$5,000 may be used to reduce gross FIF income in later years.

Last modified: 04 Feb 2010QC 21777