Taxation Determination

TD 96/39

Income tax: foreign income: can a controlled foreign company (CFC) obtain the benefit of the trading stock exemption under section 521 of the Income Tax Assessment Act 1936 ('the Act')?

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FOI status:

may be releasedFOI number: I 1015739

This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953 , is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue. However, this Determination does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).

1. No. A CFC cannot obtain the benefit of this Foreign Investment Fund (FIF) exemption.

2. The FIF trading stock exemption under section 521 of the Act is available if a taxpayer elects, under subsection 31(5) of the Act, to account for all of its interests in FIFs that are trading stock at market value.

3. However, for the purposes of calculating the attributable income of a CFC, section 397 modifies the trading stock provisions of the Act so that the value of any article of trading stock to be taken into account is its cost price only.

4. Thus, an election cannot be made by, or on behalf of, a CFC under subsection 31(5) to value its trading stock at market value because of the requirement in section 397 that the CFC must value its trading stock at cost price.

Commissioner of Taxation
18 September 1996

Previously issued as Draft TD 94/D28


ATO references:
NO NAT 96/9066-2; 93/2948-0

ISSN 1038 - 8982

Subject References:
foreign source income

Legislative References:
ITAA 521
ITAA 31(5)
ITAA 397

TD 96/39 history
  Date: Version: Change:
  18 September 1996 Original ruling  
You are here 29 November 2006 Original ruling + note Repeal provision note
  18 January 2012 Withdrawn