Getting the CFC provisions right

Do you have clients with a substantial interest in a foreign company controlled by Australian residents?

If so, make sure you’re correctly applying the CFC provisions. This involves disclosing all CFCs, and their income, in tax returns and the international dealings schedule.

Our reviews have shown that some tax agents don’t fully understand the provisions, putting their clients at risk of lengthy reviews and costly amendments.

Resources to use

You can check your understanding of the CFC provisions by reviewing:

• The Foreign income return form guide, which includes information about how the CFC provisions attribute income to Australian residents. Important sections to understand include:
  • Are you subject to the CFC measures? 
  • Working out your control and attribution percentages
  • Does the CFC satisfy the active income test?
  • Working out the tainted income ratio for a CFC 
  • Working out attributable income and the amount to include in your assessable income 
• Information on provisions which deem certain transfers and payments made by an unlisted country CFC to be dividends.
• The International dealings schedule instructions 2025, which contains information for companies, partnerships and trusts on how to complete the schedule. Importantly, Section C has instructions on how to report interests in foreign entities and related disclosures.