Chapter 1: Attribution of the current year profits of a controlled foreign company

Note: Unless specified otherwise, all references to legislation are to the Income Tax Assessment Act 1936.

This chapter explains the accruals tax system for residents with interests in foreign companies.

The accruals tax system applies to Australian residents who have a substantial interest in a foreign company controlled by Australians - referred to as a controlled foreign company (CFC). The system operates to include a taxpayer's share of specified income and gains of a CFC in the taxpayer's assessable income. This is called attribution. Subject to some modifications, the income and gains of CFCs are worked out using the same tax rules that apply for residents.

Part 1	Are you subject to the CFC measures?
Part 2	Is the CFC largely exempt because it is primarily engaged in a genuine active business?
Part 3	Working out attributable income and the amount to include in your assessable income