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
- of an amount that independent parties would accept. [subsection 539(3)]
Worksheet 1: Market value method will help you to understand the following examples.
Example: FIF income included in assessable income
The opening value of a FIF interest at 1 July was $HK50,000 (C).
At the end of the notional accounting period, 30 June, the closing value of the interest was $HK53,000 (A).
There were no brought forward losses or acquisitions or disposals during the notional accounting period (D).
On 30 April, during the notional accounting period, there was a distribution - interim dividend - of $HK1000 (B).
The FIF amount, as worked out in step 1 is:
[$HK53,000 (A) + $HK1,000 (B)] − [$HK50,000 (C) − nil (D)] = $HK4,000 (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). If the exchange rate is $A1.00 = $HK5.00, the FIF income is $A800 - that is, $HK4,000 divided by five.
The distribution of $HK1,000 = $A200 and is assessable under section 44 of the ITAA 1936.
Applying subsection 530(1), the FIF income of $A800 is reduced by the amount of the distribution of $A200. Therefore, your assessable income would include $A600 FIF income.
End of example
Example: Unapplied previous FIF loss
The opening value of a FIF interest was $HK50,000 (C) and, at the end of the notional accounting period (30 June) the closing value of the interest was $HK45,000 (A).
There were no brought forward losses or acquisitions, disposals (D) or distributions (B) during the accounting period.
The decrease in market value - that is, the FIF amount - would be:
[$HK45,000 (A) + nil (B)] − [$HK50,000 (C) − nil (D)] = $HK5000 (E)
This FIF loss of $HK5,000 may be used to reduce gross FIF income in later years.
End of exampleDeemed rate of return method
You may use this method where you cannot apply the market value method.
The following four steps will help you to complete Worksheet 2: Deemed rate of return method for FIFs.