You must work out the foreign investment fund (FIF) or foreign life assurance policy (FLP) income accruing to you separately for each FIF or FLP in which you hold an interest or interests.
Use one of the following methods to decide the amount of FIF income accruing to you from a FIF company or trust during a notional accounting period:
- market value method
- deemed rate of return method
- calculation method.
Most taxpayers liable to pay tax under the FIF measures will use the market value method to work out the FIF income to include in their assessable income.
Use the deemed rate of return method only if you are unable to establish a market value for your FIF interest and you have not elected to use the calculation method.
Use the calculation method if you have access to the financial accounts of the FIF and are able to determine your share of the FIF's calculated profit or calculated loss.
If you use the calculation method for a FIF you must also elect the 12-month accounting period used by that FIF as its notional accounting period. [subsections 486(3) and 535(5)]
There are two methods for determining the amount of FIF income that accrues from an interest in an FLP:
- the deemed rate of return method, and
- the cash surrender value method.
The method you adopt will depend on the access you have to information on the company or trust in which you hold an interest.