Overview
Under the market value method, the amount of FIF income is decided in two steps.
- Step 1 works out the movement in the market value of the FIF interest, generally between two annual reporting dates.
- Step 2 allows for the deduction of any previous year's FIF losses if the losses have not been used in an earlier year.
Working through these steps gives you the amount of FIF income to include in your assessable income.
The following information will help you to complete Worksheet 1: Market value method.
Step 1: Working out the movement in the market value [section 538]
Box A
Insert the market value of your interests in the FIF on the last day of the notional accounting period.
Box B
Insert the total value of distributions to you by the FIF during the notional accounting period for the interests held on the last day of the notional accounting period.
If you disposed of an interest in a FIF during the notional accounting period, also include the value of distributions made by the FIF before disposal.
Box C
Insert the opening market value (at the beginning of the notional accounting period) of the interests you held on the last day of the notional accounting period.
If you used the deemed rate of return method to value your interests in the previous notional accounting period, use that method to determine the opening value of your interests for the notional accounting period. Include this amount at C.
Box D
Insert the total cost of any interests in the FIF that you acquired during the notional accounting period and held on the last day of that period.
Usually, you must express the amounts at B, C and D in the currency you used for the amount at A. [subsection 538(3)] However, the market value method gives you an irrevocable election to use Australian currency in working out all your FIF income. This brings to account currency exchange gains and losses at the time the transactions and values relevant to the determination of FIF income occurred.
If you make the election, you must express the amounts at A, B, C and D in Australian currency. [subsections 538(4) and (5)]
When converting the following to Australian currency |
Use exchange rates applicable on the following days for the market value method |
|---|---|
Market value of a FIF interest |
Last day of each relevant notional accounting period for each FIF interest |
Distribution made by a FIF |
Day of each distribution made by a FIF |
Acquisition value of a FIF |
Day you acquired the FIF interest |
Excess of FIF income over FIF losses |
Last day of the notional accounting period of the FIF for the relevant income year |
FIF loss |
Last day of the notional accounting period of the FIF in which the loss occurred |
FIF losses to the same currency as the gross FIF income - not necessarily Australian currency |
Last day of the notional accounting period of the FIF |
Box E
Take away the sum of C and D from the sum of A and B. This is the FIF amount.
Gross FIF income
If the FIF amount is positive, that amount represents the gross FIF income of the FIF as it relates to you. [section 540]
FIF loss
If the FIF amount is negative, the amount is a FIF loss.
This FIF loss may be used to offset your assessable income but only to the extent that you have previously been subject to FIF taxation from that FIF - that is, to the extent that you have a FIF attribution surplus in relation to that FIF.
Where there is no FIF attribution surplus the FIF loss must be carried forward to be applied against future gross FIF income of that FIF. You cannot use a FIF loss in relation to one FIF to reduce the gross FIF income of another FIF. [sections 532 and 541]
Step 2: Working out the amount to include in assessable income
Box F
Insert the total of any unapplied previous FIF losses. [subsection 542(2)]
If it is not already the case, you must convert the unapplied previous FIF loss to the same currency as the gross FIF income - that is, the amount at E. [subsection 542(8)]