Individuals (other than trustees) with small levels of offshore investments can qualify for an exemption. You may qualify for this exemption in one of two ways:
- If the total of your interests and your associates' interests in foreign companies, trusts and life policies does not exceed A$50,000, the FIF taxation provisions will not apply to your investments. [subsection 515(1)]
- If the total of your interests and your associates' interests in foreign companies, trusts and life policies and interests in resident public unit trusts does not exceed A$50,000, the FIF taxation provisions will not apply in calculating your share of net income of the resident public unit trust. [subsection 96A(2)]
Associates
Your associates include:
- your spouse, but does not include your spouse who, although legally married to you, has been living separately and apart from you for at least 12 months
- your child, whether or not the child lives with you
- your stepchild who lives with you
- your partner in a partnership and a spouse or child of the partner
- a trustee of a trust, other than a public unit trust or a complying superannuation fund, a non-complying superannuation fund, an approved deposit fund, a non-complying approved deposit fund or a pooled superannuation trust - if you or an associate benefit under the trust, and
- a company in which you and your associates have a majority voting interest or which is sufficiently influenced by you and your associates.
If you are under 18 years of age, your associates include, in addition to the above:
- your parents, and
- your brother or sister. [section 491]
Direct interests in FIFs and FLPs
If you and your associates' direct interests in FIFs and FLPs are A$50,000 or less, the FIF taxation provisions do not apply. [subsection 515(1)]
Direct interests in resident public unit trusts
This test measures you and your associates' interests in Australian resident public unit trusts, FIFs and FLPs.
If the total of these interests is A$50,000 or less, your share of the net income of the resident public unit trust will not include any amount included in the net income of the trust under the FIF measures because of the FIF interests held by the trust.
If the interests are more than A$50,000 under both tests, you do not qualify for the exemption. The example below sets out how the exemption applies. [subsection 96A(2)]
Example: Exemption for interests of A$50,000 or less
A Direct interests of taxpayer and associates in FIFs and FLPs |
B Direct interests of taxpayer and associates in resident public unit trusts |
Total (A + B) |
Does small investor exemption apply to direct interests in FIFs and FLPs? |
Does small investor exemption apply to direct interests in resident public unit trusts? |
|---|---|---|---|---|
$30,000 |
$15,000 |
$45,000 |
Yes |
Yes |
$26,000 |
$25,000 |
$51,000 |
Yes |
No - therefore taxpayer's share of net income of resident public unit trust includes amounts which relate to FIF income of the trust. |
$50,000 |
$1,000 |
$51,000 |
Yes |
No - therefore taxpayer's share of net income of resident public unit trust includes amounts which relate to FIF income of the trust. |
$1,000 |
$60,000 |
$61,000 |
Yes |
No - therefore taxpayer's share of the net income of the resident public unit trust includes those amounts which relate to FIF income of the trust. |
$60,000 |
$60,000 |
$120,000 |
No |
No - therefore taxpayer's share of the net income of the resident public unit trust includes those amounts which relate to FIF income of the trust. |
End of example
Exemption for temporary residents
From 1 July 2006, if you are a temporary resident at the end of an income year the FIF provisions will not apply to an interest you hold in a FIF or FLP for the notional accounting period that ends in that income year, in accordance with section 768-965 of the ITAA 1997.
You will qualify as a temporary resident under the definition of that term in subsection 995-1(1) of the ITAA 1997 if you meet all of the following conditions:
- you hold a temporary visa granted under the Migration Act 1958
- you are not an Australian resident within the meaning of the Social Security Act 1991, and
- your spouse (if applicable) is not an Australian resident within the meaning of the Social Security Act 1991.
However, if you are an Australian resident for tax purposes but not a temporary resident on or after 6 April 2006 you will not be entitled to the temporary resident exemptions from that time, even if you later hold a temporary visa.
For further information, see Exemption foreign employment income.