Question 40
This question needs to be completed by qualifying foreign banks and financial entities to which Part IIIB of the ITAA 1936 applies (and have not elected out of Part IIIB).
The dollar amounts or values asked for in this question are all based on your tax records.
If you are a foreign bank or a qualifying foreign financial entity that carries on business operations through an Australian branch, and you have not made an election under section 160ZZVB of the ITAA 1936 that Part IIIB not apply, then the rules in Part IIIB of the ITAA 1936 apply.
For the purposes of Part IIIB of the ITAA 1936 the following terms are defined in section 160ZZV of the ITAA 1936:
- 'Australian branch' in relation to a foreign bank, means a permanent establishment in Australia through which the bank carries on banking business
- 'foreign bank' means a body corporate that is a foreign authorised deposit taking institution (ADI) for the purposes of the Banking Act 1959
- 'financial entity' and 'foreign entity' both have the meaning given in section 995-1 of the ITAA 1997.
If you are a foreign bank or other qualifying financial entity which has not elected out of Part IIIB of the ITAA 1936, answer Yes at A item 40 and complete the following.
At B, write the amount of your average quarterly notional borrowings within the meaning of subsection 160ZZZ(1) of the ITAA 1936. This is calculated by adding up your notional borrowings determined under subsection 160ZZZ(1) at the end of each quarter in your financial year and dividing it by four.
At C, write the amount of the amount of interest taken to be paid under section 160ZZZA of the ITAA 1936 (capped at LIBOR). If you are an offshore banking unit (OBU), do not include any amounts attributable to OB activities under Division 9A of Part III of ITAA 1936.
At D, write the amount of interest taken to be paid under section 160ZZZA of the ITAA 1936 attributable to OB activities under Division 9A of Part III of ITAA 1936 (if you are an OBU).
At E, write the amount of withholding tax you paid on the interest amount taken to be paid under section 160ZZZA of the ITAA 1936 (capped at LIBOR).
Interest withholding tax is payable under section 160ZZZJ of the ITAA 1936 on 50% of the amount of interest taken to be paid under section 160ZZZA.
Question 41
If you are an offshore banking unit (OBU), what you show at this question helps in assessing your level of compliance with the OBU tax provisions.
To complete this question you need to undertake the following steps:
- For each OB activity type listed in the schedule work out the (gross) amount of your assessable OB income in accordance with section 121EE of the ITAA 1936.
- Calculate your net OB income/loss in accordance with sections 121EE and 12EF of the ITAA 1936 for each OB activity type listed in the schedule (by subtracting exclusive OB deductions for the OB activity type from the assessable OB income for the activity).
- Identify your OB activities undertaken with related parties.
- Calculate the (gross) amount of your assessable OB income, within the meaning of section 121EE of the ITAA 1936, for the OB activities you have undertaken with related parties
- Work out the amount of your general OB deduction and apportionable OB deductions for the income year in accordance with section 121EF of the ITAA 1936.
- Work out the amount of your eligible fraction of foreign income tax you claimed as a foreign tax offset under Division 770 of the ITAA 1997.
If you were an OBU or the head company of a consolidated group that includes an OBU, answer Yes at A item 41 and complete the following.
At B items 41a, 41b, 41c, 41d, 41e, 41f, 41g, 41h and 41i, writethe amount of your assessable OB income for the income year determined in accordance with section 121EE of the ITAA 1936, for each specified OB activity type.
At B item 41m, write the sum of the amounts you have written at items 41a to 41i. The amount you have written at B item 41m should be the amount of your total assessable OB income for the income year determined under section 121EE of the ITAA 1936.
If the amount at any of these labels is a loss, write L in the box at the right of the amount.
At C items 41a, 41b, 41c, 41d, 41e, 41f, 41g, 41h and 41i, write the amount of your net OB income/loss for each specified OB activity type (calculated by subtracting the amount of your exclusive OB deductions for the income year, within the meaning of subsection 121EF(3) of the ITAA 1936, for the OB activity type, from the amount of assessable OB income which you have written at B items 41a to 41i for that activity type). If this amount is a net loss, write L in the box at the right of the amount.
At C item 41j, write the sum of the amount of your general OB deduction and the amount of your apportionable OB deductions determined under section 121EF of the ITAA 1936 for all your OB activities for the income year.
At C item 41m, write the sum of the amounts you have written at C items 41a to 41i, less the sum of the amount of your general OB deduction and apportionable OB deductions you have written at C item41j. If this amount is a net loss, write L n the box at the right of the amount. The amount you have written at C item 41m should be the amount of your total assessable OB income, subject to subsection 121EG(1) of the ITAA 1936 less allowable OB deductions, subject to subsection 121EG(2) of the ITAA 1936, for the income year. If this amount is a net loss, write 'L' in the box at the right of the amount.
For the purposes of providing information at D (Assessable OB income from related parties), treat the term ‘related party’ as having the same meaning as it has in determining whether you have international related party dealings.
At D items 41a, 41b, 41c, 41d, 41e, 41f, 41g, 41h and 41i, write the amount of your assessable OB income for the income year determined in accordance with section 121EE of the ITAA 1936, for each specified OB activity type for OB activities undertaken with related parties.
At D item 41m, write the sum of the amounts you have written at D items 41a to 41i. The amount you have written at D item 41m should be the amount of your total assessable OB income for the income year determined under section 121EE of the ITAA 1936 for all your OB activities undertaken with related parties.
At E item 41n, write the eligible fraction of foreign income tax on OB income you claimed under Division 770 of the ITAA 1936.
The foreign income tax paid on the offshore banking income of an OBU is taken to be one-third (the current offshore banking eligible fraction) of the amount of foreign income tax actually paid (see subsection 121EG(3A) of the ITAA 1936).
Example
During the income year, XYZ Co, an Australian taxpayer which was an OBU, extracted the following information from its tax records for its financial services activities.
| Activity type | Related party | Total assessable income | Assessable OB income | Assessable non-OB income | Exclusive deductions |
|---|---|---|---|---|---|
Lending |
Yes |
100,000 |
100,000 |
|
25,000 |
Lending |
Yes |
150,000 |
|
150,000 |
45,000 |
Lending |
No |
125,000 |
125,000 |
|
40,000 |
Guarantee-type |
Yes |
90,000 |
90,000 |
|
10,000 |
Guarantee-type |
No |
110,000 |
|
110,000 |
30,000 |
Trading |
Yes |
250,000 |
250,000 |
|
200,000 |
Trading |
Yes |
140,000 |
|
140,000 |
30,000 |
Trading |
No |
300,000 |
300,000 |
|
120,000 |
Eligible contract |
No |
210,000 |
210,000 |
|
60,000 |
Advisory |
No |
80,000 |
80,000 |
|
10,000 |
Advisory |
Yes |
100,000 |
100,000 |
|
25,000 |
Hedge |
Yes |
390,000 |
|
390,000 |
270,000 |
Total |
|
2,045,000 |
1,255,000 |
790,000 |
865,000 |
The OB income can be summarised as follows.
| Activity type | Assessable OB income | Net OB income/loss (assessable OB income – exclusive OB deductions) | Assessable OB income from related parties |
|---|---|---|---|
Lending |
225,000 |
160,000 |
100,000 |
Guarantee-type |
90,000 |
80,000 |
90,000 |
Trading |
550,000 |
230,000 |
250,000 |
Eligible contract |
210,000 |
150,000 |
|
Advisory |
180,000 |
145,000 |
100,000 |
Total |
1,255,000 |
765,000 |
540,000 |
Additional information:
- XYZ Co has total allowable deductions of $100,000, within the meaning of subsection 121EF(4), attributable to both their OB activities and non-OB activities.
- XYZ Co did not incur any apportionable deductions, within the meaning of subsection 121EF(5), during the income year.
- All of XYZ Co's exclusive OB deductions and exclusive non-OB deductions, within the meaning of subsections 121EF(3) and (6), for its lending activities were for expenses in the nature of interest.
- None of XYZ Co's exclusive deductions for any other kinds of activities were for expenses in the nature of interest.
- XYZ Co did not claim an eligible fraction of foreign income tax as an offset.
In accordance with subsection 121EF(4), XYZ Co works out its general OB deduction amount for its $100,000 of deductions attributable to both their OB activities and non-OB activities under the following equation:
Deduction |
X | Adjusted assessable OB income |
|---|
Adjusted assessable OB income is the amount of the OBU’s assessable OB income less the amount of the OBU’s exclusive OB deductions for interest (including discounts in the nature of interest).
Adjusted total assessable income is the amount of the OBU’s total assessable income less the sum of the OBU’s exclusive OB deductions for interest and the OBU’s exclusive non-OB deductions for interest (including discounts in the nature of interest).
Accordingly, the amount of XYZ Co's general OB deduction equals:
$100,000 |
X | $1,255,000 – ($25,000 + $40,000) $2,045,000 – ($25,000 + $40,000 + $45,000) |
|---|---|---|
=$100,000 |
X |
$1,190,000 $1,935,000 |
= $61,498 |
|
|
XYZ Co writes: