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Section C: Interests in foreign entities

Last updated 15 February 2022

Question 21

This question is one of a number dealing with controlled foreign companies (CFCs) and controlled foreign trusts (CFTs). These questions are for the purpose of understanding your interests in and dealings with these overseas entities and assessing compliance with the relevant tax legislation.

21a Did you have any interests in CFCs or CFTs?

An interest in a CFC or CFT may be either direct or indirect, and has the same meaning as given in Division 3 of Part X of the ITAA 1936.

To complete this question, you must identify whether you had an interest in any CFCs or CFTs at the end of the income year. If you had an interest in a CFC or CFT, answer Yes at A item 21a and complete items 21b, 21c, 21d, 21e, 21f and questions 22, 22a, 22b, 23a and 23b.

21b Specify the number of CFCs and CFTs in which you had an interest at the end of your income year.

At B, C and D of 21b:

  • Identify the CFCs and CFTs in which if you had an interest at the end of your income year. Then, referring to the tables at Appendix 1 and Appendix 3, identify the category of the country of residency of each CFC or CFT.
  • At B, write the number of your CFCs and CFTs identified as residents of listed countries.
  • At C, write the number of your CFCs and CFTs identified as residents of specified countries or jurisdictions.
  • At D, write the number of your CFCs and CFTs identified as residents of other unlisted countries or jurisdictions.

If the number of CFCs and CFTs is:

  • less than 10, write zero zero (00) as the first two digits and then write the number, for example, write 009
  • less than 100, write zero (0) as the first digit and then write the number, for example, write 083
  • more than 999, write 999
  • zero, leave the relevant answer blank.

Example 20

Jack Brothers & Co had at the end of their income year the following:

  • two German resident CFTs
  • three Japanese resident CFCs
  • one Cayman Islands resident CFT.

As Germany and Japan are listed countries, they wrote 005 at B to record its five listed country CFTs and CFCs at the end of its income year.

At C they wrote 001 to record its specified country or jurisdiction CFT.

They left the remaining box blank.

This image shows an example of how to complete Question 21.

End of example

Question 21c Did you acquire any interests in CFCs or CFTs during the income year?

If you acquired any associate-inclusive control interest in a CFC or CFT during the income year, answer Yes at A item 21c.

The associate-inclusive control interest has the meaning given by section 349 of the ITAA 1936.

At B, C and D of 21c:

  • Identify the CFCs and CFTs in which you acquired any associate-inclusive control interest during the income year. Then, referring to the tables at Appendix 1 and Appendix 3, identify the category of the country of residency of each CFC or CFT.
  • At B, write the number of CFCs and CFTs resident in listed countries in which you acquired any associate-inclusive control interest during the income year.
  • At C, write the number of CFCs and CFTs resident in specified countries or jurisdictions in which you acquired any associate-inclusive control interest during the income year.
  • At D, write the number of CFCs and CFTs resident in other unlisted countries or jurisdictions in which you acquired any associate-inclusive control interest during the income year.

If the number of CFCs and CFTs in which you acquired any associate-inclusive control interest during the income year is:

  • less than 10, write zero zero (00) as the first two digits and then write the number, for example, if the number is 9 write 009
  • less than 100 but not less than 10, write zero (0) as the first digit and then write the number, for example, if the number is 83 write 083
  • more than 999, write 999.

If you did not acquire any interests in CFCs or CFTs of any of the three categories of the country of residency during the income year, write zero (0) for that category.

Example 21

During the income year, an Australian resident taxpayer (attributable taxpayer) acquired associate-inclusive control interest in following CFCs and CFTs:

CFC or CFT

Country of residence

Section 349 associate-inclusive control interest

Transaction dates

CFC

Canada

100% direct control interest

2 July

CFT

USA

65% indirect control interest

1 October

CFC

UK

85% direct control interest held by an associate of the attributable taxpayer

15 January

CFC

Singapore

additional 70% direct control interest (the attributable taxpayer already held 20% direct control interest)

7 November

CFT

Belgium

100% direct control interest

3 February

CFC

South Africa

35% direct control interest

16 April

21c Did you acquire any interests in CFCs or CFTs during the income year?
 Items completed, Yes with X for Specify the number of CFS or CFTs of which you acquired any interests during the income year, B Listed countries 003, C Specified countries 001 and D Other unlisted countries 002.

End of example

Question 21d Did you dispose of any interests in CFCs or CFTs during the income year?

If you disposed of any associate-inclusive control interest in a CFC or CFT during the income year, answer Yes at A item 21d.

The associate-inclusive control interest has the meaning given by section 349 of the ITAA 1936.

At B, C and D of item 21d:

  • Identify the CFCs and CFTs in which you disposed of any associate-inclusive control interest during the income year. Then, referring to the tables at Appendix 1 and Appendix 3, identify the category of the country of residency of each CFC or CFT.
  • At B, write the number of CFCs and CFTs resident in listed countries in which you disposed of any associate-inclusive control interest during the income year.
  • At C, write the number of CFCs and CFTs resident in specified countries or jurisdictions in which you disposed of any associate-inclusive control interest during the income year.
  • At D, write the number of CFCs and CFTs resident in other unlisted countries or jurisdictions in which you disposed of any associate-inclusive control interest during the income year.

If the number of CFCs and CFTs is:

  • less than 10, write zero zero (00) as the first two digits and then write the number, for example, if the number is 9 write 009
  • less than 100 but not less than 10, write zero (0) as the first digit and then write the number, for example, if the number is 83 write 083
  • more than 999, write 999.

If you did not dispose of any interests in CFCs or CFTs of any of the three categories of the country of residency during the income year, write 0 (zero).

Example 22

During the income year, an Australian resident taxpayer (the attributable taxpayer) disposed of associate-inclusive control interest in following CFCs and CFTs:

CFC or CFT

Country of residence

Section 349 associate-inclusive control interest

Transaction dates

CFC

Canada

100% direct control interest (the CFC in Canada, in which the attributable taxpayer acquired 100% direct control interest on 2 July)

31 May

CFC

New Zealand

The CFC ceased to exist (the attributable taxpayer held the 100% direct control interest for the last 5 years)

20 September

CFC

Sweden

17% indirect control interest held by the attributable taxpayer ((the attributable taxpayer held a total of 85% indirect control interest for the last 3 years)

30 November

 

21d Did you dispose of any interests in CFCs or CFTs during the income year? 
Items completed, Yes with X for Specify the number of CFS or CFTs of which you disposed any interests during the income year, B Listed countries 002, C Specified countries 000 and D Other unlisted countries 001.

End of example

Question 21e Have your CFCs in the following countries satisfied the active income test for their statutory accounting period(s) under section 432 of ITAA 1936?

The active income test has the meaning given by section 432 of the ITAA 1936.

The statutory accounting period has the meaning given by section 319 of the ITAA 1936.

If your CFCs in listed countries have satisfied the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer Yes at A item 21e.

If your CFCs in listed countries have failed the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer No at A item 21e.

If some of your CFCs in listed countries have satisfied, and some of your CFC in listed countries have failed, the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer Yes at A item 21e and No at A item 21e.

If your CFCs in specified countries or jurisdictions have satisfied the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer Yes at B item 21e.

If your CFCs in specified countries or jurisdictions have failed the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer No at B item 21e.

If some of your CFCs in specified countries or jurisdictions have satisfied, and some of your CFC in specified countries or jurisdictions have failed, the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer Yes at B item 21e and No at B item 21e.

If your CFCs in other unlisted countries or jurisdictions have satisfied the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer Yes at C item 21e.

If your CFCs in other unlisted countries or jurisdictions have failed the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer No at C item 21e.

If some of your CFCs in other unlisted countries or jurisdictions have satisfied, and some of your CFC in other unlisted countries or jurisdictions have failed, the active income test for their statutory accounting period(s) under section 432 of ITAA 1936 answer Yes at C item 21e and No at C item 21e.

To help work out whether your CFCs have passed or failed the relevant tests, see:

Question 21f Did you exclude tainted interest income from the passive income of a CFC which was an AFI subsidiary?

If you excluded tainted interest income from the passive income of a CFC which was an AFI subsidiary under section 326 of the ITAA 1936, answer Yes at A item 21f and provide the following information.

If all of your AFI subsidiary CFCs have banking licences in their countries, you still need to answer Yes at B item 21f if you excluded tainted interest income from their passive income, however if all of your AFI subsidiary CFCs have banking licences in their countries, you do not need to specify any amounts at D, E, F or G.

If not all, or none, of your AFI subsidiary CFCs have banking licences in their countries, answer No at B item 21f.

Answer Yes at C item 21f if the income of any of your AFI subsidiary CFCs which did not have banking licences in their countries was principally derived from the lending of money within the meaning of the definition of financial intermediary business under section 317 of the ITAA 1936.

Financial intermediary business means:

  • bankingExternal Link business, or
  • a business whose income is principally derived from the lending of money.

At D, write the total amount of tainted interest income excluded from passive income of your financial intermediary subsidiary CFCs of listed countries for the income year (excluding CFCs with banking licences in their country).

At E, write the total amount of tainted interest income excluded from passive income of your financial intermediary subsidiary CFCs of specified countries or jurisdictions for the income year (excluding CFCs with banking licences in their country).

At F, write the total amount of tainted interest income excluded from passive income of your financial intermediary subsidiary CFCs of other unlisted countries or jurisdictions for the income year (excluding CFCs with banking licences in their country).

At G, write the total amount of tainted interest income excluded from passive income of your financial intermediary subsidiary CFCs (excluding CFCs with banking licences in their country).

At H, write the number of your financial intermediary CFCs identified as residents of listed countries which excluded tainted interest income from passive income for the income year (excluding any CFCs with banking licences).

At I, write the number of your financial intermediary CFCs identified as residents of specified countries or jurisdictions which excluded tainted interest income from passive income for the income year (excluding any CFCs with banking licences).

At J, write the number of your financial intermediary CFCs s identified as residents of other unlisted countries or jurisdictions which excluded tainted interest income from passive income for the income year (excluding any CFCs with banking licences).

If the number of CFCs and CFTs is:

  • less than 10, write zero (00) as the first two digits and then write the number, for example, if the number is 9 write 009
  • less than 100 but not less than 10, write zero (0) as the first digit and then write the number, for example, if the number is 83 write 083
  • more than 999, write 999
  • zero, write zero (0)

To help work out the amounts to include, see:

  • The exclusion of tainted interest income from passive income under subsection 449(1) of the ITAA 1936
  • The meaning of AFI subsidiary given by section section 326 of the ITAA 1936
  • The meaning of AFI given by section 317 of the ITAA 1936
  • The meaning of financial intermediary business given by section 317 of the ITAA 1936
  • The meaning of tainted interest income given by section 317 of the ITAA 1936
  • The meaning of passive income given by section 446 of the ITAA 1936

Example 23

Bank Co is an Australian authorised deposit-taking institution. It has AFI subsidiary CFCs in the following countries or jurisdictions:

Listed countries

Country of residence

Banking licence in residence country

Principally derives income from the lending of money

Tainted interest income excluded from passive income

UK

Yes

Yes

1,329,000

New Zealand

Yes

No

714,000

 

 

Total

2,043,000

Specified countries or jurisdictions

Country of residence

Banking licence in residence country

Principally derives income from the lending of money

Tainted interest income excluded from passive income

Netherlands

Yes

No

623,000

Hong Kong

Yes

No

387,000

British Virgin Islands

No

Yes

451,000

 

 

Total

1,461,000

Other unlisted countries or jurisdictions

Country of residence

Banking licence in residence country

Principally derives income from the lending of money

Tainted interest income excluded from passive income

Malaysia

No

Yes

508,000

Fiji

No

Yes

863,000

 

 

Total

1,371,000

With this information, the taxpayer completes item 21f as follows:

A

Yes

B

No

C

Yes

D

(blank)

E

451,000

F

1,371,000

G

1,822,000

H

0

I

001

J

002

 

End of example

QC58653