Income excluding foreign income – items 10 to 15

Instructions to complete items 10 to 15 in the tax return relating to income excluding foreign income.

10. Forestry managed investment scheme income

Instructions to complete item 10 in the tax return relating to forestry managed investment scheme income.

Definitions

A partnership is an initial participant in a forestry managed investment scheme (FMIS) if:

• it obtained its forestry interest in the FMIS from the forestry manager of the scheme, and
• its payment to obtain the forestry interest in an FMIS results in the establishment of trees.

A partnership is a subsequent participant if it obtains an interest in an FMIS through secondary market trading. This means it acquired its interest other than as an initial participant, usually by purchasing that interest from an initial participant in the scheme.

The forestry manager of an FMIS is the entity that manages, arranges or promotes the FMIS.

A forestry interest in an FMIS is a right to benefits produced by the FMIS, whether the right is actual, prospective or contingent, and whether it is enforceable or not.

The amount of the partnership’s total forestry scheme deductions is the total of all the amounts it can deduct or has deducted for each income year it held its forestry interest. See item 17 Forestry managed investment scheme deduction for more information on amounts you can deduct.

The amount of the partnership’s incidental forestry scheme receipts is the total of all the amounts it has received from the FMIS in each income year it held its forestry interest, other than amounts received because of a capital gains tax (CGT) event. Write at item 10 – label Q the total income from the following activities for each FMIS in which the partnership holds a forestry interest.

For information on the CGT treatment of the partnership’s forestry interests, see Guide to capital gains tax 2022. If the partnership is a member of a collapsed agribusiness managed investment scheme, for information on calculating your income and deductions, see Collapse and restructure of agribusiness managed investment schemes – participant information.

For an initial participant in an FMIS

Thinning receipts

If the partnership received thinning proceeds from its forestry interest, include the actual amount received at label Q.

Sale and harvest receipts – forestry interest no longer held

Include the market value of the forestry interest at the time of the CGT event at label Q if the following applies:

• a CGT event happened and the partnership ceased holding its forestry interest (because it sold its interest or it received harvest proceeds), and
• the partnership          
  • has claimed a deduction, or
  • can claim a deduction, or
  • would be entitled to deduct such amounts, but for a CGT event happening within four years after the end of the income year in which the partnership first pays an amount under the FMIS.

Sale and harvest receipts – forestry interest still held

Include the amount by which the market value of the forestry interest was reduced at label Q if the following applies:

• a CGT event happened and the partnership still held its forestry interest (because it sold part of its interest or there was a partial harvest), and
• the partnership          
  • has claimed a deduction
  • can claim a deduction, or
  • would be entitled to deduct such amounts, but for a CGT event happening within four years after the end of the income year in which the partnership first pays an amount under the FMIS.

For a subsequent participant in an FMIS

Thinning receipts

If the partnership received thinning proceeds from its forestry interest, include the actual amount received at label Q.

Sale and harvest receipts – forestry interest no longer held

Include the amount worked out below in the total amount at label Q if the following applies:

• a CGT event happened and the partnership ceased holding its forestry interest as a result of a CGT event (because it sold its interest or it received harvest proceeds), and
• the partnership has deducted, or can deduct or could have deducted an amount, if it paid the amount under the FMIS.

Work out in relation to the forestry interest the lesser of the following two amounts:

• the market value of the forestry interest at the time of the CGT event, or
• the amount (if any) by which the total forestry scheme deductions exceeded the incidental forestry scheme receipts.

Sale and harvest receipts – forestry interest still held

Include the amount worked out below in the total amount at label Q if the following applies:

• a CGT event happened and the partnership still held its forestry interest (because it sold part of its interest or there was a partial harvest), and
• the partnership has deducted, can deduct or could have deducted an amount it had paid the amount under the FMIS.

Work out the lesser of the following two amounts, in relation to the forestry interest:

• the market value of the forestry interest at the time of the CGT event, and
• the amount (if any) by which the total forestry scheme deductions exceeded the incidental forestry scheme receipts ('net deductions').

Use the lesser of the two amounts above in the following formula:

the lesser of the two amounts above × the decrease (if any in the market value of the forestry interest as a result of the CGT event ÷ the market value of the forestry interest just before the CGT event

Include at label Q the amount calculated using the above formula.

In a future income year (a year in which the partnership receives further proceeds from a harvest or the sale of its forestry interest), disregard the amount of the 'net deductions' that has already been shown at label Q.

 

11. Gross interest

Show at label J the interest from banks and credit unions, building societies, debentures, notes and deposits, income accrued on discounted or deferred interest securities, government securities, and interest paid by us.

The total, which is the gross amount of interest received or credited, must be included in assessable income.

If the only income you derived jointly (or in common) with another person was:

• rent from a jointly owned property
• interest from a jointly held account
• dividends from jointly held shares

and you were not in a partnership carrying on a business, do not show any interest income at this item. Show your share of the interest income at item 10 Gross interest on your Tax return for individuals 2022.

If the TOFA rules apply to the partnership, include all interest received or credited to it from financial arrangements subject to the TOFA rules at label J.

Show interest that is part of a cash management trust distribution or other similar trust investment product at item 8 Partnerships and trusts.

Copy details from all statements to worksheet 3 and keep the worksheet with your tax records. Do not include non-share dividends received from holding a non-share equity interest. If the partnership holds such an interest, the issuer is obliged to forward a dividend statement with details of the dividends, which should be shown at item 12 Dividends. For more information on non-share dividends and non-share equity interests, see Debt and equity tests: overview.

Discounted, deferred interest or capital-indexed securities

Show at label J the appropriate amount of discount, interest or other gain which accrued this income year on a discounted, deferred interest or capital-indexed security.

Qualifying security rules

A discounted, deferred interest or capital-indexed security may be subject to the qualifying security rules in Division 16E of the ITAA 1936.

Those rules will only apply if the TOFA rules do not apply (see TOFA rules below). In addition, the security must be one that:

• was issued after 16 December 1984
• had a maturity date of more than 12 months from the issue date, and
• the sum of all payments under the security (except periodic interest, for example, a coupon rate) exceeds its issue price by greater than 1.5%.

In the example, the six-monthly period falls at exactly half-year.

Taxation of financial arrangements (TOFA) rules

A discounted, deferred interest or capital-indexed security that is a qualifying security may instead be subject to the TOFA rules.

This will be the case if the partnership starts to have the security on or after the start of the partnership's first income year starting on or after 1 July 2010 (or 1 July 2009 if the partnership made an early start election under the TOFA rules), and:

• the partnership is affected by the TOFA rules (below), or
• the security is to end more than 12 months after the partnership starts to have it.

If what you show at label J includes an amount which is brought to account under the TOFA rules, also complete item 31 Taxation of financial arrangements (TOFA).

TFN amounts withheld from gross interest

Show at label I any TFN amounts withheld from gross interest where a TFN has not been provided to the investment body.

Record keeping

Keep all documents issued by the investment body that detail payments of income and any TFN amounts withheld from those payments.

Do not attach these documents to the partnership tax return. Keep them with the partnership’s tax records.

We may check the amount shown at label J with our own records to determine accuracy. For more information, see Data-matching programs.

12. Dividends

Instructions to complete item 12 in the tax return relating to dividends.

When to show dividends

If the only income you derived jointly (or in common) with another person was:

• rent from a jointly owned property
• interest from a jointly held account
• dividends from jointly held shares

and you were not in a partnership carrying on a business, do not show any dividend income at this item. Show your share of the dividend income at item 11 Dividends on your Tax return for individuals 2022.

If the partnership is a shareholder or holder of a non-share equity interest in a company (including a LIC) or held units in a corporate unit trust or a public trading trust, that entity gives the partnership a dividend or non-share dividend statement. The statement is likely to include the:

• name of the entity making the distribution
• date on which the distribution was made
• amount of the distribution
• amount of franking credit allocated to the distribution
• franking percentage for the distribution
• amount of any withholding tax has been deducted from the distribution
• name of the shareholder
• if the distribution is unfranked, a statement to that effect, and
• if the distribution is franked, the franked amount and the unfranked amount of the distribution.

If a franked distribution has been received with an associated distribution statement that does not distinguish between the franked and unfranked portions of the dividend, include the total dividend amount at label L Franked amount and include any attached franking credits at label M Franking credit.

Show only amounts received from Australian companies, corporate limited partnerships, corporate unit trusts and public trading trusts.

Show dividends that are part of a distribution from a managed investment fund at item 8 Partnerships and trusts.

Show dividends received from foreign sources, including dividends from a New Zealand franking company with Australian franking credits attached, at item 23 Other assessable foreign source income.

Copy details from all statements to worksheet 4 and keep the worksheet with the partnership’s tax records.

If the partnership was paid a dividend by a LIC and the dividend advice statement shows a LIC capital gain amount, the partnership can claim a deduction of 50% of the LIC capital gain amount at item 16 Deductions relating to Australian investment income.

Dividends on which family trust distribution or trustee beneficiary non-disclosure tax has been paid

To the extent that Family trust distribution tax (FTDT) has been paid on a dividend paid or credited to the partnership by a company that has made an interposed entity election, that amount is excluded from the assessable income of the partnership under section 271-105 of Schedule 2F to the ITAA 1936. Do not show it at label K or L.

You can't claim a deduction for any losses or outgoings incurred in deriving an amount that is excluded from assessable income under section 271-105 and you can't claim a credit or tax offset for any franking credit attached to the non-assessable non-exempt portion of the dividend.

Accordingly, do not include any amount at label M for a franking credit attached to the whole or part of a dividend that is excluded under section 271-105. For more information on the circumstances in which FTDT is payable, see Family trust distribution tax.

If trustee beneficiary non-disclosure tax (TBNT) has been paid on a dividend that is included in a share of net income which the partnership is presently entitled to or which has been distributed to the partnership, then the dividend is not included in the assessable income of the partnership.

You can't claim a deduction for any losses or outgoings incurred in deriving these amounts that are excluded from assessable income, and you can't claim a tax offset for any franking credits attributable to the dividend.

For more information on dividends, franking credits and tax offset entitlements, see Appendix 1.

Unfranked amount

Show at label K the gross amount of unfranked dividends, and the unfranked amount of partially franked dividends, received before any TFN amounts were withheld.

If the TOFA rules apply to the partnership, include all unfranked dividends that were paid or credited to it by Australian companies in respect of financial arrangements subject to the TOFA rules at label K.

If the partnership is a holder, or an associate of a holder, of a share or non-share equity interest in a private company and it received:

• payments, loans or forgiveness of a debt from the company, directly or indirectly
• loans or forgiveness of a debt from a trustee, where the company has an unpaid present entitlement from the trust, or
• payments from a trustee which are attributable to certain unrealised gains, where the company has an unpaid present entitlement to the trust income

then the amounts of those payments (subject to distributable surplus and in the case of a trust the unpaid present entitlement), loans not repaid or debts forgiven are returned as an unfranked dividend unless they are specifically excluded under the provisions of Division 7A of Part III of the ITAA 1936, or the amount treated as a dividend is franked. Division 7A was amended to enable certain amounts treated as dividends to be franked. For example, a private company can frank an amount treated as a dividend that arises because of a family law obligation in certain circumstances.

Dividends paid under a demerger are generally not assessable dividends. Do not include a dividend paid under a demerger at label K unless the head entity of the demerger group has advised that it is an assessable dividend.

Franked amount

Show at label L the franked amount of franked dividends received before any TFN amounts were withheld.

If you have received a franked distribution with an associated distribution statement that does not distinguish between the franked and unfranked portions of the dividend, include the total dividend amount at label L and include any attached franking credits at label M.

Franking credit

Show at label M the amount of franking credits received directly from a paying company.

The amount at label M is distributed to the partners, and is allowed as a tax offset to reduce tax payable.

Do not show:

• franking credits if          
  • the partnership did not satisfy the holding period rule, and
  • the related payments rule for the dividend, or the dividend washing integrity rule applies

(for more information, see Appendix 1)

• franking credits received indirectly through another partnership or a trust; show your share of franking credit from franked distributions at item 8 – label D.
• franking credits attached to distributions paid by a New Zealand franking company. If the partnership received franked distributions from a New Zealand franking company, see 23. Other assessable foreign source income.

TFN amounts withheld from dividends

Show at label N the total of TFN amounts withheld from dividends received, minus any refund of TFN amounts withheld.

We may check the franking amount shown at label K, L and M with our own records to determine accuracy. See Data-matching programs.

14. Other Australian income

Show at label O the total amount of other Australian income.

If the amount is a loss, print L in the box at the right of the amount. The following are some examples of the amounts to be included at label O:

This section includes:

• Gains on the disposal of traditional securities
• Bonuses from life insurance companies and friendly societies
• Bonuses credited from friendly society income bonds
• Add backs: Listed investment company (LIC) capital gain
• Royalties
• Foreign exchange gains or losses
• TOFA amounts from financial arrangements

Gains on the disposal of traditional securities

Show at label O any gains on the disposal or redemption of a traditional security which are assessable under section 26BB of the ITAA 1936. For more information about gains and losses on traditional securities, including traditional securities that are convertible notes or exchangeable notes, see You and your shares 2022.

Bonuses from life insurance companies and friendly societies

If, during the year ended 30 June 2022, the partnership received any bonuses or other amounts in the nature of bonuses on the maturity, forfeiture, partial or full surrender of a short-term life insurance policy taken out on or after 28 August 1982, you may need to show the amount at label O.

Life insurance policies are issued by life insurance companies and friendly societies.

A partnership is regarded as having received a bonus if it re-invests or otherwise deals with the bonus during the income year.

Do not include the amount shown on a bonus certificate if the partnership:

• received it because of death, accident, illness or other disability suffered by the person on whose life the policy was effected
• received it under a policy held by the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust
• can show that the amount was received because of serious financial difficulties
• received a bonus certificate in respect of an amount allocated to increase the amount receivable on surrender or maturity.

If the policy has a date of commencement of risk on or before 27 August 1982, any bonuses received this year are not assessable.

If the policy has a date of commencement of risk after 7 December 1983, any bonus is included in assessable income as follows:

• if received during the first eight years after the date of commencement of risk of the policy, the bonus is included in full
• if received in the ninth year, two-thirds of the bonus amount is included
• if received in the tenth year, one-third of the bonus amount is included
• Amounts received after the tenth year are not included.

If, during the term of the policy, the amount of a premium increases by more than 25% over the previous year’s premium, the policy is taken to have started again with a commencement date at the beginning of the policy year in which the premium increased.

The partner may, on their own tax return, claim a tax offset for a bonus or any other amount in the nature of a bonus included in the income, if the organisation issuing the life policy is a:

• life insurance company that pays tax on the income from which the amount was paid, or
• friendly society.

The tax offset a partner may claim on their own tax return for 2021–22 is equal to 30 cents in each dollar.

Include the bonus or other amount in the nature of a bonus in the calculation of net income or loss of the partnership and apportion it among the partners in the same ratio as they share in that net income or loss of the partnership.

If the partnership received assessable bonuses from a life insurance company or friendly society, include the total amount at label O. To ensure the tax offset is allowed, provide a statement showing the amounts from the life insurance company and friendly society life insurance policies. Attach the statement to the tax return. Print X in the Yes box at Have you attached any ‘other attachments’? at the top of page 1 of the tax return.

Record keeping

If a bonus or other amount in the nature of a bonus is included at label O, or an amount was not included because of the circumstances under which it was received, keep a record of the:

• type of policy
• name of the issuing organisation
• policy number
• date the policy was taken out
• bonus statement or advice
• date that each amount was received
• nature of each amount, for example, bonus, loan or withdrawal
• circumstances under which each amount was received, for example, partial surrender of policy, serious financial difficulties, death, accident, illness or other disability
• basis of calculation of the amount included.

For more information on

• bonuses received from certain life insurance policies, see IT 2346 Income tax: bonuses paid on certain life assurance policies – section 26AH – interpretation and operation.
• amounts switched between investment options for the same life insurance policy, see TD 94/82 Income tax: does section 26AH of the Income Tax Assessment Act 1936 apply when investment options are ‘switched’ under an eligible policy?

Bonuses credited from friendly society income bonds

Include bonuses received from friendly society income bonds at label O. The distribution statement issued by friendly societies to income bond holders will advise the amount that should be included as income. Do not include these amounts in the calculation of the tax offset applicable to bonuses from life insurance policies.

Add backs: Listed investment company (LIC) capital gain

If a distribution is received from another partnership or trust which advises it has claimed a deduction for a LIC capital gain amount, the partnership is required to add back as income its share of the deduction allowed to the other partnership or trust.

Royalties

For information on royalty income shown at label O, see Appendix 2.

Foreign exchange gains or losses

Show at label O the assessable Australian source foreign exchange (forex) gains or deductible losses that you have not already included at any other label, for example, a label in item 5 Business income and expenses. If the total amount at label O is a loss, print L in the box at the right of the amount.

For more information on how to calculate forex gains and losses, see Foreign exchange gains and losses.

As foreign currency is a CGT asset, the capital gains tax provisions can apply to any capital gain or capital loss made on a CGT event. Any capital gain would generally be ignored or reduced to prevent double taxation if the gain was assessable under the TOFA rules or Division 775 of the ITAA 1997.

If a partnership has made a foreign exchange gain or loss which is subject to CGT, each partner must include their share of the capital gain or capital loss on their own tax return.

TOFA amounts from financial arrangements

If the TOFA rules apply to calculate an assessable gain or deductible loss on the partnership’s financial arrangements, include at this item those assessable gains relating to the financial arrangements.

TOFA amounts that have been included elsewhere should not be included here, for example, amounts that have already been included at:

• item 5 – label S Net income or loss from business
• item 8 – label A Distribution from partnerships
• item 8 – label Z Share of net income from trusts
• item 11 – label J Gross interest
• item 12 – label K Unfranked amount
• item 23 – label B Gross other assessable foreign source income.

If the TOFA rules apply to the partnership and the other Australian income shown at label O or any other income label includes an amount which is brought to account under the TOFA rules, also complete item 31 Taxation of financial arrangements (TOFA).

For more information, see Guide to the taxation of financial arrangements (TOFA).

15. Total of items 5 to 14

Show at item 15 the total of all Australian income.

If this amount is a loss, print L in the box at the right of the amount.

Continue to: Deductions – items 16 to 20