31 Taxation of financial arrangements (TOFA)
The key provisions of the TOFA rules are found in Division 230 of the ITAA 1997, which generally provides for:
- methods of taking into account gains and losses from financial arrangements, being
- accruals and realisation
- fair value
- foreign exchange retranslation
- hedging
- reliance on financial reports
- balancing adjustment
- the time at which the gains and losses from financial arrangements will be brought to account.
The TOFA rules apply to the following partnerships:
- authorised deposit-taking institutions, securitisation vehicles and financial sector entities with an aggregated annual turnover of $20 million or more
- managed investment schemes, or entities with a similar status under foreign law relating to corporate regulation with assets of $100 million or more
- any other partnership which satisfies one or more of the following
- an aggregated turnover of $100 million or more
- assets of $300 million or more
- financial assets of $100 million or more.
An entity that does not meet these requirements can elect to have the TOFA rules apply to it.
The aggregated turnover tests may mean that the TOFA rules will apply to partnerships that don't meet the thresholds in their own right. Aggregated turnover includes the annual turnover of any entity a partnership is connected with, or any affiliate of the partnership (including overseas entities).
Once the TOFA rules apply to a partnership, they will continue to apply to that partnership, even if its aggregated turnover, value of assets or value of financial assets subsequently falls below the requisite threshold.
There are a number of elections available to partnerships under the TOFA rules. Elections under the TOFA rules are irrevocable, and should be carefully considered before being made.
For more information, see Guide to the taxation of financial arrangements (TOFA).
Total TOFA gains
Show at label M the partnership’s total assessable TOFA gains from financial arrangements.
Total TOFA losses
Show at label N the partnership's total deductible TOFA losses from financial arrangements.
Ensure you take into account at labels M and N any amount for a TOFA financial arrangement that you have shown elsewhere such as:
- item 5 – label S Net income or loss from business
- item 8 – label A, Z, S, B, R or T Partnerships and trusts
- item 9 – label G Interest deductions
- item 11 – label J Gross interest
- item 12 – label K Unfranked dividend amount
- item 14 – label O Other Australian income
- item 18 – label Q Other deductions
- item 23 – label B Gross other assessable foreign source income.
32 Non-concessional MIT income
An MIT is a managed investment trust, and an amount is non-concessional MIT income (NCMI) if it is any of the following:
- MIT cross staple arrangement income
- MIT trading trust income
- MIT agricultural income, or
- MIT residential housing income.
Business income
Instructions to complete the primary and non-primary production amounts of business income.
Primary production
Complete the following:
Non-concessional MIT income (NCMI)
Show at label A the total NCMI amount in relation to primary production income, for example, income attributable to agricultural land held for rent.
Excluded from NCMI
Show at label B the total Excluded from NCMI amount in relation to primary production income, that is, income from transitional arrangements or approved economic infrastructure facilities.
Amounts you show at label A and B must be shown at item 5 Income– label G Other business income.
Non-primary production
Complete the following:
Non-concessional MIT income (NCMI)
Show at label C the total NCMI amount in relation to non-primary production income, that is, cross staple income, trading trust income and residential housing income.
Excluded from NCMI
Show at label D the total Excluded from NCMI amount in relation to non-primary production income, that is, income from transitional arrangements or approved economic infrastructure facilities.
Amounts you show at labels C and D must be shown at item 5 Income – label H Other business income.
Partnerships and trusts
Instructions to complete the primary and non-primary production amounts of business income.
Primary production
Complete the following:
- Non-concessional MIT income (NCMI)
- Excluded from NCMI
- Non-concessional MIT income (NCMI)
- Excluded from NCMI
Non-concessional MIT income (NCMI)
Show at label E the total NCMI amount distributed from partnerships categorised as primary production income.
Excluded from NCMI
Show at label F the total Excluded from NCMI amount distributed from partnerships categorised as primary production income.
Amounts you show at label E and F must be shown at item 8 – label A Distribution from partnerships.
Non-concessional MIT income (NCMI)
Show at label G the total NCMI amount distributed from a trust categorised as primary production income.
Excluded from NCMI
Show at label H the total Excluded from NCMI amount distributed from trusts categorised as primary production income.
Amounts you show at label G and H must be shown at item 8 – label Z Share of net income from trusts.
Non-primary production
Complete the following:
- Non-concessional MIT income (NCMI)
- Excluded from NCMI
- Non-concessional MIT income (NCMI)
- Excluded from NCMI
Non-concessional MIT income (NCMI)
Show at label I the total NCMI amount distributed from partnerships categorised as Non-primary production.
Excluded from NCMI
Show at label J the total Excluded from NCMI amount distributed from partnerships categorised as Non-primary production.
Amounts you show at I and label J must be shown at item 8 – label B Distribution from partnerships, less foreign income.
Non-concessional MIT income (NCMI)
Show at label K the total NCMI amount distributed from trusts categorised as Non-primary production.
Excluded from NCMI
Show at label L the total Excluded from NCMI amount distributed from trusts categorised as Non-primary production.
Amounts you show at label K and L must be shown at item 8 – label R Share of net income from trusts, less capital gains, foreign income and franked distributions.
If any NCMI capital gains or Excluded from NCMI capital gains amount was received during 2023–24, each partner must include their share of the capital gain or capital loss on their own tax return.
Continue to: Key financial information – items 33 to 36
Return to: Instructions to complete the Partnership tax return 2024