Foreign investment funds guide

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About this guide

Foreign investment funds guide 2008-09

Our commitment to you

We are committed to providing you with guidance you can rely on, so we make every effort to ensure that our publications are correct.

If you follow our guidance in this publication and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we must still apply the law correctly. If that means you owe us money, we must ask you to pay it but we will not charge you a penalty. Also, if you acted reasonably and in good faith we will not charge you interest.

If you make an honest mistake in trying to follow our guidance in this publication and you owe us money as a result, we will not charge you a penalty. However, we will ask you to pay the money, and we may also charge you interest.

If correcting the mistake means we owe you money, we will pay it to you. We will also pay you any interest you are entitled to.

If you feel that this publication does not fully cover your circumstances, or you are unsure how it applies to you, you can seek further assistance from us.

We regularly revise our publications to take account of any changes to the law, so make sure that you have the latest information. If you are unsure, you can check for a more recent version on our website at www.ato.gov.au or contact us.

This publication was current at May 2009.

How self-assessment affects you

Self-assessment means the Tax Office uses the information you give on your tax return and any related schedules and forms to work out your refund or tax liability. We do not take any responsibility for checking the accuracy of the details you provide, although our system automatically checks the arithmetic.

Although we do not check the accuracy of your tax return at the time of processing, at a later date we may examine the details more thoroughly by reviewing specific parts, or by conducting an audit of your tax affairs. We also have a number of audit programs that are designed to continually check for missing, inaccurate or incomplete information.

What are your responsibilities?

It is your responsibility to lodge a tax return that is signed, complete and correct. Even if someone else - including a tax agent - helps you to prepare your tax return and any related schedules, you are still legally responsible for the accuracy of your information.

What if you lodge an incorrect tax return?

If you become aware that your tax return is incorrect, you must contact us straight away.

Initiatives to complement self-assessment

There are a number of systems and entitlements that complement self-assessment, including:

• the private ruling system (see below)
• the amendment system (if you find you have left something out of your tax return)
• your entitlement to interest on early payment or over-payment of a tax debt.

Do you need to ask for a private ruling?

If you are uncertain about how a tax law applies to your personal tax affairs, you can ask for a private ruling. To do this, complete a Private ruling application form (not for tax professionals) (NAT 13742) or Private ruling application form (tax professionals) (NAT 13043), or contact us.

Lodge your tax return by the due date, even if you are waiting for the response to your application. You may need to request an amendment to your tax return once you have received the private ruling.

We publish all private rulings on our website. (Before we publish we edit the text to remove information that would identify you.)

Do you need to use this guide?

Did you have interests in a foreign company, a foreign trust or a foreign life assurance policy? (Read Chapter 2: Key concepts of the FIF measures and Chapter 5: Foreign life assurance policies .)

No	The foreign investment fund (FIF) measures do not apply to you. You do not need to use this guide.
Yes	Read on.

If you were a resident at any time during the income year, did you:

• have an interest in a FIF at the end of the income year, or
• have an interest in a foreign life assurance policy (FLP) at any time during the income year? (Read Chapter 2: Key concepts of the FIF measures and Chapter 5: Foreign life assurance policies .)

No	The FIF measures do not apply to you. You do not need to use this guide.
Yes	Read on.

Does an exemption apply to your interest in a FIF or FLP? (Read Chapter 3: Exemptions .)

No	Read on.
Yes	Do not include any amount in your assessable income from the interests in that FIF or FLP. Read Chapter 7: Record keeping to work out the records that you need to keep, then read on.

Foreign investment funds guide 2009

This guide will help you work out how to include your FIF income in your assessable income. It does not include all the qualifications and conditions of the FIF measures that may affect how you work out the amount of FIF income to include in your assessable income for a particular year.

If you need more information, phone the Individual Infoline on 13   28   61 or consult a registered tax adviser.

Abbreviations

CFC	controlled foreign company
CFT	controlled foreign trust
FIF	foreign investment fund
FLP	foreign life assurance policy
ITAA 1936	Income Tax Assessment Act 1936
ITAA 1997	Income Tax Assessment Act 1997
MEC group	multiple entry consolidated group

Note: Unless indicated otherwise, throughout this guide all sections and subsections in square brackets refer to the Income Tax Assessment Act 1936 (ITAA 1936).

Determining the amount of FIF income to include in your assessable income

There are three methods for working out taxation for an interest in a FIF and two methods for an interest in a FLP, depending on your access to certain information on the FIF or FLP.

Interest in a FIF - read Chapter 4: Methods of FIF taxation

• Most taxpayers liable to tax under the FIF measures will use the market value method.
• Use the deemed rate of return method if you are unable to establish a market value for your FIF interest and you have not elected to use the calculation method.
• Use the calculation method if you have access to the financial accounts of the FIF and you are able to determine the FIF's calculated profit or calculated loss. For income years commencing on or after 1   July   2008 certain taxpayers using the FIF calculation method to determine income to be attributed from a foreign company have a further choice (within that method) to calculate that income using the CFC rules.

Interest in a FLP - read Chapter 5: Foreign life assurance policies

If you have invested in a FLP, you can use:

• the deemed rate of return method, or
• the cash surrender method.

ATO references:
NO NAT 2130