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Fair dividend rate (FDR) method

We expect the FDR method to be the primary calculation method for calculating attributing interests in a foreign investment fund (FIF). Eligibility to use this simple method is generally available if you have the market value of your investment at the start of your income year .

How does it work?

General rule

If you use this method you will generally be taxed on 5% of the opening market value of all your attributing interests in offshore investments, and no tax is payable if the total return is a loss. Where you decide to use FDR for one investment, then you must use this method for all your FIF investments that year, unless the legislation prevents you from using the FDR method for a particular investment, such as a guaranteed return investment.

However, if you are ... and ... then you ...

an individual or family trust

your total return (dividends and capital gains) is less than 5% - this is your lower income figure

have the option of using this lower income figure.

a non-natural person, such as a company

 

do not have the option to use the lower income figure.

Quick sales adjustment

When you ... then you ... and ...

both buy and sell shares of the same class in the same company during an income year, and are not a daily unit valuer

must complete a quick sales calculation for each of those foreign investments

include the lower of the following in your FIF income:

  • 5% of the cost of the purchase (peak holding adjustment), or
  • the actual gains on these quick sales (quick sale gains)

Continued use of the FDR method

If you are ... then you ...

an individual or family trust

are able to switch freely between the FDR and comparative value methods in different income years (but not within an income year)

any other type of taxpayer

are generally required to continue to use the FDR method in succeeding years.


What does it mean?

This calculation method means that:

  • one simple calculation is made on the total (pooled) of all your attributing interests for which you are able to use the FDR method. That is 5% of the total FIF interests where you are able to use the FDR method
  • the calculation is based on the market value of your investments at one point in time, ie the start of your income year
  • you do not have to keep numerous records, (unless you are using the lower income figure), and
  • it generally ignores sales and purchases during the year.  

Go to Work it out > Foreign investment fund calculator > to calculate your FIF income using this method.

 


Date published: 30 Nov 2007

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