Section EX 52 — Income Tax Act 2007: Fair dividend rate method: usual method

EX 52 Fair dividend rate method: usual method When this section applies (1) This section applies when a person— (a) calculates FIF income from an attributing interest in a FIF for an income year under the fair dividend rate method; and (b) is neither— (i) a unit-valuing fund that is subject to section EX 53 ; nor (ii) another person that determines the market value of the attributing interest for each period of a day in the income year and that chooses to apply the method in section EX 53 . FIF income (2) The person's total FIF income for the income year from the attributing interests in FIFs (the FDR interests ) for which the person uses the fair dividend rate method is calculated using the formula in subsection (3). FIF income formula (3) The formula is— (0.05 × opening value) + quick sale adjustment. Definition of items in FIF income formula (4) The items in the FIF income formula in subsection (3) are defined in subsections (5) to (7). Opening value (5) Opening value is the total of the market values of the FDR interests that— (a) the person holds at the start of the income year; and (b) are not, at the beginning of the income year, included in a direct income interest of 10% or more in a FIF that, at the beginning of the year,— (i) meets the requirements of section EX 35(b)(i) to (iii); and (ii) does not have its liability for income tax reduced by an exemption, allowance, or relief referred to in section EX 35(c)(i) or (ii) . Exclusion for certain managed funds (5B) Subsection (5)(b) does not apply if— (a) the person is a portfolio investment entity, an entity eligible to be a portfolio investment entity, or a life insurance company; and (b) the FIF is a foreign PIE equivalent. When quick sale adjustment required (6) The quick sale adjustment is required, and is not zero, only if the person, in the income year,— (a) acquires or increases an FDR interest to which this section applies; and (b) later disposes of or reduces the FDR interest. Quick sale adjustment (7) Quick sale adjustment is the lesser of— (a) the total of the amounts (the peak holding method amount ) calculated for each FDR interest using the formula in subsection (8): (b) the total of the amounts (the quick sale gain amount ) calculated for each FDR interest using the formula in subsection (12), treating a negative total as being zero. Peak holding method amount formula (8) The formula is— 0.05 × peak holding differential × average cost. Definition of items in formula (9) The items in the formula in subsection (8) are defined in subsections (10) and (11). Peak holding differential (10) Peak holding differential is,— (a) if no share reorganisation occurs in the income year, the lesser of— (i) the difference between the greatest shareholding in the year and the shareholding at the start of the year: (ii) the difference between the greatest shareholding in the year and the shareholding at the end of the year; or (b) if a share reorganisation occurs in the income year, the amount calculated under section EX 54 for the year. Average cost (11) Average cost is— (a) if no share reorganisation occurs in the income year, the total amount of expenditure that the person incurs in acquiring or increasing during the income year the attributing interest in the FIF divided by the total for the year of the shareholding increase in the attributing interest in the FIF for each acquisition or increase; or (b) if a share reorganisation occurs in the income year, the amount calculated under section EX 54 for the year. Quick sale gain amount formula (12) The formula, for each acquisition or increase in the attributing interest that is disposed of or reduced in the income year, is— gain − (interest × average cost). Definition of items in formula (13) In the formula in subsection (12),— (a) gain is the total amount that the person derives from holding or disposing of the acquisition or increase: (b) interest is the amount of the shareholding acquisition or increase: (c) average cost is,— (i) if no share reorganisation occurs in the income year, the total amount of expenditure that the person incurs in acquiring or increasing the attributing interest in the FIF divided by the total for the income year of the shareholding increase in the interest for each acquisition or increase; or (ii) if a share reorganisation occurs in the income year, the amount calculated under section EX 54 for the year. LIFO for identifying attributing interests disposed of (14) For the purposes of subsection (12), attributing interests in a FIF are treated as being disposed of in the reverse order of their acquisition (last in-first out). Treatment of transaction under section EX 63 or EX 67 (14B) For the purposes of subsection (7), if the person is treated as disposing of or acquiring an attributing interest in an income year under section EX 63(5) or EX 67 , the disposal or acquisition is ignored. Treatment of attributing interests subject to returning share transfer (14C) If an attributing interest in a FIF is an original share subject to a returning share transfer, for the purposes of a person using the fair dividend rate method to calculate FIF income, the attributing interest is treated as held by the share supplier. Meaning of shareholding (15) In this section, shareholding means the number of shares or units in an attributing interest. Defined in this Act: amount , attributing interest , direct income interest , fair dividend rate method , FIF , FIF income , foreign PIE equivalent , income year , investor , life insurance , market value , original share , portfolio investment entity , returning share transfer , share , shareholding , share reorganisation , share supplier Compare: 2004 No 35 ss EX 44B(2) , EX 44C Section EX 52(1)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 177(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52(1)(b): substituted, on 1 April 2008, by section 394(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 52(2): substituted (with effect on 1 April 2008), on 6 October 2009, by section 177(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52(5): amended (with effect on 1 April 2008), on 6 October 2009, by section 177(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52(5): amended, on 1 April 2008, by section 394(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 52(5)(a): added, on 1 April 2008, by section 394(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 52(5)(b): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 37(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 52(5B) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 177(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52(5B): inserted (with effect on 1 April 2008), on 6 October 2009, by section 177(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52(5B)(b): substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 177(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52(6): substituted (with effect on 1 April 2008), on 6 October 2009, by section 177(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52(7)(a): substituted (with effect on 1 April 2008), on 6 October 2009, by section 177(7) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52(7)(b): substituted (with effect on 1 April 2008), on 6 October 2009, by section 177(7) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52(11)(a): amended, on 1 April 2008, by section 394(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 52(12) formula: amended, on 1 April 2008, by section 394(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 52(13)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 177(8)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52(13)(b): substituted, on 1 April 2008, by section 394(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 52(13)(c): substituted (with effect on 1 April 2008), on 29 August 2011 (applying for income years beginning on or after 1 April 2008), by section 40(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section EX 52(14B) heading: inserted, on 1 April 2008, by section 394(6) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 52(14B): inserted, on 1 April 2008, by section 394(6) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 52(14C) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 177(9) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52(14C): inserted (with effect on 1 April 2008), on 6 October 2009, by section 177(9) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52 list of defined terms direct income interest : inserted (with effect on 1 July 2011), on 7 May 2012, by section 37(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 52 list of defined terms foreign investment vehicle : repealed, on 1 April 2010, by section 177(11)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52 list of defined terms foreign PIE equivalent : inserted, on 1 April 2010, by section 177(11)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52 list of defined terms life insurance : inserted (with effect on 1 April 2008), on 6 October 2009, by section 177(10) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52 list of defined terms original share : inserted (with effect on 1 April 2008), on 6 October 2009, by section 177(10) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52 list of defined terms portfolio investment entity : inserted (with effect on 1 April 2008), on 6 October 2009, by section 177(10) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52 list of defined terms returning share transfer : inserted (with effect on 1 April 2008), on 6 October 2009, by section 177(10) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52 list of defined terms share : inserted (with effect on 1 April 2008), on 6 October 2009, by section 177(10) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 52 list of defined terms share supplier : inserted (with effect on 1 April 2008), on 6 October 2009, by section 177(10) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).