Section EX 65 — Income Tax Act 2007: Changes in application of FIF exemptions

EX 65 Changes in application of FIF exemptions Exemptions ceasing to apply (1) Subsections (2) to (4) apply if a person— (a) holds rights in 1 of the categories of rights described in section EX 29(2) to (4) ; and (b) either— (i) the rights become an attributing interest in a FIF because 1 of the exemptions in sections EX 31 to EX 43 ceases to apply; or (ii) the person starts having FIF income or loss from the rights because they incur a cost on an attributing interest in a FIF and exceed the $50,000 threshold in sections CQ 5(1)(d) or (e) (When FIF income arises) and DN 6(1)(d) or (e) (When FIF loss arises). Market value for cost-based methods (2) If the person uses the comparative value method, deemed rate of return method, the fair dividend rate method, or the cost method to calculate FIF income or loss from the rights for the period following the change, the person is treated as having— (a) disposed of the rights to an unrelated person immediately before the change; and (b) reacquired them immediately after the change; and (c) received for the sale and paid for the repurchase an amount equal to their market value at the time. Calculation of reduction in FIF income or loss (3) If the change occurs during an accounting period of the FIF and the person uses the attributable FIF income method to calculate FIF income or loss from the rights for that period, the FIF income or loss is reduced by subtracting the amount calculated using the formula— FIF income or loss × days before change days in period. Definition of items in formula (4) In the formula in subsection (3),— (a) FIF income or loss is the FIF income or loss of the person from the rights for the period before allowing for the reduction: (b) days before change is the number of complete days in the period before the change occurs: (c) days in period is the number of days in the period. Exemptions applying (5) Subsections (6) to (8) apply if a person— (a) holds an attributing interest in a FIF; and (b) either— (i) the interest ceases to be an attributing interest in a FIF because 1 of the exemptions in sections EX 31 to EX 43 starts to apply; or (ii) the person ceases having FIF income or loss from the interest because they dispose of an attributing interest in a FIF and fall below the $50,000 threshold in sections CQ 5(1)(d) or (e) and DN 6(1)(d) or (e) . Market value for cost-based methods (6) If the person uses the comparative value method, the deemed rate of return method, fair dividend rate method, or cost method to calculate FIF income or loss from the interest for the period before the change, the person is treated as having— (a) disposed of the interest to an unrelated person immediately before the change; and (b) reacquired it immediately after the change; and (c) received for the sale and paid for the repurchase an amount equal to its market value at the time. Calculation of reduction in FIF income or loss (7) If the change occurs during an accounting period of the FIF and the person uses the attributable FIF income method to calculate FIF income or loss from the interest for that period, the FIF income or loss is reduced by subtracting the amount calculated using the formula— FIF income or loss × days after change days in period. Definition of items in formula (8) In the formula in subsection (7),— (a) FIF income or loss is the FIF income or loss of the person from the interest for the period before allowing for the reduction: (b) days after change is the number of complete days in the period after the change occurs: (c) days in period is the number of days in the period. Defined in this Act: accounting period , amount , attributable FIF income method , attributing interest , comparative value method , cost method , deemed rate of return method , fair dividend rate method , FIF , FIF income , loss , market value , pay , Compare: 2004 No 35 s EX 53 Section EX 65(1)(b)(i): amended (with effect on 1 April 2008), on 6 October 2009, by section 183(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 65(3): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 44(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 65(5)(b)(i): amended (with effect on 1 April 2008), on 6 October 2009, by section 183(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 65(7): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 44(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 65 list of defined terms accounting profits method : repealed (with effect on 1 July 2011), on 7 May 2012, by section 44(3)(a) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 65 list of defined terms attributable FIF income method : inserted (with effect on 1 July 2011), on 7 May 2012, by section 44(3)(b) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 65 list of defined terms branch equivalent method : repealed (with effect on 1 July 2011), on 7 May 2012, by section 44(3)(a) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).