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DN 7: Calculation of FIF loss
or “How to work out your Foreign Investment Fund loss”
You could also call this:

“Limits on deductions for foreign investment fund losses”

When you have a loss from a foreign investment fund (FIF) that you can’t claim as an elective attributing FIF, there’s a limit on how much you can deduct. You can only deduct up to the total amount of income you get from controlled foreign companies (CFCs) and other FIFs in the same country as your first FIF. For the other FIFs, you need to use the attributable FIF income method.

If your FIF is an elective attributing FIF, there’s a similar rule. You can deduct up to the total income from CFCs and other FIFs in the same country. But these CFCs and FIFs must also be elective attributing ones and must have started being treated this way in the same year as your first FIF.

When you’re working out these deductions, you can only use each bit of CFC or FIF income once. You can’t use it for more than one FIF loss or for both a FIF loss and a CFC loss.

If you can’t deduct all of your FIF loss because of these rules, the extra amount becomes a FIF net loss. You might be able to use this in other ways, as explained in section IQ 3.

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Next up: DN 9: Treatment of certain costs incurred in acquiring FIF interests

or “Costs of buying certain foreign investments can't be deducted”
Next

Part D Deductions
Attributed losses from foreign equity

DN 8Ring-fencing cap on deduction: attributable FIF income method

  1. The deduction that a person is allowed in an income year for a FIF loss from a FIF (the first FIF) that is not an elective attributing FIF for the person in the income year is no more than the total of—

  2. total attributed CFC income of the person for the income year from CFCs, each of which is resident in the same country as the first FIF for the relevant accounting period:
    1. total FIF income of the person for the income year from other FIFs,—
      1. each of which is resident in the same country as the first FIF for the relevant accounting period; and
        1. for each of which the person uses the attributable FIF income method.

        2. The deduction that a person is allowed in an income year for a FIF loss from a FIF (the first FIF) that is an elective attributing FIF for the person in the income year is no more than the total of—

        3. total attributed CFC income of the person for the income year from CFCs, each of which—
          1. is resident in the same country as the first FIF for the relevant accounting period; and
            1. is an elective attributing CFC for the person in the income year; and
              1. has the same election commencement year as the first FIF:
              2. total FIF income of the person for the income year from other FIFs, each of which—
                1. is resident in the same country as the first FIF for the relevant accounting period; and
                  1. is an elective attributing FIF for the person in the income year; and
                    1. has the same election commencement year as the first FIF.

                    2. When subsection (1) or (1B) is applied to a FIF loss, an amount of attributed CFC income or FIF income may be used only to the extent to which the income is not used when applying—

                    3. subsection (1) or (1B) to another FIF loss; or
                      1. section DN 4 to an attributed CFC loss.

                        1. Any excess not able to be deducted because of subsection (1) or (1B) is a FIF net loss able to be used under section IQ 3 (Ring-fencing cap on FIF net losses).

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                        Notes
                        • Section DN 8(1) heading: replaced (with effect on 30 June 2009), on (applying for income years beginning on or after 1 July 2009), by section 25(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                        • Section DN 8(1): replaced (with effect on 30 June 2009), on (applying for income years beginning on or after 1 July 2009), by section 25(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                        • Section DN 8(1)(b)(ii): amended (with effect on 1 July 2009 and applying for income years beginning on or after that date), on , by section 25(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                        • Section DN 8(1B) heading: inserted (with effect on 30 June 2009), on (applying for income years beginning on or after 1 July 2009), by section 25(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                        • Section DN 8(1B): inserted (with effect on 30 June 2009), on (applying for income years beginning on or after 1 July 2009), by section 25(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                        • Section DN 8(2): amended (with effect on 30 June 2009), on (applying for income years beginning on or after 1 July 2009), by section 25(3) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                        • Section DN 8(3): replaced (with effect on 30 June 2009), on (applying for income years beginning on or after 1 July 2009), by section 25(4) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                        • Section DN 8 list of defined terms attributable FIF income method: inserted (with effect on 1 July 2011), on , by section 16(3)(b) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                        • Section DN 8 list of defined terms branch equivalent method: repealed (with effect on 1 July 2011), on , by section 16(3)(a) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                        • Section DN 8 list of defined terms election commencement year: inserted, on , by section 25(5) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                        • Section DN 8 list of defined terms elective attributing CFC: inserted, on , by section 25(5) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                        • Section DN 8 list of defined terms elective attributing FIF: inserted, on , by section 25(5) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).