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Income Tax Act 2007

Timing and quantifying rules - Controlled foreign company and foreign investment fund rules - Non-attributing Australian CFCs

EX 22: Non-attributing Australian CFCs

You could also call this:

“Australian companies controlled by New Zealanders that meet specific tax conditions”

You can have a non-attributing Australian CFC for an accounting period if certain conditions are met. This means a company that is controlled by New Zealand residents but operates in Australia.

For a CFC to be non-attributing Australian, it must be resident in Australia at all times during the accounting period. It also needs to pay income tax in Australia or be part of a group that pays income tax there. The CFC must be considered an Australian resident under all tax agreements between Australia and other countries.

The CFC can’t have its tax reduced by special exemptions for income from business activities outside Australia or for offshore banking units.

If the CFC is a unit trust, it must either pay tax like a company in Australia or have its units owned by an Australian resident entity that meets the above conditions.

When a CFC is non-attributing Australian, you don’t have to include its income or loss in your New Zealand tax return. However, if the non-attributing Australian CFC owns shares in a foreign investment fund (FIF), you might still have to pay tax on income from that FIF.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515480.

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Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Non-attributing Australian CFCs

EX 22Non-attributing Australian CFCs

  1. A CFC is a non-attributing Australian CFC for an accounting period if—

  2. at all times in the accounting period the CFC is—
    1. resident in Australia; and
      1. under Australian law, subject to income tax on its income or treated as part of the head company of a consolidated group subject to income tax on its income; and
        1. treated as being resident in Australia under all agreements between the government of Australia and the governments of other countries or territories that would be a double tax agreement if between the government of New Zealand and the government of the other country or territory; and
        2. the CFC's liability for income tax has not been reduced by—
          1. an exemption from income tax for income derived from business activities carried on outside Australia:
            1. a special allowance, relief, or exemption with respect to offshore banking units; and
            2. the CFC—
              1. is not a unit trust; or
                1. is a unit trust that is subject under Australian law to income tax on its income in the same way as a company; or
                  1. is a unit trust whose units are owned by an entity resident in Australia as described in paragraph (a)(iii), and either the unit holder meets the requirements of paragraph (a)(ii) or the unit trust is treated as part of the head company of a consolidated group subject under Australian law to tax on its income.

                  2. Sections CQ 2(1)(i) (When attributed CFC income arises) and DN 2(1)(i) (When attributed CFC loss arises) provide that no attributed CFC income or attributed CFC loss arises from a non-attributing Australian CFC.

                  3. This section does not prevent FIF income or FIF loss arising under section EX 58 from an interest of a non-attributing Australian CFC in a FIF.

                  Notes
                  • Section EX 22: substituted (with effect on 30 June 2009), on , by section 163(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section EX 22(1)(b)(ii): amended (with effect on 1 April 2014), on , by section 92(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                  • Section EX 22(1)(c): replaced, on (with effect on 1 April 2014 and applying for income years beginning on or after 1 July 2014), by section 86(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).