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New Zealand law explained for everyone

Income Tax Act 2007

Timing and quantifying rules - Controlled foreign company and foreign investment fund rules - Attributing interests in FIFs

EX 35: Exemption for interest in FIF resident in Australia

You could also call this:

“No tax on certain shares in Australian companies”

You don’t have to pay tax on your rights in a Foreign Investment Fund (FIF) that lives in Australia if certain things are true. Your income interest in the FIF must be 10% or more for the whole time you have rights in it during the year. The FIF must live in Australia, pay income tax there, and be seen as living there by other countries too. The FIF can’t get special tax breaks for doing business outside Australia or for offshore banking. If the FIF is a unit trust, it must pay tax like a company. You can’t be a special kind of investor like a portfolio investment entity, superannuation scheme, unit trust, life insurer, or group investment fund. If all these things are true, you don’t have to pay tax on your rights in the 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=DLM1515530.

Topics:
Money and consumer rights > Taxes
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Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Attributing interests in FIFs

EX 35Exemption for interest in FIF resident in Australia

  1. A person's rights in a FIF in an income year are not an attributing interest if,—

  2. for the total period in the year for which the person has rights in the FIF, the item income interest calculated under section EX 50(4) for the person and the FIF is 10% or more, treating the period that the person has rights in the FIF as the accounting period for the purposes of section EX 50(4) when the person does not have rights in the FIF for the entire accounting period; and
    1. at all times in the year, the FIF 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 FIF's liability for income tax for the income year is not 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 FIF is not a unit trust or is a unit trust subject under Australian law to income tax on its income in the same way as a company; and
                1. at all times in the year, the person is none of the following:
                  1. a portfolio investment entity:
                    1. a superannuation scheme:
                      1. a unit trust:
                        1. a life insurer:
                          1. a group investment fund.

                          Notes
                          • Section EX 35: replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 29(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                          • Section EX 35(a): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 146(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                          • Section EX 35(a): amended (with effect on 1 July 2011), on , by section 67 of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
                          • Section EX 35(b)(iii): amended (with effect on 1 April 2014), on , by section 93(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                          • Section EX 35(cb): inserted (with effect on 1 April 2014 and applying for income years beginning on or after 1 July 2014), on , by section 93(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                          • Section EX 35 list of defined terms direct income interest: repealed (with effect on 1 July 2011), on , by section 146(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).