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EX 52A: Fair dividend rate method: use of different forms
or “Rules for choosing between annual and periodic fair dividend rate methods”
You could also call this:

“Yearly calculation of income from overseas investments using a standard rate”

This section explains how to calculate Foreign Investment Fund (FIF) income using the fair dividend rate annual method. Here’s what you need to know:

You use this method when:

  • You’re calculating FIF income from an attributing interest in a FIF for an income year
  • You’re not required to use the fair dividend rate periodic method
  • You don’t choose to use the fair dividend rate periodic method

To calculate your FIF income:

  1. Multiply the opening value of your FIF interests by 0.05 (5%)
  2. Add any quick sale adjustment

The opening value is the total market value of your FIF interests at the start of the income year, with some exceptions.

A quick sale adjustment applies if you buy and then sell FIF interests within the same year. It’s calculated using formulas based on your peak holdings and average costs.

There are special rules for certain situations, like when you’re a portfolio investment entity or when there’s a share reorganisation.

This method treats the income as if you received a 5% dividend from your FIF interests, regardless of their actual performance.

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Next up: EX 53: Fair dividend rate periodic method

or “Calculating income from foreign investments using daily market values”
Next

Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Calculation of FIF income or loss

EX 52Fair dividend rate annual method

  1. This section applies when a person—

  2. calculates FIF income from an attributing interest in a FIF for an income year under the fair dividend rate method; and
    1. is not required under section EX 52A to use the fair dividend rate periodic method; and
      1. does not choose under section EX 53 to use the fair dividend rate periodic method.

        1. 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 annual method is calculated using the formula in subsection (3).

        2. The formula is—

          (0.05 × opening value) + quick sale adjustment.

          Where:

          • The items in the FIF income formula in subsection (3) are defined in subsections (5) to (7).

          • Opening value is the total of the market values of the FDR interests held by the person at the start of the income year that are not, at the start of the income year, included in a direct income interest of 10% or more in a FIF that, at the start of the income year,—

          • meets the requirements of section EX 35(b)(i) to (iii); and
            1. 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); and
              1. 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.

                1. Subsection (5)(b) does not apply if—

                2. the person is a portfolio investment entity, an entity eligible to be a portfolio investment entity, or a life insurance company; and
                  1. the FIF is a foreign PIE equivalent.

                    1. The quick sale adjustment is required, and is not zero, only if the person, in the income year,—

                    2. acquires or increases an FDR interest to which this section applies; and
                      1. later disposes of or reduces the FDR interest.

                        1. Quick sale adjustment is the lesser of—

                        2. the total of the amounts (the peak holding method amount) calculated for each FDR interest from the shareholding for the FDR interest using the formula in subsection (8):
                          1. the total of the amounts (the quick sale gain amount) calculated for each FDR interest from the shareholding for the FDR interest using the formula in subsection (12), treating a negative total as being zero.

                            1. The formula is—

                              0.05 × peak holding differential × average cost.

                              Where:

                              • The items in the formula in subsection (8) are defined in subsections (10) and (11).

                              • Peak holding differential is,—

                              • if no share reorganisation affecting the shareholding for the FDR interest occurs in the income year, the lesser of—
                                1. the difference between the greatest shareholding in the year and the shareholding at the start of the year:
                                  1. the difference between the greatest shareholding in the year and the shareholding at the end of the year; or
                                  2. if a share reorganisation affecting the shareholding for the FDR interest occurs in the income year, the amount calculated under section EX 54 for the year.

                                    1. Average cost is—

                                    2. 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
                                      1. if a share reorganisation occurs in the income year, the amount calculated under section EX 54 for the year.

                                        1. 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).

                                          Where:

                                          • In the formula in subsection (12),—

                                          • gain is the total amount that the person derives from holding or disposing of the acquisition or increase:
                                            1. interest is the amount of the shareholding acquisition or increase:
                                              1. average cost is,—
                                                1. 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
                                                  1. if a share reorganisation occurs in the income year, the amount calculated under section EX 54 for the year.

                                                  2. 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).

                                                  3. 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.

                                                  4. For a person using the fair dividend rate annual method to calculate FIF income for an attributing interest in a FIF that is an original share subject to a returning share transfer, the attributing interest is treated as being held by the share supplier, except if—

                                                  5. the share user is related to the share supplier:
                                                    1. the returning share transfer is or is part of a structured arrangement.

                                                      1. In this section, shareholding means the number of shares or units in an attributing interest.

                                                      Compare
                                                      Notes
                                                      • Section EX 52 heading: replaced, on (applying for the 2016–17 and later income years), by section 150(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                      • Section EX 52(1)(a): amended (with effect on 1 April 2008), on , by section 177(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                                      • Section EX 52(1)(b): replaced, on (applying for the 2016–17 and later income years), by section 150(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                      • Section EX 52(1)(c): inserted, on (applying for the 2016–17 and later income years), by section 150(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                      • Section EX 52(2): substituted (with effect on 1 April 2008), on , by section 177(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                                      • Section EX 52(2): amended, on (applying for the 2016–17 and later income years), by section 150(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                      • Section EX 52(5): replaced (with effect on 1 July 2014), on , by section 62(1) (and see section 62(2) for application) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                                                      • Section EX 52(5B) heading: inserted (with effect on 1 April 2008), on , 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 , 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 (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 , 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 , by section 177(7) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                                      • Section EX 52(7)(a): amended, on (applying for the 2016–17 and later income years), by section 150(4) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                      • Section EX 52(7)(b): substituted (with effect on 1 April 2008), on , by section 177(7) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                                      • Section EX 52(7)(b): amended, on (applying for the 2016–17 and later income years), by section 150(5) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                      • Section EX 52(10)(a): amended, on (applying for the 2016–17 and later income years), by section 150(6) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                      • Section EX 52(10)(b): amended, on (applying for the 2016–17 and later income years), by section 150(7) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                      • Section EX 52(11)(a): amended, on , by section 394(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                                                      • Section EX 52(12) formula: amended, on , 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 , 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 , 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 (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 , by section 394(6) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                                                      • Section EX 52(14B): inserted, on , 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 , by section 177(9) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                                      • Section EX 52(14C): replaced, on , by section 17(1) (and see section 17(3) for application) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
                                                      • Section EX 52 list of defined terms direct income interest: inserted (with effect on 1 July 2011), on , by section 37(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                                      • Section EX 52 list of defined terms fair dividend rate annual method: inserted, on , by section 150(9) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                      • Section EX 52 list of defined terms fair dividend rate periodic method: inserted, on , by section 150(9) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                      • Section EX 52 list of defined terms foreign investment vehicle: repealed, on , 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 , 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 , 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 , 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 , 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 related: inserted, on , by section 17(2) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
                                                      • Section EX 52 list of defined terms returning share transfer: inserted (with effect on 1 April 2008), on , 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 , 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 , 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 user: inserted, on , by section 17(2) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
                                                      • Section EX 52 list of defined terms structured arrangement: inserted, on , by section 17(2) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).