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EX 53: Fair dividend rate periodic method
or “Calculating income from foreign investments using daily market values”
You could also call this:

“Calculating foreign investment income when shares change during a period”

This section explains how to calculate certain items when there are changes in your shares during a specific time period. These calculations are important when you’re figuring out your income from foreign investments.

When your shares change, the time period is split into smaller periods that don’t overlap. These smaller periods start at the beginning of the main period and just before each share change. They end just before each share change and at the end of the main period.

For these calculations, your investment amount at any time is treated as if you didn’t make any changes after that time, except for the share changes that happened during the period.

If you buy more shares, the amount you bought is adjusted to what it would be at the end of the period.

There are three main things this section helps you calculate:

  1. The ‘peak holding differential’ is the smallest of two differences: between your highest investment amount and your investment at the start of the period, or between your highest investment amount and your investment at the end of the period.

  2. The ‘average cost’ is how much you spent buying shares during the period, divided by the total amount of shares you bought, adjusted for any share changes.

  3. The ‘increase’ is the difference between your investment at the start of the current period and your investment at the start of the previous period.

These calculations help make sure that changes in your shares during the period are fairly accounted for when working out your foreign investment income.

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Next up: EX 55: Deemed rate of return method

or “Calculating foreign investment fund income using a set rate”
Next

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

EX 54Fair dividend rate method and cost method: when periods affected by share reorganisations

  1. This section provides for the calculation, for an income year or unit valuation period (the affected period) in which a share reorganisation occurs, of the following:

  2. the item peak holding differential for the purposes of the formulas in sections EX 52(8), EX 53(10), and EX 56(15):
    1. the item average cost for the purposes of the formulas in sections EX 52(8), EX 52(12), EX 53(10) and EX 56(5) and (15):
      1. the item increase for the purposes of the formula in section EX 56(5).

        1. For the purposes of calculating the items for an affected period under this section,—

        2. the affected period is treated as consisting of periods (the reorganisation periods) that do not overlap:
          1. a reorganisation period—
            1. begins with the start of the affected period and immediately before each share reorganisation in the affected period; and
              1. ends immediately before each share reorganisation in the affected period and at the end of the affected period.

              2. For the purposes of calculating the items for an affected period under this section,—

              3. the amount of the attributing interest in the FIF held by the person at any time (the comparison time) in a reorganisation period, is treated as being the amount (the equivalent shareholding) of the attributing interest in the FIF that the person would hold at the end of the affected period if, after the comparison time, the person did not increase or reduce the attributing interest in the FIF except under share reorganisations occurring in the affected period:
                1. the amount of an acquisition or increase (the acquired shareholding) by the person of the attributing interest in the FIF other than under a share reorganisation is treated as being the amount (the equivalent acquired shareholding) equal to the difference between—
                  1. the equivalent shareholding for the time of the acquisition or increase; and
                    1. the amount that would be the equivalent shareholding for the time of the acquisition or increase if the person were not to have the acquired shareholding.

                    2. The item peak holding differential, for a person and an affected period, is the lesser of the following:

                    3. the difference between the equivalent shareholding that is the greatest for the affected period and the equivalent shareholding at the start of the affected period:
                      1. the difference between the equivalent shareholding that is the greatest for the affected period and the equivalent shareholding at the end of the affected period.

                        1. The item average cost, for a person and an affected period, is the total amount of expenditure that the person incurs during the affected period in acquiring or increasing the attributing interest in the FIF divided by the total for the affected period of the equivalent acquired shareholding for each acquisition or increase.

                        2. The item increase, for a person and an affected period, is the difference between the equivalent shareholding at the start of the affected period and the equivalent shareholding at the start of the period before the affected period.

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                        Notes
                        • Section EX 54(1)(b): amended (with effect on 1 April 2008), on (applying for income years beginning on or after 1 April 2008), by section 41(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                        • Section EX 54 list of defined terms unit valuation period: repealed, on , by section 243 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).