EX 56Cost method

1. If a person is using the cost method to calculate FIF income or loss from an attributing interest in a FIF for an income year, the person’s total FIF income from their attributing interests in the FIF for the income year is calculated using the formula—

   $(0.05\; \times \; opening\; value)\; +\; quick\; sale\; adjustment.$

   Where:

2. The items in the formula in subsection (1) are defined in subsections (3) to (18).

3. Opening value is the total of the market values of the person’s attributing interests in the FIF, being—

4. zero, if the relevant income year is the year in which the person acquires an attributing interest in the FIF; or
5. the amount that is shown as the net asset value of the interest in audited financial statements of the person for the relevant income year made available to the general public, if—
   1. paragraph (a) does not apply; and
   2. the FIF makes available to the general public audited financial statements for its accounting year ending in the relevant income year; and
   3. the person chooses that this paragraph applies; or
6. the amount of the cost of the interest, if—
   1. paragraphs (a) and (ab) do not apply; and
   2. the person acquires the interest in the 2005–06 or 2006–07 income year; and
   3. the interest was not an attributing interest for the income year before the relevant income year; or.
7. the amount of an independent valuation of the market value of the interest at the start of the relevant income year, if paragraphs (a), (ab) and (ac) do not apply and the person holds the interest at the start of the relevant income year, and—
   1. the interest was not an attributing interest for which the person has FIF income or loss for the income year before the relevant income year:
   2. the person chooses to use the amount of the independent valuation and there is a period of at least 4 income years between the start of the relevant income year and their last application of this paragraph to the interest, during which period they used the cost method for the interest for all income years.
8. the amount calculated using the formula in subsection (4), if paragraphs (a), (ab), (ac), and (b) do not apply and the person’s shareholding (the current opening shareholding) at the start of the relevant income year is the same as the person’s shareholding (the preceding opening shareholding) at the start of the preceding income year; or
9. the amount calculated using the formula in subsection (5), if paragraphs (a), (ab), (ac), and (b) do not apply and the person’s current opening shareholding is more than the preceding opening shareholding; or
10. the amount calculated using the formula in subsection (6), if paragraphs (a), (ab), (ac), and (b) do not apply and the person’s current opening shareholding is less than the preceding opening shareholding.

11. The formula referred to in subsection (3)(c) is—

    $1.05\; \times \; preceding\; opening.$

    Where:

12. The formula referred to in subsection (3)(d) is—

    $1.05\; \times \; preceding\; opening\; +\; (increase\; \times \; average\; cost).$

    Where:

13. The formula referred to in subsection (3)(e) is—

    $(opening\; shareholding\; ÷\; preceding\; shareholding)\; \times \; 1.05\; \times \; preceding\; opening.$

    Where:

14. The items in the formula in subsections (4) to (6) are defined in subsections (8) to (13).

15. Preceding opening is the opening value for the income year before the relevant income year.

16. Repealed

17. Increase is,—

18. if no share reorganisation occurs in the preceding income year, the difference between the person’s shareholding at the start of the relevant income year and the person’s shareholding at the start of the preceding income year:
19. if a share reorganisation occurs in the preceding income year, the amount calculated under section EX 54 for the preceding income year.

20. Average cost is,—

21. if no share reorganisation occurs in the preceding income year, the total amount of expenditure that the person incurs in acquiring or increasing during the preceding income year the attributing interest in the FIF divided by the total for the preceding income year of the increase in the attributing interest in the FIF for each acquisition or increase; or
22. if a share reorganisation occurs in the preceding income year, the amount calculated under section EX 54 for the preceding income year.

23. Opening shareholding is the amount of the person’s shareholding at the start of the relevant income year.

24. Preceding shareholding is the amount of the person’s shareholding at the start of the preceding income year.

25. The quick sale adjustment is required only if, in the relevant income year, the person disposes of or reduces their attributing interest in the FIF after acquiring it or increasing it. The quick sale adjustment is zero in any other case.

26. Quick sale adjustment is calculated using the formula—

    $0.05\; \times \; peak\; holding\; differential\; \times \; average\; cost.$

    Where:

27. The items in the formula in subsection (15) are defined in subsections (17) and (18).

28. Peak holding differential is,—

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

31. Average cost is,—

32. if no share reorganisation occurs in the relevant income year, the total amount of expenditure that the person incurs in acquiring or increasing during the relevant 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
33. if a share reorganisation occurs in the relevant income year, the amount calculated under section EX 54 for the year.

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

Compare

• 2004 No 35 s EX 45B

Notes

• Section EX 56(3)(ab): inserted, on 1 April 2008, by section 396(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
• Section EX 56(3)(ac)(ii): amended (with effect on 1 April 2008), on 6 October 2009, by section 179(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
• Section EX 56(3)(ac)(iii): added (with effect on 1 April 2008), on 6 October 2009, by section 179(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
• Section EX 56(3)(ac): inserted, on 1 April 2008, by section 396(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
• Section EX 56(3)(b): amended, on 1 April 2008, by section 396(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
• Section EX 56(3)(b)(i): amended, on 1 April 2008, by section 396(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
• Section EX 56(3)(b)(ii): replaced (with effect on 1 April 2008), on 18 March 2019, by section 182 of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
• Section EX 56(3)(c): amended, on 1 April 2008, by section 396(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
• Section EX 56(3)(d): amended, on 1 April 2008, by section 396(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
• Section EX 56(3)(e): amended, on 1 April 2008, by section 396(6) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
• Section EX 56(4) formula: substituted (with effect on 1 April 2008), on 6 October 2009, by section 179(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
• Section EX 56(5) formula: substituted (with effect on 1 April 2008), on 6 October 2009, by section 179(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
• Section EX 56(6) formula: substituted (with effect on 1 April 2008), on 6 October 2009, by section 179(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
• Section EX 56(9) heading: repealed (with effect on 1 April 2008), on 6 October 2009, pursuant to section 179(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
• Section EX 56(9): repealed (with effect on 1 April 2008), on 6 October 2009, by section 179(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
• Section EX 56(11)(a): amended, on 1 April 2008, by section 396(7) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
• Section EX 56(15) formula: substituted (with effect on 1 April 2008), on 6 October 2009, by section 179(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
• Section EX 56(18)(a): amended, on 1 April 2008, by section 396(8) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
• Section EX 56 list of defined terms close of trading spot exchange rate: repealed (with effect on 1 April 2008), on 6 October 2009, by section 179(7) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
• Section EX 56 list of defined terms shareholding: inserted, on 24 February 2016, by section 243 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
• Section EX 56 list of defined terms unit valuation period: repealed, on 24 February 2016, by section 243 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).