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IQ 2C: Effect of FIF net loss if attributed FIF income method not available
or “How to use a specific overseas investment loss when certain income calculation methods aren't available”
You could also call this:

“Limit on using past FIF losses to reduce current income tax”

When you have a Foreign Investment Fund (FIF) net loss from a previous tax year or one that’s been made available to you, you can use it to reduce your income tax in the current year. However, there are some rules about how you can do this:

If the FIF net loss is from a tax year where section IQ 2B applies to you, you can subtract it from your net income for the current tax year under section IQ 2.

If the FIF net loss is from a tax year where section IQ 2B doesn’t apply to you, you can only subtract it from your current year’s net income up to the amount of an equivalent CFC loss. The FIF net loss will also be reduced by any converted BE loss in the current tax year.

There’s a special rule if section CQ 5(1)(d) or (e) applies. In this case, you can only subtract the FIF net loss from your net income up to the amount of your income from FIF interests for that tax year.

If you can’t use all of the available tax loss because you don’t have enough net income, the leftover amount isn’t a FIF net loss anymore. Instead, it becomes a tax loss component under section IA 2(4).

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Next up: IQ 4: Group companies using attributed CFC net losses

or “How group companies can share certain overseas tax losses”
Next

Part I Treatment of tax losses
Attributed controlled foreign company net losses and foreign investment fund net losses

IQ 3Ring-fencing cap on FIF net losses

  1. If a person's FIF net loss is carried forward to a tax year (the current tax year) or FIF net loss is made available to the person in the current tax year,—

  2. FIF net loss relating to a tax year for which section IQ 2B applies to the person is available to be subtracted under section IQ 2 from the person's net income for the current tax year; and
    1. FIF net loss relating to a tax year for which section IQ 2B does not apply to the person—
      1. is available to be subtracted from the person's net income for the current tax year to the extent of the equivalent CFC loss under section IQ 2B; and
        1. is reduced in the current tax year by the converted BE loss under section IQ 2B.

        2. Despite subsection (1) and section IQ 2, if the person’s FIF net loss is carried forward to a tax year and section CQ 5(1)(d) or (e) (When FIF income arises) applies, they may subtract the amount from their net income for the tax year, but only to the extent to which the amount is no more than their assessable income from interests that would be interests in a FIF for the tax year in the absence of that section.

        3. If the person cannot use all of the amount that is available tax loss under section IQ 2(1) because there is insufficient net income, the surplus is no longer available to them as a FIF net loss, but becomes a tax loss component under section IA 2(4) (Tax losses).

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        Notes
        • Section IQ 3(1): substituted (with effect on 30 June 2009), on (applying for income years beginning on or after 1 July 2009), by section 96(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
        • Section IQ 3(2): amended (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 96(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
        • Section IQ 3(3) heading: added (with effect on 1 April 2008), on , by section 304(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
        • Section IQ 3(3): added (with effect on 1 April 2008), on , by section 304(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
        • Section IQ 3(3): amended (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 96(4) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
        • Section IQ 3 list of defined terms attributed CFC income: inserted (with effect on 1 April 2008), on , by section 304(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
        • Section IQ 3 list of defined terms CFC: inserted (with effect on 1 April 2008), on , by section 304(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
        • Section IQ 3 list of defined terms tax loss: repealed (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 34).