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EL 20: Allocation of deductions related to bright-line disposals of residential land
or “How to claim expenses when you sell a house quickly”
You could also call this:

“Rules for taxing certain Australian shares and foreign investments”

This part of the law deals with how you figure out income and expenses for certain types of investments and the ways you protect them from financial risks. It applies to two main types of investments:

  1. Some Australian shares that you own, where you might not have to pay tax on the money you make from selling them.

  2. Investments in foreign companies where you use a special method called the ‘fair dividend rate method’ to work out how much tax you need to pay.

The law explains that there are different sections that tell you:

  • Who can use these rules
  • Which investments these rules apply to
  • How to choose if you want to use these rules
  • How to calculate the parts of your investments that these rules apply to
  • How to work out your income and expenses for these investments
  • How to check if you’re using these rules correctly

This part of the law, not another part called ‘Financial arrangements rules’, decides how much income and expense you have for the parts of your investments covered by these rules. But for any part not covered by these rules, you still use the ‘Financial arrangements rules’.

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Next up: EM 2: Who does this subpart apply to?

or “This subpart applies to certain investors, funds, and life insurers”
Next

Part E Timing and quantifying rules
Hedging of currency movements in Australian non-attributing shares and attributing FDR method interests

EM 1Australian non-attributing shares and attributing FDR method interests

  1. This subpart applies to determine the income and expenditure for a person's hedges, to the extent to which their hedges have a fair dividend rate hedge portion (see: subsection (2) below, and sections EM 5 to EM 7), and their hedges hedge—

  2. Australian non-attributing shares for which—
    1. amounts derived from disposal would be either excluded income of the person under section CX 55 (Proceeds from disposal of investment shares), or the person's capital receipt; and
      1. the person determines the market value for each of a number of periods making up the income year:
      2. attributing interests in a FIF for which the person—
        1. calculates FIF income using the fair dividend rate method; and
          1. uses section EX 53 (Fair dividend rate periodic method).

          2. In this subpart,—

          3. section EM 2 provides rules for who this subpart applies to:
            1. section EM 3 provides rules for what hedges this subpart applies to:
              1. section EM 4 provides rules for elections to choose that eligible hedges are subject to this subpart by applying either a hedge-by-hedge method or the portfolio method:
                1. section EM 5 provides the hedge-by-hedge methods to calculate fair dividend rate hedge portions for a person’s eligible hedges:
                  1. section EM 5B provides the portfolio method to calculate fair dividend rate hedge portions for a person’s eligible hedges:
                    1. section EM 6 provides the calculation to determine the income and expenditure for a person's fair dividend rate hedge portions:
                      1. section EM 7 provides a quarterly test of the person's fair dividend rate hedge portions, and provides rules that apply if the value of hedge portions to eligible hedged assets exceeds 1.05, including a rule to not apply this subpart:
                        1. section EM 8 provides some definitions for this subpart.

                          1. This subpart, and not subpart EW (Financial arrangements rules), determines a person's income and expenditure for their fair dividend rate hedge portions. However, subpart EW determines a person’s income and expenditure for the portion of a hedge that is not a fair dividend rate hedge portion.

                          Notes
                          • Section EM 1: inserted, on , by section 49 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                          • Section EM 1(1)(b)(ii): replaced, on , by section 129 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                          • Section EM 1(2)(c): replaced, on , by section 88(1) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                          • Section EM 1(2)(d): replaced, on , by section 88(1) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                          • Section EM 1(2)(db): inserted, on , by section 88(1) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                          • Section EM 1(3): amended, on , by section 88(2) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).