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Australia CFC & FIF Rules Guide

Australian Controlled Foreign Company (CFC) and Foreign Investment Fund (FIF) rules. The guide covers: the Controlled Foreign Company (the 'CFC') rules — the 'CFC rules' under the 'Part X of the ITAA 1936' 'attribute the tainted income' of the 'foreign company' to the 'Australian residents' who 'control the foreign company' (the 'CFC control' — the 'Australian residents holding the 50% or more of the interest' or the 'Australian residents with the 40% or more 'effective control''); the 'tainted income' (the 'CFC attributable income') includes: (i) the 'passive income' (the 'dividends', the 'interest', the 'rents', the 'royalties', the 'annuities'), (ii) the 'tainted services income' (the 'income from the services provided to the associates'), (iii) the 'tainted sales income' (the 'income from the sales of the goods to the associates'), (iv) the 'tainted property income'; the 'CFC attributable income' is 'included in the assessable income' of the 'Australian resident' (the 'attribution of the CFC income'); the Foreign Investment Fund (the 'FIF') rules — the 'FIF rules' under the 'Division 6 of the ITAA 1936' 'attribute the income from the foreign investment funds' (the 'foreign managed funds', the 'foreign trusts', the 'foreign life insurance policies') to the 'Australian residents' who 'hold the interests in the FIFs'; the 'FIF income' is 'attributed' to the 'Australian resident' based on the 'FIF calculation methods' — the 'market value method', the 'deemed rate of return method', the 'cash surrender method', the 'accounting method'; the exemptions from the CFC and the FIF rules — the 'exemptions' include: (i) the 'de minimis exemption' — the 'CFC or the FIF with the 'adjusted tainted income' below the 'lesser of $35,000 or 5% of the gross turnover'' (the 'de minimis threshold' for the '2025-26 year'), (ii) the 'active income exemption' — the 'CFC that is the 'active business' (the 'income from the active business is NOT the 'tainted income'), (iii) the 'listed country exemption' — the 'CFC that is 'resident in the 'listed country' (the 'countries with the 'comparable tax systems' — the 'Canada, the France, the Germany, the Japan, the NZ, the UK, the USA') is 'exempt from the CFC rules''; the reporting requirements — the 'Australian resident with the 'interest in the CFC or the FIF' must 'report the interest' in the 'tax return' (the 'CFC and the FIF schedules'); the 'Australian resident must 'keep the records' of the 'CFC and the FIF interests' for the '5 years'.

CFC Rules

  • Control test: The 'Australian residents with the 50%+ interest' or the '40%+ effective control' in the 'foreign company'.
  • Tainted income: The 'passive income, the tainted services income, the tainted sales income' are 'attributed'.
  • Attribution: The 'Australian resident includes the CFC attributable income in the assessable income'.

For the cross-border tax and the foreign income rules, see our Cross-Border Tax Guide →.

Exemptions

  • De minimis: The 'tainted income below the lesser of $35,000 or 5% of the gross turnover' is 'exempt'.
  • Active income exemption: The 'income from the active business' is NOT 'tainted income'.
  • Listed countries: The 'CFC resident in the 'listed country' (the 'UK, the USA, the Canada, the NZ, the Japan') is 'exempt'.

For the tax treaties and the treaty benefits, see our Tax Treaties Guide →.