If you have interests in offshore companies you should be aware of the taxation rules relating to Controlled Foreign Companies (CFC) or Controlled Foreign Trusts Rules (CFT).
1.If an offshore entity is a CFC or CFT and has an an Australian resident “controller”, the tainted income of the CFC or CFT will be included in the assessable income of the controller.
2. The following tests apply:
(a) Is there a CFC or a CFT?
(b) Is the taxpayer an attributable taxpayer?
(c) If the answer to (a) and (b) is yes, what is the CFC or CFT’s attributable income?
group of 5 or fewer Australian entities control more than 50% of the entity; or
a single Australian entity has more than 40% control and the company is controlled by a group related to the controller group of 5 or fewer Australian entities effectively control the foreign company. For instance, where an Australian entity can control the appointment of a foreign company’s directors.
12. There are two alternative tests to determine control:
The CFC regime is a very complex tax regime. If you think you may be involved in a CFC you should seek legal advice. Waterhouse Lawyers have the necessary CFC expertise to assist you.