Issue
Is the taxpayer's accrued foreign income from interests in Personal Equity Plans (PEPs) included in the taxpayer's assessable income under section 529 of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
Yes. The investments in the Personal Equity Plans (PEPs) constitute interests in FIFs (sections 481 and 483(2) ITAA 1936) and the accrued foreign income relating to these interests are included in the taxpayer's assessable income under section 529 of the ITAA 1936.
Facts
The taxpayer, while a resident of the United Kingdom, invested in some PEPs. The investments in the PEPs were exempt from tax in the United Kingdom.
The taxpayer's investments in the PEPs exceeded A$50,000.
The taxpayer relocated to Australia and became an Australian resident.
While the taxpayer was an Australian resident, the investments remained in the PEPs and accrued foreign income.
Reasons for Decision
The Foreign Investment Fund (FIF) measures are contained in Part XI of ITAA 1936 and apply to Australian residents who have an interest in a foreign company or trust at the end of a year of income.
The PEP constitutes a FIF as it is a foreign trust (section 481 and subsection 483(2) of the ITAA 1936).
An Australian resident taxpayer who has an interest in a FIF is assessable in respect of the FIF income that accrues during the time the taxpayer held interests in the FIF (sections 485 and 529 of the ITAA 1936).
Notwithstanding the income may be exempt in the United Kingdom, the investment is still subject to the FIF regime.