Remedial amendment to the qualifying company rules

2010 Act amends the definition of non-dividend income so it does not include foreign investment fund income calculated under the Fair Dividend Rate method.

Background

A qualifying company is required to earn no more than $10,000 in foreign non-dividend income. If this amount is exceeded, the company is unable to be a qualifying company.

This test was affected by the repeal of the grey-list tax rules and the introduction of the fair dividend rate (FDR) rules. Income derived under the FDR rules is not treated as dividends, and therefore contributed to the $10,000 limit for qualifying companies.

Key features

The Act amends the definition of non-dividend income in section YA 1 so that it does not include foreign investment fund income calculated under the FDR method. As such, income derived under the FDR rules no longer counts towards the limit on foreign non-dividend income for qualifying companies.

Application date

The amendment applies from 1 April 2008.