The FDR method of calculating taxable income applies to share/equity investments of less than 10% in most
overseas companies if the holder is subject to the Foreign Investment Fund (FIF) regime. If the FDR method is
used for an investment, the taxpayer is not taxed on the dividend income or the increase in the value of the
investment. The FDR method can also be used for some investments where the taxpayer’s ownership percentage is
between 10% and 50%.
Individuals and most trusts can opt to be taxed at the lesser of:
5% of the opening value of their share portfolio*
(as at 1 April each year for standard balance date taxpayers)
or, their actual return calculated under one of the other FIF calculation methods (normally the Comparative Value
method, but losses cannot be claimed).
Companies and other non-individuals use:
5% of the opening value of their share portfolio*.
*Quick sale adjustments must be made when a FIF has been bought and sold in the same income year.
There are certain types of investment for which the FDR method is not allowed to be used.
The FIF rules do not apply to most shareholdings in companies which are tax-resident in Australia and listed on
an ASX index.
For individuals, the FIF rules generally only apply if the total cost (as defined) of the individual’s FIF
interests is more than $50,000. This threshold exemption also applies to a very limited range of trusts. A
taxpayer can voluntarily opt into the FIF regime if they are below the threshold (special rules apply).