FIF Calculator - DRR Method

This Foreign Investment Fund calculator uses the Deemed Rate of Return, which is also known as the DRR method to calculate the FIF income. 

You can only use the DRR method if you meet one of the following conditions. 

1. You are a natural person and the total market value (use book value for FIF interests if the DRR method was used in the previous income year) of all your FIF interests throughout the income year did not exceed the IRD ceiling value.
2. It is not reasonably practicable to determine the market value of your FIF interest at the end of the income year (to allow the comparative value method to be used). 
3. You have not elected or are not required to use a particular method and it is not reasonably practicable to use the comparative value method. 
4. You have previously used the DRR method and must continue to use this method

The calculation for this method is the opening book value multiplied by the deemed rate the opening book value is the book value of the attributing interest at the end of the previous income year. The deemed rate is set by the Governor General by order in the council for the relevant income year. 

In the DRR method calculator below, there are four main parameter values for the user to enter. These are the financial year that you would like to perform the calculation on, the opening market value for the year, the number of shareholding changes that have occurred in the year, and your tax rate. The calculation tool already has the relevant deemed rate loaded for all of the available financial years.

The question that asks "How many shareholding changes occurred during the year (period)" relates to the number of changes that occurred during the year, as the tool calculates the tax from the balance of the account on each of those days throughout the year. In an example where there were zero shareholding changes throughout the year, the opening balance for the period would also equal the closing period. An example of this is if Person A had an opening market value for the year of $100,000, $500 costs, with zero changes and a tax rate of 33% the following would apply.

As they had the same balance for the 365 days in the year of $100,000 as there were no changes, and they had costs of say $500 the calculator would calculate the deemed tax rate of 6.01% for FY22 on the $100,000 as ($100,000 + $500) * (6.01/365) * 365 which equals $6,040. $6,040 at a tax rate of 33% leads to the tax owing of $1,993.22.

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