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Act No. 5 of 1991 as made
An Act to amend the law relating to taxation
Administered by: Treasury
Date of Assent 08 Jan 1991
Date of repeal 10 Mar 2016
Repealed by Amending Acts 1990 to 1999 Repeal Act 2016

Taxation Laws Amendment (Foreign
Income) Act 1990

No. 5 of 1991

TABLE OF PROVISIONS

PART 1—PRELIMINARY

Section

1.        Short title

2.        Commencement

PART 2—AMENDMENT OF THE INCOME TAX ASSESSMENT ACT 1936

Division 1Amendments

3.        Principal Act

4.        Interpretation

5.        Foreign income and foreign tax

6.        Grossing-up of foreign income

7.        Income beneficially derived

8.        Insertion of new sections:

23ah.  Exemption of foreign branch profits of Australian companies

23ai    Exemption of amounts paid out of attributed income

23aj.   Exemption of certain non-portfolio dividends from foreign countries

9.        Insertion of new section:

47a.    Distribution benefits—CFCs

10.      Repeal of section and substitution of new section:

79d.    Limitation on deductions for foreign income

11.      General domestic losses of post-1989 years of income

12.      General domestic losses of pre-1990 years of income

13.      Film losses of pre-1990 years of income

14.      Primary production losses of pre-1990 years of income

15.      Transfer of loss within company group

16.      Receipt of trust income not previously subject to tax

17.      Revocable trusts

18.      Insertion of new Division:


TABLE OF PROVISIONS—continued

Section

Division 6aaaSpecial Provisions relating to Non-resident Trust Estates etc.

Subdivision APreliminary

102aaa.      Object of Division

102aab.       Interpretation

102aac.       Each listed country and unlisted country to be treated as a separate foreign country

102aad.      ‘Subject to tax’—application of subsection 324 (2)

102aae.       Listed country trust estates

102aaf.       Public unit trusts

102aag.      When entity is in a position to control a trust estate

102aah.      Non-resident family trusts

102aaj.       Transfer of property or services

102aak.       Deemed transfers of property or services to trust estate

102aal.       Division not to apply to transfers by trustees of deceased estates

Subdivision BPayment of Interest by Taxpayer on Distributions
from Certain Non-resident Trust Estates

102aam.      Payment of interest by taxpayer on distributions from certain non-resident trust estates

Subdivision CWinding-up of Non-resident Trust Estates in Existence on 12 April 1989

102aan.      Winding-up of non-resident trust estates—tax rebates

102aap.       Winding-up of non-resident discretionary trusts—adjustment of tax treatment of beneficiaries

102aaq.      Winding-up of non-resident trust estates—modified accruals system of taxation

102aar.       When trust estate is taken to be completely wound up

Subdivision DAccruals System of Taxation of Certain Non-resident Trust Estates

102aas.       Object of Subdivision

102aat.       Accruals system of taxation—attributable taxpayer

102aau.      Attributable income of a trust estate

102aav.      Double tax agreements to be disregarded

102aaw.      Certain provisions to be disregarded in calculating attributable income

102aax.      Income and expenses to be expressed in Australian currency

102aay.      Modified application of trading stock provisions

102aaz.       Modified application of depreciation provisions

102aaza.     Modified application of Division 13 of Part III

102aazb.     Modified application of Part IIIa

102aazc.     Modified application of loss provisions—pre-1990-91 losses

102aazd.     Assessable income of attributable taxpayer to include attributable income of trust estate to which taxpayer has transferred property or services

102aaze.     Accruals system of taxation does not apply to small amounts

102aazf.     Only resident partners, beneficiaries etc. liable to be assessed as a result of attribution

102aazg.     Keeping of records

19.       Loans etc. to shareholders and associates deemed to be dividends

20.       Interpretation

21.       Deductions to be allowable for expenditure incurred in gaining superannuation premiums

22.       Deductions to be allowable for expenditure incurred in gaining the investment component of certain premiums

23.       Exemption of income attributable to certain policies etc.


TABLE OF PROVISIONS—continued

Section

24.       Repeal of section 112b

25.       Notional Part IIIa disposals of fund assets

26.       Amount of assessable income in particular class

27.       Consequential adjustments to assessable income and allowable deductions

28.       Interpretation

29.       Insertion of new section:

160aea.       Passive income

30.       Credits in respect of foreign tax

31.       Certain dividends deemed to be interest income

32.       Foreign underlying tax

33.       Insertion of new sections:

160afca.     Foreign tax in respect of amounts assessable under section 456

160afcb.     Foreign tax in respect of amounts assessable under section 457

160afcc.     Foreign tax in respect of amounts assessable under section 458

160afcd.     Foreign tax in respect of amounts exempt under section 23ai

34.       Repeal of section and substitution of new section:

160afd.       Losses of previous years

35.       Carry-forward and transfer of excess credits

36.       Penalty for false or misleading statements

37.       What constitutes a disposal or acquisition

38.       Capital gains and capital losses

39.       Insertion of new section:

160zfa.       Adjustment where section 47a applies to rolled-over assets

40.       Return of capital on investment in trust

41.       Transfer of asset from company or trust to spouse upon breakdown of marriage

42.       Transfer of asset between companies in the same group

43.       Transfer of asset from subsidiary to holding company for no consideration

44.       Commissioner may collect tax from person owing money to taxpayer

45.       Assessment where no administration

46.       Penalty for false or misleading statements

47.       Interpretation

48.       Insertion of new section:

264a.           Offshore information notices

49.       Insertion of new Part:

PART X—ATTRIBUTION OF INCOME IN RESPECT OF CONTROLLED
FOREIGN COMPANIES

Division 1Preliminary

316.             Object of Part

317.             Interpretation

318.             Associates

319.             Statutory accounting period of a company

320.             Listed countries and unlisted countries

321.             Each listed country and each unlisted country to be treated as a separate foreign country

322.             Meaning of ‘entitled to acquire’

323.             State foreign taxes may be treated as federal foreign taxes

324.             When income or profits subject to tax in a listed country

325.             When dividends etc. taxed in a listed country at normal company tax rate

326.             AFI subsidiary

327.             Eligible finance shares

328.             Non-resident family trusts

329.             Public unit trusts

330.             Tax detriment

331.             Company deemed to be treated as a resident of a listed country or an unlisted country for the purposes of the tax law of that country

332.             Companies that are residents of listed countries

333.             Companies that are residents of unlisted countries

334.             Member of a non-portfolio company group

335.             References extend to pre-commencement matters and things


TABLE OF PROVISIONS—continued

Section

Division 2Types of Entity

Subdivision AAustralian Entities

336.             Australian entity

337.             Australian partnership

338.             Australian trust

Subdivision BControlled Foreign Entities (CFEs)

339.             Controlled foreign entity (CFE)

340.             Controlled foreign company (CFC)

341.             Controlled foreign partnership (CFP)

342.             Controlled foreign trust (CFT)

Subdivision CEligible Transferors in relation to Trusts

343.             Interpretation

344.             References to transfer of property or services

345.             Deemed transfers of property or services

346.             Circumstances in which a transfer of property or services is an eligible business transaction

347.             Eligible transferor in relation to a discretionary trust

348.             Eligible transferor in relation to a non-discretionary trust or a public unit trust

Division 3Control Interests, Attribution Interests, Attributable Taxpayers and Attribution Percentages

Subdivision AControl Interests

349.             Associate-inclusive control interest in a company or trust

350.             Direct control interest in a company

351.             Direct control interest in a trust

352.             Indirect control interest in a company or trust

353.             Control tracing interest in a company

354.             Control tracing interest in a CFP

355.             Control tracing interest in a CFT

Subdivision BAttribution Interests

356.             Direct attribution interest in a CFC or CFT

357.             Indirect attribution interest in a CFC or CFT

358.             Attribution tracing interest in a CFC

359.             Attribution tracing interest in a CFP

360.             Attribution tracing interest in a CFT

Subdivision CAttributable Taxpayers and Attribution Percentages

361.             Attributable taxpayer in relation to a CFC or a CFT

362.             Attribution percentage of an attributable taxpayer

Division 4Attribution Accounts

363.             Attribution account entity

364.             Attribution account percentage

365.             Attribution account payment

366.             Direct attribution account interest in a company

367.             Direct attribution account interest in a partnership

368.             Direct attribution account interest in a trust

369.             Indirect attribution account interest in an entity

370.             Attribution surplus

371.             Attribution credit

372.             Attribution debit

373.             Grossed-up amount of an attribution debit


TABLE OF PROVISIONS—continued

Section

Division 5Attributed Tax Accounts

374.             Attributed tax account surplus

375.             Attributed tax account credit

376.             Attributed tax account debit

Division 6Exempting Receipts etc.

377.             Exempting receipt of an unlisted country company

378.             Exempting profits

379.             Exempting profits percentage

380.             Exempting receipt of a section 6 resident company

Division 7Calculation of Attributable Income of CFC

Subdivision ABasic Principles

381.             Separate attributable income for each attributable taxpayer

382.             Attributable income is taxable income calculated on certain assumptions

383.             Basic assumptions

384.             Additional assumption for unlisted country CFC

385.             Additional assumption for listed country CFC

386.             Adjusted tainted income

387.             Reduction of attributable income because of interim dividends

Subdivision BGeneral Modifications of Australian Tax Law

388.             Double tax agreements to be disregarded

389.             Certain provisions to be disregarded in calculating attributable income

390.             Elections to be made by eligible taxpayer

391.             Income and expenses to be expressed in Australian currency

392.             Notional assessable amounts are to be pre-tax

393.             Notional allowable deduction for taxes paid

394.             Notional allowable deduction for eligible finance share dividends

395.             Expenditure incurred to produce income or profits in later statutory accounting periods

396.             Modified application of sections 25a and 52

397.             Modified application of trading stock provisions

398.             Modified application of depreciation provisions

399.             Modifications of net income of partnerships and trusts

400.             Modified application of Division 13 of Part III

401.             Reduction of disposal consideration where attributed income not distributed

402.             Additional notional exempt income—unlisted or listed country CFC

403.             Additional notional exempt income—unlisted country CFC

404.             Additional notional exempt income—listed country CFC

Subdivision CModifications Relating to Australian Capital Gains Tax

405.             Interpretation

406.             Meaning of ‘30 June 1990 non-taxable Australian asset’

407.             Certain provisions of this Subdivision to be treated as provisions of Part IIIa

408.             Part IIIa not to apply to disposals of taxable Australian assets

409.             Losses on disposals before end of 30 June 1990 to be disregarded

410.             Modified application of Part IIIa—general modifications

411.             30 June 1990 non-taxable Australian assets taken to have been acquired on that date

412.             Cost base of 30 June 1990 non-taxable Australian asset


TABLE OF PROVISIONS—continued

Section

413.             Adjustment of cost base as at 30 June 1990—return of capital

414.             Rights to acquire shares or share options

415.             Rights to acquire units or unit options

416.             Company-issued options to acquire unissued shares

417.             Unit trust-issued options to acquire unissued units

418.             Options

419.             Modified application of section 160zzo (transfer of asset between companies in the same group)

420.             Modified application of section 160zzoa (transfer of asset from subsidiary to holding company for no consideration)

421.             Elections under CGT roll-over provisions

422.             Adjustment of disposal consideration where change of residence by eligible CFC from unlisted to listed country

423.             Adjustment of disposal consideration where section 47a applies to rolled-over assets

Subdivision DModifications Relating to Losses

424.             Classes of notional assessable income

425.             Sometimes-exempt income etc.

426.             Creation of loss in relation to a class of notional assessable income

427.             Certain provisions to be disregarded

428.             Subdivision to apply as if there were always a requirement to calculate attributable income

429.             Notional allowable deduction for (sometimes-exempt income) loss of a particular class

430.             Limitation on deductions for classes of notional assessable income

431.             Deduction etc. for previous period loss in relation to a class of notional assessable income

Division 8Active Income Test

Subdivision ABasic Conditions for Passing the Active Income Test

432.             Active income test

Subdivision BTainted Income Ratio

433.             Tainted income ratio

434.             Gross turnover

435.             Gross tainted turnover

436.             Amounts excluded from active income test

Subdivision CTreatment of Partnership Income

437.             Treatment of partnership income

Subdivision DGeneral Interpretive Provisions

438.             Roll-overs—asset disposals

439.             When currency exchange gains or losses relate to active income transactions

440.             Asset disposals—revaluations and arm’s length amounts

441.             Hire-purchase and other property financing transactions

442.             Assumption of rights of lender under a loan

443.             Net tainted commodity gains

444.             Net tainted currency exchange gains

445.             Net gains—disposal of tainted assets


TABLE OF PROVISIONS—continued

Section

Subdivision EPassive Income, Tainted Sales Income and Tainted Services Income

446.             Passive income

447.             Tainted sales income

448.             Tainted services income

Subdivision FSpecial Rules Relating to AFI Subsidiaries Carrying On Financial Intermediary Business

449.             AFI subsidiaries—interest income

450.             AFI subsidiaries—asset disposals and currency transactions

Subdivision GSubstantiation Requirements

451.             Active income test—substantiation requirements for company

452.             Active income test—substantiation requirements for partnership

453.             Active income test—substantiation requirements for attributable taxpayer

454.             Assessment on assumption—retention of accounts etc. and compliance with information notices

455.             Amendment of assessments

Division 9Attribution of Attributable Income and Other Amounts

456.             Assessability in respect of CFC’s attributable income

457.             Assessability where CFC changes residence from unlisted country to listed country or to Australia

458.             Assessability in respect of certain dividends paid by a CFC

459.             Assessability in respect of certain dividends deemed to be paid by a CFC under section 47a

460.             Only resident partners, beneficiaries etc. liable to be assessed as a result of attribution

Division 10Post-attribution Asset Disposals

461.             Reduction of disposal consideration where attributed income not distributed

Division 11Keeping of Records

462.             Keeping of records—section 456

463.             Keeping of records—section 458

464.             Keeping of records—section 459

465.             Offence of failing to keep records

466.             Manner in which records required to be kept

467.             Circumstances where records not required to be kept—reasonable excuse etc.

468.             Treatment of partnerships

Division 2Application and Transitional

50.       Interpretation

51.       Application of amendments

52.       Transitional—section 108 of the amended Act

53.       Transitional—section 160afd of the amended Act

54.       Transitional—section 319 of the amended Act

55.       Transitional—section 458 of the amended Act

56.       Transitional—section 459 of the amended Act

57.       Transitional—CFT distributions

58.       Transitional—change of CFC residence from unlisted to listed country

59.       Transitional—change of CFC residence from unlisted country to Australia

60.       Transitional—regulations

61.       Amendment of assessments


TABLE OF PROVISIONS—continued

Section

PART 3—AMENDMENT OF THE INCOME TAX (INTERNATIONAL AGREEMENTS) ACT 1953

62.       Principal Act

63.       Interpretation

64.       Application of amendments

PART 4—AMENDMENT OF THE TAXATION ADMINISTRATION ACT 1953

65.       Principal Act

66.       Interpretation


Taxation Laws Amendment (Foreign
Income) Act 1990

No. 5 of 1991

 

An Act to amend the law relating to taxation

[Assented to 8 January 1991]

BE IT ENACTED by the Queen, and the Senate and the House of Representatives of the Commonwealth of Australia, as follows:

PART 1—PRELIMINARY

Short title

1.       This Act may be cited as the Taxation Laws Amendment (Foreign Income) Act 1990.

Commencement

2.       This Act commences on the day on which it receives the Royal Assent.


PART 2—AMENDMENT OF THE INCOME TAX ASSESSMENT ACT 1936

Division 1Amendments

Principal Act

3.       In this Division, “Principal Act” means the Income Tax Assessment Act 19361.

Interpretation

4.       Section 6 of the Principal Act is amended:

(a)   by omitting “or” from the end of paragraph (a) of the definition of “assessment” in subsection (1);

(b)   by inserting after paragraph (a) of the definition of “assessment” in subsection (1) the following paragraph:

“(aa)   the ascertainment of the amount of interest payable under section 102aam; or”.

Foreign income and foreign tax

5.       Section 6ab of the Principal Act is amended:

(a)   by adding at the end of subsection (1) “, and includes a reference to an amount included in assessable income under section 102aazd, 456, 457, 458 or 459.”;

(b)   by omitting subsection (2) and substituting the following subsection:

“(2) A reference in this Act to foreign tax is a reference to:

(a)       tax imposed by a law of a foreign country, being:

(i)       tax upon income; or

(ii)   tax upon profits or gains, whether of an income or capital nature; or

(iii)   tax deemed by section 160afc to have been paid in respect of a dividend; or

(iv)  any other tax, being a tax that is subject to an agreement having the force of law under the Income Tax (International Agreements) Act 1953;

but does not include a unitary tax or a credit absorption tax; or

(b)  any of the following:

(i)  tax that is taken, because of section 160afca, to have been paid in respect of an amount included in assessable income under section 456;

(ii)  tax that is taken, because of section 160afcb, to have been paid in respect of an amount included in assessable income under section 457;

(iii)   tax that is taken, because of section 160afcc, to


have been paid in respect of an amount included in assessable income under section 458;

(iv)  tax that is taken, because of section 160afcd, to have been paid in respect of the section 23ai exempt part of an attribution account payment (within the meaning of section 160afcd).”;

(c)     by inserting after subsection (3) the following subsection:

“(3a) Except as provided by section 160afca, 160afcb, 160afcc or 160afcd, a taxpayer is not taken to have been personally liable for, and to have paid, foreign tax in respect of:

(a)   an amount included in assessable income under section 102aazd, 456, 457, 458 or 459; or

(b)   the section 23ai exempt part of an attribution account payment (within the meaning of section 160afcd).”.

Grossing-up of foreign income

6.        Section 6ac of the Principal Act is amended by adding at the end the following subsections:

“(3)    Where a taxpayer is, because of section 160afca, taken to have paid an amount of foreign tax in respect of an amount included in the assessable income of the taxpayer under section 456 (in this subsection called the ‘section 456 amount’), the section 456 amount is taken, for the purposes of this Act (other than sections 160afca and 371) to be increased by the amount of that tax.

“(4)    Where a taxpayer is, because of section 160afcb, taken to have paid an amount of foreign tax in respect of an amount included in the assessable income of the taxpayer under section 457 (in this subsection called the ‘section 457 amount’), the section 457 amount is taken, for the purposes of this Act (other than sections 160afcb and 371) to be increased by the amount of that tax.

“(5)    Where a taxpayer is, because of section 160afcc, taken to have paid an amount of foreign tax in respect of an amount included in the assessable income of the taxpayer under section 458 (in this subsection called the ‘section 458 amount’), the section 458 amount is taken, for the purposes of this Act (other than sections 160afcc and 371) to be increased by the amount of that tax.”.

Income beneficially derived

7.        Section 6b of the Principal Act is amended:

(a)      by inserting after subsection (1) the following subsection:

“(1a) For the purposes of this Act, an amount of income derived by a person, being income other than passive income, is to be taken to be income attributable to passive income:


(a)   if the person derived the amount of income by reason of being beneficially entitled to an amount representing passive income; or

(b)   if the person derived the amount of income as a beneficiary in a trust estate and the amount of income can be attributed, directly or indirectly, to passive income or to an amount that is taken, by any application or successive applications of this subsection, to be an amount of income attributable to passive income.”;

(b)   by omitting paragraph (2a) (b) and substituting the following paragraph:

“(b)    if the income so derived is, by virtue of subsection (1), (1a) or (2), attributable to a dividend, passive income or interest income derived from that source.”;

(c)      by inserting after subsection (2a) the following subsection:

“(2aa) In subsections (1a) and (2a), ‘passive income’ has the same meaning as in section 160aea.”.

8.       After section 23ag of the Principal Act the following sections are inserted:

Exemption of foreign branch profits of Australian companies

“23ah. (1) For the purposes of subsections (2) and (3), if the following conditions are satisfied in relation to foreign income derived by a taxpayer:

(a)  the foreign income is derived by the taxpayer during the year of income commencing on 1 July 1990 or a subsequent year of income;

(b)  the foreign income is derived in carrying on a business in a listed country at or through a permanent establishment of the taxpayer in the listed country;

(c)  the foreign income is not eligible designated concession income in relation to any listed country in relation to the year of income;

(d)  the foreign income is subject to tax in any listed country in a tax accounting period:

(i)  ending before the end of the year of income; or

(ii)  commencing during the year of income;

then:

(e)     the foreign income is foreign branch income; and

(f)      the taxpayer is the original taxpayer in relation to the foreign branch income.

“(2)    If the original taxpayer in relation to the foreign branch income is a company, the assessable income of the company does not include


so much of the foreign branch income as is attributable to a period when the company was a resident.

“(3)    If:

(a)  the original taxpayer in relation to the foreign branch income is the trustee of a trust estate or a partnership; and

(b)  the following conditions are satisfied in relation to another taxpayer (in this subsection called the ‘actual taxpayer’):

(i)   the actual taxpayer is a company;

(ii)  apart from this subsection, an amount is included in the assessable income of the actual taxpayer of a year of income (in this subsection called the ‘current year of income’) under subsection 92 (1) or section 97, 98a or 100;

(iii)   the whole or a part of the amount so included in the actual taxpayer’s assessable income (which whole or part is in this subsection called the ‘taxpayer’s portion of the foreign branch income’) is attributable (either directly or indirectly through one or more interposed trusts or partnerships) to the foreign branch income;

the assessable income of the actual taxpayer of the current year of income does not include so much of the taxpayer’s portion of the foreign branch income as is attributable to a period when the actual taxpayer was a resident.

“(4)    Subsections (2) and (3) of this section are to be disregarded in applying subsection 160za (4).

“(5)    For the purposes of subsection (1), where a taxpayer disposes, either in whole or in part, of a business carried on in a listed country at or through a permanent establishment of the taxpayer in the listed country, any foreign income derived in the course of that disposal is taken to have been derived in carrying on that business.

“(6)    For the purposes of subsections (8) and (9), if the following conditions are satisfied in relation to the disposal of an asset by a taxpayer:

(a)     the asset is disposed of during:

(i)  the year of income commencing on 1 July 1990 (in this subsection called the ‘disposal year of income’); or

(ii)   a subsequent year of income (in this subsection also called the ‘disposal year of income’);

(b)     the asset consists of:

(i)  a unit of property for which depreciation is, or would apart from this section be, allowable to the taxpayer under section 54 in respect of any year of income; or

(ii)   a building; or


(iii)  land;

(c)   the asset was used by the taxpayer wholly or principally for the purpose of producing foreign income from carrying on a business in a listed country at or through a permanent establishment of the taxpayer in the listed country;

(d)     the asset is not a taxable Australian asset of the taxpayer;

(e)   a gain or profit of a capital nature accrues to the taxpayer in respect of the disposal of the asset;

(f)   that gain or profit is not eligible designated concession income in relation to any listed country in relation to the disposal year of income;

(g)   that gain or profit is subject to tax in any listed country in a tax accounting period:

(i)  ending before the end of the disposal year of income; or

(ii)  commencing during the disposal year of income;

then:

(h)     that gain or profit is a foreign branch capital gain; and

(j)  the taxpayer is the original taxpayer in relation to the foreign branch capital gain.

“(7)    For the purposes of subsections (8) and (9), if the following conditions are satisfied in relation to the disposal of an asset of a taxpayer (in this subsection called the ‘taxpayer’s asset’):

(a)     the taxpayer’s asset is disposed of during:

(i)  the year of income of the taxpayer commencing on 1 July 1990 (in this subsection called the ‘disposal year of income’); or

(ii)  a subsequent year of income of the taxpayer (in this subsection also called the ‘disposal year of income’);

(b)  the taxpayer’s asset consists of the taxpayer’s interest in any of the following partnership assets of a partnership in which the taxpayer is a partner:

(i)  a unit of property for which depreciation is, or would apart from this section be, allowable to the partnership under section 54 in respect of any year of income;

(ii)   a building;

(iii)  land;

(c)  the partnership asset was used by the partnership wholly or principally for the purpose of producing foreign income from carrying on a business in a listed country at or through a permanent establishment of the partnership in the listed country;

(d)  the taxpayer’s asset is not a taxable Australian asset of the taxpayer;

(e)  a gain or profit of a capital nature accrues to the taxpayer in respect of the disposal of the taxpayer’s asset;


(f)  that gain or profit is not eligible designated concession income in relation to any listed country in relation to the disposal year of income;

(g)  that gain or profit is subject to tax in any listed country in a tax accounting period:

(i)  ending before the end of the disposal year of income; or

(ii)  commencing during the disposal year of income;

then:

(h)     that gain or profit is a foreign branch capital gain;

(j)  the taxpayer is the original taxpayer in relation to the foreign branch capital gain.

“(8)    If the original taxpayer in relation to the foreign branch capital gain is a company, no capital gain accrues to the company under Part IIIa in respect of the disposal of the asset.

“(9)    If:

(a)  the original taxpayer in relation to the foreign branch capital gain is the trustee of a trust estate; and

(b)  the following conditions are satisfied in relation to another taxpayer (in this subsection called the ‘actual taxpayer’):

(i)    the actual taxpayer is a company;

(ii)  apart from this subsection, an amount is included in the assessable income of the actual taxpayer of a year of income (in this subsection called the ‘current year of income’) under subsection 92 (1) or section 97, 98a or 100;

(iii)   the whole or a part of the amount so included in the actual taxpayer’s assessable income (which whole or part is in this subsection called the ‘taxpayer’s portion of the foreign branch capital gain’) is attributable (either directly or indirectly through one or more interposed trusts or partnerships) to the foreign branch capital gain;

the assessable income of the actual taxpayer of the current year of income does not include so much of the taxpayer’s portion of the foreign branch capital gain as is attributable to a period when the actual taxpayer was a resident.

“(10)  Unless the contrary intention appears, an expression used in subsections (6), (7) and (8) and in Part IIIa has the same meaning in those subsections as it has in that Part.

“(11)  Subsection 324 (2) applies in relation to this section in a corresponding way to the way in which it applies in relation to Part X.

“(12)  In this section:

‘company’ has the same meaning as in Part X;

‘double tax agreement’ has the same meaning as in Part X;


‘eligible designated concession income’ has the same meaning as in Part X;

‘foreign income’ includes an amount that:

(a)  apart from this section, would be included in assessable income under a provision of this Act other than Part IIIa; and

(b)     is derived from sources in a foreign country;

‘listed country’ has the same meaning as in Part X;

‘permanent establishment’, in relation to a listed country:

(a)  if there is a double tax agreement in relation to the listed country—has the same meaning as in the double tax agreement; or

(b)     in any other case—has the meaning given by subsection 6 (1);

‘subject to tax’ has the same meaning as in Part X;

‘tax accounting period’ has the same meaning as in Part X.

Exemption of amounts paid out of attributed income

“23ai. (1) Where:

(a)      either:

(i)   an attribution account payment of a kind referred to in paragraph 365 (1) (a), (b), (c) or (e) is made to a taxpayer (other than a partnership or taxpayer in the capacity of trustee of a trust); or

(ii)   an attribution account payment of a kind referred to in paragraph 365 (1) (d) is made to a taxpayer; and

(b)   on the making of the payment, an attribution debit arises, for the entity making the payment, in relation to the taxpayer;

the following provisions have effect:

(c)   if the payment is of a kind referred to in paragraph 365 (1) (a)— the payment is exempt from tax to the extent of the debit;

(d)   if the payment is of a kind referred to in paragraph 365 (1) (b) and, apart from this section, an amount would be included in the taxpayer’s assessable income under section 92 in respect of an individual interest in the net income of the partnership of the year of income referred to in that paragraph—that amount is not so included, to the extent of the debit;

(e)   if the payment is of a kind referred to in paragraph 365 (1) (c) and, apart from this section, an amount would:

(i)   be included in the taxpayer’s assessable income under section 97, 98a or 100; or

(ii)   be assessable to the trustee of the trust referred to in that paragraph under section 98;

in respect of a share of the net income of the trust of the year of income referred to in that paragraph—that amount is not so included, or not so assessable, to the extent of the debit;


(f)   if the payment is of a kind referred to in paragraph 365 (1) (d)— the payment is not, to the extent of the debit, assessable to the taxpayer as mentioned in that paragraph;

(g)   if the payment is of a kind referred to in paragraph 365 (1) (e) and, apart from this section, an amount would be included in the taxpayer’s assessable income, of the year of income referred to in that paragraph, under section 99b in respect of the trust property referred to in that paragraph—that amount is not so included to the extent of the debit.

“(2)    This section is to be disregarded for the purposes of applying:

(a)   the definition of ‘foreign income deduction’ in sections 79d and 160afd; and

(b)  any other provision of this Act to determine allowable deductions.

“(3)    In this section:

‘attribution account payment’ has the same meaning as in Part X;

‘attribution debit’ has the same meaning as in Part X;

‘company’ has the same meaning as in Part X;

‘trust’ has the same meaning as in Part X.

Exemption of certain non-portfolio dividends from foreign countries

“23aj. (1) Where:

(a)  a non-portfolio dividend is paid to a taxpayer by a company that is a resident of a listed or an unlisted country; and

(b)  the taxpayer is a company that is a resident within the meaning of section 6;

then the dividend is exempt from income tax to the extent that it is an exempting receipt of the taxpayer.

“(2)    In this section:

‘company’ has the same meaning as in Part X;

‘exempting receipt’ has the same meaning as in Part X;

‘non-portfolio dividend’ has the same meaning as in Part X;

‘resident of a listed country’ has the same meaning as in Part X;

‘resident of an unlisted country’ has the same meaning as in Part X.”.

9.        After section 47 of the Principal Act the following section is inserted:

Distribution benefits—CFCs

“47a. (1) Subject to subsection (2), if:

(a)  a company (in this section called the ‘first company’) has profits immediately before a distribution time for a distribution benefit in relation to the first company; and


(b)     the distribution time occurred after 3 June 1990; and

(c)     the first company is a CFC at the distribution time; and

(d)  the first company is a resident of an unlisted country at the distribution time;

so much of the distribution payment in relation to the distribution time as would not otherwise be a dividend and does not exceed the amount of those profits is taken, for the purposes of this Act, to be a dividend paid by the first company:

(e)  to the recipient of the benefit as a shareholder in the first company; and

(f)      out of profits derived by the first company; and

(g)     at the distribution time.

“(2)    If:

(a)     either of the following subparagraphs applies:

(i)  by virtue of subsection (1), the whole or a part of the distribution payment is included in the assessable income of a taxpayer of the year of income in which the distribution time occurred under section 44;

(ii)   by virtue of subsection (1), an amount is included in the assessable income of a taxpayer of a year of income under section 458 in respect of the distribution payment; and

(b)  the taxpayer’s return of income for the year of income was not prepared on the basis that the distribution payment had the consequence specified in subsection (1);

that subsection has effect in relation to the taxpayer and in relation to that distribution payment as if the reference in that subsection to the purposes of this Act were a reference to the purposes of this Act (other than Division 18, section 365 and Division 6 of Part X).

“(3)    Subject to subsections (9) and (12), a reference in this section to a distribution benefit in relation to the first company is a reference to an eligible benefit where the following conditions are satisfied:

(a)     the eligible benefit was provided to:

(i)    an associated entity in relation to the first company; or

(ii)   another entity that, immediately after the time of the provision of the eligible benefit, was an associated entity in relation to the first company;

(b)     the eligible benefit was provided by:

(i)    the first company; or

(ii)   an entity (in this subsection called the ‘arranger’) other than the first company under an arrangement between:

(a)       the first company; and

(b)        the arranger or another entity;


(c)  if subparagraph (b) (ii) applies—the first company made, or entered into an undertaking to make, one or more transfers of property or services to the arranger or to another entity (which transfers are in this section called the ‘arrangement transfers’) that are attributable, in whole or in part, to the provision of the eligible benefit.

“(4)    Where the first company entered into an undertaking to make one or more arrangement transfers, the time of the arrangement transfers is the time the undertaking was entered into.

“(5)    Where, at a particular time, an entity (in this subsection called the ‘provider’) waives or releases the obligation of another entity (in this subsection called the ‘recipient’) to pay or repay to the provider an amount:

(a)  the waiver or release is taken to constitute an eligible benefit provided at that time by the provider to the recipient; and

(b)  if the eligible benefit is a distribution benefit in relation to the first company—each of the following times is a distribution time for the eligible benefit:

(i)  if the eligible benefit was provided by the first company— the time of the provision of the eligible benefit; or

(ii)  in any other case—the time, or each of the times, of the arrangement transfers concerned;

(c)  if the eligible benefit is a distribution benefit in relation to the first company—the distribution payment in relation to the distribution time is:

(i)  if the benefit was provided by the first company—the amount the payment or repayment of which is waived or released; or

(ii)  in any other case—so much of the amount or market value of the arrangement transfer as is attributable to the provision of the eligible benefit.

“(6)    For the purposes of subsection (5), an entity is taken to be under an obligation to pay or repay an amount even if the amount is not due for payment or repayment.

“(7)    Where, at a particular time, an entity (in this subsection called the ‘provider’) makes a loan to another entity (in this subsection called the ‘recipient’), where:

(a)  the parties to the loan are not at arm’s length with each other in relation to the loan; or

(b)  the purpose, or one of the purposes, of the making of the loan was to facilitate, directly or indirectly (through one or more interposed companies, partnerships or trusts), the payment of a dividend that is, or would be:


(i)  exempt from tax under section 23aj (in whole or in part); or

(ii) an exempting receipt for the purposes of section 377; or

(c)  the purpose, or one of the purposes, of the making of the loan was to facilitate, directly or indirectly, the provision of an eligible benefit by the recipient, being an eligible benefit that is a distribution benefit in relation to any company;

the following provisions have effect:

(d)  the making of the loan is taken to constitute an eligible benefit provided by the provider to the recipient at that time;

(e)  if the eligible benefit is a distribution benefit in relation to the first company—each of the following times is a distribution time for the eligible benefit:

(i)  if the benefit was provided by the first company—the time of the provision of the benefit; or

(ii)  in any other case—the time, or each of the times, of the arrangement transfers concerned;

(f)   if the eligible benefit is a distribution benefit in relation to the first company—the distribution payment in relation to the distribution time is:

(i)  if the benefit was provided by the first company—the amount of the loan; or

(ii)   in any other case—so much of the amount or market value of the arrangement transfer as is attributable to the provision of the eligible benefit.

“(8)    Where, at a particular time:

(a)  an entity (in this subsection called the ‘provider’) acquires from a company (in this subsection called the ‘recipient’):

(i)  a share in the recipient;

(ii) a right to acquire a share in the recipient;

(iii)        an option to acquire a share in the recipient; or

(b)  an entity (in this subsection also called the ‘provider’) acquires from the trustee of a unit trust (in this subsection also called the ‘recipient’):

(i)  a unit in the recipient;

(ii)  a right to acquire a unit in the recipient;

(iii)   an option to acquire a unit in the recipient;

the following provisions have effect:

(c)  the acquisition is taken to constitute an eligible benefit provided by the provider to the recipient at that time;

(d)  if the eligible benefit is a distribution benefit in relation to the first company—each of the following is a distribution time for the eligible benefit:


(i)  if the benefit was provided by the first company—the time of the provision of the benefit; or

(ii)   in any other case—the time, or each of the times, of the arrangement transfers concerned;

(e)  if the eligible benefit is a distribution benefit in relation to the first company—the distribution payment in relation to the distribution time is:

(i)  if the benefit was provided by the first company—the amount or market value of the consideration paid or given by the first company in respect of the acquisition; or

(ii)  in any other case—so much of the amount or market value of the arrangement transfer as is attributable to the provision of the eligible benefit;

(f)     if:

(i)  the eligible benefit is a distribution benefit in relation to the first company; and

(ii)  the provider transferred property or services to the recipient in respect of the acquisition;

in determining the profits of the company immediately before the distribution time, or the first distribution time, as the case requires, for the distribution benefit, the following assumptions are to be made:

(iii)   if the benefit was provided by the first company—the assumption that, immediately before the distribution time, the company had:

(a)  disposed of the property or services to an entity other than the recipient; and

(b)  received, in respect of that disposal, consideration equal to the market value of the property or services;

(iv)  if subparagraph (iii) does not apply—the assumption that, immediately before the distribution time, the company had:

(a)  disposed of equivalent property or services to an entity other than the recipient or the entity who provided the eligible benefit; and

(b)  received, in respect of that disposal, consideration equal to the market value of the property or services.

“(9)    An eligible benefit that is covered by subsection (8) and provided at a particular time is not a distribution benefit in relation to the first company if, at that time, there is no entity who is:

(a)     either:


(i)  the holder of an eligible equity interest in the first company; or

(ii)   an associate of an entity who is the holder of an eligible equity interest in the first company; and

(b)  the holder of an eligible equity interest in the recipient referred to in that subsection.

“(10)  Where:

(a)  an entity (in this subsection called the ‘provider’) transfers property or services to another entity (in this subsection called the ‘recipient’); and

(b)     the property or services are transferred:

(i)  for no consideration; or

(ii)  for a consideration less than the market value of the property or services; and

(c)  in the case of a transfer of services—the services do not consist of the making of a loan; and

(d)  in any case—the property or services are not transferred by way of consideration for the acquisition from a company of:

(i)  a share in the company; or

(ii)  a right to acquire a share in the company; or

(iii)   an option to acquire a share in the company; and

(e)  in any case—the property or services are not transferred in respect of the acquisition from the trustee of a unit trust of:

(i)  a unit in the unit trust; or

(ii)    a right to acquire a unit in the unit trust; or

(iii)   an option to acquire a unit in the unit trust; and

(f)  in the case of a transfer of property—the property does not consist of a payment in respect of a call on a share in a company;

the following provisions have effect:

(g)  the transfer is taken to constitute an eligible benefit provided by the provider to the recipient at that time;

(h)  if the eligible benefit is a distribution benefit in relation to the first company—each of the following is a distribution time for the eligible benefit:

(i)  if the benefit was provided by the first company—the time of the provision of the benefit; or

(ii)  in any other case—the time, or each of the times, of the arrangement transfers concerned;

(j)  if the eligible benefit is a distribution benefit in relation to the first company—the distribution payment in relation to the distribution time is:

(i)   if the benefit was provided by the first company—the


amount by which the amount or market value of the property or services exceeds the consideration (including nil consideration) mentioned in paragraph (b); or

(ii)  if subparagraph (i) does not apply and there is only one arrangement transfer—the amount by which so much of the amount or market value of the arrangement transfer as is attributable to the provision of the eligible benefit exceeds the consideration (including nil consideration) mentioned in paragraph (b); or

(iii)   if subparagraph (i) does not apply and there are 2 or more arrangement transfers—the amount worked out in relation to the arrangement transfer using the following formula:

where:

‘Total Excess’ means the amount by which so much of the total amount or market value of all of the arrangement transfers as is attributable to the provision of the eligible benefit exceeds the consideration (including nil consideration) mentioned in paragraph (b);

‘Arrangement transfer’ means the amount or market value of the arrangement transfer concerned;

‘Total arrangement transfers’ means the total amount or market value of all of the arrangement transfers;

(k)  if the eligible benefit is a distribution benefit in relation to the first company—in determining the profits of the company immediately before a distribution time for the distribution benefit, the following assumptions are to be made:

(i)  if the benefit was provided by the first company—the assumption that, immediately before the distribution time, the company had:

(a)  disposed of the property or services to an entity other than the recipient; and

(b)  received, in respect of that disposal, consideration equal to the market value of the property or services;

(ii)  if subparagraph (i) does not apply and there is only one arrangement transfer—the assumption that, immediately before the distribution time, the company had:

(a)  disposed of the property or services covered by the arrangement transfer to an entity other than the entity who provided the eligible benefit; and

(b)      received, in respect of that disposal, consideration


equal to the market value of the property or services;

(iii)   if subparagraph (i) does not apply and there are 2 or more arrangement transfers—the assumption that, immediately before each distribution time, the company had:

(a)  disposed of the property or services covered by the arrangement transfer concerned to an entity other than the entity who provided the eligible benefit; and

(b)   received, in respect of that disposal, consideration equal to the market value of the property or services.

“(11)  Where, at a particular time, an entity (in this subsection called the ‘provider’) makes a payment to another entity, being a company (in this subsection called the ‘recipient’), in respect of a call on a share in the recipient:

(a)  the making of the payment is taken to constitute an eligible benefit provided by the provider to the recipient at that time; and

(b)  if the eligible benefit is a distribution benefit in relation to the first company—each of the following is a distribution time for the eligible benefit:

(i)  if the benefit was provided by the first company—the time of the provision of the benefit; or

(ii)  in any other case—the time, or each of the times, of the arrangement transfers concerned;

(c)  if the eligible benefit is a distribution benefit in relation to the first company—the distribution payment in relation to the distribution time is:

(i)  if the benefit was provided by the first company—the amount of the payment; or

(ii)   in any other case—so much of the amount or market value of the arrangement transfer as is attributable to the provision of the eligible benefit.

“(12)  An eligible benefit that is covered by subsection (11) and provided at a particular time is not a distribution benefit in relation to the first company if, at that time, there is no entity who is:

(a)     either:

(i)  the holder of an eligible equity interest in the first company; or

(ii)  an associate of an entity who is the holder of an eligible equity interest in the first company; and


(b)  the holder of an eligible equity interest in the recipient referred to in that subsection.

“(13)  If:

(a)  apart from this subsection, a particular eligible benefit that is covered by subsection (8) or (11) and provided at a particular time is not a distribution benefit in relation to the first company only because of subsection (9) or (12); and

(b)     at a later time, there is an entity who is:

(i)  either:

(a)  the holder of an eligible equity interest in the first company; or

(b)  an associate of an entity who is the holder of an eligible equity interest in the first company; and

(ii)   the holder of an eligible equity interest in the recipient referred to in whichever of subsections (8) and (11) is applicable;

the following provisions have effect:

(c)  this section has effect as if subsection (9) or (12), as the case requires, had never applied in relation to that eligible benefit;

(d)  section 170 does not prevent the amendment of an assessment at any time for the purposes of giving effect to this subsection.

“(14)  If:

(a)  apart from this subsection, a particular eligible benefit (in this subsection called the ‘first eligible benefit’) that is covered by subsection (8) or (11) and provided at a particular time is not a distribution benefit in relation to the first company only because of subsection (9) or (12); and

(b)  the recipient referred to in whichever of subsections (8) and (11) is applicable provides an eligible benefit (in this subsection called the ‘second eligible benefit’) to:

(i)  the first company; or

(ii)   the provider referred to in whichever of those subsections is applicable; or

(iii)  an associated entity in relation to:

(a)       the first company; or

(b)       that provider; and

(c)  the provision of the first eligible benefit facilitated, directly or indirectly, the provision of the second eligible benefit;

the following provisions have effect:

(d)  this section has effect as if subsection (9) or (12), as the case requires, had never applied in relation to the first eligible benefit;


(e)  section 170 does not prevent the amendment of an assessment at any time for the purposes of giving effect to this subsection.

“(15)  In determining whether a company has profits at a particular time, it is to be assumed that the accounts of the company had been drawn up immediately before that time.

“(16)  For the purposes of this section, where:

(a)  the first company has profits (in this subsection called the ‘original profits’) immediately before a distribution time for a distribution benefit in relation to the first company; and

(b)  by virtue of subsection (1), an amount (in this subsection called the ‘original assessable amount’) is included in the assessable income of a taxpayer (in this subsection called the ‘original taxpayer’) of a year of income (in this subsection called the ‘original year of income’) under section 44, 458 or 459 in respect of the distribution payment in relation to the distribution time; and

(c)     any of the following subparagraphs applies:

(i)  the original taxpayer is:

(a)  a resident at any time during the original year of income; and

(b)   a company or a natural person (other than a company or a natural person in the capacity of a trustee);

(ii)  the original taxpayer is the trustee of a corporate unit trust in relation to the original year of income;

(iii)   the original taxpayer is the trustee of a public trading trust in relation to the original year of income;

(iv)  the original taxpayer is the trustee of an eligible entity (within the meaning of Part IX) in relation to the original year of income;

(v)  the original taxpayer is the trustee of a resident trust estate (within the meaning of Division 6) in relation to the year of income who is liable to be assessed and pay tax under section 99 or 99a in respect of a part of the net income of the trust estate;

then, in determining the profits that the first company has at a later time, no account is to be taken of so much of the original profits as is equal to the original assessable amount.

“(17)  For the purposes of this section, where:

(a)  the first company has profits (in this subsection called the ‘original profits’) immediately before a distribution time for a distribution benefit in relation to the first company; and

(b)  by virtue of subsection (1), an amount (in this subsection called the ‘original assessable amount’) is included in the assessable


income of a taxpayer (in this subsection called the ‘original taxpayer’) of a year of income (in this subsection called the ‘original year of income’) under section 44, 458 or 459 in respect of the distribution payment in relation to the distribution time; and

(c)     all of the following conditions are satisfied:

(i)  the original taxpayer is the trustee of a trust estate who is liable to be assessed and pay tax under section 98 in respect of a share in the net income of the trust estate of the original year of income;

(ii)  the beneficiary who was entitled to that share was a resident at any time during the original year of income;

(iii)   the whole or a part (which whole or part is in this subsection called the ‘beneficiary’s portion of the original assessable amount’) of the share of the net income is attributable to the original assessable amount;

then, in determining the profits that the first company has at a later time, no account is to be taken of so much of the original profits as is equal to the beneficiary’s portion of the original assessable amount.

“(18)  For the purposes of this section, where:

(a)   the first company has profits (in this subsection called the ‘original profits’) immediately before a distribution time for a distribution benefit in relation to the first company; and

(b)  by virtue of subsection (1), an amount (in this subsection called the ‘original assessable amount’) is included in the assessable income of a taxpayer (in this subsection called the ‘original taxpayer’) of a year of income (in this subsection called the ‘original year of income’) under section 44, 458 or 459 in respect of the distribution payment in relation to the distribution time; and

(c)   the original taxpayer is the trustee of a trust estate or a partnership; and

(d)  the following conditions are satisfied in relation to another taxpayer (in this subsection called the ‘actual taxpayer’):

(i)  an amount is included in the assessable income of the actual taxpayer of a year of income (in this subsection called the ‘assessment year of income’) under subsection 92 (1) or section 97 or 100;

(ii)   the actual taxpayer is:

(a)  a resident at any time during the assessment year of income, being a company or a natural person (other than a company or a natural person in the capacity of a trustee); or

(b)   the trustee of a corporate unit trust in relation to the assessment year of income; or


(c)   the trustee of a public trading trust in relation to the assessment year of income; or

(d)   the trustee of an eligible entity (within the meaning of Part IX) in relation to the assessment year of income; or

(e)   the trustee of a trust estate who is liable to be assessed and pay tax under section 98 in respect of a share in the net income of a trust estate; or

(f)   the trustee of a trust estate who is liable to be assessed and pay tax under section 99 or 99a in respect of a part of the net income of a trust estate;

(iii)  if sub-subparagraph (ii) (a), (b), (c) or (d) applies—the whole or a part of the amount so included in the actual taxpayer’s assessable income (which whole or part is in this subsection called the ‘actual taxpayer’s portion of the original assessable amount’) is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the original assessable amount;

(iv)  if sub-subparagraph (ii) (e) applies:

(a)  the beneficiary who was entitled to the share concerned was a resident at any time during the assessment year of income; and

(b)   the whole or a part (which whole or part is in this subsection also called the ‘actual taxpayer’s portion of the original assessable amount’) of the share of the net income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the original assessable amount;

(v)  if sub-subparagraph (ii) (f) applies:

(a)   the trust estate was a resident trust estate (within the meaning of Division 6) in relation to the assessment year of income; and

(b)    the whole or a part (which whole or part is in this subsection also called the ‘actual taxpayer’s portion of the original assessable amount’) of the part of the net income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the original assessable amount;

then, in determining the profits that the first company has at a later time, no account is to be taken of so much of the original profits as is equal to the actual taxpayer’s portion of the original assessable amount.

“(19)  The provisions of section 102aaj apply for the purposes of this section in like manner as they apply for the purposes of Division 6aaa.


“(20) For the purposes of this section, the question whether a company is a resident of an unlisted country is to be determined in the same manner in which that question is determined for the purposes of Part X.

“(21)  In this section:

‘arrangement’ means:

(a)  any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and

(b)  any scheme, plan, proposal, action, course of action or course of conduct, whether there are 2 or more parties or only one party involved;

‘associate’ has the same meaning as in Part X;

‘associated entity’, in relation to a company, means either of the following entities:

(a)     a shareholder in the company;

(b)     an entity who is an associate of a shareholder in the company;

‘CFC’ has the same meaning as in Part X;

‘distribution benefit’ has the meaning given by subsection (3) of this section;

‘eligible equity interest’:

(a)     in relation to a company, means any of the following:

(i)  a share, or an interest in a share, in the company;

(ii)  a right to acquire a share, or an interest in a share, in the company;

(iii)   an option to acquire a share, or an interest in a share, in the company; or

(b)     in relation to a unit trust, means any of the following:

(i)  a unit, or an interest in a unit, in the unit trust;

(ii)  a right to acquire a unit, or an interest in a unit, in the unit trust;

(iii)   an option to acquire a unit, or an interest in a unit, in the unit trust; or

‘entity’ has the same meaning as in Part X;

‘loan’ includes:

(a)      an advance of money; and

(b)  the provision of credit or any other form of financial accommodation; and

(c)   the payment of an amount for, on account of, on behalf or at the request of an entity where there is an obligation (whether expressed or implied) to repay the amount; and


(d)  a transaction (whatever its terms or form) which in substance effects a loan of money;

‘property’ has the same meaning as in Division 6aaa;

‘services’ has the same meaning as in Division 6aaa;

‘statutory accounting period’ has the same meaning as in Part X;

‘transfer’ has the same meaning as in Division 6aaa.”.

10.     Section 79d of the Principal Act is repealed and the following section is substituted:

Limitation on deductions for foreign income

“79d. (1) Where:

(a)   apart from this section, there are one or more foreign income deductions of a taxpayer in relation to a class of assessable foreign income in relation to a year of income; and

(b)      either:

(i)   the taxpayer did not derive any assessable foreign income of that class in the year of income; or

(ii)   the taxpayer derived assessable foreign income of that class in the year of income and its amount is exceeded by the sum of the foreign income deductions;

then, for the purposes of this Act, those deductions are reduced respectively:

(c)      where subparagraph (b) (i) applies—to nil; or

(d)   where subparagraph (b) (ii) applies—by amounts proportionate to those deductions and equal in total to the amount of the excess referred to in that subparagraph.

“(2)    In this section:

‘assessable foreign income’ has the same meaning as in section 160afd;

‘class of assessable foreign income’ has the same meaning as in section 160afd;

foreign income deduction’ has the same meaning as in section 160afd.”.

General domestic losses of post-1989 years of income

11.     Section 79e of the Principal Act is amended:

(a)  by inserting in subsections (5) and (6) “assessable” before “foreign” (wherever occurring);

(b)  by omitting from subsection (12) the definitions of “class of income” and “foreign source”;

(c)     by inserting in subsection (12) the following definitions:

‘assessable foreign income’ has the same meaning as in section 160afd;

‘class of assessable foreign income’ has the same meaning as in section 160afd;


‘exempt income’ does not include income to which section 23ah, 23ai or 23aj or paragraph 99b (2) (d) or (e) applies;

‘foreign income deduction’ has the same meaning as in section 160afd;”;

(d)     by omitting subsection (14) and substituting the following subsection:

“(14)       For the purposes of the definition of ‘non-loss deduction’ in subsection (12), where:

(a)  there are one or more foreign income deductions of a taxpayer in relation to a class of assessable foreign income in relation to a year of income; and

(b)  either:

(i)  the taxpayer did not derive any assessable foreign income of that class in the year of income; or

(ii)  the taxpayer derived assessable foreign income of that class in the year of income and its amount is exceeded by the sum of the foreign income deductions;

then:

(c)  where subparagraph (b) (i) of this subsection applies— the foreign income deductions are to be disregarded; and

(d)  where subparagraph (b) (ii) of this subsection applies— the foreign income deductions are to be disregarded to the extent of the excess referred to in that subparagraph.”.

General domestic losses of pre-1990 years of income

12.     Section 80 of the Principal Act is amended:

(a)  by inserting in subsections (2b) and (2c) “assessable” before “foreign” (wherever occurring);

(b)  by omitting subsection (3) and substituting the following subsection:

“(3) In this section:

‘assessable foreign income’ has the same meaning as in section 160afd;

‘exempt income’ does not include income to which section 23ah, 23ai or 23aj or paragraph 99b (2) (d) or (e) applies;

‘net exempt income’ means:

(a)  where the taxpayer is a resident—the amount by which the taxpayer’s exempt income derived from all sources exceeds the sum of the expenses (not being expenses of a capital nature) incurred in deriving that income, and any taxes payable in respect of that income in any country or place outside Australia; and

(b)  where the taxpayer is a non-resident—the amount by


which the taxpayer’s exempt income derived from sources in Australia (other than income, if any, to which section 128d applies) exceeds the sum of the expenses (not being expenses of a capital nature) incurred in deriving that income.”;

(c)  by adding at the end of subsection (9) “, as in force immediately before the commencement of the Taxation Laws Amendment (Foreign Income) Act 1990.”.

Film losses of pre-1990 years of income

13.     Section 80aaa of the Principal Act is amended by omitting subsection (2) and substituting the following subsection:

“(2)    In this section, ‘exempt income’ and ‘net exempt income’ have the same respective meanings as in section 80.”.

Primary production losses of pre-1990 years of income

14.     Section 80aa of the Principal Act is amended by omitting subsection (5) and substituting the following subsection:

“(5)    In this section, ‘exempt income’ and ‘net exempt income’ have the same respective meanings as in section 80.”.

Transfer of loss within company group

15.     Section 80g of the Principal Act is amended by omitting subsection (19) and substituting the following subsection:

“(19)  In this section, ‘exempt income’ and ‘net exempt income’ have the same respective meanings as in section 80.”.

Receipt of trust income not previously subject to tax

16.     Section 99b of the Principal Act is amended:

(a)      by omitting “or” from the end of paragraph (2) (b);

(b)      by adding at the end of subsection (2) the following paragraphs:

“(d)   an amount that is or has been included in the assessable income of any taxpayer (other than a company) under section 102aazd; or

(e)   if the beneficiary is a company—an amount that is or has been included in the assessable income of the beneficiary under section 102aazd.”;

(c)      by adding at the end the following subsection:

“(3) In paragraphs (2) (d) and (e):

‘company’ means a company other than a company in the capacity of a trustee.”.


Revocable trusts

17.     Section 102 of the Principal Act is amended by omitting from subsection (2b) all the words after “to that net income” and substituting the following words and paragraphs:

“reduced by:

(a)   so much (if any) of that net income as is attributable to a period when the person who created the trust was not a resident and is also attributable to sources out of Australia; and

(b)  so much (if any) of that net income as is not covered by paragraph (a) and represents an amount included in the assessable income of any taxpayer under section 102aazd.”.

18.     After section 102 of the Principal Act the following Division is inserted:

“Division 6aaaSpecial Provisions relating to Non-resident Trust Estates etc.

“Subdivision APreliminary

Object of Division

“102aaa. The object of this Division is to set out rules relating to the following:

(a)  the payment of interest on distributions from certain non-resident trust estates (Subdivision B);

(b)  the winding-up of certain non-resident trust estates in existence on 12 April 1989 (Subdivision C);

(c)  an accruals system of taxation of certain non-resident trust estates (Subdivision D).

Interpretation

“102aab. In this Division, unless the contrary intention appears:

‘1 July 1990 net worth’, in relation to a trust estate, means the market value, as at the beginning of 1 July 1990, of the assets of the trust estate, reduced by the liabilities of the trust estate as at the beginning of that day;

‘accounts’ has the same meaning as in Part X;

‘actual transfer’, in relation to property or services, means a transfer of the property or services other than a transfer that is taken to have been made because of subsection 102aak (1), (2), (5), (6), (8), (10) or (11);

‘approved form’ means the form approved in writing by the Commissioner for the purposes of the provision in which the expression appears;

‘arm’s length amount’, in relation to an actual transfer of property or services to a trust estate, means the amount that the trustee could


reasonably be expected to have been required to pay to obtain the property or the services concerned from the transferor under a transaction where the parties to the transaction are dealing with each other at arm’s length in relation to the transaction;

‘associate’ has the same meaning as in Part X;

‘attributable income’, in relation to a trust estate, has the meaning given by section 102aau;

‘attributable taxpayer’ has the meaning given by section 102aat;

‘attribution account payment’ has the same meaning as in Part X;

‘attribution debit’ has the same meaning as in Part X;

‘Australian entity’ has the same meaning as in Part X;

‘Australian trust’ has the same meaning as in Part X;

‘basic statutory interest rate’, in relation to a year of income, means the interest rate, or each of the interest rates, applicable for the purposes of section 10 of the Taxation (Interest on Overpayments) Act 1983 for the year of income or for periods included in the year of income, as the case may be;

‘CFC’ has the same meaning as in Part X;

‘controlled foreign trust’ has the same meaning as in Part X;

‘corporate unit trust’, in relation to a year of income, means a unit trust that is a corporate unit trust in relation to the year of income for the purposes of Division 6b;

de facto marriage’ means a relationship between 2 persons who, although not legally married to each other, live with each other on a bona fide domestic basis as husband and wife;

‘depreciation provision’ has the same meaning as in Part X;

‘designated concession income’ has the same meaning as in Part X;

‘discretionary trust estate’ means a trust estate where:

(a)     both of the following conditions are satisfied:

(i)  a person (who may include the trustee) is empowered (either unconditionally or on the fulfilment of a condition) to exercise any power of appointment or other discretion;

(ii)  the exercise of the power or discretion, or the failure to exercise the power or discretion, has the effect of determining, to any extent, either or both of the following:

(a)  the identities of those who may benefit under the trust;

(b)  how beneficiaries are to benefit, as between themselves, under the trust; or

(b)  one or more of the beneficiaries under the trust have a contingent or defeasible interest in some or all of the corpus or income of the trust estate; or

(c)  the trustee of another trust estate, being a trust estate where both of the conditions in paragraph (a) are satisfied, benefits,


or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the first-mentioned trust estate;

‘eligible designated concession income’ has the same meaning as in Part X;

‘entity’ means any of the following:

(a)      a company;

(b)      a partnership;

(c)      a person in the capacity of trustee;

(d)      any other person;

‘exempt income’, in relation to a trust estate, means the exempt income of the trust estate calculated as if the trustee were a taxpayer who was a resident;

‘IP time’ means 7.30 p.m., by standard time in the Australian Capital Territory, on 12 April 1989;

‘listed country’ has the same meaning as in Part X;

‘listed country trust estate’ has the meaning given by section 102aae;

‘net income’, in relation to a trust estate, in relation to a year of income, means:

(a)  if the trust estate is a corporate unit trust in relation to the year of income—the net income (within the meaning of Division 6b) of the corporate unit trust of the year of income; or

(b)  if the trust estate is a public trading trust in relation to the year of income—the net income (within the meaning of Division 6c) of the public trading trust of the year of income; or

(c)  in any other case—the net income (within the meaning of Division 6) of the trust estate;

‘non-attributable year of income’, in relation to a trust estate, means a non-resident year of income of the trust estate where no amount calculated by reference to the attributable income of the trust estate of that year of income is included in the assessable income of any taxpayer under subsection 102aazd (1);

‘non-discretionary trust estate’ means a trust estate other than a discretionary trust estate;

‘non-resident family trust’ has the meaning given by section 102aah;

‘non-resident trust estate’ (except in section 102aaa), in relation to a year of income, means a trust estate that is not a resident trust estate in relation to the year of income;

‘non-resident year of income’, in relation to a trust estate, means a year of income in relation to which the trust estate is a non-resident trust estate;

‘pre-franking rebate tax’, in relation to a taxpayer, in relation to a year of income, means the tax that would be payable by the taxpayer in respect of income of the year of income if the taxpayer were not entitled to a rebate under Part IIIaa;


‘profits’ includes gains, whether of an income or capital nature;

‘property’ includes money;

‘public trading trust’, in relation to a year of income, means a unit trust that is a public trading trust in relation to the year of income for the purposes of Division 6c;

‘public unit trust’ has the meaning given by section 102aaf;

‘resident trust estate’, in relation to a year of income, means:

(a)   a resident trust estate in relation to the year of income within the meaning of Division 6; or

(b)  a unit trust that is a corporate unit trust, or a public trading trust, in relation to the year of income; or

(c)   an eligible entity (within the meaning of Part IX) in relation to the year of income;

‘scheme’ means:

(a)  any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and

(b)  any scheme, plan, proposal, action, course of action or course of conduct, whether there are 2 or more parties or only one party involved;

‘services’ includes any benefit, right (including a right in relation to, and an interest in, real or personal property), privilege or facility and, without limiting the generality of the foregoing, includes a benefit, right, privilege, service or facility that is, or is to be, provided under:

(a)      an arrangement for or in relation to:

(i)  the performance of work (including work of a professional nature), whether with or without the provision of property; or

(ii)  the provision of, or of the use of facilities for, entertainment, recreation or instruction; or

(iii)  the conferring of benefits, rights or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; or

(b)      a contract of insurance; or

(c)     an arrangement for or in relation to the lending of money;

‘spouse’, in relation to a person, includes another person who, although not legally married to the person, lives with the person on a bona fide domestic basis as the husband or wife of the person;

‘subject to tax’ has the same meaning as in Part X;

‘tax accounting period’ has the same meaning as in Part X;

‘tax law’, in relation to a listed country or an unlisted country, has the same meaning as in Part X;

‘transfer’:


(a)  in relation to property—includes dispose of (whether by assignment, declaration of trust or otherwise) or provide; and

(b)  in relation to services—includes allow, confer, give, grant, perform or provide;

‘trust estate’, in relation to a transfer of property or services, means the trust estate or, as the case requires, the trustee of the trust estate;

‘underlying transfer’, in relation to a transfer of property or services to a trust estate, means:

(a)      if that transfer was an actual transfer—the actual transfer; or

(b)  if that transfer was taken to have been made because of subsection 102aak (1)—the actual transfer referred to in that subsection; or

(c)   if that transfer was taken to have been made because of subsection 102aak (2)—the actual transfer referred to in paragraph 102aak (2) (d); or

(d)  if that transfer was taken to have been made because of subsection 102aak (5)—the actual transfer referred to in paragraph 102aak (5) (b); or

(e)   if that transfer was taken to have been made because of the application of subsection 102aak (6) or (8) to an actual transfer—the actual transfer; or

(f)  if that transfer was taken to have been made because of the application of subsection 102aak (6) or (8) to a transfer that was taken to have been made because of subsection 102aak (1)—the actual transfer referred to in subsection 102aak (1); or

(g)  if that transfer was taken to have been made because of the application of subsection 102aak (6) or (8) to a transfer that was taken to have been made because of subsection 102aak (5)—the actual transfer referred to in paragraph 102aak (5) (b); or

(h)  if that transfer was taken to have been made because of subsection 102aak (10)—the actual transfer referred to in paragraph 102aak (10) (b); or

(j)  if that transfer was taken to have been made because of one or more applications of subsection 102aak (11) to an actual transfer—the actual transfer; or

(k)  if that transfer was taken to have been made because of one or more applications of subsection 102aak (11) to a transfer (in this paragraph called the ‘deemed transfer’) that was taken to have been made because of subsection 102aak (1), (2), (5), (6), (8) or (10)—the actual transfer that, under a preceding paragraph of this definition, is the underlying transfer in relation to the deemed transfer;


‘underlying transferor’, in relation to a transfer of property or services to a trust estate, means the entity who made the underlying transfer concerned;

‘weighted statutory interest rate’, in relation to a year of income, means:

(a)   if there is only one basic statutory interest rate in relation to the year of income—that rate; or

(b)  if there are 2 or more basic statutory interest rates in relation to the year of income—the weighted average of the basic statutory rates for the year of income.

Each listed country and unlisted country to be treated as a separate foreign country

“102aac. For the purposes of the application of section 6ab to this Division, each listed country and each unlisted country is to be treated as a separate foreign country.

‘Subject to tax’—application of subsection 324 (2)

“102aad. Subsection 324 (2) applies in relation to this Division in a corresponding way to the way in which it applies in relation to Part X.

Listed country trust estates

“102aae. (1) For the purposes of this Division, a trust estate is taken to be a listed country trust estate in relation to a year of income if, and only if, either of the following paragraphs applies to each item of income or profit derived by the trust estate in the year of income:

(a)      the income or profit is either:

(i)  subject to tax in a listed country in a tax accounting period ending before the end of the year of income or commencing during the year of income; or

(ii)  designated concession income in relation to any listed country;

(b)      both of the following conditions are satisfied:

(i)  a part of the income or profit is either:

(a)  subject to tax in a listed country in a tax accounting period ending before the end of the year of income or commencing during the year of income; or

(b)  designated concession income in relation to any listed country;

(ii)  the remaining part, or each of the remaining parts, of the income or profit:

(a)  is subject to tax in another listed country or in different listed countries, as the case may be, in a tax accounting period ending before the end of the year of income or commencing during the year of income; or


(b)  is designated concession income in relation to any listed country.

“(2)    For the purposes of the application of subparagraph (1) (b) (ii) to a trust estate, if a particular part of an item of income or profit (which part is in this subsection called the ‘item part’) derived by the trust estate is included, or would apart from section 23 be included, in the assessable income of the trust estate of a year of income (in this subsection called the ‘trust’s year of income’) and either of the following paragraphs applies:

(a)      both of the following conditions are satisfied:

(i)  the trustee of the trust estate is liable to be assessed and pay tax under section 98, 99 or 99a in respect of a part of, or a share in, the net income of the trust estate of the trust’s year of income;

(ii)  the whole or a part of the part or share of the net income is attributable to the item part;

(b)     all of the following conditions are satisfied:

(i)  an amount is included in the assessable income of another taxpayer of the trust’s year of income or the next following year of income (which taxpayer is in this subsection called the ‘actual taxpayer’) under subsection 92 (1) or section 97, 98a or 100;

(ii)   the actual taxpayer is:

(a)   a company or a natural person (other than a company or a natural person in the capacity of a trustee); or

(b)   the trustee of an eligible entity (within the meaning of Part IX) in relation to the year of income concerned; or

(c)   the trustee of a corporate unit trust in relation to the year of income concerned; or

(d)   the trustee of a public trading trust in relation to the year of income concerned; or

(e)   the trustee of a trust estate who is liable to be assessed and pay tax under section 98, 99 or 99a in respect of a part of, or a share in, the net income of a trust estate;

(iii)   if sub-subparagraph (ii) (a), (b), (c) or (d) applies—the whole or a part of the amount so included in the actual taxpayer’s assessable income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the item part;

(iv)  if sub-subparagraph (ii) (e) applies—the whole or a part of the part or share of the net income is attributable


(either directly or indirectly through one or more interposed partnerships or trusts) to the item part;

the item part is to be treated as if it were subject to tax in a listed country in a tax accounting period ending before the end of the trust’s year of income.

“(3)    For the purposes of this section, where a part of a particular item of income or profits derived by an entity would, if it were a separate item of income or profits, be taken to be subject to tax in a listed country in a particular tax accounting period, that part is taken to be subject to tax in that listed country in that tax accounting period.

Public unit trusts

“102aaf. (1) Subject to this section, for the purposes of this Division, a unit trust is a public unit trust at all times during a year of income if either of the following conditions are satisfied:

(a)     at any time during the year of income:

(i)  any of the units in the unit trust were listed for quotation in the official list of a stock exchange in Australia or elsewhere; or

(ii)  any of the units in the unit trust were offered to the public;

(b)  at all times during the year of income, the units in the unit trust were held by not fewer than 50 persons.

“(2)    In determining whether a unit trust is a public unit trust at all times during a year of income for the purposes of this Division, subsections 102g (2) to (8) (inclusive) and (10) apply:

(a)  as if a reference in those subsections to Division 6b were a reference to this Division; and

(b)  as if a reference in those subsections to subsection 102g (1) were a reference to subsection (1) of this section; and

(c)  as if a reference in those subsections to a public unit trust in relation to a year of income were a reference to a public unit trust at all times during a year of income.

“(3)    In determining whether a unit trust (in this subsection called the ‘first unit trust’) is a public unit trust at all times during a year of income for the purposes of this Division, the following provisions have effect:

(a)     the following entities are taken to be one person:

(i)  an entity, whether or not it holds units in the first unit trust; and

(ii)  the entity or entities who are the associate or associates of the entity;

(b)  where any units in the first unit trust are held by the trustee of another trust that, apart from this paragraph, is a public unit


trust at all times during the year of income—a person who has a beneficial interest in property of that other trust that consists of those units is taken to hold those units;

(c)  where any units in the first unit trust are held by the trustee of another trust that:

(i)  apart from paragraph (b); or

(ii)  by virtue of the application of paragraph (b);

is a public unit trust at all times during the year of income—a person who has a beneficial interest in the property of that other trust that consists of those units (whether or not that beneficial interest is taken to be held by virtue of the application of this paragraph) is taken to hold those units.

When entity is in a position to control a trust estate

“102aag. (1) For the purposes of this Division, an entity is taken to be in a position to control a trust estate if, and only if:

(a)  a group in relation to the entity had the power by means of the exercise by the group of any power of appointment or revocation or otherwise, to obtain, with or without the consent of any other entity, the beneficial enjoyment of the corpus or income of the trust estate; or

(b)  a group in relation to the entity was able in any manner whatsoever, whether directly or indirectly, to control the application of the corpus or income of the trust estate; or

(c)  a group in relation to the entity was capable under a scheme of gaining the enjoyment or the control referred to in paragraph (a) or (b); or

(d)  a trustee of the trust estate was accustomed or under an obligation (whether formally or informally) or might reasonably be expected to act in accordance with the directions, instructions or wishes of a group in relation to the entity; or

(e)  a group in relation to the entity was able to remove or appoint the trustee, or any of the trustees, of the trust estate.

“(2)    In subsection (1), a reference to a group in relation to an entity is a reference to:

(a)      the entity acting alone; or

(b)     an associate of the entity acting alone; or

(c)   the entity and one or more associates of the entity acting together; or

(d)     2 or more associates of the entity acting together.

Non-resident family trusts

“102aah. (1) Subject to subsections (4) and (5), for the purposes of this Division, a trust estate is a non-resident family trust in relation to a natural person at a particular time if, and only if, at that time:


(a)     the trust estate is either:

(i)  a post-marital family trust in relation to the natural person; or

(ii)  a family relief trust in relation to the natural person; and

(b)     the trust is constituted by:

(i)   a deed of trust or other instrument; or

(ii)  an order or declaration of a court.

“(2)    For the purposes of this section, a trust estate is a post-marital family trust in relation to a natural person at a particular time if:

(a)     either of the following conditions is satisfied:

(i)  the trust was created pursuant to:

(a)  a decree or order of dissolution or annulment of marriage, being a dissolution or annulment that, because of the Family Law Act 1975, has effect, or continues to have effect in Australia or is recognised as valid in Australia; or

(b)  a decree or order of judicial separation or a similar decree or order;

(ii)  the trust was created in consequence of the break-down of a de facto marriage; and

(b)  at that time, the only persons who benefit, or are capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust (which persons are in subsections (4) and (5) called the ‘primary potential beneficiaries’) are natural persons who:

(i)  are non-residents at that time; and

(ii)  are covered by any of the following categories:

(a)   the spouse or former spouse of the natural person;

(b)   a child of the natural person;

(c)   a child of the former spouse of the natural person, being a child who was such a child at a time when the former spouse was the spouse of the natural person;

(d)   a child of the spouse of the natural person.

“(3)    For the purposes of this section, a trust estate is a family relief trust in relation to a natural person at a particular time (in this subsection called the ‘test time’) if:

(a)  the only persons who benefit, or are capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust (which persons are in subsections (4) and (5) called the ‘primary potential beneficiaries’) are natural persons who:

(i)  are identified by name in the trust deed or instrument,


or in the court order or declaration, constituting the trust; and

(ii)  are non-residents at that time; and

(iii)   are covered by any of the following categories:

(a)        the spouse or former spouse of the natural person;

(b)        a parent of the natural person or of the natural person’s spouse or former spouse;

(c)        a child of the natural person or of the natural person’s spouse or former spouse;

(d)        a grandparent of the natural person;

(e)        a grandchild of the natural person;

(f)        a brother or sister of the natural person or of the natural person’s spouse or former spouse;

(g)        a child of a brother or sister mentioned in sub-subparagraph (f); and

(b)  the trust was established, and is operated, for the relief of persons who are in necessitous circumstances; and

(c)     any of the following conditions is satisfied:

(i)  at the test time, the assets of the trust are not excessive having regard to the requirements, or likely requirements, of the primary potential beneficiaries;

(ii)  no transfers of property or services to the trust estate were made during the period (in this paragraph called the ‘test period’) commencing at the IP time and ending at the test time;

(iii)   immediately after each transfer of property or services to the trust estate made during the test period, the assets of the trust were not excessive having regard to the requirements, or likely requirements, of the beneficiaries at the time of the transfer.

“(4)    Subsection (1) does not prevent a trust estate from being a non-resident family trust in relation to a natural person at a particular time if, in the event of the death of a particular primary potential beneficiary at that time, one or more natural persons (which persons are in subsection (5) called the ‘secondary potential beneficiaries’) who:

(a)     are non-residents at that time; and

(b)     are children of the primary potential beneficiary;

would benefit, or be capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust.

“(5)    Subsections (1) and (4) do not prevent a trust estate from being a non-resident family trust in relation to a natural person at a particular time if, in the event of the death of all of the primary potential beneficiaries and all of the secondary potential beneficiaries at that time, there are one or more funds, authorities or institutions in


Australia covered by paragraph 78 (1) (a) that would benefit, or be capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust.

“(6)    For the purposes of this section, if, at a particular time, an entity holds an interest in, or right to benefit under, a trust that is dependent on the death of one or more natural persons, then, the entity is taken to be an entity who, in the event of the death of that natural person or those natural persons immediately after that time, would benefit under the trust.

“(7)    A reference in this section to a natural person does not include a reference to a natural person in the capacity of a trustee.

Transfer of property or services

“102aaj. (1) A reference in this Division to the transfer of property or services to a trust estate includes a reference to the transfer of such property or services by way of the creation of the trust estate.

“(2)    For the purposes of this Division, where an entity acquires property that did not previously exist, the property is taken to have existed immediately before the acquisition and to have been transferred by the entity who created the property.

“(3)    For the purposes of this Division, property or services are taken to have been transferred to an entity if the property or services have been applied for the benefit of, or in accordance with the directions of, the entity.

“(4)    Without limiting the generality of subsection (3), a reference in that subsection to the application of property or services for the benefit of an entity includes a reference to the application of property or services in the discharge, in whole or in part, of a debt due by the entity.

“(5)    Unless the contrary intention appears, a reference in this Division to a transfer of property or services includes a reference to a transfer made before the commencement of this Division.

“(6)    A reference in this Division to a transfer of property or services made before the IP time includes a reference to a transfer made at the IP time.

Deemed transfers of property or services to trust estate

“102aak. (1) For the purposes of this Division, where an entity (in this subsection called the ‘prime entity’) causes another entity to actually transfer property or services to a trust estate, the prime entity is taken to have transferred the property or services (instead of the other entity).

“(2)    For the purposes of this Division, where:


(a)  the trustee of a trust estate issues units in the trust to an entity (in this subsection called the ‘first entity’) in the first entity’s capacity as a manager, underwriter or dealer in relation to the marketing or placement of the units; and

(b)  in the course of the marketing or placement of the units, the units are disposed of by the first entity to another entity (in this subsection called the ‘second entity’); and

(c)  at a particular time (in this subsection called the ‘second entity’s transfer time’), the second entity transfers property or services to the first entity as consideration for the acquisition of the units; and

(d)  the first entity has actually transferred, or actually transfers, property or services (in this subsection called the ‘original property or services’) to the trust estate for the sole purpose of acquiring the units;

the second entity is taken to have transferred the original property or services (instead of the first entity) at the second entity’s transfer time.

“(3)    A reference in subsection (2) to a unit in a trust estate is a reference to an interest (however described) in any of the income or property of the trust estate.

“(4)    Subsections (1) and (2) do not limit the operation of subsection (5).

“(5)    Where, under a scheme:

(a)   an entity (in this subsection called the ‘scheme entity’) actually transfers property or services to another entity; and

(b)   property or services are actually transferred to a trust estate at a particular time otherwise than by the scheme entity;

the Commissioner may, for the purposes of this Division, treat the property or services mentioned in paragraph (b) as having been transferred by the scheme entity to the trust estate (instead of by any other entity) at that time to such extent as the Commissioner considers reasonable.

“(6)    For the purposes of this Division, if (apart from subsections (8), (10) and (11)) an entity, being a partnership, transfers property or services to a trust estate at a particular time:

(a)   each partner in the partnership is taken to have transferred a part of the property or services to the trust estate at that time; and

(b)   the market value of the part transferred by a particular partner is calculated using the formula:

where:


Market value means the market value, immediately before the transfer, of the property or services transferred by the partnership;

Partner’s interest means:

(i)  the partner’s percentage interest in the profits of the partnership as at that time; or

(ii)  the partner’s percentage interest in the property of the partnership as at that time;

or, if they are different, whichever is the higher.

“(7)    Nothing in paragraph (6) (a) affects the application of this Division to the transfer made by the partnership concerned.

“(8)    For the purposes of this Division, if:

(a)   apart from this subsection, subsections (6), (10) and (11), an entity being the trustee of a trust estate (in this subsection called the ‘transferor trust estate’) transfers property or services (in this subsection called the ‘transferred property or services’) to another trust estate (in this subsection called the ‘transferee trust estate’) at a particular time (in this subsection called the ‘transfer time’); and

(b)   the transferor trust estate was an Australian trust, or a controlled foreign trust, at the transfer time; and

(c)   the transferor trust estate was a discretionary trust estate at the transfer time; and

(d)   apart from this subsection, subsections (6), (10) and (11), one or more other entities transferred property or services to the transferor trust estate at or before the transfer time;

each of those other entities is taken to have transferred the transferred property or services to the transferee trust estate at the transfer time.

“(9)    Nothing in subsection (8) affects the application of this Division to the transfer mentioned in paragraph (8) (a).

“(10) For the purposes of this Division, where:

(a)     any of the following subparagraphs applies:

(i)  any of the following events occurs in relation to a company (which company is in this subsection called the ‘transferor’):

(a)       the company passes a resolution for its winding-up;

(b)       an order is made for the winding-up of the company;

(c)        any similar event;

(ii)  a partnership (in this subsection also called the ‘transferor’) ceases to exist for the purposes of this Act;

(iii) either of the following sub-subparagraphs applies in


relation to the trustee of a trust estate (in this subsection also called the ‘transferor’):

(a)       the trust estate commences to be wound-up;

(b)       the trust estate ceases to exist for the purposes of this Act; and

(b)  an actual transfer of property or services is made to a trust estate (in this subsection called the ‘transferee’) as a consequence of the transferor being wound-up or ceasing to exist;

the transferor is taken to have transferred to the transferee the property or services concerned.

“(11)  For the purposes of this Division (other than section 102aan), where:

(a)   the following subparagraphs apply to an entity (in this subsection called the ‘defunct entity’):

(i)   the defunct entity is a company, a partnership or the trustee of a trust estate;

(ii)   the defunct entity transferred property or services to a trust estate (including a transfer that was taken to have been made because of another application or other applications of this subsection) at a particular time;

(iii)    if the defunct entity is a company—any of the following events occurs:

(a)   the company passes a resolution for its winding-up;

(b)   an order is made for the winding-up of the company;

(c)   any similar event;

(iv)   if the defunct entity is a partnership—the partnership ceases to exist for the purposes of this Act;

(v)   if the defunct entity is a trustee of a trust estate—either of the following sub-subparagraphs applies:

(a)   the trust estate commences to be wound-up;

(b)  the trust estate ceases to exist for the purposes of this Act; and

(b)   the Commissioner is satisfied that another entity (in this subsection called the ‘successor entity’) has benefited or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting (either directly or indirectly through one or more interposed companies, partnerships or trusts) by, or as a result of:

(i)  a transfer of property or services made by the defunct entity; or

(ii)   a transfer of property or services made as a consequence


of the defunct entity being wound-up or ceasing to exist; and

(c)  the Commissioner is of the opinion that it is appropriate to apply this subsection to the successor entity;

the assessable income of the successor entity of the year of income in which the event, or the earliest event, mentioned in subparagraph (a) (iii), (iv) or (v) occurred and of each subsequent year of income is to be determined as if the successor entity had transferred to the trust estate mentioned in subparagraph (a) (ii), at the time mentioned in that subparagraph:

(d)   the whole of the property or services mentioned in that subparagraph; or

(e)   if the Commissioner thinks it appropriate—a part of the property or services referred to in that subparagraph.

Division not to apply to transfers by trustees of deceased estates

“ 102aal. A reference in this Division to a transfer of property or services to a trust estate does not include a reference to a transfer made by the trustee of the estate of a deceased person under:

(a)      the terms of the deceased person’s will or codicil; or

(b)   an order of a court that varied or modified the provisions of the deceased person’s will or codicil;

unless:

(c)   the transfer was made in or as the result of the exercise (by the trustee or any other person) of a power of appointment or any other discretion; or

(d)   under subsection 102aak (1), the property or services are taken to have been transferred by an entity other than the trustee, instead of by the trustee; or

(e)   under subsection 102aak (5), the Commissioner treats the property or services as having been (to any extent) transferred by an entity other than the trustee, instead of by the trustee.

“Subdivision BPayment of Interest by Taxpayer on Distributions from
Certain Non-resident Trust Estates

Payment of interest by taxpayer on distributions from certain non-resident trust estates

“102aam. (1) For the purposes of this section, if:

(a)   an amount is included in the assessable income of a taxpayer of a year of income (which year of income is in this section called the ‘current year of income’), being the year of income commencing on 1 July 1990 or a subsequent year of income, under section 99b in relation to a trust estate; and


(b)   the whole or a part of the amount so included in the taxpayer’s assessable income (which whole or part is in this section called the ‘distributed amount’) is attributable to:

(i)   if the trust estate was a listed country trust estate in relation to a particular non-resident year of income of the trust estate (in this section called the ‘non-resident trust’s year of income’)—so much of the income and profits of the trust estate of the non-resident trust’s year of income as represents eligible designated concession income in relation to any listed country in relation to the non-resident trust’s year of income; or

(ii)   if the trust estate was not a listed country trust estate in relation to a particular non-resident year of income of the trust estate (in this section also called the ‘non-resident trust’s year of income’)—so much of the income and profits of the trust estate of the non-resident trust’s year of income as has not been subject to tax in any listed country in a tax accounting period:

(a)  ending before the end of the non-resident trust’s year of income; or

(b)  commencing during the non-resident trust’s year of income;

then:

(c)   the distributed amount is the distributed amount of the non-resident trust’s year of income; and

(d)   the taxpayer is the original taxpayer in relation to the distributed amount of the non-resident trust’s year of income.

“(2)    Subject to this section, if the original taxpayer in relation to the distributed amount of the non-resident trust’s year of income is:

(a)  a company or a natural person (other than a company or a natural person in the capacity of a trustee); or

(b)  the trustee of a corporate unit trust in relation to the current year of income; or

(c)  the trustee of a public trading trust in relation to the current year of income; or

(d)  the trustee of an eligible entity within the meaning of Part IX in relation to the current year of income;

the taxpayer is liable to pay interest to the Commissioner in respect of the distributed amount of the non-resident trust’s year of income, calculated under subsection (5), on the amount calculated using the formula:

where:

Distributed amount means the distributed amount of the non-resident trust’s year of income;


Applicable rate of tax has the meaning given by subsection (10);

FTC [Foreign tax credit] means so much of any credit under Division 18 to which the taxpayer is entitled as is attributable to the distributed amount of the non-resident trust’s year of income.

“(3)    Subject to this section, if:

(a)   the original taxpayer in relation to the distributed amount of the non-resident trust’s year of income is the trustee of a trust estate who is liable to be assessed and pay tax under section 98, 99 or 99a in respect of a part of, or a share in, the net income of the trust estate; and

(b)   the whole or a part (which whole or part is in this subsection called the ‘taxpayer’s portion of the distributed amount of the non-resident trust’s year of income’) of the part or share of the net income is attributable to the distributed amount of the non-resident trust’s year of income;

the taxpayer is liable to pay interest to the Commissioner in respect of the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income, calculated under subsection (5), on the amount calculated using the formula:

where:

Taxpayer’s portion of the distributed amount means the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income;

Applicable rate of tax has the meaning given by subsection (10);

FTC [Foreign tax credit] means so much of any credit under Division 18 to which the taxpayer is entitled as is attributable to the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income.

“(4)    Subject to this section, if:

(a)   the original taxpayer in relation to the distributed amount of the non-resident trust’s year of income is the trustee of a trust estate or a partnership; and

(b)   the following conditions are satisfied in relation to another taxpayer (in this subsection called the ‘actual taxpayer’):

(i)   an amount is included in the assessable income of the actual taxpayer of a year of income under subsection 92 (1) or section 97, 98a or 100;

(ii)   the actual taxpayer is:

(a)   a company or a natural person (other than a company or a natural person in the capacity of a trustee); or

(b)   the trustee of an eligible entity (within the meaning of Part IX) in relation to the year of income; or


(c)   the trustee of a corporate unit trust in relation to the year of income; or

(d)   the trustee of a public trading trust in relation to the year of income; or

(e)   the trustee of a trust estate who is liable to be assessed and pay tax under section 98, 99 or 99a in respect of a part of, or a share in, the net income of a trust estate;

(iii)   if sub-subparagraph (ii) (a), (b), (c) or (d) applies—the whole or a part of the amount so included in the actual taxpayer’s assessable income (which whole or part is in this subsection called the ‘taxpayer’s portion of the distributed amount of the non-resident trust’s year of income’) is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the distributed amount of the non-resident trust’s year of income;

(iv)   if sub-subparagraph (ii) (e) applies—the whole or a part (which whole or part is in this subsection also called the ‘taxpayer’s portion of the distributed amount of the non-resident trust’s year of income’) of the part or share of the net income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the distributed amount of the non-resident trust’s year of income;

the actual taxpayer is liable to pay interest to the Commissioner in respect of the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income, calculated under subsection (5), on the amount calculated using the formula:

where:

Taxpayer’s portion of the distributed amount means the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income;

Applicable rate of tax has the meaning given by subsection (10);

FTC [Foreign tax credit] means so much of any credit under Division 18 to which the taxpayer is entitled as is attributable to the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income.

“(5)   Interest payable by a taxpayer under this section is to be calculated:

(a)   in respect of the period commencing at whichever of the following times is the latest:


(i)   the beginning of the first year of income of the taxpayer that begins after the end of the non-resident trust’s year of income;

(ii)   the beginning of the year of income of the taxpayer commencing on 1 July 1990;

(iii)    if the taxpayer is a natural person (other than a natural person in the capacity of a trustee) who first commenced to be a resident of Australia at a time (in this subparagraph called the ‘first residence time’) on or after 1 July 1990—the beginning of the year of income of the taxpayer next following the year of income of the taxpayer in which the first residence time occurred;

and ending at the end of the assessment year of income; and

(b)   at such rate of interest as is, or such rates of interest as are, applicable for the purposes of section 10 of the Taxation (Interest on Overpayments) Act 1983.

“(6)    Where the assessable income of a taxpayer of a year of income includes one or more of the following amounts in relation to one or more non-resident years of income of a particular trust estate (which amounts are in this subsection called the ‘principal amounts’):

(a)   the distributed amount of the non-resident trust’s year of income;

(b)   the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income;

the aggregate of the interest payable by the taxpayer in respect of the principal amounts is not to exceed the difference between:

(c)      the aggregate of the principal amounts; and

(d)   so much of the taxpayer’s pre-franking rebate tax for the year of income as is attributable to the aggregate of the principal amounts.

“(7)    For the purposes of this section, the extent to which an amount (in this subsection called the ‘section 99b amount’) included in the assessable income of a taxpayer of a year of income under section 99b in relation to a trust estate is attributable to an amount (in this subsection called the ‘trust amount’) covered by subparagraph (1) (b) (i) or (ii) is to be determined in accordance with the following paragraphs:

(a)  in all cases—distributions of income and profits of the trust estate are to be taken to have been made in the following order:

(i)  first, from income and profits of the earliest non-resident year of income;

(ii)   then, successively from income and profits of successive subsequent years of income;

(b)  if subparagraph (1) (b) (i) applies—the extent to which the amount (in this paragraph called the ‘adjusted section 99b


amount’), being so much of the section 99b amount as is attributable to the income and profits of the trust estate of the non-resident trust’s year of income, represents eligible designated concession income in relation to any listed country in relation to the non-resident trust’s year of income is calculated using the formula:

where:

Adjusted section 99b amount means the adjusted section 99b amount;

Eligible designated concession income means the number of dollars in the amount, being so much of the income and profits of the trust estate of the non-resident trust’s year of income as represents eligible designated concession income in relation to any listed country in relation to the non-resident trust’s year of income;

Total income means the number of dollars in the income and profits of the trust estate of the non-resident trust’s year of income;

(c)  if subparagraph (1) (b) (ii) applies—the extent to which the amount (in this paragraph called the ‘adjusted section 99b amount’), being so much of the section 99b amount as is attributable to the income and profits of the trust estate of the non-resident trust’s year of income, represents income and profits that have not been subject to tax in a listed country in a tax accounting period mentioned in that subparagraph is calculated using the formula:

where:

Adjusted section 99b amount means the adjusted section 99b amount;

Untaxed income means the number of dollars in the amount, being so much of the income and profits of the trust estate of the non-resident trust’s year of income as is not subject to tax in any listed country in a tax accounting period mentioned in that subparagraph;

Total income means the number of dollars in the income and profits of the trust estate of the non-resident trust’s year of income.


“(8) For the purposes of subsection (7), an amount of income or profits of a trust estate is to be taken to be distributed if the amount is paid to, or applied for the benefit of (within the meaning of section 99b), a beneficiary of the trust estate.

“(9)    Where, apart from this subsection, the amount of interest that would be payable under this section by a taxpayer in respect of the distributed amount of a non-resident trust’s year of income, or in respect of the taxpayer’s portion of the distributed amount of a non-resident trust’s year of income, is less than 50 cents, interest is not payable by the taxpayer under this section.

“(10)  For the purposes of this section, the applicable rate of tax in relation to a taxpayer is:

(a)   if the taxpayer is a company (other than a company in the capacity of a trustee)—the general company tax rate (within the meaning of Part IIIaa) for the year of tax to which the assessment year of income relates; or

(b)   in any other case—the maximum rate specified in Column 2 of the table in Part I of Schedule 7 of the Income Tax Rates Act 1986 that applies for the assessment year of income.

“(11)  For the purposes of the application of this section to a taxpayer, the assessment year of income is:

(a)     if subsection (2) or (3) applies—the current year of income; or

(b)  if subsection (4) applies—the year of income referred to in subparagraph (4) (b) (i).

“(12)  The Commissioner must make an assessment of the interest payable by a taxpayer under this section.

“(13)  Nothing in this Act precludes notice of an assessment made in respect of a taxpayer under subsection (12) from being incorporated in a notice of any other assessment made in respect of the taxpayer under this Act.

“(14)   Unless the contrary intention appears, in sections 170, 172, 174, 201, 204, 205, 206, 207, 208, 209, 214, 215, 216, 254, 255, 258, 259 and 265, but not in any other section of this Act, ‘income tax’ or ‘tax’ includes interest payable under this section.

“Subdivision CWinding-up of Non-resident Trust Estates in Existence on 12 April 1989

Winding-up of non-resident trust estates—tax rebates

“102aan. (1) If:

(a)   an amount (in this section called the ‘section 99b amount’) is included in the assessable income of a taxpayer of:

(i)  the year of income commencing on 1 July 1988 (which


year of income is in this section called the ‘taxpayer’s year of income’); or

(ii)  the year of income commencing on 1 July 1989 (which year of income is in this section also called the ‘taxpayer’s year of income’); or

(iii)   the year of income commencing on 1 July 1990 (which year of income is in this section also called the ‘taxpayer’s year of income’);

under section 99b in relation to:

(iv)   a trust estate that:

(a)  if the period commencing on 1 July 1988 and ending at the IP time had been a year of income, would be a non-resident trust estate in relation to that year of income; and

(b)  was in existence, and was a discretionary trust estate, at the IP time; and

(v)   an amount paid to, or applied for the benefit of (within the meaning of section 99b), the taxpayer after the IP time; and

(b)  before the IP time, one or more entities (in this section called the ‘transferors’) transferred property or services to the trust estate; and

(c)      at least one of the transferors was an Australian entity at:

(i)  in any case—the time of that transfer of property or services; or

(ii)  in the case of an entity who is a natural person (other than a natural person in the capacity of trustee)—the end of 30 June 1991; or

(iii)   in the case of an entity to whom subparagraph (ii) does not apply—the IP time; and

(d)  the trust estate is completely wound up before 30 June 1991; and

(e)   neither the transferors, nor any associate of the transferors, transferred property or services to the trust estate after the IP time (not being property or services relating to, or consisting of, the provision of personal services in connection with that winding-up);

the following provisions have effect:

(f)  the taxpayer is the original taxpayer in relation to the section 99b amount and in relation to the taxpayer’s year of income;

(g)  the section 99b amount, as reduced by so much of that amount as represents an amount that, if it had been derived by a taxpayer being a resident, would have been an amount of assessable income derived, or included in assessable income, in respect of property or services transferred to the trust estate


after the IP time, is to be taken to be the rebatable section 99b amount.

“(2)    If the original taxpayer in relation to the section 99b amount in relation to the taxpayer’s year of income is:

(a)   a company or a natural person (other than a company or a natural person in the capacity of a trustee); or

(b)  the trustee of a corporate unit trust in relation to the taxpayer’s year of income; or

(c)   the trustee of a public trading trust in relation to the taxpayer’s year of income; or

(d)  the trustee of an eligible entity (within the meaning of Part IX) in relation to the taxpayer’s year of income;

the following provisions have effect:

(e)   the taxpayer is entitled to a rebate of tax in the taxpayer’s assessment for the taxpayer’s year of income of such an amount (if any) that is necessary to ensure that the rate of tax on the rebatable section 99b amount does not exceed 10%;

(f)   a reference in subsection 160af (1) to the foreign income of the taxpayer does not include a reference to the rebatable section 99b amount.

“(3)    If:

(a)   the original taxpayer in relation to the section 99b amount in relation to the taxpayer’s year of income is the trustee of a trust estate who is liable to be assessed and pay tax under section 98, 99 or 99a in respect of a part of, or a share in, the net income of the trust estate; and

(b)   the whole or a part (which whole or part is in this subsection called the ‘taxpayer’s portion of the section 99b amount’) of the part or share of the net income is attributable to the section 99b amount;

the following provisions have effect:

(c)   the taxpayer is entitled to a rebate of tax in the taxpayer’s assessment for the taxpayer’s year of income of such an amount (if any) as is necessary to ensure that the rate of tax on so much of the taxpayer’s portion of the section 99b amount as represents the rebatable section 99b amount does not exceed 10%;

(d)   a reference in subsection 160af (1) to the foreign income of the taxpayer does not include a reference to the rebatable section 99b amount.

“(4)    If:

(a)   the original taxpayer in relation to the section 99b amount in relation to the taxpayer’s year of income is the trustee of a trust estate or a partnership; and


(b)   the following conditions are satisfied in relation to another taxpayer (in this subsection called the ‘actual taxpayer’):

(i)   an amount is included in the assessable income of the actual taxpayer of a year of income (in this subsection called the ‘current year of income’) under subsection 92 (1) or section 97, 98a or 100;

(ii)   the actual taxpayer is:

(a)  a company or a natural person (other than a company or a natural person in the capacity of a trustee); or

(b)  the trustee of an eligible entity (within the meaning of Part IX) in relation to the current year of income; or

(c)  the trustee of a corporate unit trust in relation to the current year of income; or

(d)  the trustee of a public trading trust in relation to the current year of income; or

(e)  the trustee of a trust estate who is liable to be assessed and pay tax under section 98, 99 or 99a in respect of a part of, or a share in, the net income of a trust estate;

(iii)    if sub-subparagraph (ii) (a), (b), (c) or (d) applies—the whole or a part of the amount so included in the actual taxpayer’s assessable income (which whole or part is in this subsection called the ‘taxpayer’s portion of the section 99b amount’) is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the section 99b amount;

(iv)   if sub-subparagraph (ii) (e) applies—the whole or a part (which whole or part is in this subsection also called the ‘taxpayer’s portion of the section 99b amount’) of the part or share of the net income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the section 99b amount;

the following provisions have effect:

(c)   the actual taxpayer is entitled to a rebate of tax in the taxpayer’s assessment for the current year of income of such an amount (if any) as is necessary to ensure that the rate of tax on so much of the taxpayer’s portion of the section 99b amount as represents the rebatable section 99b amount concerned does not exceed 10%;

(d)   a reference in subsection 160af (1) to the foreign income of the actual taxpayer does not include a reference to so much of the taxpayer’s portion of the section 99b amount as represents the rebatable section 99b amount concerned.


Winding-up of non-resident discretionary trusts—adjustment of tax treatment of beneficiaries

“102aap. Where:

(a)  the trustee of a trust estate has a discretion to pay or apply income of the trust estate to or for the benefit of specified beneficiaries; and

(b)  the trust estate is completely wound up before 30 June 1991; and

(c)  the trustee exercises the trustee’s discretion in favour of a beneficiary:

(i)  in the course of that winding-up; and

(ii)   during a year of income mentioned in subparagraph 102aan (1) (a) (i), (ii) or (iii); and

(iii)   after the IP time; and

(d)  under section 101, the beneficiary is taken to be presently entitled to the amount (in this subsection called the ‘distributed amount’) paid to the beneficiary or applied to the beneficiary’s benefit by the trustee in the exercise of that discretion; and

(e)  the conditions set out in subparagraph 102aan (1) (a) (iv) and paragraphs 102aan (1) (b), (c) and (e) are satisfied in relation to the trust estate;

the following provisions have effect:

(f)   neither section 97 nor 98 is taken to have applied in relation to the beneficiary’s present entitlement to the distributed amount;

(g)  the distributed amount is taken to have been included in the assessable income of the beneficiary of the taxpayer’s year of income under section 99b.

Winding-up of non-resident trust estates—modified accruals system of taxation

“102aaq. Where the conditions set out in subparagraph 102aan (1) (a) (iv) and paragraphs 102aan (1) (b) to (e) (inclusive) are satisfied in relation to a trust estate, then, for the purposes of this Division, an entity is not taken to be an attributable taxpayer in relation to:

(a)  the year of income of the entity commencing on 1 July 1990; or

(b)     the year of income of the entity commencing on 1 July 1991; and in relation to the trust estate.

When trust estate is taken to be completely wound up

“102aar. For the purposes of this Subdivision, a trust estate is not taken to be completely wound up as at a particular time unless:

(a)  all of the liabilities of the trust estate are discharged before that time; and


(b)  all of the property of the trust estate is distributed to the beneficiaries of the trust estate before that time.

“Subdivision DAccruals System of Taxation of Certain Non-resident Trust Estates

Object of Subdivision

“102aas. The object of this Subdivision is to set out rules relating to the following:

(a)  the determination of attributable taxpayer status (section 102aat);

(b)  the calculation of the attributable income of a trust estate (sections 102aau to 102aazc (inclusive));

(c)  the inclusion of amounts in assessable income (sections 102aazd, 102aaze and 102aazf);

(d)     the keeping of associated records (section 102aazg).

Accruals system of taxation—attributable taxpayer

“102aat. (1) Subject to this Division, for the purposes of this Division, an entity is an attributable taxpayer in relation to a year of income of the entity (which year of income is in this section called the ‘entity’s current year of income’) and in relation to a particular trust estate if, and only if:

(a)      either of the following subparagraphs applies:

(i)   all of the following conditions are satisfied:

(a)  the trust estate was a discretionary trust estate at any time during the entity’s current year of income;

(b)  the trust estate was not a public unit trust at all times during the entity’s current year of income;

(c)  the entity has transferred property or services to the trust estate at a time (in this subparagraph called the ‘transfer time’) before or during the entity’s current year of income;

(d)  if the underlying transfer was made in the course of carrying on a business—it is not the case that, at or about the time of the underlying transfer, identical or similar property or services were transferred by the underlying transferor in the ordinary course of business to ordinary clients or customers under arm’s length transactions and in similar circumstances and subject to identical or similar terms and conditions as those that applied in relation to the underlying transfer of the property or services concerned;

(e)   if the underlying transfer was made under an arm’s


length transaction otherwise than in the course of carrying on a business—the entity was in a position, at any time after the transfer time and before the end of the entity’s current year of income, to control the trust estate;

(f)   if the transfer was made before the IP time and the trust estate was in existence, and was a discretionary trust estate, at the IP time—the entity was in a position, at any time after the IP time and before the end of the entity’s current year of income, to control the trust estate;

(ii)  all of the following conditions are satisfied:

(a)  the trust estate was a non-discretionary trust estate, or a public unit trust, at all times during the entity’s current year of income when the trust estate was in existence;

(b)  the entity has transferred property or services to the trust estate after the IP time and before or during the entity’s current year of income;

(c)  the underlying transfer was made for no consideration or for a consideration less than the arm’s length amount in relation to the underlying transfer;

(d)  it is not the case that the sole purpose of the underlying transfer was the acquisition of units in the trust estate where the parties to the underlying transfer were at arm’s length with each other in relation to the underlying transfer and the trust estate was a public unit trust at all times during the entity’s current year of income when the trust estate was in existence; and

(b)      if the entity is a natural person (other than a natural person in the capacity of a trustee):

(i)   if:

(a)  the natural person first commenced to be a resident of Australia at a time (in this subparagraph called the ‘first residence time’) after the IP time and before the end of the entity’s current year of income; and

(b)  the transfer, or each of the transfers, covered by paragraph (a) was made before the first residence time;

the trust estate was not a non-resident family trust in relation to the natural person at all times:

(c)     after the beginning of the first year of income of


the natural person after the first residence time; and

(d)   before the end of the entity’s current year of income;

when the trust estate was in existence; or

(ii)  in any other case—the trust estate was not a non-resident family trust in relation to the natural person at all times after the beginning of the year of income of the taxpayer commencing on 1 July 1990 and before the end of the entity’s current year of income when the trust estate was in existence; and

(c)     it is not the case that:

(i)  the entity is a natural person (other than a natural person in the capacity of a trustee) who first commenced to be a resident of Australia at a time (in this paragraph called the ‘first residence time’) after the IP time and before the end of the entity’s current year of income; and

(ii)  the transfer was made before the first residence time; and

(iii)   the entity was not in a position to control the trust estate at any time during the period:

(a)  commencing at the beginning of the first year of income of the entity after the first residence time; and

(b)  ending at the end of the entity’s current year of income.

“(2)    For the purposes of this section, if:

(a)  an entity (in this subsection called the ‘transferor’) being a partnership is an attributable taxpayer in relation to the entity’s current year of income and in relation to a particular trust estate (in this subsection called the ‘transferee trust estate’) because of one or more transfers (being actual transfers or transfers taken to have been made because of subsection 102aak (1), (2) or (5)) of property or services made by the transferor to the transferee trust estate; or

(b)  an entity (in this subsection also called the ‘transferor’) being a trust estate is an attributable taxpayer in relation to the entity’s current year of income and in relation to another trust estate (in this subsection also called the ‘transferee trust estate’) because of one or more transfers (being actual transfers or transfers taken to have been made because of subsection 102aak (1), (2) or (5)) of property or services made by the transferor to the transferee trust estate;

the question whether any other entity is an attributable taxpayer in relation to the same year of income and in relation to the transferee trust estate is to be determined as if:


(c)   if paragraph (a) applies—subsection 102aak (6) did not apply in relation to any of the transfers mentioned in that paragraph; or

(d)  if paragraph (b) applies—subsection 102aak (8) did not apply in relation to any of the transfers mentioned in that paragraph.

“(3)    If:

(a)   apart from this subsection, an entity, being a natural person (other than a natural person in the capacity of a trustee), is not an attributable taxpayer in relation to the entity’s current year of income and in relation to a trust estate; and

(b)   apart from paragraph (1) (b), the entity would have been such an attributable taxpayer; and

(c)   apart from subparagraph 102aah (2) (b) (i) or (3) (a) (ii), the trust estate was not a non-resident family trust in relation to the natural person at some time after the entity’s current year of income when the natural person was alive and the trust estate was in existence;

the following provisions have effect:

(d)      subsection (1) has effect as if paragraph (1) (b) had applied;

(e)   section 170 does not prevent the amendment of an assessment at any time for the purposes of giving effect to this subsection.

“(4)    If:

(a)   apart from this subsection, an entity is not an attributable taxpayer in relation to the entity’s current year of income and in relation to a trust estate; and

(b)  apart from sub-subparagraph (1) (a) (i) (e) or (f) or paragraph (1) (c), the entity would have been such an attributable taxpayer; and

(c)   the entity was in a position to control the trust estate at some time after the entity’s current year of income when the trust estate was in existence;

the following provisions have effect:

(d)  subsection (1) has effect as if sub-subparagraph (1) (a) (i) (e) or (f) or paragraph (1) (c), as the case may be, had applied;

(e)   section 170 does not prevent the amendment of an assessment at any time for the purposes of giving effect to this subsection.

Attributable income of a trust estate

“102aau. (1) Subject to this Subdivision, the attributable income of a non-resident trust estate of a year of income is:

(a)   if the non-resident trust estate is not a listed country trust estate in relation to the year of income—the net income of the non-resident trust estate of the year of income; or


(b)   if the non-resident trust estate is a listed country trust estate in relation to the year of income—the amount that would have been the net income of the non-resident trust estate of the year of income if the exempt income of the trust estate included all income and profits of the trust estate other than eligible designated concession income in relation to any listed country in relation to the year of income;

reduced by:

(c)   so much (if any) of the amount covered by paragraph (a) or (b) as represents:

(i)    an amount:

(a)  that is or has been included in the assessable income of a beneficiary under section 97; or

(b)  in respect of which the trustee of the non-resident trust estate is or has been assessed and liable to pay tax under section 98, 99 or 99a; or

(ii)   an amount:

(a)  that is paid to a beneficiary, being a resident of a listed country, during the period of 13 months commencing at the beginning of the year of income; and

(b)  subject to tax in a listed country in a tax accounting period ending before the end of the year of income or commencing during the year of income; or

(iii)   an amount that consists of, or is attributable to, so much of a frankable dividend (within the meaning of Part IIIaa) as has been franked in accordance with section 160aqf; or

(iv)   an amount that is included in the assessable income of the trustee of the trust estate under section 160aqt; or

(v)   if an amount is or has been included in the assessable income of any taxpayer under section 102aazd because the taxpayer is an attributable taxpayer in relation to any year of income (in this subparagraph called the ‘taxpayer’s year of income’) and in relation to a trust estate other than the non-resident trust estate—so much of an amount paid to the trustee of the non-resident trust estate as represents the attributable income of that other trust estate of the taxpayer’s year of income; or

(vi)   if:

(a)  one or more amounts (in this subparagraph called the ‘section 458 amounts’) are included in the assessable incomes of one or more taxpayers under section 458 in respect of a dividend paid by a CFC; and


(b)  the assessable income of the trust estate of the year of income includes an amount that is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the payment of the dividend;

the total of the section 458 amounts; or

(vii)  if:

(a)  an attribution account payment is made to the trustee of the trust estate during the year of income; and

(b)  the making of the attribution account payment gives rise to an attribution debit, in relation to any taxpayer, for the entity making the payment;

the amount of the attribution debit; or

(viii)  an amount of income or profits of the trust estate:

(a)  that is subject to tax in any listed country in a tax accounting period ending before the end of the year of income or commencing during the year of income; and

(b)  that is not eligible designated concession income in relation to any listed country in relation to the year of income; and

(d)   so much of any foreign tax or Australian tax paid by the trustee or a beneficiary as is attributable to so much of the amount covered by paragraph (a) or (b), as the case requires, as remains after the reduction or reductions covered by paragraph (c).

“(2)    The attributable income of a resident trust estate of a year of income is 0.

“(3)    For the purposes of sub-subparagraph (1) (c) (ii) (a), a beneficiary is to be taken to be a resident of a listed country if, and only if, the beneficiary is treated as a resident of the listed country for the purposes of the tax law of the listed country.

“(4)    If the tax law of a listed country adopts some criterion other than treatment as a resident as the criterion for applying a worldwide source tax base to a beneficiary, then, subsection (3) has effect, in relation to that tax law, as if that criterion were the same as treatment as a resident of the listed country for the purposes of that tax law.

“(5)    For the purposes of this section, where, because of section 101, a beneficiary is presently entitled to a particular amount, the amount is taken to have been paid to the beneficiary.

“(6)    For the purposes of this section, the extent to which an amount referred to in subparagraph (1) (c) (i) or (ii) (in this subsection called the ‘taxed amount’) represents the amount covered by paragraph (1) (b)


(in this subsection called the ‘listed country trust amount’) is calculated using the formula:

where:

Taxed amount means the taxed amount;

Listed country trust amount means the number of dollars in the listed country trust amount;

Net income means the number of dollars in the net income of the non-resident trust estate concerned of the year of income concerned.

Double tax agreements to be disregarded

“102aav. In calculating the attributable income of a trust estate, the Income Tax (International Agreements) Act 1953 is to be disregarded, except for the purpose of references in this Act to that Act.

Certain provisions to be disregarded in calculating attributable income

“102aaw. For the purpose of applying this Act in calculating the attributable income of a trust estate, sections 20, 23ai, 38 to 43 (inclusive), 128d, 456, 457, 458 and 459 are to be disregarded.

Income and expenses to be expressed in Australian currency

“102aax. (1) For the purpose of applying this Act in calculating the attributable income of a trust estate of a year of income, any amount (in this section called an ‘eligible amount’) of income wherever derived or of expenditure wherever incurred is to be expressed in Australian currency.

“(2)    Where, according to the accounts of the trust estate that are used to calculate the attributable income of the trust estate of the year of income, some or all of the eligible amounts of the trust estate are not expressed in Australian currency, then any such eligible amount is to be converted:

(a)  if there is a single or predominant foreign currency in which the eligible amounts of the trust estate are expressed in the accounts and paragraph (b) does not apply:

(i)  where the eligible amount is expressed in that currency— to Australian currency at a rate equal to:

(a)  if sub-subparagraph (b) does not apply—the average of the exchange rates applicable from time to time during the year of income; or

(b)  if the trustee of the trust estate elects in accordance with subsection (3)—the exchange rate applicable on the last day of the year of income; or


(ii)   in any other case—first to the single or predominant currency using any reasonable method and then to Australian currency in accordance with whichever of sub-subparagraph (i) (a) or (b) applies; or

(b)  if the eligible amount is an amount of foreign tax paid by the trustee of the trust estate:

(i)  if the foreign tax was paid by deduction from another amount—to Australian currency, or to another currency and then to Australian currency, according to the method applicable under paragraph (a) or (c) for the conversion of the amount from which it was deducted; or

(ii)  in any other case—to Australian currency at the rate of exchange applicable at the time when the foreign tax was paid; or

(c)  if neither paragraph (a) or (b) applies—to Australian currency using any reasonable method.

“(3)    The trustee of the trust estate may elect that sub-subparagraph (2) (a) (i) (b) is to apply in relation to the trust estate.

“(4)    An election under subsection (3):

(a)     must be in writing; and

(b)  must be lodged with the Commissioner before the end of the period of 30 days after the end of the year of income concerned, or within such further period as the Commissioner allows.

“(5)    Where the trustee of the trust estate does so, that sub-subparagraph applies instead of sub-subparagraph (2) (a) (i) (a) in calculating the attributable income of the trust estate for the year of income and for all subsequent years of income.

Modified application of trading stock provisions

“102aay. For the purpose of applying this Act in calculating the attributable income of the trust estate, Subdivision B of Division 2 of Part III has effect as if the value of the article of trading stock to be taken into account at the beginning of the year of income were its cost price.

Modified application of depreciation provisions

“102aaz. (1) For the purpose of determining the attributable income of a trust estate of a year of income (in this section called the ‘attributable year of income’), where property has been held by the trustee of the trust estate in a non-attributable year of income before the attributable year of income, then, in relation to the application of a depreciation provision to the property, subsection (2) applies.

“(2)    Such amount as the Commissioner considers appropriate to take account of the holding of the property as mentioned in subsection (1) is, under the depreciation provision:


(a)     an allowable deduction to the trustee of the trust estate; or

(b)     included in the assessable income of the trust estate;

as the case requires, for the attributable year of income in substitution for any amount that would otherwise be so included or allowable.

“(3)    For the purpose of exercising the Commissioner’s power under subsection (2) in relation to deductions allowable under sections 54 to 62 (inclusive), the Commissioner must assume that the property was used by the trustee of the trust estate during any non-attributable year of income wholly and exclusively for the purpose of producing assessable income.

Modified application of Division 13 of Part III

“102aaza. In calculating the attributable income of a trust estate of a year of income:

(a)  for the purposes of section 136ac, if the trust estate is a non-resident trust estate in relation to the year of income—the trustee is taken to be a non-resident, within the meaning of that section, without regard to the assumption about the trustee’s residence that is made in whichever of the following provisions is applicable:

(i)  the definition of ‘net income’ in subsection 95 (1);

(ii)    the definition of ‘net income’ in subsection 102d (1);

(iii)   the definition of ‘net income’ in section 102m;

(iv)   section 272; and

(b)     section 136af applies as if:

(i)  the reference in subsection 136af (1) to the application of section 136ad in relation to a taxpayer were a reference both to:

(a)  the application of that section in relation to any trust estate in calculating its attributable income or in relation to any CFC in calculating its attributable income under Division 7 of Part X; and

(b)  the actual application of that section in relation to any taxpayer in calculating the taxable income of the taxpayer apart from this Division; and

(ii)  the references in paragraphs 136af (1) (a) and (b) to assessable income or allowable deductions in relation to the relevant taxpayer were references to assessable income, or to allowable deductions, taken into account in calculating the attributable income of the trust estate.

Modified application of Part IIIa

“102aazb. For the purposes of applying this Act in calculating the attributable income of a trust estate, Part IIIa applies as if:

(a)     the following provisions were disregarded:


(i)  subsections 160m (13) and (14);

(ii)  subsection 160z (6) and paragraph 160z (9) (c); and

(b)  the trust estate were a resident trust estate, or a resident unit trust, as the case may be.

Modified application of loss provisions—pre-1990-91 losses

“102aazc. (1) In calculating the attributable income of a trust estate of a year of income, no deductions are allowable under section 79e, 79f, 80, 80aaa or 80aa in respect of losses of a year of income earlier than the year of income commencing on 1 July 1990.

“(2)    In calculating the attributable income of a trust estate of a year of income, section 160afd does not apply to an overall foreign loss incurred in a year of income earlier than the year of income commencing on 1 July 1990.

Assessable income of attributable taxpayer to include attributable income of trust estate to which taxpayer has transferred property or services

“102aazd. (1) Subject to section 102aaze and to this section, if:

(a)     an entity is an attributable taxpayer:

(i)  in relation to the year of income of the taxpayer commencing on 1 July 1990 (which year of income is in this section called the ‘taxpayer’s current year of income’) or in relation to a subsequent year of income of the taxpayer (which year of income is in this section also called the ‘taxpayer’s current year of income’); and

(ii)  in relation to a trust estate; and

(b)  any part of a non-resident year of income of the trust estate occurs during the taxpayer’s current year of income; and

(c)  the taxpayer is a resident at any time during the taxpayer’s current year of income;

the assessable income of the taxpayer of the taxpayer’s current year of income includes:

(d)  if the taxpayer is a resident at all times during the taxpayer’s current year of income—the whole of the notional attributable income of the trust estate of the taxpayer’s current year of income; or

(e) if the taxpayer is a resident for only part of the taxpayer’s current year of income—the amount calculated using the formula:

where:


Notional attributable income means the notional attributable income of the trust estate of the taxpayer’s current year of income;

Days in residency period means the number of whole days during the taxpayer’s current year of income when the taxpayer was a resident;

Days in year of income means the number of whole days in the taxpayer’s current year of income.

“(2)    A reference in subsection (1) to the notional attributable income of the trust estate of the taxpayer’s current year of income is a reference to:

(a)  if there is a year of income of the trust estate that begins at the same time as the beginning of the taxpayer’s current year of income—the attributable income of the trust estate of that year of income; or

(b)     in any other case—the amount obtained:

(i)  by calculating, for each year of income of the trust estate (in this paragraph called the ‘trust’s year of income’) any part of which occurs during the taxpayer’s current year of income, the amount calculated using the formula:

where:

Attributable income means the attributable income of the trust estate of the trust’s year of income;

Days in overlapping period means the number of whole days in the trust’s year of income that occurred during the taxpayer’s current year of income;

Days in trust’s year of income means the number of whole days in the trust’s year of income; and

(ii)  by adding together the amounts calculated under subparagraph (i).

“(3)    If:

(a)   an amount is included in the assessable income of an attributable taxpayer of the taxpayer’s current year of income under subsection (1); and

(b)   before or during the taxpayer’s current year of income, one or more entities other than the taxpayer have transferred property or services to the trust estate concerned; and

(c)   the taxpayer gives to the Commissioner, in accordance with the approved form, such information in connection with the operation of this Division as is required by the form to be set out;


the Commissioner may reduce the amount included in the taxpayer’s assessable income of the taxpayer’s current year of income under subsection (1) having regard to:

(d)   the extent to which the attributable income of the trust estate is, in the opinion of the Commissioner, attributable to property or services transferred by the taxpayer; and

(e)      such other matters as the Commissioner considers relevant.

“(4)    If:

(a)   apart from this subsection, an amount would be included in the assessable income of an attributable taxpayer of the taxpayer’s current year of income under subsection (1) in relation to a particular trust estate; and

(b)   the taxpayer could not reasonably be expected to obtain the information required to determine the attributable income of the trust estate;

the following provisions have effect:

(c)   no amount is to be included in the assessable income of the taxpayer of the taxpayer’s current year of income under subsection (1) in relation to the trust estate;

(d)   the assessable income of the taxpayer of the taxpayer’s current year of income includes the amount obtained:

(i)   if any of the transfers that were taken into account in determining whether the taxpayer was an attributable taxpayer in relation to the taxpayer’s current year of income and in relation to the trust estate were made by the taxpayer to the trust estate after the IP time—by calculating, for each such transfer, the amount calculated using the formula:

where:

Adjusted value of the transfer has the meaning given by subsection (5);

Weighted statutory interest rate means the weighted statutory interest rate in relation to the taxpayer’s current year of income; and

(ii)   if any of the transfers that were taken into account in determining whether the taxpayer was an attributable taxpayer in relation to the taxpayer’s current year of income and in relation to the trust estate were made by the taxpayer to the trust estate before the IP time—the amount calculated using the formula:


where:

Adjusted net worth of trust estate has the meaning given by subsection (6);

Weighted statutory interest rate means the weighted statutory interest rate in relation to the taxpayer’s current year of income; and

(iii)    by adding together the amounts calculated under subparagraphs (i) and (ii).

“(5)    For the purposes of subsection (4), the adjusted value of a transfer of property or services made by an attributable taxpayer to a trust estate is:

(a)   if the transfer occurred during the taxpayer’s current year of income—the amount calculated using the formula:

where:

Market value of transferred property or services means the market value, immediately before the transfer, of the property or services;

Days after transfer means the number of whole days in the taxpayer’s current year of income after the day on which the transfer took place;

Days in year of income means the number of whole days in the taxpayer’s current year of income; or

(b)   if the transfer of the property or services occurred before the taxpayer’s current year of income—the sum of:

(i)   the market value, immediately before the transfer, of the property or services; and

(ii)   the amount obtained:

(a)  by calculating, in respect of the transfer, for each year of income preceding the taxpayer’s current year of income, the amount ascertained using the formula in subparagraph (4) (d) (i); and

(b)  by adding together the amounts calculated under sub-subparagraph (a).

“(6)    For the purposes of the application of subsection (4) in relation to a transfer of property or services made by an attributable taxpayer to a trust estate, the adjusted net worth of the trust estate is:


(a)   if the taxpayer’s current year of income is the year of income commencing on 1 July 1990—the 1 July 1990 net worth of the trust estate; or

(b)      in any other case—the sum of:

(i)    the 1 July 1990 net worth of the trust estate; and

(ii)   the amount obtained:

(a)  by calculating, in respect of the transfer, for each year of income preceding the taxpayer’s current year of income, the amount ascertained using the formula in subparagraph (4) (d) (ii); and

(b)  by adding together the amounts calculated under sub-subparagraph (a).

“(7)    If:

(a)   subsection (4) applies to an attributable taxpayer in relation to the taxpayer’s current year of income; and

(b)   any of the transfers taken into account in determining whether the taxpayer was an attributable taxpayer in relation to the taxpayer’s year of income and in relation to the trust estate concerned were made before the IP time; and

(c)   the taxpayer gives to the Commissioner, in accordance with the approved form, such information in connection with the operation of this Division as is required by the form to be set out;

the Commissioner may reduce the amount included in the taxpayer’s assessable income of the taxpayer’s current year of income under subsection (4) having regard to:

(d)   the extent to which the market value, as at the beginning of the taxpayer’s current year of income, of the assets of the trust estate is, in the opinion of the Commissioner, attributable to property or services transferred by the taxpayer before the IP time; and

(e)      such other matters as the Commissioner considers relevant.

Accruals system of taxation does not apply to small amounts

“102aaze. An amount is not to be included in the assessable income of the taxpayer of a year of income under section 102aazd in relation to a trust estate that is a listed country trust estate in relation to the year of income if the amount obtained by:

(a)   identifying each trust estate in relation to which the taxpayer is an attributable taxpayer in relation to the year of income; and

(b)   calculating the attributable income of the year of income of each such trust estate; and

(c)      adding the amounts calculated under paragraph (b);

does not exceed the lesser of the following amounts:


(d)      $20,000;

(e)   10% of the total of the net incomes of each of those trust estates of the year of income.

Only resident partners, beneficiaries etc. liable to be assessed as a result of attribution

“102aazf. Section 460 applies to an amount included in the assessable income of a taxpayer under section 102aazd in a corresponding way to the way in which section 460 applies to an amount included in the assessable income of a taxpayer under section 456, 457, 458 or 459 and, for the purposes of that corresponding application, references in sections 336, 338 and 460 to a Part X Australian resident are to be read as references to a resident within the meaning of section 6.

Keeping of records

“102aazg. (1) Subject to this section, a person who is an attributable taxpayer:

(a)  in relation to the year of income of the person commencing on 1 July 1990 or in relation to a subsequent year of income of the person; and

(b)     in relation to a particular trust estate;

must keep records (in Australia or elsewhere) containing particulars of:

(c)  the acts, transactions and other circumstances that resulted in the person being an attributable taxpayer in relation to that year of income and in relation to that trust estate; and

(d)  except where subsection 102aazd (4) applies in relation to the trust estate and in relation to the year of income of the person— the basis of the calculation of the attributable income of the trust estate for each year of income of the trust estate any part of which occurred during the year of income of the person; and

(e)  the basis of the calculation of the amounts (including nil amounts) included in the assessable income of the person of the year of income of the person under section 102aazd.

“(2)    A person who contravenes subsection (1) is guilty of an offence punishable on conviction by a fine not exceeding $3,000.

“(3)    A person who is required by this section to keep records must:

(a)  keep the records in writing in the English language or so as to enable the records to be readily accessible and convertible into writing in the English language; and

(b)  keep the records so as to enable the person’s liability under this Act to be readily ascertained.

“(4)    This section does not require a person to keep a record of information if:


(a)   the person did not know, and had no reasonable grounds to suspect, that the person was an attributable taxpayer of the kind mentioned in subsection (1); or

(b)  the person did not know that, and made all reasonable efforts to ascertain whether, the person was an attributable taxpayer as mentioned in subsection (1); or

(c)   the person did not know, and made all reasonable efforts to obtain, the information.

“(5)    Subject to subsections (6) and (7), the following provisions apply to a partnership as if the partnership were a person:

(a)     subsections (1) to (4) (inclusive) of this section;

(b)  subsections 262a (4) and (5), in so far as those subsections apply to records kept under or for the purposes of this section;

(c)  Part III of the Taxation Administration Act 1953, in so far as that Part of that Act relates to the provisions covered by paragraph (a) or (b) of this subsection.

“(6)    Where, by virtue of subsection (5), an offence is taken to have been committed by a partnership, that offence is taken to have been committed by each of the partners.

“(7)    In a prosecution of a person for an offence by virtue of subsection (6), it is a defence if the person proves that the person:

(a)  did not aid, abet, counsel or procure the act or omission by virtue of which the offence was taken to have been committed; and

(b)  was not in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, an act or omission by virtue of which the offence is taken to have been committed.”.

Loans etc. to shareholders and associates deemed to be dividends

19.     Section 108 of the Principal Act is amended by inserting after subsection (2) the following subsections:

“(2a) In spite of anything in any other provision of this section, if:

(a)  a company has profits immediately before a distribution time for a distribution benefit in relation to the company; and

(b)  the distribution time occurred after 3 June 1990; and

(c)  the first company is a CFC at the distribution time; and

(d)  the first company is a resident of an unlisted country at the distribution time; and

(e)  apart from this subsection, an amount deemed by this section to be a dividend paid by the company would include an amount (in this subsection called the ‘eligible distributed amount’) that represents the whole or a part of so much of the distribution payment as does not exceed the amount of those profits;


then, the eligible distributed amount is not deemed by this section to be a dividend paid by the company.

“(2b) An expression used in subsection (2a) of this section and in section 47a has the same meaning in that subsection as it has in that section.”.

Interpretation

20.     Section 110 of the Principal Act is amended:

(a)  by omitting “or” from subparagraph (b) (ii) of the definition of “AD/RLA policy” in subsection (1);

(b)  by adding at the end of paragraph (b) of the definition of “AD/RLA policy” in subsection (1) the following word and subparagraph:

“or (iv) an eligible non-resident policy;”;

(c)  by inserting “or an eligible non-resident policy” after “eligible policy” in the definition of “CS policy” in subsection (1);

(d)  by inserting “or an eligible non-resident policy” after “eligible policy” in the definition of “NCS policy” in subsection (1);

(e)  by inserting “a policy (other than an eligible non-resident policy) that is” after “means” in the definition of “RA policy” in subsection (1);

(f)      by inserting in subsection (1) the following definition:

‘eligible non-resident policy’ means a life assurance policy that is:

(a)  issued by a life assurance company in the course of a business carried on by the company at or through a permanent establishment of the company in a foreign country; and

(b)  vested in an entity (within the meaning of Part X):

(i)  who is not an associate (within the meaning of Part X) of the company; and

(ii)  who is not a Part X Australian resident (within the meaning of Part X);”.

Deductions to be allowable for expenditure incurred in gaining superannuation premiums

21.      Section 111a of the Principal Act is amended by adding at the end the following subsection:

“(2)    Subsection (1) does not apply to superannuation premiums that are:

(a)     received in respect of eligible non-resident policies; or

(b)     exempt from tax under section 23ah.”.


Deductions to be allowable for expenditure incurred in gaining the investment component of certain premiums

22.     Section 111aa of the Principal Act is amended by adding at the end of subsection (1) the following word and paragraphs:

“or (d) premiums received in respect of eligible non-resident policies; or

(e)       premiums exempt from tax under section 23ah.”.

Exemption of income attributable to certain policies etc.

23.     Section 112a of the Principal Act is amended:

(a)  by inserting in subsection (1) “and eligible non-resident policies” after “exempt policies”;

(b)  by inserting in subsection (2) “(other than eligible non-resident policies)” after “not to include policies”.

Repeal of section 112b

24.     Section 112b of the Principal Act is repealed.

Notional Part IIIa disposals of fund assets

25.     Section 116cb of the Principal Act is amended by inserting in subsection (2) “or eligible non-resident policies” after “exempt policies”.

Amount of assessable income in particular class

26.     Section 116ce of the Principal Act is amended by inserting in subsection (5) “or eligible non-resident policies” after “exempt policies”.

Consequential adjustments to assessable income and allowable deductions

27.     Section 136af of the Principal Act is amended by inserting after subsection (1) the following subsection:

“(1a) Subsection (1) also has the effect that it would have if the reference in that subsection to the application of section 136ad in relation to a taxpayer included references to:

(a)  the application of section 136ad in accordance with section 102aaza for the purpose of calculating the attributable income of a trust estate; and

(b)  the application of section 136ad in accordance with section 400 for the purpose of calculating the attributable income of a CFC.”.

Interpretation

28.     Section 160ae of the Principal Act is amended:

(a)   by omitting from subsection (1) the definition of “underlying tax” and substituting the following definition:

‘underlying tax’ means foreign tax payable on the taxable profits of a company;”;


(b)    by omitting from subsection (1) the definition of “profits”;

(c)    by inserting in subsection (1) the following definitions:

‘attributable income’ has the same meaning as in Part X;

‘attributed tax account debit’ has the same meaning as in Part X;

‘attribution account entity’ has the same meaning as in Part X;

‘attribution account payment’ has the same meaning as in Part X;

‘attribution percentage’ has the same meaning as in Part X;

‘attribution surplus’ has the same meaning as in Part X;

‘CFC’ has the same meaning as in Part X;

‘CFC-type foreign tax’ means foreign tax in respect of amounts that correspond to those included in assessable income under section 456;

‘distributable profits’ has the same meaning as in Part X;

‘exempting profits’ has the same meaning as in Part X;

‘exempting profits percentage’ has the same meaning as in Part X;

‘exempting receipt’ has the same meaning as in Part X;

‘listed country’ has the same meaning as in Part X;

‘modified passive income’ has the meaning given by subsection 160aea (2);

‘non-exempting profits’, in relation to a company in relation to a taxpayer, means distributable profits of the company other than exempting profits of the company in relation to the taxpayer;

‘non-portfolio dividend’ has the same meaning as in Part X;

‘notional allowable deduction’ has the same meaning as in Part X;

‘passive income’ has the meaning given by subsection 160aea (1);

‘resident of a listed country’ has the same meaning as in Part X;

‘resident of an unlisted country’ has the same meaning as in Part X;

‘statutory accounting period’ has the same meaning as in Part X;

taxable profits’, in relation to a company, means income and profits or gains, whether of an income or capital nature, of the company on which foreign tax is payable;

‘unlisted country’ has the same meaning as in Part X.”;

(d)   by inserting in subsection (2) “or gains” after “profits” (wherever occurring);

(e)   by inserting in subsection (2) “(other than section 160afd)” after “Division”;

(f)    by adding at the end the following subsections:

“(7)       For the purposes of this Division, and for the purposes of the application of section 6ab to this Division, each listed


country and each unlisted country is to be treated as a separate foreign country.

“(8) For the purposes of this Division, underlying tax relates to distributable profits of a company to the extent that the taxable profits of the company on which the underlying tax is payable are attributable to the distributable profits.”.

29.     After section 160ae of the Principal Act the following section is inserted:

Passive income

“160aea. (1) In this Division:

‘passive income’, in relation to a taxpayer, in relation to a year of income, means:

(a)  dividends (within the meaning of section 6) paid to the taxpayer in the year of income; or

(b)  unit trust dividends (within the meaning of Division 6b or 6c) paid to the taxpayer in the year of income; or

(c)  a distribution made to the taxpayer in the year of income where the distribution is taken to be a dividend because of section 47; or

(d)  an amount that is taken to be a dividend paid to the company in the year of income because of section 47a or 108; or

(e)  interest income derived by the taxpayer in the year of income; or

(f)   annuities derived by the taxpayer in the year of income; or

(g)  rental income derived by the taxpayer in the year of income; or

(h)  royalties derived by the taxpayer in the year of income; or

(j)   an amount derived by the taxpayer in the year of income as consideration for the assignment, in whole or in part, of any copyright, patent, design, trade mark or other like property or right; or

(k)  profits of a capital nature that accrued to the taxpayer in the year of income; or

(m) passive commodity gains that accrued to the taxpayer in the year of income; or

(n)  an amount included in the assessable income of the taxpayer of the year of income under section 102aazd, 456, 457, 458 or 459;

but does not include offshore banking income.

“(2)    In this Division:

‘modified passive income’, in relation to a taxpayer, in relation to a year of income, means amounts that would be passive income of the taxpayer


of the year of income if that passive income did not include interest income of the taxpayer of the year of income.

“(3)    In this section:

‘commodity’ means any thing that is capable of delivery under an agreement for its delivery, but does not include an instrument creating or evidencing a chose in action;

‘passive commodity gain’, in relation to a taxpayer, in relation to a year of income, means a gain realised by the taxpayer in a year of income from disposing of a passive commodity investment;

‘passive commodity investment’, in relation to a taxpayer, means:

(a)     either of the following contracts:

(i)   a forward contract in respect of a commodity;

(ii)  a futures contract in respect of a commodity; or

(b)     a right or option in respect of such a contract;

except where both of the following conditions are satisfied:

(c)     the taxpayer carries on:

(i)  a business of producing or processing the commodity; or

(ii)  a business that involves the use of the commodity as a raw material in a production process;

(d)  the contract, right or option relates to the carrying on of that business;

‘rent’ has the same meaning as in Part X;

‘rental income’ means income derived by way of rent.”.

Credits in respect of foreign tax

30.      Section 160af of the Principal Act is amended by omitting paragraph (7) (a) and substituting the following paragraph:

“(a)    passive income;”.

Certain dividends deemed to be interest income

31.      Section 160afa of the Principal Act is amended by omitting from subsection (1a) and paragraph (2) (b) “total profits derived during” and substituting “distributable profits in relation to”.

Foreign underlying tax

32.      Section 160afc of the Principal Act is amended:

(a)   by omitting from paragraph (2) (b) “out of the” and substituting “that relates to the distributable”;

(b)   by omitting the definition of component C in the formula in subsection (2) and substituting the following definition:

“C is the number of whole dollars in the distributable profits out of which the dividend has been paid.”;


(c)   by omitting the definitions of components B, C and D in the formula in subsection (4) and substituting the following definitions:

B   is the amount (if any) of underlying tax paid by the paying company that relates to the distributable profits out of which the dividend has been paid;

is the amount (if any) of foreign tax deemed to have been paid by the paying company by any other application or applications of this subsection in relation to the dividend series; and

is the number of whole dollars in the distributable profits out of which the dividend has been paid.”;

(d)    by inserting after subsection (5) the following subsection:

“(5a)     Where the dividend is in whole or in part:

(a)   an exempting receipt of a company in relation to an accounting period in relation to the Australian company; or

(b)        an exempting receipt of the Australian company;

then, in determining the foreign tax (if any) that the Australian company is taken, because of this section, to have paid, and to have been personally liable for, in respect of the dividend:

(c)   a reference in subsection (2) or (4) to the amount of the dividend is a reference to so much of the dividend as is not an exempting receipt; and

(d)  a reference in subsection (2) or (4) to the amount of the underlying tax that relates to the distributable profits out of which the dividend has been paid is a reference to:

(i)  where the dividend is paid by a company (in this subparagraph called the ‘paying company’) that is a resident of a listed country—the amount calculated using the formula:

where:

Attribution surplus tax means so much of the underlying tax as relates exclusively to the part of the distributable profits that is attributable to any attribution surplus, immediately before the payment of the dividend, for the paying company in relation to the Australian company;

General tax means so much of the underlying tax as does not relate exclusively to the part of the attributable profits attributable to that attribution


surplus or exclusively to the remainder of the distributable profits;

Attribution surplus percent means the percentage of the general tax that may reasonably be related to the part of the distributable profits that is attributable to that attribution surplus; or

(ii)  in any other case—the amount calculated using the formula:

where:

Non-exempting tax means so much of the underlying tax as relates exclusively to non-exempting profits, in relation to the Australian company, forming part of the distributable profits;

General tax means so much of the underlying tax as does not relate exclusively to non-exempting profits in relation to the Australian company, or exclusively to exempting profits in relation to the Australian company, forming part of the distributable profits;

Non-exempting percent means the percentage of the General tax that may reasonably be related to non-exempting profits, in relation to the Australian company, forming part of the distributable profits; and

(e)  a reference in subsection (2) or (4) to the amount of the distributable profits out of which the dividend has been paid is a reference to:

(i)  where the dividend is paid by a company that is a resident of a listed country—so much of those distributable profits as is attributable to any attribution surplus, for the latter company in relation to the Australian company, existing immediately before the dividend is paid; or

(ii)  in any other case—any non-exempting profits, in relation to the Australian company, that form part of those distributable profits.”;

(e)  by inserting in subsections (6) and (7) “distributable” before “profits” (wherever occurring);

(f)   by omitting subsections (10) and (11) and substituting the following subsection:

“(10)      In this section:

‘accounting period’ means an accounting period used by the


company in the accounts by reference to which it distributes dividends.”.

33.     After section 160afc of the Principal Act the following sections are inserted:

Foreign tax in respect of amounts assessable under section 456

“160afca. If:

(a)   an amount (in this section called the ‘section 456 amount’) is included in the assessable income of a taxpayer, being a company, of a year of income under section 456 in respect of the taxpayer’s attribution percentage of the attributable income of a CFC for a statutory accounting period; and

(b)   at the end of the statutory accounting period, the CFC was related to the taxpayer;

then the taxpayer is taken, for the purposes of this Division, to have paid, and to have been personally liable for, in respect of the section 456 amount, in the year of income, an amount of foreign tax equal to the attribution percentage of the total amount of the notional allowable deductions under section 393 in relation to the attributable income of the CFC for the statutory accounting period.

Foreign tax in respect of amounts assessable under section 457

“160afcb. If:

(a)  an amount (in this section called the ‘section 457 amount’) is included in the assessable income of a taxpayer, being a company, of a year of income under section 457 as a result of a change of residence at a particular time (in this section called the ‘residence-change time’) by a CFC; and

(b)  at the residence-change time, the CFC was related to the taxpayer;

the following provisions have effect:

(c)  the taxpayer is taken, for the purposes of this Division, to have paid, and to have been personally liable for, in respect of the section 457 amount, in the year of income, an amount of foreign tax equal to the total foreign tax and Australian tax paid by the CFC that is attributable to the section 457 amount;

(d)  if the section 457 amount is attributable in whole or part to a non-portfolio dividend paid to the CFC by a foreign company that, at the time of the payment of the dividend, was related to the taxpayer—the taxpayer is taken, for the purposes of this Division, to have paid, and to have been personally liable for, in respect of the section 457 amount, in the year of income, an amount of foreign tax equal to the taxpayer’s attribution percentage, at the residence-change time, of the amount (if any) of foreign tax that the CFC would have been taken to have


paid, and to have been personally liable for, because of section 160afc, in respect of the whole or the part of the dividend if:

(i)  the CFC had been an Australian company at the time of the payment of the dividend; and

(ii)  it were a requirement of that section (in addition to the other requirement of that section), for companies to be a pair of companies in a dividend series, that they be related to the taxpayer referred to in this section.

Foreign tax in respect of amounts assessable under section 458

“160afcc. If:

(a)   an amount (in this section called the ‘section 458 amount’) is included in the assessable income of a taxpayer, being a company, of a year of income under section 458 in respect of a dividend paid by a CFC to another CFC; and

(b)   at the time of the payment of the dividend, both CFCs were related to the taxpayer;

then the taxpayer is taken, for the purposes of this Division, to have paid, and to have been personally liable for, in respect of the section 458 amount, in the year of income, an amount of foreign tax equal to the sum of the following amounts:

(c)   if the CFC to which the dividend is paid has paid an amount of foreign tax (other than under a tax law of the listed or unlisted country of which the CFC is a resident) in respect of the dividend—the amount calculated using the following formula:

where:

Section 458 amount means the section 458 amount;

Foreign tax means the amount of the foreign tax;

Dividend means the amount of the dividend;

(d)      the amount calculated using the formula:

where:

160afc deemed tax means the amount (if any) of foreign tax that the CFC to which the dividend is paid would have been taken to have paid, and to have been personally liable for, because of section 160afc, in respect of the dividend if:

(i)  the CFC had been an Australian company at the time of the payment of the dividend; and

(ii)  it were a requirement of that section (in addition to the other requirement of that section), for companies to be


a pair of companies in a dividend series, that they be related to the taxpayer referred to in this section; and

(iii)   for the purpose of applying subsection 160afc (2) or (4) in the case where the paying company referred to in that subsection is the CFC that paid the dividend, the reference in component B of the formula in that subsection to underlying tax included a reference to amounts that would be underlying tax if Australian tax were foreign tax;

Section 458 amount means the section 458 amount;

Dividend means the amount of the dividend;

Exempting profits part means the exempting profits percentage, in relation to the taxpayer, of the dividend.

Foreign tax in respect of amounts exempt under section 23ai

“160afcd. If an attribution account payment made to a resident taxpayer by an attribution account entity in a year of income is, in whole or in part (which whole or part is in this section called the ‘section 23ai exempt part’), exempt from tax under section 23ai, the following provisions have effect:

(a)   the section 23ai exempt part is taken, for the purposes of paragraph 160af (1) (a) but not (d), to be included in the assessable income of the taxpayer of the year of income;

(b)   the taxpayer is taken for the purposes of this Division to have paid, and to have been personally liable for, in respect of the section 23ai exempt part, in the year of income, an amount of foreign tax calculated using the formula:

where:

EP [Exempt Percentage] means the percentage of the attribution account payment represented by the section 23ai exempt part;

DT [Direct Tax] means any foreign tax that, disregarding this section and section 160afc, the taxpayer is taken for the purposes of this Division to have paid, and to have been personally liable for, in respect of the attribution account payment;

AEP [Adjusted Exempt Percentage] means the percentage that would be formula component EP if the attribution account payment were reduced by any part of that payment that is exempt under section 23aj;

UT [Underlying Tax] means any foreign tax (other than CFC-type foreign tax) that, disregarding this section, the taxpayer is taken, for the purposes of this Division, to have paid, and to have been personally liable for, under section 160afc in respect of the attribution account payment;


AT [Attributed Tax] means the amount of any attributed tax account debit arising for the attribution account entity in relation to the taxpayer on the making of the attribution account payment, to the extent that the amount of the debit does not exceed the amount of the formula component AEP × UT.”.

34.      Section 160afd of the Principal Act is repealed and the following section is substituted:

Losses of previous years

“160afd. (1) Where a resident taxpayer has incurred one or more overall foreign losses in respect of a class of assessable foreign income in respect of any of the 7 pre-1990 years of income before a particular year of income, the amount that, but for this section, would be the taxpayer’s assessable foreign income of that class of the particular year of income is, for the purposes of this Act, reduced by an amount calculated using the formula:

where:

Total loss means the amount of the loss, or the sum of the amounts of the losses;

Recouped loss means so much of the Total loss as has been taken into account, in any previous application of this subsection, in reducing the taxpayer’s assessable foreign income of that class.

“(2)    Where a resident taxpayer has incurred one or more overall foreign losses in respect of a class of assessable foreign income in respect of any of the post-1989 years of income before a particular year of income, the amount that, but for this section, would be the taxpayer’s assessable foreign income of that class of the particular year of income is, for the purposes of this Act, reduced by an amount calculated using the formula:

where:

Total loss means the amount of the loss, or the sum of the amounts of the losses;

Recouped loss means so much of the Total loss as has been taken into account, in any previous application of this subsection, in reducing the taxpayer’s assessable foreign income of that class.

“(3)    Where, because of the application of either subsection (1) or (2) or of both subsections (1) and (2), a taxpayer’s assessable foreign income of a particular class of a year of income is to be reduced by 2 or more losses, the losses are to be taken into account in accordance with the following principles:

(a)  any loss or losses under subsection (1) are to be taken into account before any under subsection (2);


(b)  any losses under the same subsection are to be taken into account in the order in which they were incurred.

“(4)    Where the amount of a taxpayer’s assessable foreign income of a particular class of a year of income is reduced under subsection (1) or (2), any foreign tax paid by the taxpayer in respect of the amount is, for the purposes of this Act, to be calculated as if the amount were so reduced.

“(5)    This section has effect whether or not the law of the foreign country concerned allows the income of a taxpayer of a particular year to be reduced because of losses incurred in previous years.

“(6)    Where:

(a)   apart from this subsection, an overall foreign loss in respect of a class of assessable foreign income incurred by a taxpayer in respect of a year of income would be taken into account for the purpose of applying subsection (1) or (2) in relation to the particular year of income referred to in that subsection; and

(b)   if that loss were a loss incurred by the taxpayer within the meaning of section 80, it would not, because of section 80a or 80da, be taken into account for the purpose of applying section 80 in relation to the particular year of income;

then the overall foreign loss is not to be taken into account for the purpose of applying subsection (1) or (2) of this section in relation to the particular year of income.

“(7)    Where:

(a)   there are one or more foreign income deductions of a taxpayer in relation to a class of assessable foreign income in relation to a year of income; and

(b)      either:

(i)   the taxpayer did not derive any assessable foreign income of that class during the year of income; or

(ii)   the taxpayer derived assessable foreign income of that class during the year of income and its amount is exceeded by the sum of the foreign income deductions;

the taxpayer is taken, for the purposes of this section, to have incurred an overall foreign loss in respect of the class of assessable foreign income for the year of income equal to:

(c)   where subparagraph (b) (i) applies—the amount of the deductions; or

(d)   where subparagraph (b) (ii) applies—the amount of the excess referred to in that subparagraph.

“(8)    For the purposes of this section, each of the following kinds of assessable foreign income constitutes a single class:

(a)     interest income;


(b)     modified passive income;

(c)     offshore banking income;

(d)     all other assessable foreign income.

“(9)    In this section:

‘assessable foreign income’, in relation to a taxpayer in relation to a year of income, means:

(a)  foreign income that is included in the assessable income of the taxpayer of the year of income; or

(b)     where:

(i)  during the year of income, the taxpayer derives a profit or gain of a capital nature from sources in a foreign country; and

(ii)   the whole or part of the profit or gain is included in the assessable income of the taxpayer of the year of income other than under Part IIIa;

the whole or the part of the profit or gain;

‘foreign income deduction’, in relation to a taxpayer in relation to a class of assessable foreign income in relation to a year of income, means any deduction that, disregarding section 79d, is allowed or allowable from the assessable income of the taxpayer of the year of income, to the extent that the deduction relates to assessable foreign income of that class of any year of income;

‘post-1989 year of income’ means the year of income commencing on 1 July 1989 or any later year of income;

‘pre-1990 year of income’ means any year of income before the year of income commencing on 1 July 1989.”.

Carry-forward and transfer of excess credits

35.     Section 160afe of the Principal Act is amended:

(a)   by omitting subsection (1) and substituting the following subsections:

“(1) If:

(a)   there is an initial credit shortfall for a class of income of a taxpayer in relation to a year of income (in this subsection called the ‘current year of income’); and

(b)   either or both of the following conditions are satisfied:

(i)   there is a post-transfer excess credit balance for the class of income of the taxpayer in relation to one or more earlier years of income that is available for the current year of income;

(ii)   one or more amounts that relate to that class of income have been transferred to the taxpayer under subsection (1d) for utilisation in the current year of income;


the taxpayer is to be taken to have utilised the following amounts, in the following order, in the current year of income, to successively increase the amount ascertained under paragraph 160af (1) (c) (in the application of that paragraph to the class of income of the taxpayer in relation to the current year of income) to an amount not exceeding the Australian tax upper limit for the class of income of the taxpayer in relation to the current year of income:

(c)    the post-transfer excess credit balance for the class of income of the taxpayer in relation to the fifth year of income before the current year of income, being the balance that is available for the current year of income;

(d)    the post-transfer excess credit balance for the class of income of the taxpayer in relation to the fourth year of income before the current year of income, being the balance that is available for the current year of income;

(e)    the post-transfer excess credit balance for the class of income of the taxpayer in relation to the third year of income before the current year of income, being the balance that is available for the current year of income;

(f)    the post-transfer excess credit balance for the class of income of the taxpayer in relation to the second year of income before the current year of income, being the balance that is available for the current year of income;

(g)    the post-transfer excess credit balance for the class of income of the taxpayer in relation to the year of income before the current year of income, being the balance that is available for the current year of income;

(h)    any amounts that relate to that class of income and that have been transferred to the taxpayer under subsection (1d) for utilisation in the current year of income.

“(1a) For the purposes of the application of this section in relation to a taxpayer, if:

(a)    all of the foreign income derived by the taxpayer in a year of income consists of income of a single class (within the meaning of subsection 160af (7)); and

(b)    section 160af applies in relation to the taxpayer in relation to the year of income;

section 160af is to be taken to apply in relation to that income as if the income were income of a particular class.

“(1b) For the purposes of the application of this section in relation to a taxpayer, if section 160af applies in relation to a particular class of income of the taxpayer in relation to a year of income:


(a)    the amount ascertained under paragraph 160af (1) (c) in that application (apart from this section) is the original foreign tax upper limit for the class of income of the taxpayer in relation to the year of income; and

(b)    the amount ascertained under paragraph 160af (1) (d) in that application is the Australian tax upper limit for the class of income of the taxpayer in relation to the year of income; and

(c)    if the original foreign tax upper limit for the class of income of the taxpayer in relation to the year of income exceeds the Australian tax upper limit for the class of income of the taxpayer in relation to the year of income—the amount of the excess is the initial excess credit for the class of income of the taxpayer in relation to the year of income; and

(d)    if the original foreign tax upper limit for the class of income of the taxpayer in relation to the year of income falls short of the Australian tax upper limit for the class of income of the taxpayer in relation to the year of income—the amount of the shortfall is the initial credit shortfall for the class of income of the taxpayer in relation to the year of income.

“(1c) For the purposes of the application of this section in relation to a taxpayer, if there is an initial excess credit for a class of income of the taxpayer in relation to a year of income (in this subsection called the ‘original year of income’):

(a)    the opening excess credit balance for the class of income of the taxpayer in relation to the original year of income that is available for a later year of income (in this paragraph called the ‘current year of income’), being one of the 5 years of income after the original year of income, is:

(i)   if the current year of income is the first year of income after the original year of income—the initial excess credit, reduced by so much of the initial excess credit as is transferred by the taxpayer under subsection (1d) for utilisation in the original year of income; or

(ii)  if the current year of income is a later year of income—the closing excess credit balance for the class of income of the taxpayer in relation to the original year of income that is available for the previous year of income; and

(b)    the post-transfer excess credit balance for the class of income of the taxpayer in relation to the original year of income that is available for a later year of income (in


this paragraph called the ‘current year of income’), being one of the 5 years of income after the original year of income, is the opening excess credit balance for the class of income of the taxpayer in relation to the original year of income that is available for the current year of income, reduced by so much of that opening excess credit balance as is transferred by the taxpayer under subsection (1d) for utilisation in the current year of income; and

(c)    the closing excess credit balance for the class of income of the taxpayer in relation to the original year of income that is available for a later year of income (in this paragraph called the ‘current year of income’), being one of the 5 years of income after the original year of income, is the post-transfer excess credit balance for the class of income of the taxpayer in relation to the original year of income that is available for the current year of income, reduced by so much of that post-transfer excess credit balance as is taken to have been utilised in the current year of income under subsection (1).

“(1d) For the purposes of this section, if:

(a)    either of the following conditions are satisfied in relation to an Australian company (in this section called the ‘credit company’) in relation to a year of income (in this subsection called the ‘current year of income’):

(i)   the credit company has an initial excess credit in relation to a class of income of the Australian company in relation to the current year of income;

(ii)  the credit company has an opening excess credit balance for a class of income of the credit company in relation to a year of income earlier than the current year of income, being a balance that is available for the current year of income; and

(b)    section 160af applies in relation to that class of income of an Australian company (in this section called the ‘income company’) of the current year of income, being a company that is a group company in relation to the credit company in relation to the current year of income; and

(c)    the credit company and the income company give the Commissioner, on or before the date of lodgment of the return of income of the income company for the current year of income or within such further time as the Commissioner allows, a notice in writing signed by the public officer of each of those companies, stating that the whole or a specified part of:

(i)   the initial excess credit; or


(ii)  the opening excess credit balance;

as the case may be, should be transferred to the income company for utilisation in the current year of income;

the notice gives effect to the transfer concerned.

“(1e) Subsection (1d) applies only to the following 2 classes of income:

(a)   passive income;

(b)   all other income other than offshore banking income.”;

(b)      by omitting subsections (7) and (8).

Penalty for false or misleading statements

36.      Section 160as of the Principal Act is amended by adding at the end of subsection (2) “or 264a (1) (d) or (e)”.

What constitutes a disposal or acquisition

37.     Section 160m of the Principal Act is amended:

(a)     by inserting after subsection (12) the following subsections:

“(12a) Subsection (12) does not apply where a company that is a CFC ceases to be a resident of an unlisted country or a listed country and becomes a resident within the meaning of section 6.

“(12b) In subsection (12a):

CFC’ has the same meaning as in Part X;

‘resident of a listed country’ has the same meaning as in Part X;

‘resident of an unlisted country’ has the same meaning as in Part X.”;

(b)     by inserting after subsection (13) the following subsection:

“(13a) Subsection (13) does not apply where a trust estate becomes a resident trust estate if, immediately before it does so, it is a CFT, within the meaning of section 342, because paragraph (a) of that section applies.”;

(c)     by inserting after subsection (14) the following subsection:

“(14a) Subsection (14) does not apply where a unit trust becomes a resident unit trust if, immediately before it does so, it is a CFT, within the meaning of section 342, because paragraph (a) of that section applies.”.

Capital gains and capital losses

38.     Section 160z of the Principal Act is amended:

(a)   by inserting in subsection (6) and paragraph (9) (c) “eligible” before “exempt”;

(b)      by adding at the end the following subsection:


“(10) in this section:

‘eligible exempt income’ means exempt income other than income to which section 23ah, 23ai or 23aj or paragraph 99b (2) (d) or (e) applies.”.

39.     After section 160zf of the Principal Act the following section is inserted:

Adjustment where section 47a applies to rolled-over assets

“160zfa. Where:

(a)     either:

(i)  because of Division 17, this Part does not apply to the disposal of an asset by a person (in this section called the ‘transferor’) to another person (in this section called the ‘transferee’); or

(ii)  because of Division 17, in its application in accordance with Division 7 of Part X, this Part does not apply, for the purpose of calculating the attributable income of a company under that Division in relation to any taxpayer, to the disposal of an asset by the CFC (in this section also called the ‘transferor’) to another person (in this section also called the ‘transferee’); and

(b)  section 47a applies in relation to the disposal of the asset to deem the transferor to have paid a dividend to the transferee; and

(c)     either:

(i)  the whole or part of the deemed dividend is included in the assessable income of the transferee under section 44; or

(ii)   an amount in respect of the deemed dividend is included in the assessable income of another taxpayer under section 458 or 459; and

(d)     the transferee subsequently disposes of the asset;

then, for the purposes of this Part, the consideration in respect of the subsequent disposal is taken to be reduced by the lesser of:

(e)     the amount of the deemed dividend; and

(f)   the amount of any capital gain that, disregarding Division 17, would have accrued to the transferor:

(i)  where subparagraph (a) (i) applies—under this Part; or

(ii)   where subparagraph (a) (ii) applies—under this Part in its application for the purpose of calculating the attributable income of the transferor in relation to the taxpayer;

in respect of the disposal referred to in subparagraph (a) (i) or (ii) if the consideration in respect of the disposal had been


equal to the market value of the asset at the time of that disposal.”.

Return of capital on investment in trust

40.      Section 160zm of the Principal Act is amended by inserting after subsection (1) the following subsection:

“(1a) Section 23ai and paragraphs 99b (2) (d) and (e) are to be disregarded in determining whether an amount is assessable income of the taxpayer for the purposes of subsection (1) of this section.”.

Transfer of asset from company or trust to spouse upon breakdown of marriage

41.      Section 160zzma of the Principal Act is amended by inserting after subsection (3) the following subsections:

“(3a) If:

(a)  there is a requirement to calculate under Division 7 of Part X the attributable income of a company in relation to any taxpayer; and

(b)  this section, as it has effect in accordance with that Division, is relevant to that calculation because both of the following subparagraphs apply:

(i)  the company is the first taxpayer;

(ii)  apart from the residency assumption mentioned in that Division, the disposal of the asset concerned is not a disposal of a taxable Australian asset;

then, in addition to the effect that this section has apart from this subsection, this section also has the effect, in relation to any subsequent disposal of the asset (whether by the spouse or otherwise) that it would have if it had applied in relation to the spouse subject to the modifications made by that Division.

“(3b) If:

(a)  there is a requirement to calculate under section 102aau the attributable income of a non-resident trust estate of a year of income; and

(b)  this section, as it has effect in accordance with Subdivision D of Division 6aaa of Part III, is relevant to that calculation because both of the following subparagraphs apply:

(i)  the trustee of the trust estate is the first taxpayer;

(ii)   apart from the assumptions about residency that apply for the purposes of that Subdivision, the disposal of the asset concerned is not a disposal of a taxable Australian asset;

then, in addition to the effect that this section has apart from this subsection, this section also has the effect, in relation to any subsequent


disposal of the asset (whether by the spouse or otherwise) that it would have if it had applied in relation to the spouse subject to the modifications made by that Subdivision.”.

Transfer of asset between companies in the same group

42.      Section 160zzo of the Principal Act is amended by inserting before subsection (3) the following subsection:

“(2d) If:

(a)  there is a requirement to calculate under Division 7 of Part X the attributable income of a company in relation to any taxpayer; and

(b)  this section, as it has effect in accordance with that Division, is relevant to that calculation because both of the following subparagraphs apply:

(i)  the company is the transferor;

(ii)   apart from the residency assumption mentioned in that Division, the disposal of the asset concerned is not a disposal of a taxable Australian asset;

then, in addition to the effect that this section has apart from this subsection, this section also has the effect, in relation to any subsequent disposal of the asset (whether by the transferee or otherwise) that it would have if it had applied in relation to the transferee subject to the modifications made by that Division.”.

Transfer of asset from subsidiary to holding company for no consideration

43.      Section 160zzoa of the Principal Act is amended by inserting before subsection (3) the following subsection:

“(2a) If:

(a)   there is a requirement to calculate under Division 7 of Part X the attributable income of a company in relation to any taxpayer; and

(b)  this section, as it has effect in accordance with that Division, is relevant to that calculation because both of the following subparagraphs apply:

(i)  the company is the transferor;

(ii)  apart from the residency assumption mentioned in that Division, the disposal of the asset concerned is not a disposal of a taxable Australian asset;

then, in addition to the effect that this section has, apart from this subsection, this section also has the effect, in relation to any subsequent disposal of the asset (whether by the transferee or otherwise) that it would have if it had applied in relation to the transferee subject to the modifications made by that Division.”.


Commissioner may collect tax from person owing money to taxpayer

44.      Section 218 of the Principal Act is amended by inserting “102aam or” before “170aa” in paragraph (ba) and subparagraph (c) (iv) of the definition of “tax” in subsection (6b).

Assessment where no administration

45.      Section 220 of the Principal Act is amended:

(a)      by inserting after paragraph (1) (a) the following paragraph:

“(aa)    interest under section 102aam to which the taxpayer is liable has not been assessed or paid; or”;

(b)   by omitting subsection (8) and substituting the following subsection:

“(8) In this section, unless the contrary intention appears:

‘tax’ includes:

(a)   interest under section 102aam; and

(b)   additional tax under Part VII.”.

Penalty for false or misleading statements

46.      Section 223 of the Principal Act is amended by omitting from subsection (8) all the words after “but does not include a statement made” and substituting the following words and paragraphs:

“in:

(e)  a document produced pursuant to paragraph 264 (1) (b) or 264a (1) (d) or (e) (other than a document containing particulars of the basis of the calculation of taxable income of a year of income and the tax payable in respect of that taxable income that were specified in a return in accordance with section 221azd); or

(f)  a document produced pursuant to subparagraph 451 (2) (c) (ii) or paragraph 453 (1) (e).”.

Interpretation

47.      Section 251r of the Principal Act is amended by inserting in subsection (7) “section 102aan,” after “subsection 6 (1),”.

48.      After section 264 of the Principal Act the following section is inserted:

Offshore information notices

“264a. (1) Where the Commissioner has reason to believe that:

(a)     information relevant to the assessment of a taxpayer is:

(i)  within the knowledge (whether exclusive or otherwise) of a person outside Australia; or

(ii)  recorded (whether exclusively or otherwise) in a document outside Australia; or


(iii)   kept (whether exclusively or otherwise) by means of a mechanical, electronic or other device outside Australia; or

(b)  documents relevant to the assessment of a taxpayer are outside Australia (whether or not copies are in Australia or, if the documents are copies of other documents, whether or not those other documents are in Australia);

the Commissioner may, by notice in writing served on the taxpayer (which notice is in this section called the ‘offshore information notice’), request the taxpayer:

(c)  to give to the Commissioner, within the period and in the manner specified in the offshore information notice, any such information; or

(d)  to produce to the Commissioner, within the period and in the manner specified in the offshore information notice, any such documents; or

(e)  to make copies of any such documents and to produce to the Commissioner, within the period and in the manner specified in the offshore information notice, those copies.

“(2)    The period specified in the offshore information notice must end 90 days after the date of service of the notice.

“(3)    Upon written application made by the taxpayer within the period specified in the offshore information notice, the Commissioner may, by notice in writing served on the taxpayer, extend the period specified in the offshore information notice.

“(4)    Where:

(a)  an application under subsection (3) is made before the end of the period specified in the offshore information notice; and

(b)  at the end of the period, the Commissioner has not notified the taxpayer of the Commissioner’s decision on the application;

the following provisions have effect:

(c)  the Commissioner is taken to have extended the period under subsection (3) to the end of the day (in this subsection called the ‘decision day’) on which the Commissioner’s decision is notified to the taxpayer;

(d)  if the Commissioner decides to extend the period—the extended period must end after the decision day.

“(5)    A reference in this section (other than subsection (3)) to the period specified in the offshore information notice is a reference to the period as extended under subsection (3).

“(6)    Where:

(a)  an offshore information notice (in this subsection called the ‘first notice’) was served on a taxpayer; and


(b)  during the period specified in the first notice (including a period specified by virtue of one or more previous applications of this subsection), another offshore information notice (which other notice is in this subsection called the ‘subsequent notice’) is served on the taxpayer; and

(c)  the subsequent notice is expressed to be by way of variation of the first notice;

the following provisions have effect:

(d)  the request, or each of the requests, set out in the subsequent notice is taken, for the purposes of subsections (10), (11) and (14), to have been set out in the first notice;

(e)  if the period specified in the first notice would, apart from this subsection, end before the end of the period specified in the subsequent notice—the period specified in the first notice is taken to have been extended under subsection (3) to the end of the period specified in the subsequent notice.

“(7)    The Commissioner may, by notice in writing served on the taxpayer, vary the offshore information notice by:

(a)     reducing its scope; or

(b)     correcting a clerical error or obvious mistake;

and, if the Commissioner does so, a reference in this section to the offshore information notice is to be read as a reference to the notice as so varied.

“(8)    The Commissioner may withdraw an offshore information notice.

“(9)    If the Commissioner withdraws an offshore information notice, nothing in this section prevents the Commissioner giving another offshore information notice in substitution, in whole or in part, for the withdrawn notice.

“(10)  If the taxpayer refuses or fails to comply with the request or requests set out in the offshore information notice, then, except with the consent of the Commissioner:

(a)   if the information or documents to which the request or requests apply are only relevant to one issue concerning the assessment of the taxpayer:

(i)   where the request, or any of the requests, apply to information—the information is not admissible in proceedings disputing the taxpayer’s assessment; or

(ii)   where the request, or any of the requests, apply to documents—neither the documents, nor any secondary evidence of the documents, are admissible in proceedings disputing the taxpayer’s assessment; or

(b)     if:

(i)  the information or documents to which the request or


requests apply are relevant to 2 or more issues concerning the assessment of the taxpayer; and

(ii)  the refusal or failure of the taxpayer relates to information or documents that are relevant to any or all of those issues;

the following provisions have effect:

(iii)   where the request, or any of the requests, apply to information—the information, to the extent to which it is relevant to the issue or issues mentioned in subparagraph (ii), is not admissible in proceedings disputing the taxpayer’s assessment;

(iv)   where the request, or any of the requests, apply to documents—neither:

(a)  the documents, to the extent to which they are relevant to the issue or issues mentioned in subparagraph (ii); nor

(b)  secondary evidence of the documents, to the extent to which the secondary evidence is relevant to the issue or issues mentioned in subparagraph (ii);

are admissible in proceedings disputing the taxpayer’s assessment.

“(11)  Without limiting the power conferred by subsection (10), where:

(a)  the taxpayer refuses or fails to comply with the request or requests set out in the offshore information notice; and

(b)  the refusal or failure of the taxpayer relates to some, but not all, of the information or documents to which the request or requests apply and that are relevant to a particular issue concerning the assessment of the taxpayer;

the Commissioner, in exercising that power, must have regard to whether there is reason to believe that, because of the absence of that information or those documents, the remaining information or documents that are relevant to that issue are, or are likely to be, misleading.

“(12)  The Commissioner, in exercising the power conferred by subsection (10), must ignore the consequences (whether direct or indirect) of an obligation arising under a law of, or of a part of, a foreign country, in so far as that obligation relates to the secrecy of information or documents.

“(13)  In spite of anything in this section, the Commissioner must give a consent under subsection (10) in any case where a refusal would have the effect, for the purposes of the Constitution, of making any tax or penalty incontestable.


“(14) Where, before the commencement of the hearing of proceedings disputing the taxpayer’s assessment, the Commissioner forms both of the following views:

(a)  the view that the taxpayer has refused or failed to comply with the request or requests set out in the offshore information notice;

(b)  the view that the Commissioner is unlikely to give a consent under subsection (10) in relation to that request or those requests and in relation to those proceedings;

the Commissioner must serve on the taxpayer a notice in writing setting out those views.

“(15)  A failure to comply with subsection (14) does not affect the validity of a decision under subsection (10).

“(16)  A reference in this section to a refusal or failure of a taxpayer to comply with a request includes a reference to a refusal or failure resulting from the taxpayer being incapable of complying with the request.

“(17)  A reference in this section to proceedings disputing the taxpayer’s assessment is a reference to proceedings before a court or the Tribunal arising out of, or relating to, an objection against the assessment.

“(18)  Nothing in this Act precludes an offshore information notice from being set out in the same document as a notice under section 264.

“(19)  An offshore information notice must set out the effect of subsection (10).

“(20)  A failure to comply with subsection (19) does not affect the validity of the offshore information notice.

“(21)  A request under this section is not taken to be a requirement for the purposes of any other provision of this Act or of any provision of the Taxation Administration Act 1953.

“(22)  A refusal or failure to comply with a request set out in an offshore information notice is not an offence.

“(23)  The express references in this section to documents do not imply that references to documents in any other provision of this Act, or in a provision of the Taxation Administration Act 1953, do not have the meaning given by section 25 of the Acts Interpretation Act 1901.

“(24)  Nothing in this section affects the operation of section 264 and nothing in section 264 affects the operation of this section.”.

49.      After section 315 of the Principal Act the following Part is inserted:


“PART X—ATTRIBUTION OF INCOME IN RESPECT OF
CONTROLLED FOREIGN COMPANIES

“Division 1Preliminary

Object of Part

“316. (1) The object of this Part is to provide for certain amounts to be included in a taxpayer’s assessable income (Division 9) in respect of:

(a)     the attributable income of a CFC (section 456); and

(b)     certain changes of residence by a CFC (section 457); and

(c)     certain dividends paid by a CFC (sections 458 and 459).

“(2)    To that end (and for other purposes of this Act) this Part contains rules relating to the following:

(a)     interpretation (Division 1);

(b)     types of entities (Division 2);

(c)   control interests, attribution interests, attributable taxpayers and attribution percentages (Division 3);

(d)     attribution accounts (Division 4);

(e)     attributed tax accounts (Division 5);

(f)      exempting receipts etc. (Division 6);

(g)     the calculation of attributable income of a CFC (Division 7);

(h)     the active income test (Division 8);

(j)      post-attribution asset disposals (Division 10);

(k)     the keeping of records (Division 11).

Interpretation

“317. In this Part, unless the contrary intention appears:

‘accounting period’, in relation to company, means an accounting period used by the company in the accounts by reference to which it distributes dividends;

‘accounting records’ includes invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes, vouchers and other documents of prime entry and also includes such working papers and other documents as are necessary to explain the methods and calculations by which accounts are made up;

‘accounts’ means ledgers, journals, profit and loss accounts and balance-sheets, and includes statements, reports and notes attached to, or intended to be read with, any of the foregoing;

‘active income test’ has the meaning given by section 432;

‘adjusted tainted income’ has the meaning given by section 386;

‘AFI’ or ‘Australian financial institution’ means any of the following Australian entities:

(a)      a bank within the meaning of the Banking Act 1959;


(b)   a person who carries on State banking within the meaning of paragraph 51 (xiii) of the Constitution;

(c)   a registered corporation within the meaning of the Financial Corporations Act 1974;

(d)   a life assurance company;

‘AFI subsidiary’ or ‘Australian financial institution subsidiary’ has the meaning given by section 326;

‘aircraft’ means a machine or apparatus that can derive support in the atmosphere from the reactions of the air or from buoyancy, but does not include an air-cushion vehicle;

‘associate’ has the meaning given by section 318;

‘associate-inclusive control interest’ has the meaning given by section 349;

‘attributable income’ has the meaning given by Division 7;

‘attributable taxpayer’, has the meaning given by section 361;

‘attributed tax account credit’ has the meaning given by section 375;

‘attributed tax account debit’ has the meaning given by section 376;

‘attributed tax account surplus’ has the meaning given by section 374;

‘attribution account entity’ has the meaning given by section 363;

‘attribution account payment’ has the meaning given by section 365;

‘attribution credit’ has the meaning given by section 371;

‘attribution debit’ has the meaning given by section 372;

‘attribution percentage’ has the meaning given by section 362;

‘attribution tracing interest’:

(a)   in relation to a CFC—has the meaning given by section 358; and

(b)   in relation to a CFP—has the meaning given by section 359; and

(c)      in relation to a CFT—has the meaning given by section 360;

‘Australian 1% entity’, in relation to a company or trust, means an Australian entity whose associate-inclusive control interest in the company or trust is at least 1%;

‘Australian entity’ has the meaning given by section 336;

‘Australian partnership’ has the meaning given by section 337;

‘Australian tax’ means income tax or withholding tax;

‘Australian trust’ has the meaning given by section 338;

‘CFC’ or ‘controlled foreign company’ has the meaning given by section 340;

‘CFE’ or ‘controlled foreign entity’ has the meaning given by section 339;

‘CFP’ or ‘controlled foreign partnership’ has the meaning given by section 341;

‘CFT’ or ‘controlled foreign trust’ has the meaning given by section 342;


‘CGT roll-over provisions’ means section 160zzf and Divisions 5a, 7a and 17 of Part IIIa;

‘commodity’ means any thing that is capable of delivery under an agreement for its delivery, but does not include an instrument creating or evidencing a chose in action;

‘commodity investment’ means:

(a)      either of the following contracts:

(i)   a forward contract in respect of a commodity;

(ii)  a futures contract in respect of a commodity; or

(b)      a right or option in respect of such a contract;

‘company’ does not include a company in the capacity of trustee;

‘company title interest’, in relation to land, means a right of occupancy of the land, or of a building or part of a building erected on the land, arising by virtue of the holding of shares, or by virtue of a contract to purchase shares, in a company that owns the land or building;

‘control tracing interest’:

(a)     in relation to a CFC—has the meaning given by section 353; or

(b)     in relation to a CFP—has the meaning given by section 354; or

(c)     in relation to a CFT—has the meaning given by section 355;

‘currency exchange gain’, in relation to a company, in relation to a statutory accounting period, means a currency gain realised by the company in the statutory accounting period, to the extent to which it is attributable to currency exchange rate fluctuations;

‘currency exchange loss’, in relation to a company, in relation to a statutory accounting period, means a currency loss realised by the company in the statutory accounting period, to the extent to which it is attributable to currency exchange rate fluctuations;

de facto marriage’ means a relationship between 2 persons who, although not legally married to each other, live with each other on a bona fide domestic basis as husband and wife;

‘depreciation provision’ means any of sections 54 to 62 of Division 3 of Part III, or any provision of Divisions 10, 10aaa, 10aa, 10a, 10c and 10d of that Part;

‘designated concession income’, in relation to a particular listed country, means income or profits of a kind specified in the regulations where:

(a)     either of the following subparagraphs applies:

(i)  foreign tax imposed by a tax law of the listed country is not payable in respect of the income or profits because of a particular feature;

(ii)  foreign tax imposed by a tax law of the listed country is payable in respect of the income or profits but there is a feature in relation to that tax; and


(b)     the feature is of a kind specified in the regulations;

‘direct attribution account interest’ has the meaning given by section 366;

‘direct attribution interest’ has the meaning given by section 356;

‘direct control interest’:

(a)     in relation to a company—has the meaning given by section 350;

(b)     in relation to a trust—has the meaning given by section 351;

‘discretionary trust’ means a trust where:

(a)     both of the following conditions are satisfied:

(i)  a person (who may include the trustee) is empowered (either unconditionally or on the fulfilment of a condition) to exercise any power of appointment or other discretion;

(ii)  the exercise of the power or discretion, or the failure to exercise the power or discretion, has the effect of determining, to any extent, either or both of the following:

(a)  the identities of those who may benefit under the trust;

(b)   how beneficiaries are to benefit, as between themselves, under the trust; or

(b)  one or more of the beneficiaries under the trust have a contingent or defeasible interest in some or all of the corpus or income of the trust; or

(c)  the trustee of another trust, being a trust where both of the conditions in paragraph (a) are satisfied, benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the first-mentioned trust;

‘disposal’, in relation to an asset, includes redemption;

‘distributable profits’, in relation to a company, means the amount, whether of an income or capital nature, that, having regard to the accounts of the company and such other matters as may reasonably be regarded as relevant, constitutes profits of the company that would be available for distribution by the company by way of dividends if there were disregarded any requirement of the constituent document, or of any resolution or decision, of the company restricting the availability of the profits for distribution in that way, other than any requirement providing for an eligible provision or reserve;

‘double tax agreement’, in relation to a foreign country, means:

(a)  if there is only one agreement (within the meaning of the Income Tax (International Agreements) Act 1953) in force in respect of the foreign country—that agreement; or

(b)  if there are 2 or more agreements (within the meaning of that Act) in force in respect of the foreign country—the agreement that is expressed to be:


(i)  for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income; or

(ii)  for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital; or

(iii)   for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital; or

(iv)  for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains; or

(v)  for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital and to certain other taxes;

‘eligible designated concession income’, in relation to a listed country, in relation to a particular period (in this definition called the ‘income period’), means designated concession income in relation to the listed country:

(a)  that is not subject to tax in another listed country in a tax accounting period:

(i)    ending before the end of the income period; or

(ii)   commencing during the income period; or

(b)     that is:

(i)  subject to tax in another listed country in a tax accounting period:

(a)       ending before the end of the income period; or

(b)       commencing during the income period; and

(ii)   designated concession income in relation to that other listed country;

‘eligible finance share’ has the meaning given by section 327;

‘eligible finance share dividend’ means a dividend in respect of an eligible finance share;

‘eligible provision or reserve’ means:

(a)   a provision or reserve required to be maintained by law; or

(b)   a provision for any liability in respect of foreign tax or Australian tax; or

(c)   a reserve maintained for the purpose of qualifying for relief from foreign tax; or

(d)   a provision or reserve for depreciation, bad or doubtful debts or leave payments; or

(e)   any other provision or reserve of a kind prescribed by regulations for the purposes of this paragraph;

‘eligible transferor’ has the meaning given by sections 347 and 348;

‘entitled to acquire’ has the meaning given by section 322;


‘entity’ means any of the following:

(a)      a company;

(b)      a partnership;

(c)      a person in the capacity of trustee;

(d)      any other person;

‘exempting profits’ has the meaning given by section 378;

‘exempting profits percentage’ has the meaning given by section 379;

‘exempting receipt’ has the meaning given by section 377 (in relation to a company that is a resident of an unlisted country) or section 380 (in relation to a company that is a resident within the meaning of section 6);

‘factoring income’ means income derived from carrying on a business of factoring;

‘financial intermediary business’ means:

(a)      banking business; or

(b)      a business whose income is principally derived from the lending of money;

‘general insurance company’ means a company whose sole or principal business is insurance business within the meaning of subsection 3 (1) of the Insurance Act 1973, but does not include a life assurance company;

‘goods’ includes:

(a)      ships, aircraft and other vehicles; and

(b)      animals, including fish; and

(c)      minerals, trees and crops, whether on, under or attached to land or not; and

(d)      gas and electricity;

‘grossed-up amount’ has the meaning given by section 373;

‘gross tainted turnover’ has the meaning given by section 435;

‘gross turnover’ has the meaning given by section 434;

‘group’ includes:

(a)   one entity alone; and

(b)   a number of entities the members of which are not in any way associated with each other nor acting together;

‘income interest in a partnership’ means an interest in the profits of the partnership;

‘income interest in a trust’ means an interest in the income of the trust;

‘indirect attribution account interest’ has the meaning given by section 369;

‘indirect attribution interest’ has the meaning given by section 357;

‘indirect control interest’ has the meaning given by section 352;

‘IP time’ means 7.30 p.m., by standard time in the Australian Capital Territory, on 12 April 1989;


‘law’, in relation to a listed country or an unlisted country, means a law of that listed country or unlisted country, or of any part of, or place in, that listed country or unlisted country;

‘lease’ includes a sublease and, in relation to a company title interest in land, includes an agreement similar to a lease or sublease;

‘leased’ includes let on hire (including a letting on hire that is described in the relevant agreement as a lease) under an agreement other than a hire-purchase agreement;

‘life assurance company’ has the same meaning as in section 110;

‘life assurance policy’ has the same meaning as in section 110;

‘life assurance premiums’ means premiums (within the meaning of section 110) in respect of life assurance policies;

‘listed country’ has the meaning given by section 320;

‘member of a non-portfolio company group’ has the meaning given by section 334;

‘net tainted commodity gains’ has the meaning given by section 443;

‘net tainted currency exchange gains’ has the meaning given by section 444;

‘non-attributable income period’, in relation to a taxpayer in relation to a company in relation to the application of a provision of this Act in accordance with Division 7, means a statutory accounting period of the company for which:

(a)  there is no requirement to calculate under Division 7 the attributable income of the company in relation to the taxpayer; or

(b)  there is a requirement to calculate under Division 7 the attributable income of the company in relation to the taxpayer, but the particular provision is not relevant to that calculation;

‘non-discretionary trust’ means a trust other than a discretionary trust;

‘non-portfolio dividend’ means a dividend paid to a company where that company has a voting interest, within the meaning of section 160afb, amounting to at least 10% of the voting power, within the meaning of that section, in the company paying the dividend;

‘non-resident family trust’ has the meaning given by section 328;

‘non-share forward contract’ means a forward contract that is not in respect of shares or a share price index;

‘non-share futures contract’ means a futures contract that is not in respect of shares or a share price index;

‘notional allowable deduction’ has the meaning given by subsection 382 (2);

‘notional assessable income’ has the meaning given by subsection 382 (2);

‘notional exempt income’ has the meaning given by subsection 382 (2);

‘Part X Australian resident’ means a resident within the meaning of section 6, but does not include an entity where:


(a)  there is a double tax agreement in force in respect of a foreign country; and

(b)  that agreement contains a provision that is expressed to apply where, apart from the provision, the entity would, for the purposes of the agreement, be both a resident of Australia and a resident of the foreign country; and

(c)  that provision has the effect that the entity is, for the purposes of the agreement, a resident solely of the foreign country;

‘passive income’ has the meaning given by section 446;

‘premium income’ means:

(a)     premiums in respect of insurance or reinsurance; or

(b)     life assurance premiums;

‘profits’ includes gains, whether of an income or capital nature;

‘property management services’ includes any of the following services:

(a)     cleaning;

(b)     secretarial;

(c)     catering;

‘provide’, in relation to services, includes allow, confer, give, grant or perform;

‘public unit trust’ has the meaning given by section 329;

‘recognised accounts’:

(a)  in relation to a company, in relation to a statutory accounting period, means the accounts referred to in subparagraph 432 (1) (c) that are prepared by the company for the statutory accounting period; or

(b)  in relation to a partnership in which a company is a partner at any time during a statutory accounting period, means the accounts referred to in paragraph 437 (1) (b) that are prepared by the partnership for the statutory accounting period;

‘rent’ means any consideration (in this definition called a ‘rental consideration’) paid or given by a lessee under a lease and includes consideration (whether paid or given by a lessee or another person) in the nature of a rental consideration;

‘residency assumption’, in relation to a CFC, means the assumption about the residence of the CFC that is made in paragraph 383 (a);

‘retention period’, in relation to a statutory accounting period, means the period of 5 years commencing at the end of the statutory accounting period;

‘sale’, in relation to goods, includes exchange or hire-purchase and

‘purchase’, when used in relation to goods, has a corresponding meaning;

‘services’ includes any benefit, right (including a right in relation to, and an interest in, real or personal property), privilege or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under:


(a)      an arrangement for or in relation to:

(i)   the performance of work (including work of a professional nature), whether with or without the provision of property; or

(ii)   the provision of, or of the use of facilities for, entertainment, recreation or instruction; or

(iii)   the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; or

(b)      a contract of insurance; or

(c)      an arrangement for or in relation to the lending of money;

‘ship’ means a vessel or boat of any description, and includes:

(a)      an air-cushion vehicle; and

(b)      any floating structure;

‘statutory accounting period’ has the meaning given by section 319;

‘subject to tax’ has the meaning given by section 324;

‘tainted asset’, in relation to a company, means:

(a)     any of the following:

(i)  loans (including deposits with a bank or other financial institution);

(ii)  debenture stock, bonds, debentures, certificates of entitlement, bills of exchange, promissory notes or other securities;

(iii)  shares in a company;

(iv)  an interest in a trust or partnership;

(v)  futures contracts;

(vi)  forward contracts;

(vii)   interest rate swap contracts;

(viii)  currency swap contracts;

(ix)  forward exchange rate contracts;

(x)  forward interest rate contracts;

(xi)  life assurance policies;

(xii)  a right or option in respect of such a loan, security, share, interest, contract or policy;

(xiii)  any similar financial instrument; or

(b)  an asset that was held by the company solely or principally for the purpose of deriving tainted rental income; or

(c)     an asset other than:

(i)  trading stock; or

(ii)  any other asset used solely in carrying on a business;

but does not include a commodity investment;


‘tainted commodity gain’, in relation to a company, in relation to a statutory accounting period, means a gain realised by the company in the statutory accounting period from disposing of a tainted commodity investment;

‘tainted commodity investment’, in relation to a company, means:

(a)      either of the following contracts:

(i)   a forward contract in respect of a commodity;

(ii)  a futures contract in respect of a commodity; or

(b)      a right or option in respect of such a contract;

except where either of the following conditions is satisfied:

(c)      both of the following subparagraphs apply:

(i)  the company carries on:

(a)  a business of producing or processing the commodity; or

(b)  a business that involves the use of the commodity as a raw material in a production process;

(ii)   the contract, right or option relates to the carrying on of that business;

(d)  both of the following subparagraphs apply in relation to the contract:

(i)  the contract was entered into by the company for the sole purpose of eliminating or reducing the risk of adverse financial consequences that might result for the company, under another contract, from fluctuations in the price of the commodity;

(ii)   the company does not and will not derive tainted sales income from a transaction under that other contract;

‘tainted commodity loss’, in relation to a company, in relation to a statutory accounting period, means a loss realised by the company in the statutory accounting period from disposing of a tainted commodity investment;

‘tainted currency exchange gain’, in relation to a company, in relation to a statutory accounting period, means a currency exchange gain realised by the company in the statutory accounting period except where the gain related to an active income transaction (within the meaning of section 439);

‘tainted currency exchange loss’, in relation to a company, in relation to a statutory accounting period, means a currency exchange loss realised by the company during the statutory accounting period except where the loss related to an active income transaction (within the meaning of section 439);

‘tainted income ratio’ has the meaning given by section 433;

‘tainted interest income’, in relation to a company, means:

(a)      interest or a payment in the nature of interest; or


(b)   an amount that, if the company were a resident within the meaning of section 6, would be included in assessable income under Division 16e of Part III; or

(c)      factoring income;

but does not include offshore banking income within the meaning of Division 18 of Part III;

‘tainted rental income’, in relation to a company, in relation to a statutory accounting period, means income derived by the company in the statutory accounting period by way of rent in respect of any of the following:

(a)   a lease to which an associate of the company was a party at the time the income was derived;

(b)  a lease where any or all of the rent was paid or given by an associate of the company;

(c)   a lease of land, except where the following conditions are satisfied:

(i)  the land is situated in a listed country or in an unlisted country;

(ii)  at all times during the period when the income accrued, the company was a resident of the listed country, or of the unlisted country, as the case may be;

(d)     a lease of land where the following conditions are satisfied:

(i)  the land is situated in a listed country or in an unlisted country;

(ii)  at all times during the period when the income accrued, the company was a resident of the listed country, or of the unlisted country, as the case may be;

(iii)  it is not the case that a substantial part of the income is attributable to the provision of labour-intensive property management services in connection with the land, being services provided by directors or employees of the company;

(e)     a lease of either of the following:

(i)  a ship;

(ii)  an aircraft;

except where a substantial part of the income is attributable to the provision by the directors or employees of the company of any of the following in relation to the ship or aircraft concerned:

(iii)  operating crew services;

(iv)  maintenance services;

(v)  management services;

(f)      a lease of either of the following:

(i)  a cargo container designed or intended for use on ships


or aircraft as part of a containerised cargo handling system;

(ii)  plant or equipment designed or intended for use on board ships;

except where a substantial part of the income is attributable to the provision by the directors or employees of the company of either of the following in relation to the container, plant or equipment concerned:

(iii)   maintenance services;

(iv)  management services;

‘tainted royalty income’, in relation to a company, means royalties derived by the company except where all of the following conditions are satisfied:

(a)  the royalties are derived in the course of a business carried on by the company;

(b)  at the time the royalties were derived, the entity liable to pay the royalties was not an associate of the company;

(c)     either of the following subparagraphs applies:

(i)  the matter or thing in respect of which the royalty is consideration originated with the company;

(ii)  the company has substantially developed, altered or improved that matter or thing with the result that its market value was substantially enhanced;

‘tainted sales income’ has the meaning given by section 447;

‘tainted services income’ has the meaning given by section 448;

‘tax accounting period’, in relation to an entity, in relation to a foreign tax imposed by a tax law of a listed country, means the accounting period used by the entity for the purposes of determining the tax base under that law;

‘tax detriment’ has the meaning given by section 330;

‘tax law’, in relation to a listed country or an unlisted country, means:

(a)  if the listed country or the unlisted country has federal foreign tax and either or both of the following:

(i)  State foreign tax;

(ii)   municipal foreign tax;

the law of the listed country or the unlisted country that imposes the federal foreign tax; or

(b)  in any other case—the law of the listed country or the unlisted country that imposes foreign tax;

‘trust’ means:

(a)  an entity in the capacity of trustee (including an entity that is taken to be a trustee because of section 268); or

(b)     as the case requires, a trust or trust estate;

‘unlisted country’ has the meaning given by section 320.


Associates

“318. (1) For the purposes of this Part, the following are associates of an entity (in this subsection called the ‘primary entity’) that is a natural person (otherwise than in the capacity of trustee):

(a)   a relative of the primary entity;

(b)   a partner of the primary entity or a partnership in which the primary entity is a partner;

(c)   if a partner of the primary entity is a natural person otherwise than in the capacity of trustee—the spouse or a child of that partner;

(d)   a trustee of a trust where the primary entity, or another entity that is an associate of the primary entity because of another paragraph of this subsection, benefits under the trust;

(e)      a company where:

(i)   the company is sufficiently influenced by:

(a)        the primary entity; or

(b)  another entity that is an associate of the primary entity because of another paragraph of this subsection; or

(c)  another company that is an associate of the primary entity because of another application of this paragraph; or

(d)  2 or more entities covered by the preceding sub-subparagraphs; or

(ii)   a majority voting interest in the company is held by:

(a)        the primary entity; or

(b)  the entities that are associates of the primary entity because of subparagraph (i) of this paragraph and the preceding paragraphs of this subsection; or

(c)  the primary entity and the entities that are associates of the primary entity because of subparagraph (i) of this paragraph and because of the preceding paragraphs of this subsection.

“(2)    For the purposes of this Part, the following are associates of a company (in this subsection called the ‘primary entity’):

(a)   a partner of the primary entity or a partnership in which the primary entity is a partner;

(b)   if a partner of the primary entity is a natural person otherwise than in the capacity of trustee—the spouse or a child of that partner;

(c)   a trustee of a trust where the primary entity, or another entity that is an associate of the primary entity because of another paragraph of this subsection, benefits under the trust;


(d)  another entity (in this paragraph called the ‘controlling entity’) where:

(i)  the primary entity is sufficiently influenced by:

(a)  the controlling entity; or

(b)   the controlling entity and another entity or entities; or

(ii)  a majority voting interest in the primary entity is held by:

(a)  the controlling entity; or

(b)   the controlling entity and the entities that, if the controlling entity were the primary entity, would be associates of the controlling entity because of subsection (1), because of subparagraph (i) of this paragraph, because of another paragraph of this subsection or because of subsection (3);

(e)   another company (in this paragraph called the ‘controlled company’) where:

(i)   the controlled company is sufficiently influenced by:

(a)  the primary entity; or

(b)   another entity that is an associate of the primary entity because of another application of this paragraph of this subsection; or

(c)   a company that is an associate of the primary entity because of another application of this paragraph; or

(d)  2 or more entities covered by the preceding sub-subparagraphs; or

(ii)   a majority voting interest in the controlled company is held by:

(a)  the primary entity; or

(b)   the entities that are associates of the primary entity because of subparagraph (i) of this paragraph and the other paragraphs of this subsection; or

(c)   the primary entity and the entities that are associates of the primary entity because of subparagraph (i) of this paragraph and the other paragraphs of this subsection;

(f)   any other entity that, if a third entity that is an associate of the primary entity because of paragraph (d) of this subsection were the primary entity, would be an associate of that third entity because of subsection (1), because of another paragraph of this subsection or because of subsection (3).

“(3)    For the purposes of this Part, the following are associates of a trustee (in this subsection called the ‘primary entity’):


(a)      any entity that benefits under the trust;

(b)   if a natural person benefits under the trust—any entity that, if the natural person were the primary entity, would be an associate of that natural person because of subsection (1) or because of this subsection;

(c)   if a company is an associate of the primary entity because of paragraph (a) or (b) of this subsection—any entity that, if the company were the primary entity, would be an associate of the company because of subsection (2) or because of this subsection.

“(4)    For the purposes of this Part, the following are associates of a partnership (in this subsection called the ‘primary entity’):

(a)      a partner in the partnership;

(b)   if a partner in the partnership is a natural person—any entity that, if that natural person were the primary entity, would be an associate of that natural person because of subsection (1) or (3);

(c)   if a partner in the partnership is a company—any entity that, if the company were the primary entity, would be an associate of the company because of subsection (2) or (3).

“(5)    In determining, for the purposes of this section, whether an entity is an associate of another entity at a particular time (in this subsection called the ‘test time’):

(a)  an entity (in this subsection called the ‘public unit trust entity’) that, apart from this subsection, is the trustee of a public unit trust at the test time is to be treated as if it were a company instead of a trustee; and

(b)  the public unit trust entity is taken to be sufficiently influenced by another entity or other entities if the public unit trust entity is accustomed or under an obligation (whether formal or informal), or might reasonably be expected, to act in accordance with the directions, instructions or wishes of the other entity or other entities (whether those directions, instructions or wishes are, or might reasonably be expected to be, communicated directly or through interposed companies, partnerships or trusts); and

(c)  another entity or other entities are taken to hold a majority voting interest in the public unit trust entity if either of the following percentages is not less than 50%:

(i)  the percentage of the income of the trust represented by the share of the income to which the other entity or other entities are entitled, or that the other entity or other entities are entitled to acquire;

(ii)  the percentage of the corpus of the trust represented by the share of the corpus to which the other entity or other


entities are entitled, or that the other entity or other entities are entitled to acquire.

“(6)    For the purposes of this section:

(a)  a reference to an entity benefiting under a trust is a reference to the entity benefiting, or being capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust, either directly or through any interposed companies, partnerships or trusts; and

(b)  a company is sufficiently influenced by an entity or entities if the company, or its directors, are accustomed or under an obligation (whether formal or informal), or might reasonably be expected, to act in accordance with the directions, instructions or wishes of the entity or entities (whether those directions, instructions or wishes are, or might reasonably be expected to be, communicated directly or through interposed companies, partnerships or trusts); and

(c)  an entity or entities hold a majority voting interest in a company if the entity or entities are in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the company.

“(7)    In this section, and in any other provision of this Act in so far as that provision has effect for the purposes of this section:

(a)   a reference to the spouse of a person (in this paragraph called the ‘first person’):

(i)   includes a reference to a de facto spouse of the first person; and

(ii)   does not include a reference to a person who is legally married to the first person but is living separately and apart from the first person on a permanent basis; and

(b)   a reference to the de facto spouse of a person (in this paragraph called the ‘first person’) is a reference to a person who (although not legally married to the first person) is living with the first person as the husband or wife of the first person on a genuine domestic basis.

Statutory accounting period of a company

“319. (1) Subject to this section, each period of 12 months finishing at the end of 30 June is a statutory accounting period of a company.

“(2)    A company may, by notice in writing to the Commissioner, elect that a day (in this section called the ‘new day’) is to be the last day of its statutory accounting period instead of the day (in this section called the ‘old day’) that would otherwise apply under this section.

“(3)   The new day must be:

(a)     if:


(i)  the company has not previously given a notice under this section; and

(ii) the company regularly uses:

(a)  an accounting period of 12 months finishing at the end of a day other than 30 June for the purposes of complying with the requirements of a tax law of any country; or

(b)  an accounting period of 12 months finishing at the end of a day other than 30 June for the purposes of reporting to its shareholders;

either of those days; or

(b)  if the company has previously given a notice under this section—30 June or either of the days that, but for the giving of the notice, would be applicable under paragraph (a).

“(4)    Subject to any further application of subsection (2) and to subsection (5):

(a)  the first statutory accounting period using the new day is the period that begins immediately after the end of the statutory accounting period (using the old day) during which the election was made; and

(b)  later statutory accounting periods are the successive periods of 12 months finishing at the end of the new day.

“(5)    Where, when it makes the election, it is less than 12 months since the company was incorporated or otherwise established:

(a)   the reference in subparagraph (3) (a) (ii) to the company regularly using an accounting period is instead a reference to the company proposing to use the accounting period; and

(b)     subject to any further application of subsection (2):

(i)  the first statutory accounting period of the company is the period beginning at the time of incorporation or establishment and ending at the end of the new day; and

(ii)  later statutory accounting periods are the successive periods of 12 months finishing at the end of the new day.

Listed countries and unlisted countries

“320. (1) In this Part:

‘listed country’ means a foreign country, or a part of a foreign country, that is declared by the regulations to be a listed country for the purposes of this Part;

‘unlisted country’ means:

(a)   a foreign country that does not (either in whole or in part) consist of a listed country or listed countries; or

(b)   if one or more parts of a foreign country are listed countries— the remainder of that foreign country.


“(2) Subject to this section, for the purposes of this section, if, apart from this section:

(a)   a colony, overseas territory or protectorate of a foreign country; or

(b)   an overseas territory for the international relations of which a foreign country is responsible;

is not a foreign country in its own right, the colony, territory or protectorate is taken to be a foreign country in its own right.

“(3)    Subject to subsection (4), for the purposes of this section, if, apart from this subsection and subsection (4), there are 2 or more foreign countries with a common income tax system, those countries are to be treated as the same country.

“(4)    For the purposes of this section, if, apart from this subsection, one or more parts of a particular foreign country are excluded (either expressly or by implication) from the operation of a double tax agreement in force in relation to the foreign country, the part or parts so excluded are to be taken to constitute a separate foreign country.

Each listed country and each unlisted country to be treated as a separate foreign country

“321. For the purposes of the application of section 6ab to this Part, each listed country and each unlisted country is to be treated as a separate foreign country.

Meaning of ‘entitled to acquire’

“322. For the purposes of this Part, an entity is entitled to acquire anything that the entity is absolutely or contingently entitled to acquire, whether because of any constituent document of a company, the exercise of any right or option or for any other reason.

State foreign taxes may be treated as federal foreign taxes

“323. If, apart from this section, a listed country or an unlisted country has both:

(a)     federal foreign tax; and

(b)     State foreign tax;

the regulations may provide that a specified State foreign tax is to be treated, for the purposes of this Part, as if it were an additional federal foreign tax of the listed country or the unlisted country.

When income or profits subject to tax in a listed country

“324. (1) Subject to subsection (2), for the purposes of this Part, a particular item of income or profits derived by an entity is taken to be subject to tax in a listed country in a particular tax accounting period if, and only if:

(a)     foreign tax (other than a withholding-type tax) is payable under


a tax law of the listed country in respect of the item because the item is included in the tax base of that law for the tax accounting period; or

(b)     both of the following conditions are satisfied:

(i)  either of the following sub-subparagraphs applies:

(a)  regulations made for the purposes of section 160aff provide that an amount of foreign tax (other than a withholding-type tax) not actually paid in respect of the item because of a particular provision of a law of the listed country is deemed to have been paid;

(b)   a double tax agreement provides that an amount of foreign tax (other than a withholding-type tax) not actually paid in respect of the item because of a particular provision of a law of the listed country is deemed to have been paid;

(ii)   if that foreign tax had been payable, it would have been payable under a tax law of the listed country in respect of the item because the item would have been included in the tax base of that law for the tax accounting period.

“(2)    If:

(a)  apart from this subsection, a particular item of income or profits derived by an entity is not subject to tax in a listed country in a particular tax accounting period; and

(b)  apart from a feature of a kind specified in the regulations, the item would have been subject to tax in the listed country in the tax accounting period;

the regulations may provide that the item is to be treated, for the purposes of this Part or one or more specified provisions of this Part, as if it were subject to tax in the listed country in the tax accounting period.

When dividends etc. taxed in a listed country at normal company tax rate

“325. For the purposes of this Part, a dividend or other amount of a particular kind is to be taken to be taxed in a listed country at the country’s normal company tax rate if, and only if:

(a)  foreign tax is payable under a tax law of the listed country in respect of the dividend or the other amount of a particular kind at the same rate as, or a higher rate than, is payable under the tax law in respect of non-dividend income, or non-dividend amounts not of that particular kind, as the case may be, included in the tax base of a company that is a resident of the listed country; and

(b)     the tax law of the listed country does not provide for any


credit, rebate or other tax concession in respect of the dividend or the other amount of a particular kind, other than for foreign tax payable under a tax law of a different listed or an unlisted country.

AFI subsidiary

“326. (1) For the purposes of this Part, a company is an AFI subsidiary (or an Australian financial institution subsidiary) at a particular time if either of the following paragraphs applies:

(a)   at that time, there is a group of 5 or fewer AFI entities the aggregate of whose direct control interests and indirect control interests in the company is not less than 50%;

(b)     both of the following subparagraphs apply:

(i)  at that time, there is a single AFI entity (in this paragraph called the ‘assumed controller’) the aggregate of whose direct control interests and indirect control interests in the company is not less than 40%;

(ii)   at that time, the company is not controlled by a group of entities not being or including the assumed controller or any of its associates.

“(2)    A reference in this section to an AFI entity is a reference to:

(a)     a company that is an AFI; or

(b)     a 100% subsidiary of such a company.

“(3)    For the purposes of this section, a company (in this subsection called the ‘subsidiary company’) is taken to be the 100% subsidiary of another company (in this subsection called the ‘holding company’) at a particular time if:

(a)  at that time, all the shares in the subsidiary company were beneficially owned by:

(i)  the holding company; or

(ii)  a company that is, or 2 or more companies each of which is, a 100% subsidiary of the holding company; or

(iii)   the holding company and a company that is, or 2 or more companies each of which is, a 100% subsidiary of the holding company; and

(b)  there was no agreement, arrangement or understanding in force at that time by virtue of which any person was in a position, or would be in a position after that time, to affect rights of the holding company or of a 100% subsidiary of the holding company in relation to the subsidiary company.

“(4)    For the purposes of this section, where a company is a 100% subsidiary of another company (including a company that is such a 100% subsidiary by virtue of another application or other applications of this subsection), every company that is a 100% subsidiary of the


first-mentioned company is taken to be a 100% subsidiary of that other company.

“(5)    For the purposes of subsection (3), a person is taken to be in a position at a particular time to affect any rights of a company in relation to another company if, at that time, that person has a right, power or option (whether by virtue of any provision of the constituent document of either of those companies or by virtue of any agreement or instrument or otherwise) to acquire those rights or do an act or thing that would prevent the first-mentioned company from exercising those rights for its own benefit or receiving any benefits accruing by reason of those rights.

Eligible finance shares

“327. For the purposes of this Part, a share in a company is an eligible finance share if all the following conditions are satisfied:

(a)   the shareholder is an AFI or an AFI subsidiary;

(b)  the share was issued to the shareholder by the company in the ordinary course of business carried on by the shareholder;

(c)     the shareholder is not an associate of the company;

(d)     having regard to:

(i)  the manner in which the amount of dividends in respect of the share are to be calculated; and

(ii)   the conditions applicable to the payment of dividends in respect of the share; and

(iii)  any other relevant matters;

the payment of the dividends in respect of the share may reasonably be regarded as equivalent to the payment of interest on a loan where the interest accrues at intervals not exceeding 12 months and is paid not later than 12 months after it accrues.

Non-resident family trusts

“328. (1) Subject to subsections (4) and (5), for the purposes of this Part, a trust is a non-resident family trust in relation to a natural person at a particular time if, and only if, at that time:

(a)     the trust is either:

(i)  a post-marital family trust in relation to the natural person; or

(ii) a family relief trust in relation to the natural person; and

(b)     the trust is constituted by:

(i)   a deed of trust or other instrument; or

(ii)  an order or declaration of a court.

“(2)    For the purposes of this section, a trust is a post-marital family trust in relation to a natural person at a particular time if:

(a)     either of the following conditions is satisfied:


(i)  the trust was created pursuant to:

(a)  a decree or order of dissolution or annulment of marriage, being a dissolution or annulment that, because of the Family Law Act 1975, has effect, or continues to have effect in Australia or is recognised as valid in Australia; or

(b)  a decree or order of judicial separation or a similar decree or order;

(ii)  the trust was created in consequence of the break-down of a de facto marriage; and

(b)  at that time, the only persons who benefit, or are capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust (which persons are in subsections (4) and (5) called the ‘primary potential beneficiaries’) are natural persons who:

(i)    are not Part X Australian residents at that time; and

(ii)   are covered by any of the following categories:

(a)   the spouse or former spouse of the natural person;

(b)   a child of the natural person;

(c)   a child of the former spouse of the natural person, being a child who was such a child at a time when the former spouse was the spouse of the natural person;

(d)   a child of the spouse of the natural person.

“(3)    For the purposes of this section, a trust is a family relief trust in relation to a natural person at a particular time (in this subsection called the ‘test time’) if:

(a)  the only persons who benefit, or are capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust (which persons are in subsections (4) and (5) called the ‘primary potential beneficiaries’) are natural persons who:

(i)  are identified by name in the trust deed or instrument, or in the court order or declaration, constituting the trust; and

(ii)    are not Part X Australian residents at that time; and

(iii)   are covered by any of the following categories:

(a)   the spouse or former spouse of the natural person;

(b)   a parent of the natural person or of the natural person’s spouse or former spouse;

(c)   a child of the natural person or of the natural person’s spouse or former spouse;

(d)   a grandparent of the natural person;

(e)   a grandchild of the natural person;


(f)   a brother or sister of the natural person or of the natural person’s spouse or former spouse;

(g)   a child of a brother or sister mentioned in sub-subparagraph (f); and

(b)  the trust was established, and is operated, for the relief of persons who are in necessitous circumstances; and

(c)     any of the following conditions is satisfied:

(i)  at the test time, the assets of the trust are not excessive having regard to the requirements, or likely requirements, of the primary potential beneficiaries;

(ii)  no transfers of property or services to the trust were made during the period (in this paragraph called the ‘test period’) commencing at the IP time and ending at the test time;

(iii)  immediately after each transfer of property or services to the trust made during the test period, the assets of the trust were not excessive having regard to the requirements, or likely requirements, of the beneficiaries at the time of the transfer.

“(4)    Subsection (1) does not prevent a trust from being a non-resident family trust in relation to a natural person at a particular time if, in the event of the death of a particular primary potential beneficiary at that time, one or more natural persons (which persons are in subsection (5) called the ‘secondary potential beneficiaries’) who:

(a)     are not Part X Australian residents at that time; and

(b)     are children of the primary potential beneficiary;

would benefit, or be capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust.

“(5)    Subsections (1) and (4) do not prevent a trust from being a non-resident family trust in relation to a natural person at a particular time if, in the event of the death of all of the primary potential beneficiaries and all of the secondary potential beneficiaries at that time, there are one or more funds, authorities or institutions in Australia covered by paragraph 78 (1) (a) that would benefit, or be capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust.

“(6)    For the purposes of this section, if, at a particular time, an entity holds an interest in, or right to benefit under, a trust that is dependent on the death of one or more natural persons, then, the entity is taken to be an entity who, in the event of the death of that natural person or those natural persons immediately after that time, would benefit under the trust.

“(7)    A reference in this section to a natural person does not include a reference to a natural person in the capacity of a trustee.


Public unit trusts

“329. For the purposes of this Part, a unit trust is a public unit trust at a particular time if, assuming that the 12 month period ending at that time had been a year of income, the unit trust would have been a public unit trust at all times during the year of income for the purposes of Division 6aaa of Part III.

Tax detriment

“330. (1) For the purposes of this Part, each of the following is a tax detriment to a partner in a partnership:

(a)   an increase in an amount included under section 92 in the partner’s assessable income in respect of an interest in the net income of the partnership;

(b)   a reduction in an amount allowable under section 92 as a deduction to the partner in respect of the partner’s interest in a partnership loss of the partnership;

(c)      a combination of such a reduction to nil and such an increase.

“(2)    For the purposes of this Part, an increase in an amount included under section 97, 98a or 100 in the assessable income of a beneficiary in respect of a share of the net income of a trust is a tax detriment to the beneficiary.

“(3)    For the purposes of this Part, an increase (including from nil) in an amount assessable to a trustee under section 98 in respect of a beneficiary’s share of, or under section 99 or 99a in respect of the whole or a part of, the net income of a trust is a tax detriment to the trustee.

“(4)    The amount of the tax detriment is equal to the amount of the increase or reduction or, where paragraph (1) (c) applies, the sum of the amounts of the reduction and increase.

Company deemed to be treated as a resident of a listed country or an unlisted country for the purposes of the tax law of that country

“331. If the tax law of a listed country or an unlisted country adopts some criterion other than treatment as a resident as the criterion for applying a worldwide source tax base to a company, then, sections 332 and 333 have effect, in relation to that tax law, as if that criterion were the same as treatment as a resident of the listed country or the unlisted country for the purposes of that tax law.

Companies that are residents of listed countries

“332. (1) For the purposes of this Part, a company is a resident of a listed country at a particular time if, and only if, the company is, in accordance with subsection (2), a resident of a particular listed country at that time.


“(2) For the purposes of this Part, a company is a resident of a particular listed country at a particular time if, and only if, both of the following conditions are satisfied at that time:

(a)      the company is not a Part X Australian resident;

(b)   the company is treated as a resident of the listed country for the purposes of the tax law of the listed country.

Companies that are residents of unlisted countries

“333. (1) For the purposes of this Part, a company is a resident of an unlisted country at a particular time if, and only if:

(a)   the company is, in accordance with subsection (2), a resident of a particular unlisted country at that time; or

(b)   paragraph (a) does not apply and the company is at that time neither:

(i)   a Part X Australian resident; nor

(ii)   a resident of a particular listed country.

“(2)    For the purposes of this Part, a company is a resident of a particular unlisted country (in this section called the ‘unlisted country of residence’) at a particular time if, and only if:

(a)   the company is not a Part X Australian resident at that time; and

(b)   the company is not treated as a resident of a listed country at that time for the purposes of the tax law of the listed country; and

(c)      any of the following subparagraphs applies:

(i)   both of the following conditions are satisfied at that time:

(a)   the company is treated as a resident of the unlisted country of residence for the purposes of the tax law of the unlisted country of residence;

(b)   the company is not treated as a resident of any other unlisted country for the purposes of the tax law of the unlisted country;

(ii)   both of the following conditions are satisfied at that time:

(a)   the company is treated as a resident of the unlisted country of residence and at least one other unlisted country for the purposes of the tax laws of each of those unlisted countries;

(b)   the company is incorporated in the unlisted country of residence;

(iii)    both of the following conditions are satisfied at that time:

(a)  the company is not treated as a resident of any unlisted country for the purposes of the tax law of the unlisted country;


(b)  the company’s management and control is solely or principally located in the unlisted country of residence.

(iv)  all of the following conditions are satisfied at that time:

(a)  the company is not treated as a resident of any unlisted country for the purposes of the tax law of the unlisted country;

(b)  the company’s management and control is not solely or principally located in the unlisted country of residence;

(c)  the company is incorporated in the unlisted country of residence.

Member of a non-portfolio company group

“334. A company is a member of a non-portfolio company group if it is a member of a group of companies for the purposes of section 160afb.

References extend to pre-commencement matters and things

“335. Unless otherwise expressly provided, references in this Part are to matters and things whether occurring before or after the commencement of this Part.

“Division 2Types of Entity

“Subdivision AAustralian Entities

Australian entity

“336. For the purposes of this Part, each of the following is an Australian entity:

(a)      an Australian partnership;

(b)      an Australian trust;

(c)   an entity (other than a partnership or trust) that is a Part X Australian resident.

Australian partnership

“337. For the purposes of this Part, a partnership is an Australian partnership at a particular time if at least one of the partners is an Australian entity at that time.

Australian trust

“338. For the purposes of this Part, a trust is an Australian trust at a particular time (in this section called the ‘test time’) if:

(a)  at any time in the period of 12 months immediately before the test time:

(i)  any trustee of the trust was a Part X Australian resident; or


(ii)  the central management and control of the trust was in Australia; or

(b)  the trust is a corporate unit trust for the purposes of Division 6b of Part III, or a public trading trust for the purposes of Division 6c of Part III, in relation to the year of income of the trust in which the test time occurs.

“Subdivision BControlled Foreign Entities (CFEs)

Controlled foreign entity (CFE)

“339. Each of the following is a CFE (or controlled foreign entity):

(a)      a CFC (or controlled foreign company);

(b)      a CFP (or controlled foreign partnership);

(c)      a CFT (or controlled foreign trust).

Controlled foreign company (CFC)

“340. A company is a CFC at a particular time if, at that time, the company is a resident of a listed country or of an unlisted country and any of the following paragraphs applies:

(a)   at that time, there is a group of 5 or fewer Australian 1% entities the aggregate of whose associate-inclusive control interests in the company is not less than 50%;

(b)      both of the following subparagraphs apply:

(i)   at that time, there is a single Australian entity (in this paragraph called the ‘assumed controller’) whose associate-inclusive control interest in the company is not less than 40%;

(ii)   at that time, the company is not controlled by a group of entities not being or including the assumed controller or any of its associates;

(c)   at that time, the company is controlled by a group of 5 or fewer Australian entities, either alone or together with associates (whether or not any associate is also an Australian entity).

Controlled foreign partnership (CFP)

“341. A partnership is a CFP at a particular time if:

(a)  the partnership is not an Australian partnership at that time; and

(b)     at least one of the partners is a CFE at that time.

Controlled foreign trust (CFT)

“342. A trust is a CFT at a particular time if, at that time, the trust is not an Australian trust and:

(a)      there is an eligible transferor in respect of the trust; or


(b)   there is a group of 5 or fewer Australian 1% entities the aggregate of whose associate-inclusive control interests in the trust is not less than 50%.

“Subdivision CEligible Transferors in relation to Trusts

Interpretation

“343. In this Subdivision, unless the contrary intention appears:

‘actual transfer’, in relation to property or services, means a transfer of the property or services other than a transfer that is taken to have been made because of subsection 345 (1), (2), (5), (6), (8), (10) or (11);

‘property’ includes money;

‘scheme’ has the same meaning as in Division 6aaa of Part III;

‘services’ has the same meaning as in Division 6aaa of Part III;

‘transfer’ has the same meaning as in Division 6aaa of Part III;

‘underlying transfer’, in relation to a transfer of property or services to a trust, means:

(a)      if that transfer was an actual transfer—the actual transfer; or

(b)  if that transfer was taken to have been made because of subsection 345 (1)—the actual transfer referred to in that subsection; or

(c)   if that transfer was taken to have been made because of subsection 345 (2)—the actual transfer referred to in paragraph 345 (2) (d); or

(d)  if that transfer was taken to have been made because of subsection 345 (5)—the actual transfer referred to in paragraph 345 (5) (b); or

(e)   if that transfer was taken to have been made because of the application of subsection 345 (6) or (8) to an actual transfer— the actual transfer; or

(f)   if that transfer was taken to have been made because of the application of subsection 345 (6) or (8) to a transfer that was taken to have been made because of subsection 345 (1)—the actual transfer referred to in subsection 345 (1); or

(g)   if that transfer was taken to have been made because of the application of subsection 345 (6) or (8) to a transfer that was taken to have been made because of subsection 345 (5)—the actual transfer referred to in paragraph 345 (5) (b); or

(h)  if that transfer was taken to have been made because of subsection 345 (10)—the actual transfer referred to in paragraph 345 (10) (b); or

(j)  if that transfer was taken to have been made because of one or more applications of subsection 345 (11) to an actual transfer— the actual transfer; or

(k)     if that transfer was taken to have been made because of one or


more applications of subsection 345 (11) to a transfer (in this paragraph called the ‘deemed transfer’) that was taken to have been made because of subsection 345 (1), (2), (5), (6), (8) or (10)—the actual transfer that, under a preceding paragraph of this definition, is the underlying transfer in relation to the deemed transfer.

References to transfer of property or services

“344. (1) A reference in this Subdivision to the transfer of property or services to a trust includes a reference to the transfer of property or services by way of the creation of the trust.

“(2)    For the purposes of this Subdivision, where an entity acquires property that did not previously exist, the property is taken to have existed immediately before the acquisition and to have been acquired from the entity who’ created the property.

“(3)    For the purposes of this Subdivision, property or services are to be taken to have been transferred to an entity if the property or services have been applied for the benefit of, or in accordance with the directions of, the entity.

“(4)    Without limiting the generality of subsection (3), a reference in that subsection to the application of property or services for the benefit of an entity includes a reference to the application of property or services in the discharge, in whole or in part, of a debt due by the entity.

“(5)    A reference in this Subdivision to a transfer of property or services to an entity includes a reference to a transfer made before the commencement of this Subdivision.

“(6)    A reference in this Subdivision to the transfer of property or services to a trust does not include a reference to a transfer made by the trustee of the estate of a deceased person under:

(a)      the terms of the deceased person’s will or codicil; or

(b)   an order of a court that varied or modified the provisions of a deceased person’s will or codicil;

unless:

(c)   the transfer was made in or as a result of the exercise (by the trustee or any other person) of a power of appointment or any other discretion; or

(d)   under subsection 345 (1), the property or services are taken to have been transferred by an entity other than the trustee, instead of by the trustee; or

(e)   under subsection 345 (5), the Commissioner treats the property or services as having been (to any extent) transferred by an entity other than the trustee, instead of by the trustee.


Deemed transfers of property or services

“345. (1) For the purposes of this Subdivision, where an entity (in this subsection called the ‘prime entity’) causes another entity to actually transfer property or services to a trust, the prime entity (instead of the other entity) is to be taken to have transferred the property or services to the trust.

“(2)    For the purposes of this Subdivision, where:

(a)  the trustee of a trust issues units in the trust to an entity (in this subsection called the ‘first entity’) in the first entity’s capacity as a manager, underwriter or dealer in relation to the marketing or placement of the units; and

(b)  in the course of the marketing or placement of the units, the units are disposed of by the first entity to another entity (in this subsection called the ‘second entity’); and

(c)  at a particular time (in this subsection called the ‘second entity’s transfer time’), the second entity transfers property or services to the first entity as consideration for the acquisition of the units; and

(d)  the first entity has actually transferred, or actually transfers, property or services (in this subsection called the ‘original property or services’) to the trust for the sole purpose of acquiring the units;

the second entity is taken to have transferred the original property or services (instead of the first entity) at the second entity’s transfer time.

“(3)    A reference in subsection (2) to a unit in a trust is a reference to an interest (however described) in any of the income or property of the trust.

“(4)    Subsections (1) and (2) do not limit the operation of subsection (5).

“(5)    Where, under a scheme:

(a)  an entity (in this subsection called the ‘scheme entity’) actually transfers property or services to another entity; and

(b)  property or services are actually transferred to a trust at a particular time otherwise than by the scheme entity;

the Commissioner may, for the purposes of this Subdivision, treat the property or services mentioned in paragraph (b) as having been transferred by the scheme entity (instead of by any other entity) to the trust at that time.

“(6)    Where:

(a)  apart from subsections (8), (10) and (11), a partnership transfers property or services to a trust at a particular time (in this subsection called the ‘transfer time’); and


(b)  at a later time (in this subsection called the ‘cessation time’), the partnership ceases to exist for the purposes of this Act;

then, for the purpose of determining whether an entity that was a partner in the partnership immediately before the cessation time is an eligible transferor in relation to the trust at a time after the cessation time, each such partner is to be taken to have transferred the original property or services to the trust at the transfer time.

“(7)    Nothing in subsection (6) affects the application of this Subdivision to the transfer made by the partnership concerned.

“(8)    For the purposes of this Subdivision, if:

(a)  apart from this subsection and subsections (6), (10) and (11), a discretionary trust (in this subsection called the ‘transferor trust’) transfers property or services (in this subsection called the ‘original property or services’) to another trust (in this subsection called the ‘transferee trust’) at a particular time (in this subsection called the ‘transfer time’); and

(b)  at a later time (in this subsection called the ‘cessation time’), the transferor trust commences to be wound up or ceases to exist for the purposes of this Act; and

(c)  apart from this subsection and subsections (6), (10) and (11), one or more other entities transferred property or services to the transferor trust at or before the transfer time;

each of those other entities is to be taken to have transferred the original property or services to the transferee trust at the transfer time.

“(9)    Nothing in subsection (8) affects the application of this Subdivision to the transfer mentioned in paragraph (8) (a).

“(10)  For the purposes of this Subdivision, where:

(a)     any of the following subparagraphs applies:

(i)  any of the following events occurs in relation to a company (which company is in this subsection called the ‘transferor’):

(a)        the company passes a resolution for its winding-up;

(b)   an order is made for the winding-up of the company;

(c)        any similar event;

(ii)  a partnership (in this subsection also called the ‘transferor’) ceases to exist for the purposes of this Act;

(iii)   either of the following sub-subparagraphs applies in relation to the trustee of a trust (in this subsection also called the ‘transferor’):

(a)        the trust commences to be wound-up;


(b)  the trust estate ceases to exist for the purposes of this Act; and

(b)  an actual transfer of property or services is made to a trust (in this subsection called the ‘transferee’) as a consequence of the transferor being wound-up or ceasing to exist;

the transferor is taken to have transferred to the transferee the property or services concerned.

“(11) Where:

(a)  the following subparagraphs apply to an entity (in this subsection called the ‘defunct entity’):

(i) the defunct entity is a company, partnership or trust;

(ii)   the defunct entity transferred property or services (in this subsection called the ‘original property or services’) to a trust (including a transfer that was taken to have been made because of another application or applications of this subsection) at a particular time (in this subsection called the ‘transfer time’);

(iii)   if the defunct entity is a company—the company passes a resolution for its winding-up, an order is made for the winding-up of the company or a similar event occurs;

(iv)  if the defunct entity is a partnership—the partnership ceases to exist for the purposes of this Act;

(v)  if the defunct entity is a trust—the trust commences to be wound up or ceases to exist for the purposes of this Act; and

(b)  the Commissioner is satisfied that an entity (in this subsection called the ‘successor entity’) has benefited or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting (either directly or indirectly through one or more interposed companies, partnerships or trusts) as a result of a transfer of property or services made by the defunct entity or a transfer of property or services made as a consequence of the defunct entity being wound up or ceasing to exist; and

(c)  the Commissioner is of the opinion that it is appropriate to apply this subsection to the successor entity;

then, for the purpose of determining whether the successor entity is an eligible transferor in relation to the trust referred to in subparagraph (a) (ii) at a time after the transfer time, the successor entity is to be taken to have transferred the original property or services to that trust.

Circumstances in which a transfer of property or services is an eligible business transaction

“346. An underlying transfer of property or services to a trust is an eligible business transaction if, and only if, at or about the time of the transfer, identical or similar property or services were transferred by the transferor in the ordinary course of business to ordinary clients or


customers under arm’s length transactions in similar circumstances and subject to identical or similar terms and conditions as those that applied in relation to the underlying transfer of the property or services concerned.

Eligible transferor in relation to a discretionary trust

“347. (1) An entity (in this section called the ‘transferor entity’) is an eligible transferor in relation to a discretionary trust at a particular time (in this section called the ‘test time’) if the trust is not a public unit trust at the test time and:

(a)     all of the following subparagraphs apply:

(i)  the transferor entity transferred property or services to the trust at a time (in this subparagraph called the ‘transfer time’) at or after the IP time and before the test time;

(ii)  if the underlying transfer was made in the course of carrying on a business—the underlying transfer was not an eligible business transaction;

(iii)   if the underlying transfer was made under an arm’s length transaction otherwise than in the course of carrying on a business—the transferor entity was in a position, at any time after the transfer time and before the test time, to control the trust; or

(b)     all of the following subparagraphs apply:

(i)  the transferor entity transferred property or services to the trust at any time before the IP time;

(ii)  the underlying transfer was not an eligible business transaction;

(iii)   at any time after the IP time and before the test time, the entity was in a position to control the trust;

and, at the test time, the transferor entity is an Australian entity or a CFE.

“(2)    For the purposes of this section, an entity is taken to be in a position to control a trust if, and only if:

(a)  a group in relation to the entity had the power by means of the exercise by the group of any power of appointment or revocation or otherwise, to obtain, with or without the consent of any other entity, the beneficial enjoyment of the corpus or income of the trust; or

(b)  a group in relation to the entity was able in any manner whatsoever, whether directly or indirectly, to control the application of the corpus or income of the trust; or

(c)  a group in relation to the entity was capable under a scheme of gaining the enjoyment or the control referred to in paragraph (a) or (b); or


(d)  a trustee of the trust was accustomed or under an obligation (whether formally or informally) or might reasonably be expected to act in accordance with the directions, instructions or wishes of a group in relation to the entity; or

(e)  a group in relation to the entity was able to remove or appoint the trustee, or any of the trustees, of the trust.

“(3)    A reference in subsection (2) to a group in relation to an entity is a reference to any of the following:

(a)     the entity acting alone;

(b)     an associate of the entity acting alone;

(c)     the entity and one or more associates of the entity acting together;

(d)     2 or more associates of the entity acting together.

Eligible transferor in relation to a non-discretionary trust or a public unit trust

“348. (1) An entity is an eligible transferor in relation to a non-discretionary trust or a public unit trust at a particular time (in this section called the ‘test time’) if:

(a)  the transferor entity transferred property or services to the trust at or after the IP time and before the test time; and

(b)  the underlying transfer was made for no consideration or for a consideration less than the arm’s length amount in relation to the underlying transfer; and

(c)  it is not the case that the sole purpose of the underlying transfer was the acquisition of units in the trust where the parties to the underlying transfer were at arm’s length with each other in relation to the underlying transfer and the trust was a public unit trust at the test time;

and, at the test time, the transferor entity is an Australian entity or a CFE.

“(2)    For the purposes of subsection (1), the arm’s length amount in relation to a transfer of property or services to a trust is the amount that the trustee could reasonably be expected to have been required to pay to obtain the property or services concerned from the transferor under a transaction where the parties were dealing with each other at arm’s length in relation to the transaction.

“Division 3Control Interests, Attribution Interests, Attributable
Taxpayers and Attribution Percentages

“Subdivision AControl Interests

Associate-inclusive control interest in a company or trust

“349. (1) Subject to this section, the associate-inclusive control interest that an entity (in this section called the ‘lower entity’) holds in a company or trust at a particular time is the aggregate of:


(a)  the direct control interest in the company or trust that the lower entity holds at that time; and

(b)  the indirect control interests in the company or trust that the lower entity holds at that time; and

(c)  the direct control interests in the company or trust held at that time by associates of the lower entity; and

(d)  the indirect control interests in the company or trust held at that time by associates of the lower entity.

“(2)    In calculating the associate-inclusive control interest that the lower entity holds in the company or trust:

(a)  an indirect control interest of the lower entity is not to be counted under paragraph (1) (b) to the extent to which it is calculated by reference to:

(i)  a direct control interest in the company or trust that is taken into account under paragraph (1) (c); or

(ii)   an indirect control interest in the company or trust that is taken into account under paragraph (1) (d); and

(b)  an indirect control interest of an associate of the lower entity is not to be counted under paragraph (1) (d) to the extent to which it is calculated by reference to:

(i)  a direct control interest in the company or trust that is taken into account under paragraph (1) (a) or (c); or

(ii)  an indirect control interest in the company or trust that is taken into account under paragraph (1) (b) or (d).

“(3)    If, apart from this subsection, both of the following things would be counted in calculating the associate-inclusive control interest that the lower entity holds in the company or trust:

(a)  the holding of a direct control interest by the lower entity or any other entity;

(b)     an entitlement to acquire that direct control interest;

only one of those things is to be taken into account.

“(4)    For the purpose of determining any of the following matters:

(a)  whether the aggregate of the associate-inclusive control interests that a group of entities holds in a company is not less than 50%;

(b)  whether a single Australian entity has an associate-inclusive control interest in a company of not less than 40%;

(c)  whether the aggregate of the associate-inclusive control interests that a group of entities holds in a trust is not less than 50%;


(d)  whether the associate-inclusive control interest that an Australian entity holds in a CFC is not less than 10%;

(e)  whether the associate-inclusive control interest that an Australian entity holds in a company is not less than 1%;

if, apart from this subsection, an entity, or each of 2 or more entities, would hold a direct control interest, or control tracing interest, in another entity (in this subsection called the ‘higher entity’) equal to 100%:

(f)  only one of those entities is to be taken to hold a direct control interest, or control tracing interest, as the case may be, in the higher entity equal to 100%; and

(g)  no other entity (whether or not the entity would, apart from this subsection hold a direct control interest, or control tracing interest, of 100%) is to be taken to hold any direct control interest, or control tracing interest, as the case may be, in the higher entity.

“(5)    For the purpose of calculating the aggregate of the associate-inclusive control interests that a group of entities holds in a company or trust:

(a)  if a particular direct control interest or indirect control interest that an entity holds in another entity would be counted more than once because the entity is an associate of one or more other entities in the group, that interest is to be counted only once; and

(b)  if both of the following things would, but for this subsection, be counted in calculating the aggregate of the associate-inclusive control interests that a group of entities holds in a company or trust:

(i)  the holding of a direct control interest by an entity;

(ii)  an entitlement to acquire that direct control interest;

only one of those things is to be counted.

“(6)    If it is necessary for the purposes of this section to decide:

(a)  which one of 2 things is to be taken into account for the purposes of subsection (3) or (5); or

(b)  which one of 2 or more entities is to be chosen for the purposes of paragraph (4) (f);

the Commissioner may make that decision.

Direct control interest in a company

“350. (1) Subject to subsection (7), an entity holds a direct control interest in a company at a particular time equal to the percentage that the entity holds, or is entitled to acquire, at that time of:

(a)     the total paid-up share capital of the company; or


(b)   the total rights of shareholders to vote, or participate in any decision-making, concerning any of the following:

(i)     the making of distributions of capital or profits of the company to its shareholders;

(ii)    the constituent document of the company;

(iii)   any variation of the share capital of the company; or

(c)   the total rights to distributions of capital or profits of the company to its shareholders on winding-up; or

(d)   the total rights to distributions of capital or profits of the company to its shareholders, otherwise than on winding-up;

or, if different percentages are applicable under the preceding paragraphs, the greater or greatest of those percentages.

“(2)    If the percentage of total rights to vote or participate in decision making differs as between differing types of decision-making, the highest of those percentages applies for the purposes of paragraph (1) (b).

“(3)    For the purposes of the application of subsection (1) to a company, the percentage that an entity holds, or is entitled to acquire, at a particular time (in this subsection called the ‘test time’) in a statutory accounting period of the company, of the total rights to distributions of capital or profits of the company to its shareholders on winding-up is to be worked out by:

(a)     ascertaining whichever of the following is applicable:

(i)  the capital of the company as at the end of the statutory accounting period;

(ii)  the profits of the company for the statutory accounting period; and

(b)  assuming that the rights to such distributions that the entity holds, or is entitled to acquire, at the test time were the same at all other times during the statutory accounting period; and

(c)     ascertaining the percentage concerned:

(i)  at the end of the statutory accounting period instead of at the test time; and

(ii) on that assumption.

“(4)    For the purposes of the application of subsection (1) to a company, the percentage that an entity holds, or is entitled to acquire, at a particular time (in this subsection called the ‘test time’) in a statutory accounting period of the company, of the total rights to distributions of capital or profits of the company to its shareholders, otherwise than on winding-up, is to be worked out by:

(a)     ascertaining whichever of the following is applicable:

(i)  the capital of the company as at the end of the statutory accounting period;

(ii)   the profits of the company for the statutory accounting period; and


(b)  assuming that the rights to such distributions that the entity holds, or is entitled to acquire, at the test time were the same at all other times during the statutory accounting period; and

(c)     ascertaining the percentage concerned:

(i)  at the end of the statutory accounting period instead of at the test time; and

(ii)  on that assumption.

“(5)   Eligible finance shares in a company are to be ignored for the purposes of the application of subsection (1) to the company.

“(6)    If, at a particular time, a company is controlled by a group of 5 or fewer Australian entities, either alone or together with associates (whether or not any associate is also an Australian entity), each Australian entity in that group of 5 or fewer holds a direct control interest in the company equal to 100%.

“(7)    An entity that holds a direct control interest in a company at a particular time because of subsection (6) is not to be taken to hold any direct control interest in the company at that time because of subsection (1).

Direct control interest in a trust

“351. (1) An entity that is a beneficiary in a trust holds a direct control interest in the trust at a particular time equal to:

(a)   the percentage of the income of the trust represented by the share of the income to which the beneficiary is entitled, or that the beneficiary is entitled to acquire; or

(b)   the percentage of the corpus of the trust represented by the share of the corpus to which the beneficiary is entitled, or that the beneficiary is entitled to acquire;

or, if those percentages differ, the greater of those percentages.

“(2)    For the purposes of the application of subsection (1) to a trust:

(a)  the percentage of the income of the trust represented by the share of the income to which the beneficiary is entitled, or that the beneficiary is entitled to acquire; or

(b)  the percentage of the corpus of the trust represented by the share of the corpus to which the beneficiary is entitled, or that the beneficiary is entitled to acquire;

at a particular time (in this subsection called the ‘test time’) in a year of income of the trust, is to be worked out by:

(c)     ascertaining whichever of the following is applicable:

(i)  the income of the trust for the year of income;

(ii)  the corpus of the trust as at the end of the year of income; and


(d)  assuming that the share to which the entity is entitled, or that the entity is entitled to acquire, at the test time was the same at all other times during the year of income; and

(e)     ascertaining the percentage concerned:

(i)  at the end of the year of income instead of at the test time; and

(ii) on that assumption.

“(3)    Each entity that is an eligible transferor in relation to a trust at a particular time holds a direct control interest in the trust at that time equal to 100%.

“(4)    An entity that holds a direct control interest in a trust at a particular time because of subsection (3) is not to be taken to hold any direct control interest in the trust at that time because of subsection (1).

Indirect control interest in a company or trust

“352. (1) An indirect control interest that an entity (in this section called the ‘bottom entity’) holds in a company or trust at a particular time is calculated in accordance with this section.

“(2)    An interposed entity is not to be taken into account in calculating an indirect control interest unless the entity is a CFE.

“(3)    If there is only one entity interposed between the bottom entity and the company or trust, the indirect control interest is calculated by multiplying the control tracing interest that the bottom entity holds in the interposed entity by the control tracing interest that the interposed entity holds in the company or trust.

“(4)    If there are 2 entities interposed between the bottom entity and the company or trust, the indirect control interest is calculated:

(a)   by multiplying the control tracing interest that the bottom entity holds in the first interposed entity by the control tracing interest that the first interposed entity holds in the second interposed entity; and

(b)   by multiplying the result of the calculation referred to in paragraph (a) by the control tracing interest that the second interposed entity holds in the company or trust.

“(5)    If there are 3 or more entities interposed between the bottom entity and the company or trust, the indirect control interest is calculated:

(a)  by multiplying the control tracing interest that the bottom entity holds in the first interposed entity by the control tracing interest that the first interposed entity holds in the second interposed entity; and

(b)  by multiplying the result of the calculation referred to in paragraph (a) by the control tracing interest that the second interposed entity holds in the third interposed entity;


and so on, ending with a multiplication by the control tracing interest that the last interposed entity holds in the company or trust.

“(6)    For the purposes of this section, an entity (in this subsection called the ‘second entity’) is interposed between 2 other entities (in this subsection called the ‘first entity’ and the ‘third entity’ respectively) if, and only if:

(a)  the first entity has a control tracing interest in the second entity; and

(b)  the second entity has a control tracing interest in the third entity.

Control tracing interest in a company

“353. (1) Subject to this section, an entity (in this subsection called the ‘lower entity’) holds a control tracing interest in a company at a particular time equal to the direct control interest in the company that the lower entity holds at that time.

“(2)    An entity (in this subsection called the ‘lower entity’) holds a control tracing interest in a company at a particular time equal to 100% if:

(a)  the aggregate of the direct control interests in the company held at that time by the lower entity and its associates is not less than 50%; or

(b)     both of the following conditions are satisfied:

(i)  the aggregate of the direct control interests in the company held at that time by the lower entity and its associates is not less than 40%;

(ii)  at that time, the company is not controlled by a group of entities not being or including the lower entity or any of its associates; or

(c)  at that time, the company is controlled by the lower entity, either alone or together with associates.

Control tracing interest in a CFP

“354. Each partner in a CFP holds a control tracing interest in the CFP equal to 100%.

Control tracing interest in a CFT

“355. (1) An entity that is an eligible transferor at a particular time in relation to a CFT holds a control tracing interest in the CFT at that time equal to 100%.

“(2)    Subject to subsection (4), an entity (in this subsection called the ‘lower entity’) that is a beneficiary in a CFT holds a control tracing interest in the trust at a particular time equal to:


(a)   the percentage of the income of the CFT represented by the share of the income to which the lower entity is entitled, or that the lower entity is entitled to acquire; or

(b)   the percentage of the corpus of the CFT represented by the share of the corpus to which the lower entity is entitled, or that the lower entity is entitled to acquire;

or, if those percentages differ, the greater of those percentages.

“(3)    For the purposes of the application of subsection (2) to a trust:

(a)   the percentage of the income of the trust represented by the share of the income to which the beneficiary is entitled, or that the beneficiary is entitled to acquire; or

(b)  the percentage of the corpus of the trust represented by the share of the corpus to which the beneficiary is entitled, or that the beneficiary is entitled to acquire;

at a particular time (in this subsection called the ‘test time’) in a year of income of the trust, is to be worked out by:

(c)     ascertaining whichever of the following is applicable:

(i)  the income of the trust for the year of income;

(ii)  the corpus of the trust as at the end of the year of income; and

(d)  assuming that the share to which the entity is entitled, or that the entity is entitled to acquire, at the test time was the same at all other times during the year of income; and

(e)     ascertaining the percentage concerned:

(i)  at the end of the year of income instead of at the test time; and

(ii) on that assumption.

“(4)    If the percentage calculated under subsection (2) is not less than 50%, the lower entity holds a control tracing interest in the CFT equal to 100%.

“(5)    An entity that holds a control tracing interest in a CFT at a particular time because of subsection (1) is not to be taken to hold any control tracing interest in the CFT at that time because of subsection (2) or (4).

“Subdivision BAttribution Interests

Direct attribution interest in a CFC or CFT

“356. (1) An entity holds a direct attribution interest in a CFC at a particular time equal to the percentage that the entity holds, or is entitled to acquire, at that time of:

(a)     the total paid-up share capital of the CFC; or

(b)  the total rights of shareholders to vote, or participate in any decision-making, concerning any of the following:


(i)  the making of distributions of capital or profits of the CFC to its shareholders;

(ii)   the constituent document of the CFC;

(iii)   any variation of the share capital of the CFC; or

(c)   the total rights to distributions of capital or profits of the CFC to its shareholders on winding-up; or

(d)  the total rights to distributions of capital or profits of the CFC to its shareholders, otherwise than on winding-up;

or, if different percentages are applicable under the preceding paragraphs, the greater or greatest of those percentages.

“(2)    For the purposes of the application of subsection (1) to a company, the percentage that an entity holds, or is entitled to acquire, at a particular time (in this subsection called the ‘test time’) in a statutory accounting period of the company, of the total rights to distributions of capital or profits of the company to its shareholders on winding-up is to be worked out by:

(a)     ascertaining whichever of the following is applicable:

(i)  the capital of the company as at the end of the statutory accounting period;

(ii)  the profits of the company for the statutory accounting period; and

(b)  assuming that the rights to such distributions that the entity holds, or is entitled to acquire, at the test time were the same at all other times during the statutory accounting period; and

(c)     ascertaining the percentage concerned:

(i)  at the end of the statutory accounting period instead of at the test time; and

(ii) on that assumption.

“(3)    For the purposes of the application of subsection (1) to a company, the percentage that an entity holds, or is entitled to acquire, at a particular time (in this subsection called the ‘test time’) in a statutory accounting period of the company, of the total rights to distributions of capital or profits of the company to its shareholders, otherwise than on winding-up, is to be worked out by:

(a)     ascertaining whichever of the following is applicable:

(i)  the capital of the company as at the end of the statutory accounting period;

(ii)   the profits of the company for the statutory accounting period; and

(b)  assuming that the rights to such distributions that the entity holds, or is entitled to acquire, at the test time were the same at all other times during the statutory accounting period; and


(c)     ascertaining the percentage concerned:

(i)  at the end of the statutory accounting period instead of at the test time; and

(ii)  on that assumption.

“(4)    Eligible finance shares in a company are to be ignored for the purposes of the application of subsection (1) to the company.

“(5)    An entity that is an eligible transferor at a particular time in relation to a CFT holds a direct attribution interest in the CFT at that time equal to 100%.

“(6)    Subsection (5) does not apply if:

(a)   the eligible transferor is a natural person (other than a natural person in the capacity of a trustee); and

(b)  the CFT is a non-resident family trust in relation to the natural person.

“(7)    An entity (in this subsection called the ‘lower entity’) that is a beneficiary in a CFT holds a direct attribution interest in the CFT at a particular time equal to:

(a)   the percentage of the income of the CFT represented by the share of the income to which the lower entity is entitled, or that the lower entity is entitled to acquire; or

(b)   the percentage of the corpus of the CFT represented by the share of the corpus to which the lower entity is entitled, or that the lower entity is entitled to acquire;

or, if those percentages differ, the greater of those percentages.

“(8)    An entity that holds a direct attribution interest in a CFT at a particular time because of subsection (5) is not to be taken to hold any direct attribution interest in the CFT at that time because of subsection (7).

Indirect attribution interest in a CFC or CFT

“357. (1) An indirect attribution interest that an entity (in this section called the ‘bottom entity’) holds in a CFC or CFT (in this section called the ‘top entity’) at a particular time is calculated in accordance with this section.

“(2)    An interposed entity is not to be taken into account in calculating an indirect attribution interest unless the entity is a CFE.

“(3)    If there is only one entity interposed between the bottom entity and the top entity, the indirect attribution interest is calculated by multiplying the attribution tracing interest that the bottom entity holds in the interposed entity by the attribution tracing interest that the interposed entity holds in the top entity.

“(4)    If there are 2 entities interposed between the bottom entity and the top entity, the indirect attribution interest is calculated:


(a)   by multiplying the attribution tracing interest that the bottom entity holds in the first interposed entity by the attribution tracing interest that the first interposed entity holds in the second interposed entity; and

(b)   by multiplying the result of the calculation referred to in paragraph (a) by the attribution tracing interest that the second interposed entity holds in the top entity.

“(5)    If there are 3 or more entities interposed between the bottom entity and the top entity, the indirect attribution interest is calculated:

(a)   by multiplying the attribution tracing interest that the bottom entity holds in the first interposed entity by the attribution tracing interest that the first interposed entity holds in the second interposed entity; and

(b)   by multiplying the result of the calculation referred to in paragraph (a) by the attribution tracing interest that the second interposed entity holds in the third interposed entity;

and so on, ending with a multiplication by the attribution tracing interest that the last interposed entity holds in the top entity.

“(6)    For the purposes of this section, an entity (in this subsection called the ‘second entity’) is interposed between 2 other entities (in this subsection called the ‘first entity’ and the ‘third entity’ respectively) if, and only if:

(a)   the first entity has an attribution tracing interest in the second entity; and

(b)   the second entity has an attribution tracing interest in the third entity.

Attribution tracing interest in a CFC

“358. An entity holds an attribution tracing interest in a CFC at a particular time equal to the direct attribution interest in the CFC that the entity holds at that time.

Attribution tracing interest in a CFP

“359. An entity that is a partner in a CFP holds an attribution tracing interest in the CFP at a particular time equal to the percentage that the entity holds, or is entitled to acquire, at that time of:

(a)      the total interests in the profits of the CFP; or

(b)      the total interests in the CFP property;

or, if those percentages differ, the greater of those percentages.

Attribution tracing interest in a CFT

“360. (1) An entity that is an eligible transferor at a particular time in relation to a CFT holds an attribution tracing interest in the CFT at that time equal to 100%.


“(2) Subsection (1) does not apply if:

(a)  the eligible transferor is a natural person (other than a natural person in the capacity of a trustee); and

(b)  the CFT is a non-resident family trust in relation to the natural person.

“(3)    An entity (in this subsection called the ‘lower entity’) that is a beneficiary in a CFT holds an attribution tracing interest in the CFT at a particular time equal to:

(a)   the percentage of the income of the CFT represented by the share of the income to which the lower entity is entitled, or that the lower entity is entitled to acquire; or

(b)   the percentage of the corpus of the CFT represented by the share of the corpus to which the lower entity is entitled, or that the lower entity is entitled to acquire;

or, if those percentages differ, the greater of those percentages.

“(4)    An entity that holds an attribution tracing interest in a CFT at a particular time because of subsection (1) is not to be taken to hold any attribution tracing interest in the CFT at that time because of subsection (3).

“Subdivision C—Attributable Taxpayers and Attribution Percentages

Attributable taxpayer in relation to a CFC or a CFT

“361. (1) An entity (in this subsection called the ‘test entity’) is an attributable taxpayer in relation to a CFC at a particular time if, at that time:

(a)   the test entity is an Australian entity whose associate-inclusive control interest in the CFC is at least 10%; or

(b)      all of the following subparagraphs apply:

(i)   the CFC is a CFC at that time only because of paragraph 340 (c);

(ii)   the CFC is controlled by any group of 5 or fewer Australian entities, either alone or together with associates (whether or not any associate is also an Australian entity);

(iii)   the test entity is an Australian 1% entity and is included in that group of 5 or fewer Australian entities.

“(2)    An entity (in this subsection called the ‘test entity’) is an attributable taxpayer in relation to a CFT at a particular time if, at that time, the test entity is an Australian entity whose associate-inclusive control interest in the CFT is at least 10%.

Attribution percentage of an attributable taxpayer

“362. (1) Subject to this section, the attribution percentage of an attributable taxpayer in relation to a CFC or CFT at a particular time is the sum of:


(a)   the direct attribution interest in the CFC or CFT held by the taxpayer at that time; and

(b)   the aggregate of the indirect attribution interests in the CFC or CFT held by the taxpayer at that time.

“(2)    If, apart from this subsection, both of the following things would be counted in calculating the attribution percentage of an attributable taxpayer in relation to a CFC or CFT at a particular time:

(a)   the holding of a direct attribution interest in an entity by any other entity;

(b)      an entitlement to acquire that direct attribution interest;

only one of those things is to be taken into account.

“(3)    If:

(a)   in calculating the percentage that would be the attribution percentage of an attributable taxpayer (apart from this subsection and subsection (5)) in relation to a CFC at a particular time (in this subsection called the ‘test time’) regard was had to an attribution tracing interest of an eligible transferor in relation to a CFT, being an attribution tracing interest determined under subsection 360 (1); and

(b)   the attribution percentage referred to in paragraph (a) is greater than it would have been apart from subsection 360 (1); and

(c)   there are other eligible transferors in relation to the CFT at the test time; and

(d)   the attributable taxpayer gives to the Commissioner, in accordance with a form approved, in writing, by the Commissioner, such information as is required by the form to be given;

the Commissioner may reduce the attribution percentage referred to in paragraph (a) by such amount as the Commissioner considers reasonable in the circumstances.

“(4)    If:

(a)   in calculating the percentage that would be the attribution percentage of an attributable taxpayer (apart from this subsection and subsection (5)) in relation to a CFT (in this subsection called the ‘attributing CFT’) at a particular time (in this subsection called the ‘test time’) regard was had to:

(i)   a direct attribution interest of the attributable taxpayer in relation to the attributing CFT, being direct attribution interest determined under subsection 356 (2); or

(ii)   an attribution tracing interest of an eligible transferor in relation to another CFT (in this subsection called the ‘interposed CFT’); and


(b)   the attribution percentage referred to in paragraph (a) is greater than it would have been apart from subsection 356 (2) or 360 (1), as the case may be; and

(c)   at the test time, there are other eligible transferors in relation to the attributing CFT or the interposed CFT, as the case may be; and

(d)   the attributable taxpayer gives to the Commissioner such information, and produces to the Commissioner such documents, as the Commissioner requires in connection with the operation of this subsection;

the Commissioner may reduce the attribution percentage referred to in paragraph (a) by such amount as the Commissioner considers reasonable in the circumstances.

“(5)    If, apart from this subsection, the aggregate of the attribution percentages of all the attributable taxpayers in relation to a CFC or CFT at a particular time would exceed 100%, the attribution percentage of each of those attributable taxpayers is the percentage calculated using the formula:

where:

Individual percentage means the percentage that would, apart from this subsection, be the attribution percentage of the attributable taxpayer concerned;

Total percentage means the aggregate of the percentages that would, apart from this subsection, be the attribution percentages of all the attributable taxpayers.

“Division 4Attribution Accounts

Attribution account entity

“363. Each of the following is an attribution account entity:

(a)      a company that is not a Part X Australian resident;

(b)      a partnership;

(c)      a trust.

Attribution account percentage

“364. The attribution account percentage of a taxpayer in relation to an entity is the sum of the taxpayer’s direct attribution account interest and indirect attribution account interest or interests in the entity.

Attribution account payment

“365. (1) Each of the following is an attribution account payment:

(a)      a dividend paid by a company to a shareholder;


(b)  the individual interest of a partner in the net income (within the meaning of section 90) of a partnership of a year of income;

(c)  where a beneficiary of a trust is presently entitled to a share of the income of the trust—that share of the net income (within the meaning of section 95) of the trust of a year of income;

(d)  the whole or part of the net income of a trust of a year of income that is assessable to the trustee under section 99 or 99a;

(e)  an amount of trust property that would be included in the assessable income of a beneficiary of a year of income under section 99b if:

(i)  the beneficiary were a resident, within the meaning of section 6, at a time during the year of income; and

(ii)  paragraph 99b (2) (c) were replaced by a paragraph referring to any attribution account payment under paragraph (c) or (d) of this subsection.

“(2)    The attribution account payment is taken to be made:

(a)  in a paragraph (1) (b) case—by the partnership to the partner; and

(b)  in a paragraph (1) (c) or (e) case—by the trust to the beneficiary; and

(c)     in a paragraph (1) (d) case—by the trust to the trustee;

and, in any such case, to be made at the end of the year of income.

“(3)    Where:

(a)  an attribution credit arises for a company in relation to a taxpayer under paragraph 371 (1) (b) as a result of a change of residence whereby the company becomes a Part X Australian resident; and

(b)  the company makes an attribution account payment consisting of a frankable dividend, within the meaning of Part IIIaa, that has been franked in accordance with section 160aqf; and

(c)  immediately before the attribution account payment is made, there is an attribution surplus for the company in relation to the taxpayer that is attributable to the attribution credit;

then, for the purposes of applying section 23ai and Divisions 4 and 5 of this Part in relation to the taxpayer, the attribution account payment is taken to be reduced to the extent that it is franked.

Direct attribution account interest in a company

“366. (1) An entity holds a direct attribution account interest in a company at a particular time equal to the percentage that the entity holds, or is entitled to acquire, at that time of:

(a)     the total paid-up share capital of the company; or


(b)  the total rights of shareholders to vote, or participate in any decision-making, concerning any of the following:

(i)    the making of distributions of capital or profits of the company to its shareholders;

(ii)   the constituent document of the company;

(iii)  any variation of the share capital of the company; or

(c)   the total rights to distributions of capital or profits of the company to its shareholders on winding-up; or

(d)  the total rights to distributions of capital or profits of the company to its shareholders, otherwise than on winding-up;

or, if different percentages are applicable under the preceding paragraphs, the greater or greatest of those percentages.

“(2)    If the percentage of total rights to vote or participate in decisionmaking differs as between differing types of decision-making, the highest of those percentages applies for the purposes of paragraph (1) (b).

“(3)    For the purposes of the application of subsection (1) to a company, the percentage that an entity holds, or is entitled to acquire, at a particular time (in this subsection called the ‘test time’) in a statutory accounting period of the company, of the total rights to distributions of capital or profits of the company to its shareholders on winding-up is to be worked out by:

(a)     ascertaining whichever of the following is applicable:

(i)  the capital of the company as at the end of the statutory accounting period;

(ii)  the profits of the company for the statutory accounting period; and

(b)  assuming that the rights to such distributions that the entity holds, or is entitled to acquire, at the test time were the same at all other times during the statutory accounting period; and

(c)     ascertaining the percentage concerned:

(i)  at the end of the statutory accounting period instead of at the test time; and

(ii) on that assumption.

“(4)    For the purposes of the application of subsection (1) to a company, the percentage that an entity holds, or is entitled to acquire, at a particular time (in this subsection called the ‘test time’) in a statutory accounting period of the company, of the total rights to distributions of capital or profits of the company to its shareholders, otherwise than on winding-up, is to be worked out by:

(a)     ascertaining whichever of the following is applicable:

(i)  the capital of the company as at the end of the statutory accounting period;

(ii)  the profits of the company for the statutory accounting period; and


(b)  assuming that the rights to such distributions that the entity holds, or is entitled to acquire, at the test time were the same at all other times during the statutory accounting period; and

(c)     ascertaining the percentage concerned:

(i)  at the end of the statutory accounting period instead of at the test time; and

(ii) on that assumption.

“(5)    Eligible finance shares in a company are to be ignored for the purposes of the application of subsection (1) to the company.

Direct attribution account interest in a partnership

“367. (1) An entity that is a partner in a partnership holds a direct attribution account interest in the partnership at a particular time equal to the percentage that the partner holds, or is entitled to acquire, of:

(a)     the total interests in the profits of the partnership; or

(b)     the total interests in the property of the partnership;

or, if those percentages differ, the greater of those percentages.

“(2)    For the purposes of the application of subsection (1) to a partnership:

(a)  the percentage that the partner holds, or is entitled to acquire, of the total interests in the profits of the partnership; or

(b)  the percentage that the partner holds, or is entitled to acquire, of the total interests in the property of the partnership;

at a particular time (in this subsection called the ‘test time’) in an accounting period of the partnership is to be worked out by:

(c)      ascertaining whichever of the following is applicable:

(i)  the profits of the partnership for the accounting period;

(ii)  the property of the partnership as at the end of the accounting period; and

(d)  assuming that the percentage that the partner holds, or that the partner is entitled to acquire, at the test time was the same at all other times during the accounting period; and

(e)      ascertaining the percentage concerned:

(i)  at the end of the accounting period instead of at the test time; and

(ii)  on that assumption.

Direct attribution account interest in a trust

“368. (1) A beneficiary in a trust holds a direct attribution account interest in the trust at a particular time equal to:

(a)  the percentage of the income of the trust represented by the share of the income to which the beneficiary is entitled, or that the beneficiary is entitled to acquire; or


(b)  the percentage of the corpus of the trust represented by the share of the corpus to which the beneficiary is entitled, or that the beneficiary is entitled to acquire;

or, if those percentages differ, the greater of those percentages.

“(2)    For the purposes of the application of subsection (1) to a trust:

(a)  the percentage of the income of the trust represented by the share of the income to which the beneficiary is entitled, or that th