Federal Register of Legislation - Australian Government

Primary content

Income Tax Assessment Act 1936

  • - C2009C00403
  • In force - Superseded Version
  • View Series
Act No. 27 of 1936 as amended, taking into account amendments up to Act No. 62 of 2009
An Act to consolidate and amend the law relating to the imposition assessment and collection of a tax upon incomes
Administered by: Treasury
General Comments: This compilation is affected by a retrospective amendment, please see Tax Laws Amendment (2011 Measures No. 9) Act 2012 [Act No. 12 of 2012], for details.
Registered 06 Aug 2009
Start Date 01 Jul 2009
End Date 17 Sep 2009
Table of contents.

 

Income Tax Assessment Act 1936

Act No. 27 of 1936 as amended

This compilation was prepared on 22 July 2009
taking into account amendments up to Act No. 62 of 2009

Volume 4 includes:       Table of Contents
                                    Sections 204 – 624

The text of any of those amendments not in force
on that date is appended in the Notes section

The operation of amendments that have been incorporated may be affected by application provisions that are set out in the Notes section

  


Contents

Part VI—Collection and recovery of tax                                                                   1

Division 1—General                                                                                                      1

204........ When tax payable............................................................................... 1

213........ Temporary business........................................................................... 2

219........ Consolidated assessments.................................................................. 3

Division 8—Prompt recovery, through estimates and payment agreements, of certain amounts not remitted                                                                                                     4

Subdivision A—Object and interpretation                                                              4

222AFA Object and outline............................................................................... 4

222AFB Interpretation...................................................................................... 4

222AFC Unpaid amount................................................................................... 6

Subdivision B—Making, reducing and revoking estimates                                6

222AGAWhen Commissioner may make estimate........................................... 6

222AGBNotice to person liable........................................................................ 7

222AGCReducing amount of estimate.............................................................. 8

222AGDRevoking estimate............................................................................... 8

222AGE Matters for Commissioner to consider under sections 222AGC and 222AGD      9

222AGF Requirements for statutory declaration under section 222AGC or 222AGD         10

222AGGFurther estimate after previous estimate revoked or
discharged......................................................................................... 11

Subdivision C—Recovering unpaid amount of estimate                                     12

222AHANature of liability created by notice................................................. 12

222AHBRefund if estimate exceeds underlying liability................................. 12

222AHCDefences in recovery proceedings..................................................... 13

222AHDEffect of affidavit on estimate.......................................................... 14

222AHE Requirements for affidavit under section 222AHC.......................... 14

Subdivision D—Insolvency proceedings                                                               16

222AIA. Effect on statutory demand if estimate reduced or revoked............. 16

222AIB. Defences on winding up application................................................ 16

222AIC. Effect of affidavit on estimate.......................................................... 17

222AID. Requirements for affidavit under section 222AIB............................ 18

222AIE. Defences under section 222AIB not available on application to set aside statutory demand 19

222AIF. Estimate provable in bankruptcy or winding up.............................. 19

222AIG. Rejection of proof of debt relating to estimate................................. 19

222AIH. Requirements for statutory declaration under section 222AIG....... 21

222AII.. Provisions altering effect of Corporations Act................................. 22

Subdivision E—Late payment of estimate                                                             22

222AJA Liability to the general interest charge.............................................. 22

222AJB. Effect of paying the general interest charge...................................... 23

Subdivision F—Effect on liabilities under this and other Divisions if estimate reduced or revoked               24

222AKALiabilities adjusted with effect from when they arose...................... 24

222AKB Reduction or revocation does not prejudice Commissioner’s rights in relation to underlying liability   24

Subdivision G—Payment agreements                                                                   24

222ALA Commissioner may make agreement................................................. 24

222ALB Effect of certain payments............................................................... 25

Subdivision H—Miscellaneous                                                                               26

222AMAEffect of judgment on liability on which it is based........................ 26

222AMBNotices under this Division where trustee has control of
affairs of person liable...................................................................... 26

Division 9—Penalties for directors of non‑remitting companies        28

Subdivision A—Object and interpretation                                                            28

222ANAObject and outline............................................................................. 28

222ANBInterpretation.................................................................................... 28

Subdivision B—Company failing to remit deductions, amounts withheld etc. 29

222AOAApplication....................................................................................... 29

222AOBDirectors to cause company to remit or to go into voluntary
administration or liquidation—deductions and amounts withheld... 30

222AOBAADirectors to cause company to remit or to go into
voluntary administration or liquidation—alienated personal services payments    31

222AOBADirectors to cause company to remit or to go into voluntary
administration or liquidation—non‑cash benefits............................. 32

222AOCPenalty for directors in office on or before due date......................... 33

222AODPenalty for new directors................................................................. 33

222AOE Commissioner must give 14 days’ notice before recovering penalty 34

222AOF How notice may be given................................................................. 35

222AOGRemission of penalty if section 222AOB, 222AOBAA or
222AOBA complied with before notice period ends....................... 35

222AOHEffect of director paying penalty or company discharging
underlying liability............................................................................ 36

222AOI. Director’s rights of indemnity and contribution............................... 36

222AOJ Defences........................................................................................... 37

Subdivision C—Company failing to pay estimate under Division 8                 37

222APA Application....................................................................................... 37

222APB Directors to cause company to pay estimate or to go into voluntary administration or liquidation       37

222APC Penalty for directors in office within 14 days after notice of estimate 38

222APD Penalty for new directors................................................................. 38

222APE Commissioner must give 14 days’ notice before recovering penalty 39

222APF Remission of penalty if section 222APB complied with before notice period ends               40

222APG Effect of director paying penalty or company discharging liability in respect of estimate     40

222APH Director’s rights of indemnity and contribution............................... 40

222API. Defences........................................................................................... 41

Subdivision D—Company contravening payment agreement under Division 8 42

222AQADirectors to ensure that company complies with payment
agreement.......................................................................................... 42

222AQBEffect of director paying penalty or company discharging
liability.............................................................................................. 42

222AQCDirector’s rights of indemnity and contribution............................... 43

222AQDDefences........................................................................................... 43

Division 10—Miscellaneous                                                                                   45

222ARAThis Part not to limit or exclude Chapter 5 of the Corporations
Act.................................................................................................... 45

Part VIIA—Registration of tax agents                                                                     46

Division 1—Interpretation                                                                                       46

251A..... Interpretation.................................................................................... 46

251B..... Territories......................................................................................... 47

251BA.. Companies in which qualified directors have a substantial interest. 47

251BB... Non‑exempt companies.................................................................... 48

251BC... Fit and proper persons to prepare income tax returns..................... 49

Division 2—Tax Agents’ Boards                                                                         51

251C..... Tax Agents’ Boards.......................................................................... 51

251D..... Constitution of Boards..................................................................... 51

251DA.. Remuneration and allowances........................................................... 51

251E...... Conduct of business of Board.......................................................... 51

251F...... Board not to be sued......................................................................... 52

251G..... Summoning of witnesses etc............................................................. 52

Division 3—Registration of tax agents                                                             53

Subdivision A—Original registration of tax agents                                           53

251J...... Applications for original registration of tax agents........................... 53

251JA... Original registration of tax agents..................................................... 53

Subdivision B—Re‑registration of tax agents                                                     54

251JB.... Applications for re‑registration of tax agents................................... 54

251JC.... Re‑registration of tax agents............................................................. 55

Subdivision C—Effect of changes in constitution of partnerships                   57

251JD... Registration of a partnership terminated if constitution changes..... 57

Subdivision D—Changes in constitution of partnerships–registration of successor tax agents    57

251JE.... Applications for registration of successor tax agents....................... 57

251JF.... Registration of successor.................................................................. 59

Subdivision E—Duration of registration of tax agents                                       59

251JG... Registration of tax agents to be in force for 3 years......................... 59

Subdivision F—Surrender of registration of tax agents                                    60

251JH... Surrender of registration................................................................... 60

Subdivision G—Termination of registration of tax agents other than partnerships          60

251JK... Death of natural person.................................................................... 60

251JM.. Companies ceasing to exist............................................................... 60

Subdivision H—Cancellation or suspension of registration of tax agents     61

251K..... Cancellation or suspension of registration of tax agents................... 61

Division 4—Registration of nominees of tax agents                                  64

251KA.. Original nominee to be registered as a nominee................................ 64

251KB.. Applications for registration or re‑registration of nominees............ 64

251KC.. Registration and re‑registration of nominees of tax agents............... 65

251KD.. Duration of registration of nominees................................................ 66

251KE... Cancellation of registration of nominees........................................... 67

Division 5—Refund of lodgment fees                                                                68

251KF... Refund of lodgment fees if application withdrawn.......................... 68

Division 6—Notification obligations of tax agents etc.                             69

251KG.. Tax agents who are natural persons.................................................. 69

251KH.. Tax agents that are partnerships....................................................... 69

251KJ... Changes in the constitution of partnerships..................................... 69

251KK.. Tax agents that are companies.......................................................... 70

Division 7—Privileges and duties of registered tax agents                   71

251L...... Unregistered tax agents not to charge fees........................................ 71

251LA... Recognised professional associations............................................... 73

251M.... Negligence of registered tax agent etc................................................ 74

251N..... Preparation of returns etc. on behalf of registered tax agents........... 75

251O..... Advertising etc. by persons other than registered tax agents........... 76

Division 8—Miscellaneous                                                                                      77

251P...... Offences by partnerships................................................................. 77

251Q..... Removal of business to another State............................................... 77

251QA.. Review of decisions.......................................................................... 77

251QB.. Statements to accompany notification of decisions........................ 78

Part VIIB—Medicare levy and Medicare levy surcharge                            79

251R..... Interpretation.................................................................................... 79

251S...... Medicare levy................................................................................... 83

251T..... Levy (other than certain levy increases) not payable by prescribed persons or by certain trustees      85

251U..... Prescribed persons............................................................................ 85

251V..... Subsections 251R(4), (5), (6B), (6C) and (6D) not to apply to certain medicare levy increases            88

251VA.. Subsection 251U(3) not to apply for certain medicare levy increases 88

251W.... Regulations....................................................................................... 89

251X..... Notice of assessment to set out Medicare levy and surcharge......... 89

251Z..... Administration of Medicare levy surcharge Act.............................. 89

Part VIII—Miscellaneous                                                                                                90

252........ Public officer of company................................................................ 90

252A..... Public officer of trust estate............................................................. 92

254........ Agents and trustees.......................................................................... 96

255........ Person in receipt or control of money from non‑resident................ 97

257........ Payment of tax by banker................................................................. 99

260........ Contracts to evade tax void.............................................................. 99

262........ Periodical payments in the nature of income.................................. 100

262A..... Keeping of records.......................................................................... 100

263........ Access to books etc........................................................................ 108

264........ Commissioner may require information and evidence.................... 109

264AA.. Reporting to Department of Primary Industries and Energy......... 109

264A..... Offshore information notices.......................................................... 110

264BB... Commissioner may require private health insurers to provide information            115

265A..... Release of liability of members of the Defence Force on death...... 116

265B..... Notices in relation to certain securities........................................... 118

266........ Regulations..................................................................................... 119

Part X—Attribution of income in respect of controlled foreign companies                120

Division 1—Preliminary                                                                                          120

316........ Object of Part................................................................................. 120

317........ Interpretation.................................................................................. 120

318........ Associates....................................................................................... 137

319........ Statutory accounting period of a company.................................... 142

320........ Listed countries and unlisted countries.......................................... 144

321........ Each listed country and each unlisted country to be treated as a separate foreign country    145

322........ Meaning of entitled to acquire........................................................ 145

323........ State foreign taxes may be treated as federal foreign taxes............. 145

324........ When income or profits subject to tax in a listed country.............. 145

325........ When dividends etc. taxed in a country at normal company tax rate 147

326........ AFI subsidiary................................................................................ 148

327........ Eligible finance shares..................................................................... 149

327A..... Widely distributed finance shares................................................... 150

327B..... Transitional finance shares............................................................. 153

328........ Non‑resident family trusts............................................................. 157

329........ Public unit trusts............................................................................ 160

330........ Tax detriment.................................................................................. 160

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................................................................................ 160

332........ Companies that are residents of listed countries............................ 161

332A..... Companies that are residents of section 404 countries.................. 161

333........ Companies that are residents of unlisted countries........................ 161

334A..... Voting interests in companies......................................................... 163

335........ References extend to pre‑commencement matters and things........ 164

Division 2—Types of entity                                                                                   165

Subdivision A—Australian entities                                                                     165

336........ Australian entity............................................................................. 165

337........ Australian partnership.................................................................... 165

338........ Australian trust............................................................................... 165

Subdivision B—Controlled foreign entities (CFEs)                                          165

339........ Controlled foreign entity (CFE)..................................................... 165

340........ Controlled foreign company (CFC)................................................ 166

341........ Controlled foreign partnership (CFP)............................................ 166

342........ Controlled foreign trust (CFT)....................................................... 166

Subdivision C—Eligible transferors in relation to trusts                               167

343........ Interpretation.................................................................................. 167

344........ References to transfer of property or services............................... 168

345........ Deemed transfers of property or services...................................... 169

346........ Circumstances in which a transfer of property or services is an eligible business transaction                172

347........ Eligible transferor in relation to a discretionary trust..................... 173

348........ Eligible transferor in relation to a non‑discretionary trust or a public unit trust    174

Division 3—Control interests, attribution interests, attributable taxpayers and attribution percentages                                                                                                                    176

Subdivision A—Control interests                                                                        176

349........ Associate‑inclusive control interest in a company or trust............ 176

350........ Direct control interest in a company.............................................. 178

351........ Direct control interest in a trust..................................................... 180

352........ Indirect control interest in a company or trust............................... 181

353........ Control tracing interest in a company............................................ 182

354........ Control tracing interest in a CFP.................................................... 183

355........ Control tracing interest in a CFT.................................................... 183

Subdivision B—Attribution interests                                                                  184

356........ Direct attribution interest in a CFC or CFT................................... 184

357........ Indirect attribution interest in a CFC or CFT................................ 188

358........ Attribution tracing interest in a CFC.............................................. 189

359........ Attribution tracing interest in a CFP.............................................. 189

360........ Attribution tracing interest in a CFT.............................................. 189

Subdivision C—Attributable taxpayers and attribution percentages            190

361........ Attributable taxpayer in relation to a CFC or a CFT..................... 190

362........ Attribution percentage of an attributable taxpayer........................ 191

Division 4—Attribution accounts                                                                       194

363........ Attribution account entity.............................................................. 194

364........ Attribution account percentage...................................................... 194

365........ Attribution account payment......................................................... 194

366........ Direct attribution account interest in a company........................... 196

367........ Direct attribution account interest in a partnership....................... 197

368........ Direct attribution account interest in a trust.................................. 198

369........ Indirect attribution account interest in an entity............................ 199

370........ Attribution surplus......................................................................... 200

371........ Attribution credit............................................................................ 201

372........ Attribution debit............................................................................. 206

373........ Grossed‑up amount of an attribution debit.................................... 207

Division 7—Calculation of attributable income of CFC                         208

Subdivision A—Basic principles                                                                          208

381........ Separate attributable income for each attributable taxpayer........... 208

382........ Attributable income is taxable income calculated on certain assumptions               208

383........ Basic assumptions.......................................................................... 208

384........ Additional assumption for unlisted country CFC.......................... 209

385........ Additional assumption for listed country CFC.............................. 210

386........ Adjusted tainted income................................................................. 213

387........ Reduction of attributable income because of interim dividends..... 214

Subdivision B—General modifications of Australian tax law                         214

388........ Double tax agreements to be disregarded........................................ 214

389........ Certain provisions to be disregarded in calculating attributable income  214

389A..... Other provisions to be disregarded in calculating attributable income 215

390........ Elections to be made by eligible taxpayer....................................... 215

392........ Notional assessable amounts are to be pre‑tax............................... 216

393........ Notional allowable deduction for taxes paid................................... 216

394........ Notional allowable deduction for eligible finance share dividends, widely distributed finance share dividends and transitional finance share dividends................................................ 216

395........ Expenditure incurred to produce income or profits in later statutory accounting periods      217

396........ Modified application of sections 25A and 52................................ 217

397........ Modified application of trading stock provisions.......................... 217

398........ Modified application of depreciation provisions........................... 218

398A..... Application of Division 3A of Part III........................................... 218

399........ Modifications of net income of partnerships and trusts................ 219

399A..... Modified application of bad debt etc. provisions.......................... 220

400........ Modified application of Division 13 of Part III............................. 222

401........ Reduction of capital proceeds where attributed income not distributed 222

402........ Additional notional exempt income—unlisted or listed country CFC 225

403........ Additional notional exempt income—unlisted country CFC......... 227

404........ Additional notional exempt income—listed or section 404 country CFC               228

Subdivision C—Modifications relating to Australian capital gains tax        228

405........ Interpretation.................................................................................. 228

406........ Meaning of commencing day and commencing day asset............... 228

408........ Certain capital gains and losses disregarded................................... 229

408A..... Certain events before commencing day ignored.............................. 229

409........ Losses before 30 June 1990 to be disregarded................................ 229

410........ General modifications—CGT......................................................... 229

411........ Commencing day assets taken to have been acquired on commencing day             230

412........ Cost base of commencing day asset............................................... 230

413........ Adjustment of cost base as at commencing day—return of capital 230

414........ Exercise of rights............................................................................. 231

418........ Options........................................................................................... 232

418A..... Effect of change of residence from Australia to listed or unlisted country              232

419........ Modified application of Subdivision 126‑B of the Income Tax Assessment Act 1997            233

421........ Elections under CGT roll‑over provisions..................................... 234

422........ Adjustment of capital proceeds where change of residence by eligible CFC from unlisted to listed country         236

423........ Adjustment of capital proceeds where section 47A applies to rolled‑over assets  238

Subdivision D—Modifications relating to losses                                              239

425........ Sometimes‑exempt income etc........................................................ 239

426........ Creation of loss............................................................................... 240

427........ Certain provisions to be disregarded.............................................. 240

428........ Subdivision to apply as if there were always a requirement to calculate attributable income 240

429........ Notional allowable deduction for (sometimes‑exempt income) loss 241

431........ Deduction etc. for previous period loss......................................... 241

Subdivision E—Modifications relating to application of Part XI                    243

431A..... Exemption of attributable taxpayer from Part XI.......................... 243

Division 8—Active income test                                                                          245

Subdivision A—Basic conditions for passing the active income test            245

432........ Active income test.......................................................................... 245

Subdivision B—Tainted income ratio                                                                  246

433........ Tainted income ratio....................................................................... 246

434........ Gross turnover................................................................................ 246

435........ Gross tainted turnover.................................................................... 249

436........ Amounts excluded from active income test.................................... 249

Subdivision C—Treatment of partnership income                                            251

437........ Treatment of partnership income................................................... 251

Subdivision D—General interpretive provisions                                               253

438........ Roll‑overs—asset disposals........................................................... 253

439........ When currency exchange gains or losses relate to active income transactions        256

440........ Asset disposals—revaluations and arm’s length amounts............. 257

441........ Hire‑purchase and other property financing transactions.............. 258

442........ Assumption of rights of lender under a loan.................................. 258

443........ Net tainted commodity gains.......................................................... 258

444........ Net tainted currency exchange gains............................................... 258

445........ Net gains—disposal of tainted assets............................................. 259

Subdivision E—Passive income, tainted sales income and tainted services income           260

446........ Passive income................................................................................ 260

447........ Tainted sales income....................................................................... 263

448........ Tainted services income.................................................................. 268

Subdivision F—Special rules relating to AFI subsidiaries carrying on financial intermediary business    272

449........ AFI subsidiaries—interest income................................................. 272

450........ AFI subsidiaries—asset disposals and currency transactions........ 273

Subdivision G—Substantiation requirements                                                   276

451........ Active income test—substantiation requirements for company.... 276

452........ Active income test—substantiation requirements for partnership 278

453........ Active income test—substantiation requirements for attributable taxpayer           281

454........ Assessment on assumption—retention of accounts etc. and compliance with information notices       283

455........ Amendment of assessments........................................................... 283

Division 9—Attribution of attributable income and other amounts 285

456........ Assessability in respect of CFC’s attributable income.................. 285

456A..... Reduction of section 456 assessability where item subject to foreign accruals tax 285

457........ Assessability where CFC changes residence from unlisted country to listed country or to Australia   287

459A..... Assessability where CFC or CFT has interest in certain attributable taxpayers    288

460........ Only resident partners, beneficiaries etc. liable to be assessed as a result of attribution        290

460A..... Effect of reducing section CGT event J1 amount........................... 292

Division 10—Post‑attribution asset disposals                                             294

461........ Reduction of capital proceeds where attributed income not distributed 294

Division 11—Keeping of records                                                                       297

462........ Keeping of records—section 456................................................... 297

462A..... Keeping of records—section 457................................................... 297

464A..... Keeping of records—section 459A................................................ 298

465........ Offence of failing to keep records................................................... 299

466........ Manner in which records required to be kept................................. 299

467........ Circumstances where records not required to be kept—reasonable excuse etc.      299

468........ Treatment of partnerships.............................................................. 299

Part XI—Foreign investment funds and foreign life assurance policies 301

Division 1—Preliminary                                                                                          301

Subdivision A—Application of Part                                                                     301

469........ Taxpayers to be taxed on share of income of certain foreign investment funds and foreign life assurance policies........................................................................................................ 301

Subdivision B—Meaning of certain expressions used in this Part               302

470........ Definitions...................................................................................... 302

471........ Australian entity............................................................................. 306

472........ Australian partnership.................................................................... 306

473........ Australian trust............................................................................... 306

474........ Distributions by a FIF or a FLP.................................................... 307

475........ Entitlement to acquire..................................................................... 307

476........ Quoted price................................................................................... 307

477........ Resident superannuation entity...................................................... 308

478........ Tax detriment.................................................................................. 308

479........ Wholly‑owned subsidiary.............................................................. 309

Subdivision C—Key concepts                                                                                310

480........ Outline of Subdivision.................................................................... 310

481........ What is a FIF.................................................................................. 310

482........ What is a FLP................................................................................. 310

483........ What is an interest in a FIF or a FLP............................................. 312

484........ Bare trustee’s interest to be attributed to beneficiary.................... 312

485........ Taxpayers to whose interests in FIFs and FLPs this Part applies 313

485AA.. Election to exclude interests in foreign hybrids from operation of this Part           314

485A..... Applying operative provision in working out net income of partnership or trust estate       316

486........ Notional accounting period of a FIF............................................... 316

487........ Notional accounting period of a FLP.............................................. 317

Subdivision D—The disposal and acquisition of interests                               319

488........ What is a disposal or acquisition of an interest in a FIF or a FLP. 319

489........ Time of disposal or acquisition of interest..................................... 320

490........ Consideration for disposal or acquisition....................................... 320

Subdivision E—Associates                                                                                    321

491........ Associates of an entity to be determined in accordance with section 318 as modified           321

Division 2—Exemption of attributable taxpayers for interests in certain FIFs 323

492........ Object of Division.......................................................................... 323

493........ Exemption of attributable taxpayer in relation to certain trusts..... 323

494........ Exemption of attributable taxpayer referred to in section 456....... 323

Division 3—Exemption for interest in foreign company that is designated as engaging, or whose assets are principally for use, in certain activities                         325

495........ Object of Division.......................................................................... 325

496........ Interpretation.................................................................................. 325

497........ Exemption....................................................................................... 325

498........ How to determine whether a foreign company is taken to have been principally engaged in eligible activities      326

499........ Stock exchange listing method........................................................ 327

500........ Balance‑sheet method..................................................................... 328

501........ Indirect ownership of paid‑up share capital of company............. 332

Division 4—Exemption for interest in foreign bank or holding company of foreign bank           334

502........ Object of Division.......................................................................... 334

503........ Exemption for interest in foreign bank........................................... 334

504........ Exemption for interest in foreign holding company of foreign bank 335

Division 5—Exemption for interest in foreign company whose assets are principally for use in carrying on life insurance business                                                            337

505........ Object of Division.......................................................................... 337

506........ Exemption for interest in foreign life insurance company.............. 337

507........ How to determine whether a foreign company was principally engaged in carrying on life insurance business     337

507A..... Exemption for interest in foreign holding company of foreign life insurance company          341

Division 6—Exemption for interest in foreign general insurance company        345

508........ Object of Division.......................................................................... 345

509........ Exemption for interest in foreign general insurance company........ 345

509A..... Exemption for interest in foreign holding company of foreign general insurance company    346

Division 7—Exemption for interest in foreign company engaged in certain activities connected with real property                                                                                                 348

510........ Object of Division.......................................................................... 348

511........ Exemption....................................................................................... 348

511A..... Exemption for interest in foreign holding company of foreign real property company          349

Division 8—Exemption for interests in certain US entities                 351

512........ Object of Division.......................................................................... 351

512A..... Division does not apply to interests in CFTs................................ 351

513........ Exemptions..................................................................................... 351

Division 9—Exemption for interests of less than $50,000                   354

514........ Object of Division.......................................................................... 354

515........ Exemption....................................................................................... 354

Division 11—Exemption for interest in an employer‑sponsored superannuation fund 355

518........ Object of Division.......................................................................... 355

519........ Interests of employees and former employees to be exempt......... 355

Division 11A—Exemption for complying superannuation/FHSA assets, segregated exempt assets and interests held by complying superannuation entities etc. 356

519A..... Objects of Division......................................................................... 356

519B..... Exemption....................................................................................... 356

Division 12—Exemption for certain interests that are trading stock 359

520........ Object of Division.......................................................................... 359

521........ Exemption....................................................................................... 359

Division 13—Exemption for interest in foreign company principally engaged in several activities      360

522........ Object of Division.......................................................................... 360

523........ Exemption....................................................................................... 360

523A..... Exemption for interest in foreign holding company of foreign mixed activity company         361

Division 14—Exemption for interests in FIFs the value of which is not more than 10% of the value of all taxpayers’ interests in FIFs                                                        363

524........ Object of Division.......................................................................... 363

525........ Exemption....................................................................................... 363

Division 15—Exemption for certain interests of underwriting members of Lloyd’s      365

526........ Object of Division.......................................................................... 365

527........ Exemption....................................................................................... 365

Division 16—Assessable income to include foreign investment fund income   366

528........ Object of Division.......................................................................... 366

529........ Foreign investment fund income to be included in assessable income 366

530........ Reduction of foreign investment fund income because of interim dividend or interim distribution of trust income........................................................................................................ 367

530A..... Reduction of foreign investment fund income because of employee share scheme shares or rights        368

Division 17—Foreign Investment Fund losses resulting from application of market value method or cash surrender value method to be allowable deductions     370

531........ Object of Division.......................................................................... 370

532........ Foreign investment fund loss from FIF under market value method to be allowable deduction             370

533........ Foreign investment fund loss from FLP under cash surrender value method to be allowable deduction                370

533A..... Foreign investment fund losses to be expressed in Australian currency 371

Division 17A—Deduction for overseas superannuation transfers   372

533B..... Deduction for overseas superannuation transfers.......................... 372

Division 18—How to determine whether Foreign Investment Fund income accrued to a taxpayer from a FIF or a FLP                                                                                        373

Subdivision A—Preliminary                                                                                 373

534........ Object of Division.......................................................................... 373

535........ Methods applicable in relation to a FIF........................................ 373

536........ Methods applicable in relation to FLP........................................... 374

Subdivision B—Market value method for FIFs                                                  376

537........ Procedure for determining foreign investment fund income by market value method             376

538........ Step 1—calculation of foreign investment fund amount................ 376

539........ How market value is ascertained.................................................... 378

540........ Gross foreign investment fund income........................................... 380

541........ Foreign investment fund loss.......................................................... 380

542........ Step 2—Calculation of foreign investment fund income................ 380

Subdivision C—Deemed rate of return method for FIFs                                  383

543........ Procedure for determining foreign investment fund income from a FIF by deemed rate of return method             383

544........ Step 1—groups of interests............................................................ 383

545........ Step 2—determination of opening value of interests..................... 384

550........ If relevant period starts after 1 January 1993................................ 384

551........ Value of interests at start of relevant period (being later than 1 January 1993)—deemed rate of return method applied for previous period......................................................................... 384

552........ Value of interests at start of relevant period (being later than 1 January 1993)—calculation method applied, or interests exempt, for previous period............................................. 385

553........ Value of interests at start of relevant period (being later than 1 January 1993)—market value method applied for previous period............................................................................... 386

554........ Value of interests at time of acquisition (after start of relevant period)  386

555........ Step 3—determination of foreign investment fund amount........... 386

556........ Step 4—conversion of foreign investment fund amount to Australian currency    387

557........ Foreign investment fund income..................................................... 387

Subdivision D—Calculation method for FIFs                                                     388

557A..... Certain other provisions to be disregarded in applying this Subdivision                388

558........ Procedure for determining foreign investment fund income by calculation method                388

559........ Determination of calculated profit or calculated loss of FIF.......... 388

559A..... Choice to work out notional income and notional deductions under Part X           389

560........ Notional income—general provision.............................................. 392

561........ Section 560 to be subject to following provisions.......................... 393

562........ Notional income—discounted securities........................................ 393

563........ Notional income—interest in net income from partnership........... 393

564........ Notional income—exclusion of certain dividends and trust distributions               394

565........ Derivation of income, profits or gains............................................ 394

566........ Notional income to be pre‑tax........................................................ 394

567........ Notional deductions—general provision........................................ 394

567A..... Notional deductions: net capital losses.......................................... 395

568........ Notional deductions—expenditure in acquiring trading stock........ 395

569........ Notional deductions—exclusion of expenditure in acquiring securities or partnership interest              395

570........ Notional deductions—amortisation of expenditure in acquiring property              396

571........ Notional deductions—interest in partnership loss......................... 397

572........ Notional deductions—past calculated losses................................. 397

573........ Notional deductions—taxes............................................................ 398

574........ Notional deductions—certain amounts to be excluded................... 398

575........ Application..................................................................................... 399

576........ Notional income of FIF to include foreign investment fund income from second tier FIF or from FLP 399

577........ How to determine whether foreign investment fund income accrued from second tier FIF or from FLP               399

578........ What happens if there is a calculated loss in respect of second tier FIF 400

579........ If second tier FIF has interest in a third tier FIF or in a FLP......... 400

580........ Procedure to be followed................................................................ 401

581........ How to work out attribution percentage applicable to taxpayer in respect of interest or interests in foreign company........................................................................................................ 403

582........ Procedure to be followed................................................................ 404

583........ Foreign investment fund income..................................................... 408

Subdivision E—Deemed rate of return method for FLPs                                 408

584........ Procedure for determining foreign investment fund income from FLP by deemed rate of return method               408

585........ Step 1—interests in a FLP............................................................. 408

586........ Step 2—determination of opening value........................................ 409

589........ If relevant period starts after 1 January 1993................................ 409

590........ Value at start of relevant period (being later than 1 January 1993) 409

591........ Value at time of acquisition (after start of relevant period)............ 410

592........ Step 3—determination of foreign investment fund amount........... 410

593........ Step 4—conversion of foreign investment fund amount to Australian currency    411

594........ Foreign investment fund income.................................................... 411

Subdivision F—Cash surrender value method for FLPs                                  411

595........ Procedure for determining foreign investment fund income by cash surrender value method 411

596........ Step 1—calculation of foreign investment fund amount................ 412

598........ Gross foreign investment fund income........................................... 413

599........ Foreign investment fund loss.......................................................... 413

600........ Step 2—Calculation of foreign investment fund income................ 413

Division 19—FIF attribution accounts                                                            416

601........ FIF attribution account entity........................................................ 416

602........ FIF attribution account percentage................................................. 416

603........ FIF attribution account payments.................................................. 416

604........ FIF attribution surplus................................................................... 417

605........ FIF attribution credit...................................................................... 417

606........ FIF attribution debit...................................................................... 422

607........ Additional FIF attribution debit..................................................... 423

607AA.. Additional FIF attribution debit—deduction for overseas superannuation transfers              423

607A..... Grossed‑up amount of a FIF attribution debit............................... 423

Division 21—Post‑attribution asset disposals                                             425

613........ Reduction of capital proceeds if FIF attributed income not distributed  425

Division 22—Keeping of records                                                                       426

614........ Application of Division.................................................................. 426

615........ Records of acts, transactions etc.................................................... 426

616........ Interest in FIF—if market value method was applied.................... 426

617........ Interest in FIF—if deemed rate of return method was applied...... 427

618........ Interest in FIF—if calculation method was applied....................... 427

619........ Interest in FLP................................................................................ 428

620........ Interest in FIF or FLP—if exemption applied............................... 428

621........ Offence of failing to keep records................................................... 429

622........ Manner in which records required to be kept................................. 429

623........ If calculation method was applied—defence for failing to keep records if information unobtainable     429

624........ Treatment of partnerships.............................................................. 429


 

Part VICollection and recovery of tax

Division 1General

204  When tax payable

             (1)  Subject to the provisions of this Part, the tax payable by a taxpayer other than a full self‑assessment taxpayer for a year of income becomes due and payable:

                     (a)  if the taxpayer’s return of income is lodged on or before the due date for lodgment—on the later of:

                              (i)  21 days after the due date for lodgment of that return specified in the Gazette under section 161 for the year of income; or

                             (ii)  21 days after a notice of assessment is given to the taxpayer; or

                     (b)  in any other case—21 days after that due date for lodgment.

Note 1:       The Commissioner may defer the time at which the tax is, or would become, due and payable: see section 255‑10 in Schedule 1 to the Taxation Administration Act 1953.

Note 2        The Commissioner may defer the due date for lodgment: see section 388‑55 in that Schedule.

       (1AA)  To avoid doubt, the reference in subparagraph (1)(a)(ii) to an assessment does not include a reference to an amended assessment.

          (1A)  Subject to the provisions of this Part, the tax payable by a full self‑assessment taxpayer for a year of income becomes due and payable as follows:

                     (a)  if the taxpayer’s year of income ends on 30 June—on 1 December of the following year of income or on such later date as the Commissioner allows by notice published in the Gazette;

                     (b)  if the taxpayer’s year of income ends on a day other than 30 June—on the first day of the sixth month of the following year of income, or on such later date as the Commissioner allows by notice published in the Gazette.

             (2)  An amount of tax that a taxpayer is liable to pay because the Commissioner amends the taxpayer’s assessment is due and payable on the 21st day after the day on which the Commissioner gives the taxpayer notice of the amended assessment.

          (2A)  An amount of shortfall interest charge that a taxpayer is liable to pay is due and payable on the 21st day after the day on which the Commissioner gives the taxpayer notice of the amount of the charge.

             (3)  If any of the tax or shortfall interest charge which a person is liable to pay remains unpaid after the time by which the tax or charge is due to be paid, the person is liable to pay the general interest charge on the unpaid amount for each day in the period that:

                     (a)  started at the beginning of the day by which the tax or shortfall interest charge was due to be paid; and

                     (b)  finishes at the end of the last day on which, at the end of the day, any of the following remains unpaid:

                              (i)  the tax or shortfall interest charge;

                             (ii)  general interest charge on any of the tax or shortfall interest charge.

Note 1:       The general interest charge is worked out under Part IIA of the Taxation Administration Act 1953, and the shortfall interest charge is worked out under Division 280 in Schedule 1 to that Act.

Note 2:       For provisions about collection and recovery of income tax and related amounts, see Part 4‑15 in Schedule 1 to the Taxation Administration Act 1953.

213  Temporary business

             (1)  Where the Commissioner has reason to believe that any person establishing or carrying on business in Australia intends to carry on that business for a limited period only, or where the Commissioner for any other reason thinks it proper so to do, he may at any time and from time to time require that person to give security by bond or deposit or otherwise to the satisfaction of the Commissioner for the due return of, and payment of income tax on, the income derived by that person.

             (2)  A person who refuses or fails to give security when required to do so under this section is guilty of an offence.

Penalty for contravention of this subsection:             20 penalty units.

219  Consolidated assessments

                   Where several persons are in receipt of income, or of profits or gains of a capital nature, for or on behalf of a non‑resident or a person absent from Australia, the Commissioner, if it appears to him to be expedient to do so, may consolidate all or any of the assessments thereof, and declare any one of such persons to be the agent of the non‑resident or absent person in respect of the consolidated assessment, and require him to pay income tax on the amount thereof, and thereupon the person so declared to be agent shall be liable to pay the tax.

Division 8Prompt recovery, through estimates and payment agreements, of certain amounts not remitted

Subdivision AObject and interpretation

222AFA  Object and outline

             (1)  The purpose of this Division is to enable the Commissioner to take prompt and effective action to recover amounts not remitted as required by Divisions 1AAA, 3B and 4 of this Act, or Part 2‑5 in Schedule 1 to the Taxation Administration Act 1953.

             (2)  It does so by empowering the Commissioner to make an estimate of the amounts, and to recover the amount of the estimate.

             (3)  Although an estimate creates a liability distinct from the underlying liability to remit amounts, the person liable can ensure that the Commissioner does not keep more than those amounts.

             (4)  This Division also empowers the Commissioner to agree to a person paying off over a period liabilities under:

                     (a)  Division 1AAA, 3B or 4; or

                     (b)  this Division; or

                     (c)  Part 2‑5 in Schedule 1 to the Taxation Administration Act 1953.

             (5)  Part 4‑15 in Schedule 1 to the Taxation Administration Act 1953 provides for the recovery of amounts payable under this Division.

222AFB  Interpretation

             (1)  In this Division, unless the contrary intention appears:

director, in relation to a company:

                     (a)  means someone who is a director of the company for the purposes of the Corporations Act 2001; and

                     (b)  in the case of an unincorporated company—includes an officeholder of the company.

due date, in relation to an amount required to be paid to the Commissioner under a remittance provision, means the day on, by or before which the amount must be paid to the Commissioner.

government body means the Commonwealth, a State, a Territory or an authority of the Commonwealth or a State or Territory.

non‑cash benefit has the same meaning as in the Income Tax Assessment Act 1997.

person means an entity within the meaning of the Income Tax Assessment Act 1997 or a government body.

relate, in the case of a reference to the liability to which an estimate relates, includes purport to relate.

remittance provision means any of the following provisions:

                     (a)  in former Division 1AAA—former sections 220AAE, 220AAM and 220AAR;

                     (c)  in former Division 3B—former subsections 221YHZD(1) and (1A);

                     (d)  in former Division 4—former subsection 221YN(1);

                     (e)  in Schedule 1 to the Taxation Administration Act 1953—section 16‑70.

statutory demand has the same meaning as in the Corporations Act 2001.

statutory minimum has the same meaning as in the Corporations Act 2001.

trustee, in relation to a person, means:

                     (a)  a trustee (as defined in section 6) in whom the person’s property is vested, or who has control of the person’s property; and

                     (b)  if the person is a partnership—includes someone who is a trustee of any of the partners because of paragraph (a).

Note:          Subsection (4) deals with the case where there are 2 or more trustees of a person.

underlying liability, in relation to an estimate, means the liability to which the estimate relates.

unpaid amount has the meaning given by section 222AFC.

             (2)  If a partnership is liable under this Division to pay an amount, the partners are jointly and severally liable to pay the amount.

             (3)  Any other obligation that this Division imposes on a partnership may be discharged by any of the partners.

             (4)  If there are 2 or more trustees of a person, anything this Division provides for to be done by or in relation to the person’s trustee may be done by or in relation to any of them.

222AFC  Unpaid amount

             (1)  The unpaid amount of a liability to pay amounts is:

                     (a)  if the liability remains undischarged to the extent of a particular amount—that amount; or

                     (b)  otherwise—a nil amount.

             (2)  The unpaid amount of an estimate is:

                     (a)  if the liability to pay the estimate remains undischarged to the extent of a particular amount—that amount; or

                     (b)  otherwise—a nil amount.

Subdivision BMaking, reducing and revoking estimates

222AGA  When Commissioner may make estimate

             (1)  If the Commissioner has reason to suspect that:

                     (a)  a person (the person liable) has become liable under a remittance provision to pay an amount to the Commissioner; and

                     (b)  the liability to pay that amount remains undischarged after the due date;

the Commissioner may make what he or she thinks is a reasonable estimate of the unpaid amount of that liability.

             (2)  In making the estimate, the Commissioner may have regard to anything he or she thinks relevant, for example, information about:

                     (a)  amounts deducted; or

                     (b)  amounts withheld from payments; or

                     (c)  payments received; or

                     (d)  non‑cash benefits provided;

during a period earlier than the period in relation to which the liability arose.

222AGB  Notice to person liable

             (1)  If the Commissioner makes an estimate, he or she must send written notice of it to the person liable or to the person’s trustee.

             (2)  The notice must:

                     (a)  identify the liability to which the estimate relates; and

                     (b)  specify the day as at which the estimate is made; and

                     (c)  set out the amount of the estimate; and

                     (d)  state that the amount of the estimate is due and payable; and

                     (e)  state that if the person or the person’s trustee gives the Commissioner a statutory declaration substantiating the actual unpaid amount of the liability to which the estimate relates, the estimate will be reduced accordingly; and

                    (ea)  state that the estimate will be revoked if the person or the person’s trustee gives the Commissioner a statutory declaration to the effect that, during the period concerned, the person did not:

                              (i)  make any deductions for the purposes of Division 1AA, 2, 3A, 3B or 4; or

                             (ii)  withhold any amounts under Division 12 in Schedule 1 to the Taxation Administration Act 1953; or

                            (iii)  receive any payments that gave rise to a liability under Division 13 in that Schedule; or

                            (iv)  provide any non‑cash benefits that gave rise to a liability under Division 14 in that Schedule;

                            as the case requires; and

                    (eb)  state that a statutory declaration mentioned in paragraph (e) or (ea) must comply with section 222AGF; and

                      (f)  state the effect of section 222AGF.

             (3)  To avoid doubt, a single notice may relate to 2 or more estimates, but must comply with subsection (2) in relation to each of them.

222AGC  Reducing amount of estimate

             (1)  If:

                     (a)  the Commissioner makes an estimate; and

                     (b)  the person liable or the person’s trustee gives the Commissioner a statutory declaration that complies with section 222AGF; and

                     (c)  the declaration is to the effect that a specified amount is the unpaid amount of the liability to which the estimate relates; and

                     (d)  the specified amount is less than the unpaid amount of the estimate;

the amount of the estimate is reduced by the amount by which the unpaid amount of the estimate (immediately before the reduction) exceeds the specified amount.

Note 1:       The effect of subsection (1) is to reduce the unpaid amount of the estimate to the specified amount.

Note 2:       Sections 222AHD, 222AIC and 222AIG also provide for the automatic reduction of an estimate.

             (2)  The Commissioner may at any time reduce the amount of an estimate, but is not obliged to consider whether or not to do so.

             (3)  If the Commissioner reduces under subsection (2) the amount of an estimate, he or she must send to the person liable or to the person’s trustee a written notice that:

                     (a)  identifies the liability to which the estimate relates; and

                     (b)  sets out the reduced amount of the estimate.

The reduction takes effect when the notice is sent.

222AGD  Revoking estimate

             (1)  This subsection revokes an estimate if:

                     (a)  the person liable or the person’s trustee gives the Commissioner a statutory declaration that complies with section 222AGF; and

                     (b)  the declaration is to the effect that, during the period concerned, the person did not:

                              (i)  make any deductions for the purposes of Division 1AA, 2, 3A, 3B or 4; or

                             (ii)  withhold any amounts under Division 12 in Schedule 1 to the Taxation Administration Act 1953; or

                            (iii)  receive any payments that gave rise to a liability under Division 13 in that Schedule; or

                            (iv)  provide any non‑cash benefits that gave rise to a liability under Division 14 in that Schedule;

                            as the case requires.

Note:          Sections 222AHD, 222AIC and 222AIG also provide for the automatic revocation of an estimate.

             (2)  The Commissioner may at any time revoke an estimate, but is not obliged to consider whether or not to do so.

             (3)  If the Commissioner revokes an estimate under subsection (2), he or she must send to the person liable or to the person’s trustee a written notice that:

                     (a)  identifies the liability to which the estimate relates; and

                     (b)  states that the estimate has been revoked.

The revocation takes effect when the notice is sent.

222AGE  Matters for Commissioner to consider under sections 222AGC and 222AGD

                   In exercising a power under subsection 222AGC(2) or 222AGD(2), the Commissioner is to have regard to the following:

                     (a)  an estimate is of the unpaid amount of a liability as at a particular time;

                     (b)  the purpose of reducing the amount of the estimate is to bring it closer to the unpaid amount of the underlying liability as at that time, and so bring the unpaid amount of the estimate closer to the unpaid amount of the underlying liability as at the time of the reduction;

                     (c)  reductions in the unpaid amount of the underlying liability that happen after the time as at which the estimate was made are dealt with by section 222AHA and so should not be taken into account in exercising such a power;

                     (d)  the effects of Subdivision F.

222AGF  Requirements for statutory declaration under section 222AGC or 222AGD

             (1)  This section sets out the requirements for a statutory declaration for the purposes of section 222AGC or 222AGD.

             (2)  The declaration must be a statutory declaration made under the Statutory Declarations Act 1959.

             (3)  It must be given to the Commissioner within 7 days, or a longer period allowed by the Commissioner, after the Commissioner sends notice of the estimate to the person liable or to the person’s trustee.

             (4)  The declaration must:

                     (a)  specify:

                              (i)  the total of the amounts of the deductions that the person made for the purposes of Division 1AA, 2, 3A, 3B or 4 during the period concerned; or

                             (ii)  the total of the amounts withheld under Division 12 in Schedule 1 to the Taxation Administration Act 1953 during the period concerned; or

                            (iii)  the total of the amounts of the payments received during the period concerned that gave rise to a liability under Division 13 in that Schedule and the total of the amounts of those liabilities; or

                            (iv)  the total of the values of the non‑cash benefits, or the amounts of the dividends, interest or royalties, provided during the period concerned that gave rise to a liability under Division 14 in that Schedule and the total of the amounts of those liabilities;

                            as the case requires; or

                     (b)  state to the effect that during the period concerned, the person did not:

                              (i)  make any deductions for the purposes of Division 1AA, 2, 3A, 3B or 4; or

                             (ii)  withhold any amounts under Division 12 in Schedule 1 to the Taxation Administration Act 1953; or

                            (iii)  receive any payments that gave rise to a liability under Division 13 in that Schedule; or

                            (iv)  provide any non‑cash benefits that gave rise to a liability under Division 14 in that Schedule;

                            as the case requires.

             (5)  For each amount (if any) paid or applied for the purpose of complying with a remittance provision, the declaration must specify the amount and the day on which it was so paid, applied or spent.

             (6)  The declaration must specify, as the unpaid amount of the liability to which the estimate relates, the difference between:

                     (a)  the total (if any) specified under paragraph (4)(a); and

                     (b)  the total of the amounts (if any) specified under subsection (5).

             (7)  The declaration must be made by:

                     (a)  if the person is a company that has directors, a secretary or both—a director or secretary; or

                     (b)  if the person is an individual—the person; or

                     (c)  if the person is a government body—a prescribed person; or

                     (d)  if the person consists of 2 or more persons including one or more individuals and is neither a company nor a government body—that individual or one of those individuals; or

                     (e)  in any case—the person’s trustee.

222AGG  Further estimate after previous estimate revoked or discharged

             (1)  While an estimate is in force, the Commissioner cannot make under section 222AGA another estimate relating to the same liability.

             (2)  An estimate is in force if the Commissioner has given notice of it to the person liable or to the person’s trustee and:

                     (a)  the estimate has not been revoked; and

                     (b)  the person’s liability to pay the estimate has not been discharged.

Subdivision CRecovering unpaid amount of estimate

222AHA  Nature of liability created by notice

             (1)  If the Commissioner makes an estimate and sends notice of it to the person liable or to the person’s trustee, the person must pay to the Commissioner the amount of the estimate. This liability is called a liability to pay an estimate.

             (2)  A liability to pay an estimate is separate and distinct from the liability to which the estimate relates. It is separate and distinct for all purposes. For example, the Commissioner may take proceedings to recover the unpaid amount of the estimate, proceedings to recover the unpaid amount of the liability to which the estimate relates, or both.

             (3)  However, the following are parallel liabilities:

                     (a)  a liability to pay an estimate;

                     (b)  the liability to which the estimate relates;

                     (c)  liability under a judgment, so far as it is based on a liability referred to in paragraph (a) or (b).

             (4)  This means that if, at a particular time:

                     (a)  an amount is paid or applied towards discharging one of the parallel liabilities; or

                     (b)  because of section 222AOH or 222APG, one of the parallel liabilities is discharged to the extent of a particular amount;

each of the others that is in existence at that time is discharged to the extent of the same amount. However, this section does not discharge a liability to a greater extent than the amount of the liability.

222AHB  Refund if estimate exceeds underlying liability

             (1)  If:

                     (a)  an amount is paid or applied towards discharging a liability to pay an estimate; and

                     (b)  the amount exceeds the unpaid amount of the underlying liability as at the time (the liability time) immediately before the payment or application;

the Commissioner must either refund the excess or:

                     (c)  apply the excess against any liability of the person to the Commonwealth that arises under or because of an Act of which the Commissioner has the general administration; and

                     (d)  refund so much of the excess as is not applied under paragraph (c).

             (2)  If the Commissioner refunds or applies an amount under subsection (1), he or she must also reduce the amount of the estimate by the amount by which the unpaid amount of the estimate as at the liability time exceeded the unpaid amount of the underlying liability at that time.

222AHC  Defences in recovery proceedings

             (1)  This section has effect for the purposes of proceedings, in so far as they relate to the recovery of the unpaid amount of an estimate.

             (2)  The Commissioner or Deputy Commissioner is not entitled to recover if the person liable or the person’s trustee files an affidavit that complies with section 222AHE and verifies facts sufficient to prove that the underlying liability never existed or has been discharged in full.

             (3)  If the person liable or the person’s trustee files an affidavit that complies with section 222AHE and verifies facts sufficient to prove that the unpaid amount of the underlying liability is a specified amount that is less than the unpaid amount of the estimate, the court is to enter judgment in favour of the Commissioner or Deputy Commissioner for the specified amount.

             (4)  The court is to make whatever orders are necessary because of subsection (2) or (3).

             (5)  If a judgment under subsection (3) is in effect, the Commissioner or a Deputy Commissioner is not entitled to recover the balance of the estimate (in the same or different proceedings or otherwise).

             (6)  However, the judgment does not prevent the Commissioner or a Deputy Commissioner from recovering (in the same or different proceedings or otherwise) the amount (if any) by which the unpaid amount of the underlying liability exceeds the amount specified in the affidavit.

             (7)  Except as provided in subsection (2) or (3), it is not a defence that:

                     (a)  the underlying liability never existed or has been discharged in full; or

                     (b)  the unpaid amount of the underlying liability is less than the unpaid amount of the estimate.

222AHD  Effect of affidavit on estimate

             (1)  This subsection revokes an estimate if subsection 222AHC(2) prevents recovery of the unpaid amount because an affidavit verifies facts sufficient to prove that the underlying liability never existed.

             (2)  If subsection 222AHC(2) prevents recovery of the unpaid amount of an estimate because an affidavit verifies facts sufficient to prove that the underlying liability has been discharged in full, the amount of the estimate is reduced by the unpaid amount of the estimate (immediately before the reduction).

Note:          The effect of subsection (2) is to reduce to a nil amount the unpaid amount of the estimate.

             (3)  While a judgment for an amount is in effect under subsection 222AHC(3), the amount of the estimate is reduced by the amount by which the unpaid amount of the estimate (immediately before the reduction) exceeds the first‑mentioned amount.

Note:          The effect of subsection (3) is to reduce the unpaid amount of the estimate to the amount of the judgment.

222AHE  Requirements for affidavit under section 222AHC

             (1)  An affidavit for the purposes of section 222AHC must comply with this section.

             (2)  The affidavit must be filed with the court, and a copy served on the Commissioner or Deputy Commissioner, as the case requires, within 14 days after the first day on which the person liable or the person’s trustee takes a procedural step as a party to the proceedings (for example, entering an appearance, filing a notice of intention to defend, or applying to set aside judgment entered in default of appearance).

             (3)  However, the court may extend the period for compliance with subsection (2).

             (4)  The facts that the affidavit must verify include:

                     (a)  the total of the deductions made for the purposes of Division 1AA, 2, 3A, 3B or 4, as the case requires, during the relevant period, or the fact that no deductions were so made;

                     (b)  what has been done to comply with Division 1AAA, 3B or 4 in relation to the deductions (if any) so made;

                     (c)  the sum of all amounts withheld under Division 12 in Schedule 1 to the Taxation Administration Act 1953 during the relevant period, or the fact that no amounts were withheld during the period;

                    (ca)  the sum of all amounts required to be paid under Division 13 in Schedule 1 to the Taxation Administration Act 1953 during the relevant period, or the fact that no amounts were so paid during the period;

                     (d)  the sum of all amounts required to be paid under Division 14 in Schedule 1 to the Taxation Administration Act 1953 during the relevant period, or the fact that no amounts were so paid during the period;

                     (e)  what has been done to comply with Division 16 in Schedule 1 to the Taxation Administration Act 1953 in relation to the amounts withheld (if any) and the amounts so paid (if any);

                      (f)  without limiting paragraphs (b) and (e), what has been done to discharge the liability to which the estimate relates.

             (5)  The affidavit must be sworn by:

                     (a)  if the person is a company that has directors, a secretary or both—a director or secretary; or

                     (b)  if the person is an individual—the person; or

                     (c)  if the person is a government body—a prescribed person; or

                     (d)  if the person consists of 2 or more persons including one or more individuals and is neither a company nor a government body—that individual or one of those individuals; or

                     (e)  in any case—the person’s trustee.

Subdivision DInsolvency proceedings

222AIA  Effect on statutory demand if estimate reduced or revoked

             (1)  If:

                     (a)  the Commissioner serves on a company a statutory demand relating to the company’s liability to pay the unpaid amount of an estimate; and

                     (b)  the amount of the estimate is later reduced or the estimate is later revoked;

then:

                     (c)  this subsection changes the statutory demand accordingly; and

                     (d)  the demand is taken to have had effect (as so changed) from the time when it was served on the company.

             (2)  This subsection sets aside the statutory demand if subsection (1) reduces below the statutory minimum the amount of the debt, or the total of the amounts of the debts, to which the demand relates.

222AIB  Defences on winding up application

             (1)  This section has effect for the purposes of:

                     (a)  an application under section 234, 459P, 462 or 464 of the Corporations Act 2001; or

                     (b)  an application for leave to make an application under section 459P of the Corporations Act 2001.

             (2)  The court is not to presume, merely because the company has failed to comply with a statutory demand, that the company is insolvent if:

                     (a)  the demand relates only to a liability in respect of an estimate and the sworn amount of the liability to which the estimate relates is less than the statutory minimum; or

                     (b)  the demand relates only to liabilities in respect of 2 or more estimates and the total of the sworn amounts of the liabilities to which the estimates relate is less than the statutory minimum; or

                     (c)  the demand relates to:

                              (i)  one or more liabilities in respect of one or more estimates; and

                             (ii)  one or more liabilities none of which is a liability in respect of an estimate;

                            and the total of:

                            (iii)  the sworn amount of the liability to which the estimate relates, or the total of the sworn amounts of the liabilities to which the estimates relate, as the case may be; and

                            (iv)  the amount of the liability, or the total of the liabilities, referred to in subparagraph (ii);

                            is less than the statutory minimum.

             (3)  The sworn amount of a liability to which an estimate relates is:

                     (a)  if the company has filed an affidavit that complies with section 222AID and verifies facts sufficient to prove that the liability never existed or has been discharged in full—a nil amount; or

                     (b)  if the company has filed an affidavit that complies with section 222AID and verifies facts sufficient to prove that the unpaid amount of the liability is a specified amount that is less than the unpaid amount of the estimate—the specified amount; or

                     (c)  otherwise—the unpaid amount of the estimate.

             (4)  Except as provided in subsection (2), the company is not entitled to oppose the application on the ground that:

                     (a)  a liability to which an estimate relates never existed or has been discharged in full; or

                     (b)  the unpaid amount of such a liability is less than the unpaid amount of the estimate.

222AIC  Effect of affidavit on estimate

                   If the unpaid amount of an estimate exceeds the amount that is the sworn amount of the underlying liability for the purposes of section 222AIB because of an affidavit filed for the purposes of that section, the amount of the estimate is reduced by the excess.

Note:          The effect is to reduce the unpaid amount of the estimate to the sworn amount of the underlying liability.

222AID  Requirements for affidavit under section 222AIB

             (1)  An affidavit for the purposes of section 222AIB must comply with this section.

             (2)  The affidavit must be filed with the court, and a copy served on the applicant, within 14 days after notice of the application was served on the company.

             (3)  However, the court may extend the period for compliance with subsection (2).

             (4)  The facts that the affidavit must verify in relation to a liability to which an estimate relates include:

                     (a)  the deductions made for the purposes of Division 1AA, 2, 3A, 3B or 4, as the case requires, during the relevant period, or the fact that no deductions were so made;

                     (b)  what has been done to comply with Division 1AAA, 3B or 4 in relation to the deductions (if any) so made;

                     (c)  the sum of all amounts withheld under Division 12 in Schedule 1 to the Taxation Administration Act 1953 during the relevant period, or the fact that no amounts were withheld during the period;

                    (ca)  the sum of all amounts required to be paid under Division 13 in Schedule 1 to the Taxation Administration Act 1953 during the relevant period, or the fact that no amounts were so paid during the period;

                     (d)  the sum of all amounts required to be paid under Division 14 in Schedule 1 to the Taxation Administration Act 1953 during the relevant period, or the fact that no amounts were so paid during the period;

                     (e)  what has been done to comply with Division 16 in Schedule 1 to the Taxation Administration Act 1953 in relation to the amounts withheld (if any) and the amounts so paid (if any);

                      (f)  without limiting paragraphs (b) and (e), what has been done to discharge the liability to which the estimate relates.

             (5)  The affidavit must be sworn by a director, secretary or trustee of the company.

222AIE  Defences under section 222AIB not available on application to set aside statutory demand

                   A court is not to set aside or vary a statutory demand on a ground referred to in subsection 222AIB(4).

222AIF  Estimate provable in bankruptcy or winding up

             (1)  A liability to pay the unpaid amount of an estimate is provable in a bankruptcy or winding up of the person liable, even if the estimate was made after the date of the bankruptcy, or after the relevant date within the meaning of the Corporations Act 2001, as the case may be.

             (2)  However, the liability is so provable only in so far as the underlying liability would be so provable if the unpaid amount of it were the same as the unpaid amount of the estimate.

Note:          Subsection (2) prevents proof of an estimate if the underlying liability could not be proved because, for example, of when it arose.

             (3)  Subsections (1) and (2) do not apply if the underlying liability has already been admitted to proof and the proof has not been set aside.

             (4)  If the liability in respect of the estimate has been admitted to proof at a particular amount (the admitted amount), the underlying liability is provable only in so far as the unpaid amount of it exceeds the admitted amount.

             (5)  In so far as a liability is provable because of this section, it is taken for the purposes of the Bankruptcy Act 1966 to be provable in bankruptcy under that Act.

222AIG  Rejection of proof of debt relating to estimate

             (1)  This section applies if the Commissioner lodges a proof of debt relating to the unpaid amount of an estimate.

             (2)  The trustee of the person liable may reject the proof in whole on the ground that the underlying liability never existed or has been discharged in full, but may only do so if the trustee has given the Commissioner a statutory declaration that complies with section 222AIH and verifies facts sufficient to prove that ground.

             (3)  The trustee may reject the proof in part on the ground that the unpaid amount of the estimate exceeds the unpaid amount of the underlying liability, but may only do so if the trustee has given the Commissioner a statutory declaration that complies with section 222AIH and verifies facts sufficient to prove that the unpaid amount of the underlying liability is a specified amount that is less than the unpaid amount of the estimate.

             (4)  If the Commissioner appeals from, or applies for review of, the trustee’s decision, nothing in subsection (2) or (3) prevents evidence being adduced to contradict statements in the declaration.

             (5)  This subsection revokes the estimate if:

                     (a)  the trustee rejects the proof under subsection (2) on the ground that the underlying liability never existed; and

                     (b)  the Commissioner does not appeal from, or apply for review of, the trustee’s decision, or the result of all appeals from, and applications for review of, the decision being finally determined or otherwise disposed of is that the proof is rejected in whole on that ground.

             (6)  If:

                     (a)  the trustee:

                              (i)  rejects the proof under subsection (2) on the ground that the underlying liability has been discharged in full; or

                             (ii)  rejects the proof under subsection (3); and

                     (b)  the Commissioner does not appeal from, or apply for review of, the trustee’s decision;

the amount of the estimate is reduced by so much of the unpaid amount of the estimate (immediately before the reduction) as is rejected.

Note:          The effect of subsection (6) is to reduce the unpaid amount of the estimate to nil if the proof is rejected in whole, and otherwise to the amount admitted to proof.

             (7)  If:

                     (a)  the trustee rejects the proof under subsection (2) or (3); and

                     (b)  the Commissioner appeals from, or applies for review of, the trustee’s decision and the result of all appeals from, and applications for review of, the decision being finally determined or otherwise disposed of is that the proof:

                              (i)  is rejected in whole on the ground that the underlying liability has been discharged in full; or

                             (ii)  is rejected in part;

the amount of the estimate is reduced by so much of the unpaid amount of the estimate (immediately before the reduction) as is rejected.

Note:          The effect of subsection (7) is to reduce the unpaid amount of the estimate to nil if the proof is rejected in whole, and otherwise to the amount admitted to proof.

222AIH  Requirements for statutory declaration under section 222AIG

             (1)  A statutory declaration for the purposes of section 222AIG must comply with this section.

             (2)  The declaration must be a statutory declaration made under the Statutory Declarations Act 1959.

             (3)  The facts that the declaration must verify include:

                     (a)  the total of the deductions made for the purposes of Division 1AA, 2, 3A, 3B or 4, as the case requires, during the relevant period, or the fact that no deductions were so made;

                     (b)  what has been done to comply with Division 1AAA, 3B or 4 in relation to the deductions (if any) so made;

                     (c)  the sum of all amounts withheld under Division 12 in Schedule 1 to the Taxation Administration Act 1953 during the relevant period, or the fact that no amounts were withheld during the period;

                    (ca)  the sum of all amounts required to be paid under Division 13 in Schedule 1 to the Taxation Administration Act 1953 during the relevant period, or the fact that no amounts were so paid during the period;

                     (d)  the sum of all amounts required to be paid under Division 14 in Schedule 1 to the Taxation Administration Act 1953 during the relevant period, or the fact that no amounts were so paid during the period;

                     (e)  what has been done to comply with Division 16 in Schedule 1 to the Taxation Administration Act 1953 in relation to the amounts withheld (if any) and the amounts so paid (if any);

                      (f)  without limiting paragraphs (b) and (e), what has been done to discharge the liability to which the estimate relates.

             (4)  The declaration must be made by:

                     (a)  if the person liable is a company that has directors, a secretary or both—a director or secretary; or

                     (b)  if the person liable is an individual—the person; or

                     (c)  if the person liable is a government body—a prescribed person; or

                     (d)  if the person liable consists of 2 or more persons including one or more individuals and is neither a company nor a government body—that individual or one of those individuals; or

                     (e)  in any case—the trustee of the person liable.

222AII  Provisions altering effect of Corporations Act

                   This Subdivision has effect despite any provision of the Corporations Act 2001.

Subdivision ELate payment of estimate

222AJA  Liability to the general interest charge

             (1)  This section applies if a liability to pay an estimate remains undischarged at the end of 7 days after the Commissioner sends notice of the estimate to the person liable or to the person’s trustee, unless the person liable is the Commonwealth.

             (2)  The unpaid amount of the estimate, as at the end of the 7 days, continues to be payable and is called the principal amount.

             (3)  The person is also liable to pay the general interest charge on the unpaid amount of the estimate for each day in the period that:

                     (a)  started at the beginning of the day by which the underlying liability was due to be paid; and

                     (b)  finishes at the end of the last day on which, at the end of the day, any of the following remains unpaid:

                              (i)  the estimate;

                             (ii)  general interest charge on any of the estimate.

Note:          The general interest charge is worked out under Part IIA of the Taxation Administration Act 1953.

222AJB  Effect of paying the general interest charge

             (1)  If a person is liable to pay the general interest charge under subsection 222AJA(3) in relation to an estimate, the following are parallel liabilities:

                     (a)  the person’s liability to the general interest charge;

                     (b)  a liability of the person to pay a general interest charge, under a corresponding provision of Division 1AAA, 3B or 4 of this Part, or Subdivision 16‑B in Schedule 1 to the Taxation Administration Act 1953, as the case requires, because the underlying liability remained undischarged;

                     (c)  liability under a judgment, so far as it is based on a liability referred to in paragraph (a) or (b);

                     (d)  a liability of the person to pay interest carried by a judgment debt, to the extent that the judgment debt is based on the liability to pay the estimate or on the liability to pay the general interest charge under subsection 222AJA(3) on an unpaid amount of the estimate.

             (2)  This means that if, at a particular time, an amount is paid or applied towards discharging one of the parallel liabilities, each of the others that is in existence at that time is discharged to the extent of the same amount. However, this section does not discharge a liability to a greater extent than the amount of the liability.

             (3)  If, because a judgment debt carries interest, section 8AAH of the Taxation Administration Act 1953 reduces the amount of a general interest charge payable as mentioned in paragraph (1)(b), the amount of the reduction is taken for the purposes of subsection (2) to have been applied towards discharging the person’s liability to the charge.

Subdivision FEffect on liabilities under this and other Divisions if estimate reduced or revoked

222AKA  Liabilities adjusted with effect from when they arose

             (1)  If the amount of an estimate is reduced, or an estimate is revoked, section 222AHA, Subdivision E and Division 9 have effect, and are taken always to have had effect, as if:

                     (a)  the original amount of the estimate had been the reduced amount, not the amount set out under paragraph 222AGB(2)(c); or

                     (b)  the estimate had never been made;

as the case may be.

             (2)  If because of subsection (1) an amount is taken to have been overpaid by a person, the Commissioner must either refund it or:

                     (a)  apply it against any liability of the person to the Commonwealth that arises under or because of an Act of which the Commissioner has the general administration; and

                     (b)  refund so much of it as is not applied under paragraph (a).

             (3)  If the amount of an estimate is reduced again, or an estimate is revoked after its amount has been reduced on one or more occasions, subsections (1) and (2) apply again accordingly.

222AKB  Reduction or revocation does not prejudice Commissioner’s rights in relation to underlying liability

                   Reduction of the amount of an estimate, or revocation of an estimate, does not affect the Commissioner’s rights or remedies in relation to the underlying liability, except so far as this Division expressly provides.

Subdivision GPayment agreements

222ALA  Commissioner may make agreement

             (1)  The Commissioner may make with a person a written agreement under which the person is to pay specified amounts, on specified days, for the purpose of discharging one or more specified liabilities of the person, each of which is:

                     (a)  a liability under a remittance provision; or

                     (b)  a liability to pay an estimate.

             (2)  An agreement may contain other provisions.

             (3)  An agreement may also provide that, if the person contravenes specified provisions of it, so much of the total of the specified amounts as remains unpaid becomes due and payable on the day of the contravention. If an agreement so provides, the specified provisions are called special conditions.

             (4)  The amounts specified in an agreement are due and payable on the specified days.

             (5)  However, if:

                     (a)  a specified amount is not paid on or before the specified day; or

                     (b)  the person contravenes a special condition;

so much of the total of the specified amounts as remains unpaid:

                     (c)  becomes due and payable on that day, or on the day of the contravention, as the case may be; and

                     (d)  is called the balance payable under the agreement.

             (6)  Subsections (4) and (5) have effect despite Divisions 1AAA, 3B and 4 and the other provisions of this Division, but are to be ignored:

                     (a)  in calculating a penalty under any of those Divisions; and

                     (b)  for the purposes of this Division (except this section) and Division 9.

             (7)  The Commissioner may make with a person a written agreement varying or terminating an agreement with the person that is in force under this section.

             (8)  Nothing in Division 9 obliges the Commissioner to enter into an agreement with a company.

222ALB  Effect of certain payments

             (1)  If an amount is paid under an agreement relating to 2 or more liabilities at least one of which is:

                     (a)  a liability to pay an estimate; or

                     (b)  a liability to which an estimate relates;

the Commissioner may apply the amount, in whatever way he or she thinks appropriate, towards discharging any one or more of those liabilities.

             (3)  If, because of section 222AOH or 222APG, a liability to which an agreement relates is discharged to the extent of a particular amount, the liability to pay the amounts specified in the agreement is discharged to the extent of the same amount.

Subdivision HMiscellaneous

222AMA  Effect of judgment on liability on which it is based

             (1)  The unpaid amount of an estimate, or of a liability to which an estimate relates, does not cease to be payable merely because a judgment has been given by, or entered in, a court.

             (2)  The provisions of this Division (except sections 222AHA, 222AIF and 222AIG) apply in relation to liability under a judgment, so far as it is based on:

                     (a)  a liability to pay an estimate; or

                     (b)  a liability to which an estimate relates;

in the same way as they apply to the liability referred to in paragraph (a) or (b) of this subsection.

             (3)  Nothing in this Division affects the conclusiveness of a judgment as to the amount of a liability on which it is based.

222AMB  Notices under this Division where trustee has control of affairs of person liable

             (1)  If:

                     (a)  the Commissioner has given a notice to a person under this Division; and

                     (b)  there is a trustee of the person;

the person must give a copy of the notice to the trustee as soon as practicable, and in any event within 7 days, after:

                     (c)  if the Commissioner gave the notice to the person before the day when the person’s property vested in, or control of the person’s property passed to, the trustee—that day; or

                     (d)  otherwise—the day when the Commissioner gave the notice to the person.

             (2)  If the Commissioner sends a notice at different times to a person and to the person’s trustee, each notice is taken to have been sent at the later or latest of those times.


 

Division 9Penalties for directors of non‑remitting companies

Subdivision AObject and interpretation

222ANA  Object and outline

             (1)  The purpose of this Division is to ensure that a company either meets its obligations under Division 8 of this Act, or under Subdivision 16‑B in Schedule 1 to the Taxation Administration Act 1953, or goes promptly into voluntary administration under Part 5.3A of the Corporations Act 2001 or into liquidation.

             (2)  The Division imposes a duty on the directors to cause the company to do so. The duty is enforced by penalties. However, a penalty can be recovered only if the Commissioner gives written notice to the person concerned. The penalty is automatically remitted if the company meets its obligations, or goes into voluntary administration or liquidation, within 14 days after the notice is given.

             (3)  A penalty recovered under this Division is applied towards meeting the company’s obligations under the relevant Division. Conversely, amounts paid by the company reduce the amount of a penalty.

             (4)  Part 4‑15 in Schedule 1 to the Taxation Administration Act 1953 provides for the recovery of amounts payable under this Division.

222ANB  Interpretation

             (1)  Except so far as the contrary intention appears, an expression has the same meaning in this Division as in Division 8.

             (2)  A deduction purporting to be made for the purposes of a Division is taken to be made for the purposes of that Division.

             (3)  A person purporting to withhold an amount under Division 12 in Schedule 1 to the Taxation Administration Act 1953 is taken to have withheld the amount under that Division.

Subdivision BCompany failing to remit deductions, amounts withheld etc.

222AOA  Application

             (1)  This Subdivision applies if a company incorporated under the Corporations Act 2001 has:

                     (a)  made one or more deductions having a particular due date, for the purposes of Division 1AA, 2, 3A, 3B or 4; or

                     (b)  withheld one or more amounts having a particular due date, for the purposes of Division 12 in Schedule 1 to the Taxation Administration Act 1953; or

                    (ba)  received one or more alienated personal services payments on a particular day in relation to which it is required to pay an amount to the Commissioner under Division 13 in Schedule 1 to the Taxation Administration Act 1953, and has not paid that amount or those amounts.

                     (c)  provided one or more non‑cash benefits on a particular day in relation to which it is required to pay an amount to the Commissioner under Division 14 in Schedule 1 to the Taxation Administration Act 1953, and has not paid that amount or those amounts.

             (2)  The earliest day on which the company, for the purposes of one of those Divisions (other than Division 13 or 14 in Schedule 1 to the Taxation Administration Act 1953):

                     (a)  made a deduction that has that particular due date; or

                     (b)  withheld an amount that has that particular due date;

is called the first deduction day.

             (3)  That due date is called the due date.

             (4)  In this section, alienated personal services payment and non‑cash benefit have the meanings given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.

222AOB  Directors to cause company to remit or to go into voluntary administration or liquidation—deductions and amounts withheld

             (1)  The persons who are directors of the company from time to time on or after the first deduction day must cause the company to do at least one of the following on or before the due date:

                     (a)  comply with its obligations in relation to deductions (if any) and amounts withheld (if any) whose due date is the same as the due date;

                     (b)  make an agreement with the Commissioner under section 222ALA in relation to the company’s liability under a remittance provision in respect of such deductions (if any) and amounts withheld (if any);

                     (c)  appoint an administrator of the company under section 436A of the Corporations Act 2001;

                     (d)  begin to be wound up within the meaning of that Act.

          (1A)  For the purposes of paragraph (1)(a), the obligations are:

                     (a)  to comply with Division 1AAA, 3B or 4, as the case may be, in relation to each deduction (if any):

                              (i)  that the company has made for the purposes of Division 1AAA, 3B or 4; and

                             (ii)  whose due date is the same as the due date; and

                     (b)  to comply with Subdivision 16‑B in Schedule 1 to the Taxation Administration Act 1953 in relation to each amount that the company has withheld (if any):

                              (i)  for the purposes of Division 12 of that Schedule; and

                             (ii)  whose due date is the same as the due date.

             (2)  This section is complied with when:

                     (a)  the company complies as mentioned in paragraph (1)(a); or

                     (b)  the company makes an agreement as mentioned in paragraph (1)(b); or

                     (c)  an administrator of the company is appointed under section 436A, 436B or 436C of the Corporations Act 2001; or

                     (d)  the company begins to be wound up within the meaning of that Act;

whichever first happens, even if the directors did not cause the event to happen.

             (3)  If this section is not complied with on or before the due date, the persons who are directors of the company from time to time after the due date continue to be under the obligation imposed by subsection (1) until this section is complied with.

222AOBAA  Directors to cause company to remit or to go into voluntary administration or liquidation—alienated personal services payments

             (1)  The persons who are directors of the company on the payment day in relation to the payment or payments (referred to in paragraph 222AOA(1)(ba)) must cause the company to do at least one of the following before the end of the payment day:

                     (a)  comply with section 13‑5 and Subdivision 16‑B in Schedule 1 to the Taxation Administration Act 1953 in relation to each payment relating to the payment day;

                     (b)  make an agreement with the Commissioner under section 222ALA in relation to the company’s liability under that Subdivision in respect of each such payment;

                     (c)  appoint an administrator of the company under section 436A of the Corporations Act 2001;

                     (d)  begin to be wound up within the meaning of that Act.

             (2)  The payment day is the day on which the company must pay an amount under section 13‑5 in Schedule 1 to the Taxation Administration Act 1953 to the Commissioner in relation to the payment or payments (referred to in paragraph 222AOA(1)(ba)).

             (3)  This section is complied with when:

                     (a)  the company complies as mentioned in paragraph (1)(a); or

                     (b)  the company makes an agreement as mentioned in paragraph (1)(b); or

                     (c)  an administrator of the company is appointed under section 436A, 436B or 436C of the Corporations Act 2001; or

                     (d)  the company begins to be wound up within the meaning of that Act;

whichever first happens, even if the directors did not cause the event to happen.

             (4)  If this section is not complied with before the end of the payment day, the persons who are directors of the company on that day continue to be under the obligation imposed by subsection (1) until this section is complied with.

222AOBA  Directors to cause company to remit or to go into voluntary administration or liquidation—non‑cash benefits

             (1)  The persons who are directors of the company on the day (the benefit day) on which the benefit or benefits (referred to in paragraph 222AOA(1)(c)) are provided must cause the company to do at least one of the following before the end of the benefit day:

                     (a)  comply with Subdivision 16‑B in Schedule 1 to the Taxation Administration Act 1953 in relation to each benefit provided on the benefit day;

                     (b)  make an agreement with the Commissioner under section 222ALA in relation to the company’s liability under that Subdivision in respect of each such benefit;

                     (c)  appoint an administrator of the company under section 436A of the Corporations Act 2001;

                     (d)  begin to be wound up within the meaning of that Act.

             (2)  This section is complied with when:

                     (a)  the company complies as mentioned in paragraph (1)(a); or

                     (b)  the company makes an agreement as mentioned in paragraph (1)(b); or

                     (c)  an administrator of the company is appointed under section 436A, 436B or 436C of the Corporations Act 2001; or

                     (d)  the company begins to be wound up within the meaning of that Act;

whichever first happens, even if the directors did not cause the event to happen.

             (3)  If this section is not complied with before the end of the benefit day, the persons who are directors of the company on that day continue to be under the obligation imposed by subsection (1) until this section is complied with.

222AOC  Penalty for directors in office on or before due date

             (1)  If section 222AOB is not complied with on or before the due date, each person who was a director of the company at any time during the period beginning on the first deduction day and ending on the due date is liable to pay to the Commissioner, by way of penalty, an amount equal to the unpaid amount of the company’s liability under a remittance provision in respect of deductions or amounts withheld:

                     (a)  that the company has deducted for the purposes of Division 1AAA, 3B or 4 of this Act, or withheld for the purposes of Division 12 in Schedule 1 to the Taxation Administration Act 1953 (as the case requires); and

                     (b)  whose due date is the same as the due date.

          (1A)  If section 222AOBAA is not complied with before the end of the payment day, each person who is a director of the company on the payment day is liable to pay to the Commissioner, by way of penalty, an amount equal to the unpaid amount or amounts that the company is required to pay under section 13‑5 in Schedule 1 to the Taxation Administration Act 1953 in respect of the payment or payments relating to the payment day.

             (2)  If section 222AOBA is not complied with before the end of the benefit day, each person who is a director of the company on the benefit day is liable to pay to the Commissioner, by way of penalty, an amount equal to the unpaid amount or amounts that the company is required to pay under Subdivision 16‑B in Schedule 1 to the Taxation Administration Act 1953 in respect of the benefit or benefits provided on the benefit day.

222AOD  Penalty for new directors

             (1)  If:

                     (a)  after the due date, a person becomes, or again becomes, a director of the company at a time when section 222AOB has not yet been complied with; and

                     (b)  at the end of 14 days after the person becomes a director, that section has still not been complied with;

the person is liable to pay to the Commissioner, by way of penalty, an amount equal to the unpaid amount of the liability referred to in subsection 222AOC(1).

          (1A)  If:

                     (a)  after the payment day, a person becomes, or again becomes, a director of the company at a time when section 222AOBAA has not yet been complied with in relation to the payment or payments relating to the payment day; and

                     (b)  at the end of 14 days after the person becomes a director, that section has still not been complied with in relation to that payment or those payments;

the person is liable to pay to the Commissioner, by way of penalty, an amount equal to the unpaid amount of the liability referred to in subsection 222AOC(1A).

             (2)  If:

                     (a)  after the benefit day, a person becomes, or again becomes, a director of the company at a time when section 222AOBA has not yet been complied with in relation to the benefit or benefits provided on the benefit day; and

                     (b)  at the end of 14 days after the person becomes a director, that section has still not been complied with in relation to that benefit or those benefits;

the person is liable to pay to the Commissioner, by way of penalty, an amount equal to the unpaid amount of the liability referred to in subsection 222AOC(2).

222AOE  Commissioner must give 14 days’ notice before recovering penalty

                   The Commissioner is not entitled to recover from a person a penalty payable under this Subdivision until the end of 14 days after the Commissioner gives to the person a notice that:

                     (a)  sets out details of the unpaid amount of the liability referred to in subsection 222AOC(1), (1A) or (2) (whichever relates to the penalty); and

                     (b)  states that the person is liable to pay to the Commissioner, by way of penalty, an amount equal to that unpaid amount, but that the penalty will be remitted if, at the end of 14 days after the notice is given:

                              (i)  the liability has been discharged; or

                             (ii)  an agreement relating to the liability is in force under section 222ALA; or

                            (iii)  the company is under administration within the meaning of the Corporations Act 2001; or

                            (iv)  the company is being wound up.

222AOF  How notice may be given

             (1)  If it appears from ASIC documents that a person is, or has been within the last 7 days, a director of the company, the Commissioner may give the person a notice under section 222AOE by leaving it at, or sending it by post to, an address that appears from such documents to be, or to have been within the last 7 days, the person’s place of residence or business.

Note:          Sections 28A and 29 of the Acts Interpretation Act 1901 are also relevant to giving a notice under section 222AOE.

             (2)  In this section:

ASIC document means a return:

                     (a)  lodged with the Australian Securities and Investments Commission under section 205A, 205B or 346C of the Corporations Act 2001; or

                     (b)  lodged with a person under a law that, for the purposes of the Corporations Act 2001, is a previous law corresponding to section 205A, 205B or 346C of that Act.

222AOG  Remission of penalty if section 222AOB, 222AOBAA or 222AOBA complied with before notice period ends

                   If:

                     (a)  a penalty is payable by a person under this Subdivision; and

                     (b)  section 222AOB, 222AOBAA or 222AOBA (whichever relates to the penalty) is complied with at a time when the Commissioner has not yet given the person a notice under section 222AOE, or within 14 days after the Commissioner gives the person such a notice;

the penalty is remitted because of this section.

222AOH  Effect of director paying penalty or company discharging underlying liability

             (1)  If one or more persons are liable to a penalty under this Subdivision, the following are parallel liabilities:

                     (a)  the liability of that person, or of each of those persons, to the penalty;

                     (b)  the liability referred to in subsection 222AOC(1), (1A) or (2) (whichever relates to the penalty);

                     (c)  liability under a judgment, so far as it is based on a liability referred to in paragraph (a) or (b).

             (2)  This means that if, at a particular time:

                     (a)  an amount is paid or applied towards discharging one of the parallel liabilities; or

                     (b)  because of section 222AHA, one of the parallel liabilities is discharged to the extent of a particular amount;

each of the others that is in existence at that time is discharged to the extent of the same amount. However, this subsection does not discharge a liability to a greater extent than the amount of the liability.

222AOI  Director’s rights of indemnity and contribution

                   A person who pays an amount under section 222AOC or 222AOD has the same rights:

                     (a)  whether by way of indemnity, subrogation, contribution or otherwise; and

                     (b)  against the company or anyone else;

as if the payment had been made under a guarantee:

                     (c)  of the liabilities referred to in section 222AOC; and

                     (d)  under which the person, and every other person who has paid, or from whom the Commissioner is entitled to recover, a penalty under this Subdivision, were jointly and severally liable as guarantors.

222AOJ  Defences

             (1)  This section has effect for the purposes of:

                     (a)  proceedings to recover from a person a penalty payable under this Subdivision; or

                     (b)  proceedings under section 222AOI against a person of the kind referred to in paragraph 222AOI(d).

             (2)  It is a defence if it is proved that, because of illness or for some other good reason, the person did not take part in the management of the company at any time when:

                     (a)  the person was a director; and

                     (b)  the directors were under the obligation to comply with subsection 222AOB(1) or 222AOBAA(1).

             (3)  It is also a defence if it is proved that:

                     (a)  the person took all reasonable steps to ensure that the directors complied with subsection 222AOB(1), 222AOBAA(1) or 222AOBA(1) (whichever is relevant); or

                     (b)  there were no such steps that the person could have taken.

             (4)  In subsection (3):

reasonable means reasonable having regard to:

                     (a)  when, and for how long, the person was a director and took part in the management of the company; and

                     (b)  all other relevant circumstances.

Subdivision CCompany failing to pay estimate under Division 8

222APA  Application

                   This Subdivision applies if a company incorporated under the Corporations Act 2001 becomes liable under section 222AHA to pay an estimate.

222APB  Directors to cause company to pay estimate or to go into voluntary administration or liquidation

             (1)  The persons who are directors of the company from time to time on and after the day when the Commissioner sent to the company notice of the estimate must cause the company to do at least one of the following within 14 days after that day:

                     (a)  pay to the Commissioner the amount of the estimate;

                     (b)  make an agreement with the Commissioner under section 222ALA in relation to the company’s liability to pay the estimate;

                     (c)  appoint an administrator of the company under section 436A of the Corporations Act 2001;

                     (d)  begin to be wound up within the meaning of that Act.

             (2)  This section is complied with when:

                     (a)  the company’s liability to pay the estimate is discharged; or

                     (b)  the company makes an agreement as mentioned in paragraph (1)(b); or

                     (c)  an administrator of the company is appointed under section 436A, 436B or 436C of the Corporations Act 2001;

                     (d)  the company begins to be wound up within the meaning of that Act;

whichever first happens, even if the directors did not cause the event to happen.

             (3)  If this section is not complied with before the end of the 14 days, the persons who are directors of the company from time to time after the 14 days continue to be under the obligation imposed by subsection (1) until this section is complied with.

222APC  Penalty for directors in office within 14 days after notice of estimate

                   If section 222APB is not complied with before the end of the 14 days, each person who was a director of the company at any time during the 14 days is liable to pay to the Commissioner, by way of penalty, an amount equal to the unpaid amount of the estimate.

222APD  Penalty for new directors

                   If:

                     (a)  after the end of the 14 days, a person becomes, or again becomes, a director of the company at a time when section 222APB has not yet been complied with; and

                     (b)  at the end of 14 days after the person becomes a director, that section has still not been complied with;

the person is liable to pay to the Commissioner, by way of penalty, an amount equal to the unpaid amount of the estimate.

222APE  Commissioner must give 14 days’ notice before recovering penalty

             (1)  The Commissioner is not entitled to recover from a person a penalty payable under this Subdivision until the end of 14 days after the Commissioner gives to the person a notice (the penalty notice) that:

                     (a)  sets out details of the unpaid amount of the estimate; and

                     (b)  if the penalty notice is given within 14 days after the Commissioner sent to the company notice of the estimate—states that at the end of those 14 days the person will become liable to pay to the Commissioner, by way of penalty, an amount equal to that unpaid amount unless:

                              (i)  the company’s liability to pay the estimate has been discharged; or

                             (ii)  an agreement relating to that liability is in force under section 222ALA; or

                            (iii)  the company is under administration within the meaning of the Corporations Act 2001; or

                            (iv)  the company is being wound up; and

                     (c)  if the penalty notice is given more than 14 days after the Commissioner sent to the company notice of the estimate—states that the person is liable to pay to the Commissioner, by way of penalty, an amount equal to that unpaid amount; and

                     (d)  states that the penalty will be remitted if, at the end of 14 days after the penalty notice is given:

                              (i)  the company’s liability to pay the estimate has been discharged; or

                             (ii)  an agreement relating to that liability is in force under section 222ALA; or

                            (iii)  the company is under administration within the meaning of the Corporations Act 2001; or

                            (iv)  the company is being wound up.

             (2)  Section 222AOF applies to a notice under this section in the same way as to a notice under section 222AOE.

222APF  Remission of penalty if section 222APB complied with before notice period ends

                   If:

                     (a)  a penalty is payable by a person under this Subdivision; and

                     (b)  section 222APB is complied with at a time when the Commissioner has not yet given the person a notice under section 222APE, or within 14 days after the Commissioner gives the person such a notice;

the penalty is remitted because of this section.

222APG  Effect of director paying penalty or company discharging liability in respect of estimate

             (1)  If one or more persons are liable to a penalty under this Subdivision, the following are parallel liabilities:

                     (a)  the liability of that person, or of each of those persons, to the penalty;

                     (b)  the company’s liability to pay the estimate;

                     (c)  liability under a judgment, so far as it is based on a liability referred to in paragraph (a) or (b).

             (2)  This means that if, at a particular time:

                     (a)  an amount is paid or applied towards discharging one of the parallel liabilities; or

                     (b)  because of section 222AHA, one of the parallel liabilities is discharged to the extent of a particular amount;

each of the others that is in existence at that time is discharged to the extent of the same amount. However, this subsection does not discharge a liability to a greater extent than the amount of the liability.

222APH  Director’s rights of indemnity and contribution

                   A person who pays an amount under section 222APC or 222APD has the same rights:

                     (a)  whether by way of indemnity, subrogation, contribution or otherwise; and

                     (b)  against the company or anyone else;

as if the payment had been made under a guarantee:

                     (c)  of the liability to pay the estimate; and

                     (d)  under which the person, and every other person who has paid, or from whom the Commissioner is entitled to recover, a penalty under this Subdivision, were jointly and severally liable as guarantors.

222API  Defences

             (1)  This section has effect for the purposes of:

                     (a)  proceedings to recover from a person a penalty payable under this Subdivision; or

                     (b)  proceedings under section 222APH against a person of the kind referred to in paragraph 222APH(d).

             (2)  It is a defence if it is proved that, because of illness or for some other good reason, the person did not take part in the management of the company at any time when:

                     (a)  the person was a director; and

                     (b)  the directors were under the obligation to comply with subsection 222APB(1).

             (3)  It is also a defence if it is proved that:

                     (a)  the person took all reasonable steps to ensure that the directors complied with subsection 222APB(1); or

                     (b)  there were no such steps that the person could have taken.

             (4)  In subsection (3):

reasonable means reasonable having regard to:

                     (a)  when, and for how long, the person was a director and took part in the management of the company; and

                     (b)  all other relevant circumstances.

Subdivision DCompany contravening payment agreement under Division 8

222AQA  Directors to ensure that company complies with payment agreement

             (1)  If a company incorporated under the Corporations Act 2001 makes an agreement with the Commissioner under section 222ALA of this Act, the persons who are directors of the company from time to time must cause the company to comply with the agreement.

             (2)  If the company contravenes the agreement by failing to pay a specified amount on or before the specified day, or by contravening a special condition, each person who was a director of the company at any time during the period beginning on the day when the agreement was made and ending on the day of the contravention is liable to pay to the Commissioner, by way of penalty, an amount equal to the balance payable under the agreement.

222AQB  Effect of director paying penalty or company discharging liability

             (1)  If one or more persons are liable under section 222AQA to a penalty equal to the balance payable under the agreement, the following are parallel liabilities:

                     (a)  the liability of that person, or of each of those persons, to the penalty;

                     (b)  the company’s liability to pay that balance;

                     (c)  liability under a judgment, so far as it is based on a liability referred to in paragraph (a) or (b).

             (2)  This means that if, at a particular time, an amount is paid or applied towards discharging one of the parallel liabilities, each of the others that is in existence at that time is discharged to the extent of the same amount. However, this subsection does not discharge a liability to a greater extent than the amount of the liability.

             (3)  If, because of subsection (2), the company’s liability to pay that balance is discharged to the extent of a particular amount:

                     (a)  the Commissioner may determine in writing how he or she would have applied the amount under subsection 222ALB(1) if it had been paid under the agreement; and

                     (b)  if the Commissioner does so—section 222AHA has effect as if the amount had been paid under the agreement and then applied as set out in the determination.

222AQC  Director’s rights of indemnity and contribution

                   A person who pays an amount under section 222AQA has the same rights:

                     (a)  whether by way of indemnity, subrogation, contribution or otherwise; and

                     (b)  against the company or anyone else;

as if the payment had been made under a guarantee:

                     (c)  of the company’s liability to pay the balance payable under the agreement; and

                     (d)  under which the person and every other person who was a director of the company as mentioned in subsection 222AQA(2) were jointly and severally liable as guarantors.

222AQD  Defences

             (1)  This section has effect for the purposes of:

                     (a)  proceedings to recover from a person a penalty payable under section 222AQA; or

                     (b)  proceedings under section 222AQC against a person of the kind referred to in paragraph 222AQC(d).

             (2)  It is a defence if it is proved that, because of illness or for some other good reason, the person did not take part in the management of the company at any time, during the period referred to in subsection 222AQA(2), when the person was a director.

             (3)  It is also a defence if it is proved that:

                     (a)  the person took all reasonable steps to ensure that the company complied with the agreement; or

                     (b)  there were no such steps that the person could have taken.

             (4)  In subsection (3):

reasonable means reasonable having regard to:

                     (a)  when, and for how long, the person was a director and took part in the management of the company; and

                     (b)  all other relevant circumstances.

             (5)  If the person was a director of the company at the time when the agreement was made, he or she is not entitled to rely on a defence under subsection (2) or (3) unless it is also proved that, at that time, the person had reasonable grounds to expect, and did expect, that the company would comply with the agreement.


 

Division 10Miscellaneous

222ARA  This Part not to limit or exclude Chapter 5 of the Corporations Act

                   To avoid doubt, this Part is not intended to limit or exclude the operation of Chapter 5 of the Corporations Act 2001, in so far as that Chapter can operate concurrently with this Part.


 

Part VIIARegistration of tax agents

Division 1Interpretation

251A  Interpretation

                   In this Part, unless the contrary intention appears:

application means an application to a Board in pursuance of this Part.

approved form means a form approved in writing by the Board concerned for the purposes of the provision in which the expression appears.

authorised trustee company means a company that is authorised by or under a law of the Commonwealth, a State or a Territory to act as an executor, administrator and trustee.

BAS provisions has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.

BAS service has the meaning given by section 251L.

Board means a Tax Agents’ Board constituted, or deemed to be constituted, under this Part.

conviction, in relation to a person, in relation to an offence, includes the making of an order under section 19B of the Crimes Act 1914 in relation to the person in respect of the offence.

executive officer, in relation to a company, means:

                     (a)  a director of the company;

                     (b)  a secretary of the company; or

                     (c)  a person (by whatever name called) who is concerned in, or takes part in, the management of the company.

registered tax agent means a person or partnership who or which is registered as a tax agent in pursuance of this Part.

serious taxation offence means:

                     (a)  an offence against section 134.1, 134.2, 135.1, 135.2 or 135.4 of the Criminal Code, being an offence that relates to a tax liability within the meaning of the Taxation Administration Act 1953; or

                     (c)  an offence that is:

                              (i)  a taxation offence within the meaning of Part III of the Taxation Administration Act 1953; and

                             (ii)  punishable on conviction by either or both of the following:

                                        (A)  a fine exceeding 20 penalty units;

                                        (B)  imprisonment.

taxation law means an Act of which the Commissioner has the general administration, or regulations under such an Act, but does not include:

                     (a)  Customs Acts as defined in section 4 of the Customs Act 1901; or

                     (b)  Excise Acts as defined in section 4 of the Excise Act 1901; or

                     (d)  a sales tax law as defined in section 5 of the Sales Tax Assessment Act 1992; or

                     (e)  A New Tax System (Goods and Services Tax Transition) Act 1999.

251B  Territories

                   For the purposes of this Part:

                     (a)  the Australian Capital Territory and Norfolk Island shall each be deemed to be part of the State of New South Wales;

                     (c)  the Northern Territory shall be deemed to be part of the State of South Australia; and

                     (d)  the Territory of Christmas Island and the Territory of Cocos (Keeling) Islands shall each be deemed to be part of the State of Western Australia.

251BA  Companies in which qualified directors have a substantial interest

             (1)  For the purposes of this Part, a company shall be taken to be a company in which qualified directors have a substantial interest if:

                     (a)  shares in the company carrying between them the right to exercise not less than 25 per cent of the voting power in the company are beneficially owned by a director who, or by directors each of whom, is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters; and

                     (b)  the voting power in the company, to the extent to which it relates to those shares, is not controlled, or capable of being controlled, by a person or persons other than the director or directors concerned.

             (2)  A reference in subsection (1) to control of the voting power in a company is a reference to control that is direct or indirect and includes a reference to control that is exercisable as a result or by means of arrangements or practices:

                     (a)  whether or not having legal or equitable force; and

                     (b)  whether or not based on legal or equitable rights.

251BB  Non‑exempt companies

                   For the purposes of this Part, a company shall be taken to be a non‑exempt company as at a particular time unless either of the following paragraphs applies:

                     (a)  all of the following conditions are satisfied:

                              (i)  the company was registered as a tax agent immediately before the commencement of section 39 of the Taxation Laws Amendment Act (No. 2) 1988;

                             (ii)  the company was registered as a tax agent at all times after that commencement and before that time;

                            (iii)  at all times after that commencement and before that time, shares in the company carrying between them:

                                        (A)  the right to exercise more than one‑half of the voting power in the company;

                                        (B)  the right to receive more than one‑half of any dividends that may be paid by the company; and

                                        (C)  the right to receive more than one‑half of any distribution of capital of the company;

                                   were beneficially owned by persons who, immediately before that commencement, beneficially owned shares in the company carrying between them rights of those kinds;

                     (b)  the company is an authorised trustee company.

251BC  Fit and proper persons to prepare income tax returns

             (1)  Without limiting the generality of an expression used in this Part, but subject to this section, a person is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters, as at a particular time, if:

                     (a)  the person is not a natural person;

                     (b)  both of the following conditions are satisfied:

                              (i)  the person was not registered as a tax agent, or as a nominee, for the purposes of this Part immediately before the commencement of section 39 of the Taxation Laws Amendment Act (No. 2) 1988;

                             (ii)  the person does not hold such qualifications (whether academic, by way of experience or otherwise) as are prescribed;

                     (c)  the person has not attained the age of 18 years;

                     (d)  the person is not of good fame, integrity and character;

                     (e)  the person has been convicted of a serious taxation offence during the previous 5 years; or

                      (f)  the person is under sentence of imprisonment for a serious taxation offence.

             (2)  Nothing in paragraph (1)(e) or (f) limits the generality of paragraph (1)(d).

             (3)  Where:

                     (a)  a Board is required, in considering an application for:

                              (i)  re‑registration as a tax agent; or

                             (ii)  re‑registration of a nominee of a tax agent;

                            to decide whether the Board is satisfied that a particular person is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;

                     (b)  the person is not under sentence of imprisonment for a serious taxation offence; and

                     (c)  the Board is satisfied that, because of special circumstances:

                              (i)  a conviction of the person;

                             (ii)  the doing of an act or thing by the person; or

                            (iii)  an omission of the person;

                            should be disregarded;

the Board may, in making the decision referred to in paragraph (a), disregard the conviction, the doing of the act or thing or the omission, as the case requires.

             (4)  For the purposes of this section:

                     (a)  a person who has been released from serving a part of a sentence of imprisonment on parole or upon licence to be at large shall be taken to be under sentence of imprisonment during any period during which action can be taken by way of requiring the person to serve the whole or a part of the remainder of that sentence; and

                     (b)  a person who has been released by a court from serving the whole or a part of a sentence of imprisonment upon the person giving a good behaviour security shall be taken to be under sentence of imprisonment during any period during which action can be taken for a breach of a condition of that security.

             (5)  A reference in subsection (4) to a good behaviour security given by a person is a reference to a security given by the person, with or without sureties, by recognizance or otherwise, that the person will comply with conditions relating to his or her behaviour.


 

Division 2Tax Agents’ Boards

251C  Tax Agents’ Boards

                   For the purposes of this Part there shall be in each State a Tax Agents’ Board.

251D  Constitution of Boards

             (1)  Subject to this Part, each Board shall consist of 3 members who shall be:

                     (a)  an officer of the Australian Taxation Office appointed by the Minister; and

                     (b)  2 other persons appointed by the Minister.

          (1A)  The Minister shall appoint as Chairperson one of the persons referred to in paragraph (1)(b).

             (2)  A vacancy in the office of a member shall not invalidate the proceedings of a Board.

             (3)  A member of a Board holds office on a part‑time basis.

251DA  Remuneration and allowances

             (1)  A member of a Board shall be paid such remuneration as is determined by the Remuneration Tribunal.

             (2)  A member shall be paid such allowances as are prescribed.

             (3)  This section has effect subject to the Remuneration Tribunal Act 1973.

251E  Conduct of business of Board

                   At all meetings of a Board:

                     (a)  any 2 members shall form a quorum;

                     (b)  all questions shall be decided by a majority of the members present;

                     (c)  if the Chairperson is not present—the members present shall elect one of their number to preside; and

                     (d)  the Chairperson or member presiding shall have a deliberative, but not a casting, vote.

251F  Board not to be sued

                   No action or suit shall be brought or maintained against any person who is or has been a member of a Board for any nonfeasance or misfeasance in connexion with his duties.

251G  Summoning of witnesses etc.

                   A Board or a member of a Board shall have such powers as are prescribed with respect to the taking of evidence, the administration of oaths or affirmations, the summoning of witnesses and the production of documents.


 

Division 3Registration of tax agents

Subdivision AOriginal registration of tax agents

251J  Applications for original registration of tax agents

             (1)  A person or partnership desiring to be registered as a tax agent may make application to a Board for registration.

             (2)  Every application under this section shall be accompanied by a lodgment fee of $80, or such higher fee as is prescribed, which the Board shall pay to the Commissioner.

             (3)  An application shall be in the approved form and shall be accompanied by such information as is required by the form to be provided.

251JA  Original registration of tax agents

             (1)  The Board shall register the applicant as a tax agent if the applicant satisfies the Board that:

                     (a)  if the applicant is a natural person:

                              (i)  the applicant is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters; and

                             (ii)  the applicant is not an undischarged bankrupt;

                     (b)  if the applicant is a partnership:

                              (i)  a partner specified in the application as the original nominee of the partnership is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;

                             (ii)  in the case of each partner who is a natural person—the partner:

                                        (A)  has attained the age of 18 years at the date on which the application is made; and

                                        (B)  is of good fame, integrity and character;

                            (iii)  in the case of each partner that is a company—each executive officer of the company:

                                        (A)  has attained the age of 18 years at the date on which the application is made; and

                                        (B)  is of good fame, integrity and character; and

                            (iv)  there is no partner who is an undischarged bankrupt; or

                     (c)  if the applicant is a company:

                              (i)  a person employed by the company and specified in the application as the original nominee of the company is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;

                             (ii) each executive officer of the company:

                                        (A)  has attained the age of 18 years at the date on which the application is made; and

                                        (B)  is of good fame, integrity and character;

                            (iii)  except where the company is an authorised trustee company—the company is a company in which qualified directors have a substantial interest; and

                            (iv)  the company has not gone into liquidation.

             (2)  The Board shall refuse to register the applicant in any other case.

             (3)  Where a Board makes a decision refusing to register an applicant as a tax agent, the Board shall cause to be served on the applicant a notice in writing setting out that decision and giving the reasons for that decision.

Subdivision BRe‑registration of tax agents

251JB  Applications for re‑registration of tax agents

             (1)  A registered tax agent may apply to the Board by which the tax agent was registered for re‑registration.

             (2)  An application shall be accompanied by a lodgment fee of $40, or such higher fee as is prescribed, which the Board shall pay to the Commissioner.

             (3)  An application shall be in the approved form and shall be accompanied by such information as is required by the form to be provided.

             (4)  An application for re‑registration as a tax agent shall be made:

                     (a)  during the period:

                              (i)  commencing 60 days before; and

                             (ii)  ending 30 days before;

                            the day on which the existing registration ceases to be in force; or

                     (b)  if the Board, on request in writing made by the tax agent, allows the application to be made at a later time but before the existing registration ceases to be in force—before that later time.

             (5)  Where a Board makes a decision refusing to allow a later time for the making of an application for re‑registration, the Board shall cause to be served on the applicant a notice in writing setting out that decision and giving the reasons for that decision.

251JC  Re‑registration of tax agents

             (1)  The Board shall re‑register the applicant as a tax agent if the applicant satisfies the Board that:

                     (a)  if the applicant is a natural person:

                              (i)  the applicant is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters; and

                             (ii)  the applicant is not an undischarged bankrupt;

                     (b)  if the applicant is a partnership:

                              (i)  a partner specified in the application as the original nominee of the partnership is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;

                             (ii)  in the case of each partner who is a natural person—the partner:

                                        (A)  has attained the age of 18 years at the date on which the application is made; and

                                        (B)  is of good fame, integrity and character;

                            (iii)  in the case of each partner that is a company—each executive officer of the company:

                                        (A)  has attained the age of 18 years at the date on which the application is made; and

                                        (B)  is of good fame, integrity and character; and

                            (iv)  there is no partner who is an undischarged bankrupt;

                     (c)  if the applicant is a company:

                              (i)  a person employed by the company and specified in the application as the original nominee of the company is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;

                             (ii)  each executive officer of the company:

                                        (A)  has attained the age of 18 years at the date on which the application is made; and

                                        (B)  is of good fame, integrity and character;

                            (iii) if the company is a non‑exempt company—the company is a company in which qualified directors have a substantial interest; and

                            (iv)  the company has not gone into liquidation; and

                     (d)  in all cases—the applicant has not permanently ceased to carry on business as a tax agent.

             (2)  The Board shall refuse to re‑register the applicant in any other case.

             (3)  Where a Board makes a decision refusing to re‑register an applicant as a tax agent, the Board shall cause to be served on the applicant a notice in writing setting out that decision and giving the reasons for that decision.

             (4)  Where:

                     (a)  a Board makes a decision refusing to re‑register an applicant as a tax agent; and

                     (b)  notice of that decision was served on the applicant at a time (in this subsection called the notice time) after the time (in this subsection called the expiry time) when the existing registration ceased to be in force;

the applicant shall be taken to have been registered as a tax agent during the period commencing at the expiry time and ending at the notice time.

Subdivision CEffect of changes in constitution of partnerships

251JD  Registration of a partnership terminated if constitution changes

                   Where:

                     (a)  a partnership is registered as a tax agent; and

                     (b)  there is a change in the constitution of the partnership;

the registration shall be taken to be terminated at the time of that change.

Subdivision DChanges in constitution of partnerships–registration of successor tax agents

251JE  Applications for registration of successor tax agents

             (1)  Where:

                     (a)  the registration of a partnership (in this section called the original partnership) is terminated because of section 251JD;

                     (b)  the registration of the original partnership was not suspended immediately before the termination; and

                     (c)  both of the following conditions are satisfied in relation to a particular natural person:

                              (i)  the person was a partner, and a registered nominee, of the original partnership immediately before the termination;

                             (ii)  the person is not an undischarged bankrupt;

the person may apply to a Board for registration as a tax agent.

             (2)  Where:

                     (a)  the registration of a partnership (in this section also called the original partnership) is terminated because of section 251JD;

                     (b)  the registration of the original partnership was not suspended immediately before the termination; and

                     (c)  both of the following conditions are satisfied in relation to another partnership (in this section called the new partnership):

                              (i)  a partner was a partner, and a registered nominee, of the original partnership immediately before the termination;

                             (ii)  there is no partner who is an undischarged bankrupt;

the new partnership may apply to a Board for registration as a tax agent.

             (3)  An application shall be in the approved form and shall be accompanied by such information as is required by the form to be provided.

             (4)  Subject to subsection (9), an application shall be made within 30 days after the termination of the registration of the original partnership.

             (5)  An application by a natural person may specify, as the original nominee or original nominees of the natural person, a person who, or persons each of whom:

                     (a)  was a registered nominee of the original partnership immediately before the termination; and

                     (b)  is an employee of the natural person.

             (6)  An application made by a new partnership shall specify, as an original nominee of the partnership, a partner of the kind referred to in subparagraph (2)(c)(i).

             (7)  An application made by a new partnership may specify, as an additional original nominee or original nominees of the partnership, a person who, or persons each of whom:

                     (a)  was a registered nominee of the original partnership immediately before the termination; and

                     (b)  is a partner, or an employee, of the new partnership.

             (8)  Where:

                     (a)  a Board receives a document purporting to be an application made in accordance with this section; and

                     (b)  the Board is of the opinion that the document is not an application made in accordance with this section;

the Board shall cause to be served on the person who lodged the document a notice in writing setting out that opinion.

             (9)  Where:

                     (a)  a Board causes to be served a notice under subsection (8) relating to a document purporting to be an application made in accordance with this section in consequence of a change in the constitution of the original partnership;

                     (b)  the purported application was made within 30 days after the termination of the registration of the original partnership; and

                     (c)  the notice under subsection (8) was served after the end of the period of 21 days after the termination of the registration of the original partnership;

the person who made the purported application may make an application under this section in consequence of the change in the constitution of the original partnership within 7 days after the day of service of the notice under subsection (8).

251JF  Registration of successor

                   The Board shall register the applicant as a tax agent within 60 days after receiving the application.

Subdivision EDuration of registration of tax agents

251JG  Registration of tax agents to be in force for 3 years

             (1)  The registration of a tax agent granted by a Board comes into force, or shall be deemed to have come into force, as the case requires:

                     (a)  if the registration was granted under section 251JA—on the day on which it was granted;

                     (b)  if the registration was granted under section 251JC by way of the re‑registration of an existing registration—immediately after the existing registration ceases or ceased to be in force; or

                     (c)  if the registration was granted under section 251JF in consequence of a change in the constitution of a partnership:

                              (i)  if the tax agent is a natural person—immediately after that change; or

                             (ii)  if the tax agent is a partnership (in this subparagraph called the new partnership)—immediately after whichever of the following times is the later:

                                        (A)  the time of that change;

                                        (B)  the time of the formation of the new partnership.

             (2)  The registration of a tax agent granted by a Board under section 251JA or 251JC shall, unless terminated, cancelled or surrendered under this Act, continue in force for a period of 3 years.

             (3)  The registration of a tax agent granted by a Board under section 251JF in consequence of a change in the constitution of a partnership shall, unless terminated, cancelled or surrendered under this Act, continue in force until the end of the period (including a period that is applicable because of one or more applications of this subsection) during which the registration of the partnership would have been in force if it had not been terminated because of section 251JD.

Subdivision FSurrender of registration of tax agents

251JH  Surrender of registration

                   A person or partnership that is registered as a tax agent may, by notice in writing to the Board by which the tax agent was registered, surrender that registration.

Subdivision GTermination of registration of tax agents other than partnerships

251JK  Death of natural person

                   The registration of a natural person as a tax agent terminates on death.

251JM  Companies ceasing to exist

                   The registration of a company as a tax agent terminates upon the company ceasing to exist.

Subdivision HCancellation or suspension of registration of tax agents

251K  Cancellation or suspension of registration of tax agents

             (1)  Where a Board is satisfied that a tax agent, or a registered nominee of a tax agent, has been convicted of:

                     (a)  an offence against section 8N, 8T or 8U of the Taxation Administration Act 1953, or against Division 136 or 137 of the Criminal Code in relation to a taxation law (within the meaning of the Taxation Administration Act 1953); or

                     (b)  an offence against:

                              (i)  section 6 of the Crimes Act 1914; or

                             (ii)  section 11.1, 11.4 or 11.5 of the Criminal Code;

                            being an offence that relates to an offence of the kind referred to in paragraph (a) of this subsection;

the Board shall suspend or cancel the registration of the tax agent.

          (1B)  Nothing in subsection (1) shall be taken to restrict or limit, by implication, the generality of subsection (2).

             (2)  A Board may suspend or cancel the registration of any tax agent upon being satisfied that:

                     (a)  any return which has been prepared by or on behalf of the tax agent is false in any material particular; unless the tax agent establishes to the satisfaction of the Board that he had no knowledge of the falsity or that the falsity was due to his inadvertence;

                     (b)  the tax agent:

                              (i)  has neglected the business of a principal; or

                             (ii)  has been guilty of misconduct as a tax agent; or

                     (c)  a registered nominee of the tax agent is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;

                     (d)  if the tax agent is a natural person—the tax agent is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;

                     (e)  if the tax agent is a partnership:

                              (i)  in the case of a partner who is a natural person—the partner:

                                        (A)  has not attained the age of 18 years; or

                                        (B)  is not of good fame, integrity and character; or

                             (ii)  in the case of a person who is an executive officer of a partner that is a company—the person:

                                        (A)  has not attained the age of 18 years; or

                                        (B)  is not of good fame, integrity and character; or

                      (f)  if the tax agent is a company—an executive officer of the company:

                              (i)  has not attained the age of 18 years; or

                             (ii)  is not of good fame, integrity and character.

             (3)  If the registration of a tax agent is not already suspended, a suspension of the registration of the tax agent shall be for such period as the Board concerned thinks fit.

          (3A)  If the registration of a tax agent is already suspended, a suspension of the registration of the tax agent shall be for such further period as the Board concerned thinks fit, being a period commencing at the end of the period for which the registration of the tax agent is already suspended.

          (3B)  The period, or further period, of a suspension under subsection (1) shall not be less than 3 months.

          (3C)  A Board shall cancel the registration of a tax agent who is a natural person if:

                     (a)  the person becomes an undischarged bankrupt; or

                     (b)  the person permanently ceases to carry on business as a tax agent.

          (3D)  A Board shall cancel the registration of a tax agent that is a non‑exempt company if the company ceases to be a company in which qualified directors have a substantial interest.

             (4)  A Board shall cancel the registration of a tax agent which is a partnership or a company:

                     (a)  in a case where the tax agent is a partnership:

                              (i)  if there is no partner registered as a nominee in respect of the tax agent; or

                             (ii)  if any partner becomes an undischarged bankrupt;

                     (b)  in a case where the tax agent is a company:

                              (i)  if there is no nominee registered in respect of the tax agent; or

                             (ii)  if the company goes into liquidation; or

                     (c)  if the tax agent permanently ceases to carry on business as a tax agent.

             (5)  Where a Board makes a decision suspending or cancelling the registration of a tax agent, the Board shall cause to be served on the tax agent a notice in writing setting out that decision and giving the reasons for that decision.

             (6)  A person or partnership whose registration as a tax agent is suspended shall, except for the purposes of section 251BB or 251BC, Division 3, 4 or 6 or section 251Q, be taken not to be registered as a tax agent while that registration remains suspended.

             (7)  A suspension of the registration of a tax agent continues notwithstanding that, during the period of suspension, the tax agent is re‑registered.


 

Division 4Registration of nominees of tax agents

251KA  Original nominee to be registered as a nominee

             (1)  Where a partnership or company is registered by a Board as a tax agent under section 251JA or 251JC, the person specified in the application for registration or re‑registration as the original nominee of the partnership or company, as the case may be, shall be registered by the Board as a nominee of the tax agent for the purposes of this Part.

             (2)  Where a partnership or company is registered as a tax agent during a particular period because of subsection 251JC(4), the person specified in the application for re‑registration as the original nominee of the partnership or company, as the case may be, shall be taken to have been registered as a nominee of the tax agent for the purposes of this Part during that period.

             (3)  Where a person or partnership is registered as a tax agent under section 251JF, the person or each of the persons specified in the application for registration as the original nominee or as the original nominees of the person or partnership, as the case may be, shall be registered by the Board concerned as a nominee of the tax agent for the purposes of this Part.

251KB  Applications for registration or re‑registration of nominees

             (1)  A person or partnership may, in an application made for the purpose, request a Board to register or re‑register, as a nominee of the person or partnership for the purposes of this Part:

                     (a)  in the case of a partnership—a partner or an employee of the partnership; or

                     (b)  in the case of a natural person or company—an employee of the person or company.

             (2)  An application shall be accompanied by a lodgment fee of:

                     (a)  if the proposed nominee is not already registered as a nominee of the person or partnership—$80, or such higher fee as is prescribed; or

                     (b)  if the proposed nominee is already registered as a nominee of the person or partnership—$5, or such higher fee as is prescribed;

which the Board shall pay to the Commissioner.

             (3)  An application shall be in the approved form and shall be accompanied by such information as is required by the form to be provided.

             (4)  An application for re‑registration as a nominee of a tax agent shall be made:

                     (a)  during the period:

                              (i)  commencing 60 days before; and

                             (ii)  ending 30 days before;

                            the day on which the existing registration ceases to be in force; or

                     (b)  if the Board, on request in writing made by the tax agent, allows the application to be made at a later time but before the existing registration ceases to be in force—before that later time.

             (5)  Where a Board makes a decision refusing to allow a later time for the making of an application for re‑registration, the Board shall cause to be served on the applicant and on the proposed nominee a notice in writing setting out that decision and giving the reasons for that decision.

251KC  Registration and re‑registration of nominees of tax agents

             (1)  The Board shall register or re‑register the proposed nominee as a nominee of the tax agent for the purposes of this Part if the Board is satisfied that the proposed nominee is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters.

             (2)  The Board shall refuse to register or re‑register the proposed nominee in any other case.

             (3)  Where the Board makes a decision refusing to register or re‑register a proposed nominee, the Board shall cause to be served on the applicant and on the proposed nominee a notice in writing setting out that decision and giving the reasons for that decision.

             (4)  Where:

                     (a)  a Board makes a decision refusing to re‑register a proposed nominee as a nominee of a tax agent;

                     (b)  notice of that decision was served on the proposed nominee at a time (in this subsection called the notice time) after the time (in this subsection called the expiry time) when the existing registration ceased to be in force; and

                     (c)  the tax agent was registered during the whole or a part of the period (which whole or part is in this subsection called the post‑expiry period) commencing at the expiry time and ending at the notice time;

the proposed nominee shall be taken to have been registered as a nominee of the tax agent during the post‑expiry period.

251KD  Duration of registration of nominees

             (1)  The registration of a nominee granted by a Board comes into force, or shall be deemed to have come into force, as the case requires:

                     (a)  if the registration was granted by way of the re‑registration of an existing registration—immediately after the existing registration ceases or ceased to be in force;

                     (b)  if the registration was granted under section 251KA—at the time when the registration of the tax agent concerned came or comes into force; or

                     (c)  in any other case—on the day on which it was granted.

             (2)  A person ceases to be a registered nominee of a tax agent if:

                     (a)  in a case where the tax agent is a natural person—the nominee ceases to be an employee of the tax agent;

                     (b)  in a case where the tax agent is a partnership—there comes a time when the nominee is neither a member of the partnership nor an employee of the partnership;

                     (c)  in a case where the tax agent is a company—the nominee ceases to be an employee of the company;

                     (d)  the tax agent notifies the Board by which it was registered that the tax agent no longer desires that person to be its nominee;

                     (e)  the registration of the nominee is cancelled;

                      (f)  the nominee dies; or

                     (g)  the registration of the tax agent is terminated, cancelled, surrendered or otherwise ceases to be in force.

251KE  Cancellation of registration of nominees

             (1)  A Board may cancel the registration of a nominee of a tax agent if the Board is satisfied that the nominee is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters.

             (2)  Where a Board makes a decision cancelling the registration of a nominee of a tax agent, the Board shall cause to be served on the tax agent and on the nominee a notice in writing setting out that decision and giving the reasons for that decision.


 

Division 5Refund of lodgment fees

251KF  Refund of lodgment fees if application withdrawn

                   Where:

                     (a)  an application under section 251J, 251JB or 251KB is withdrawn; and

                     (b)  the application was neither granted nor refused before the withdrawal;

the Commissioner shall refund the lodgment fee paid in respect of the application.

Division 6Notification obligations of tax agents etc.

251KG  Tax agents who are natural persons

             (1)  A natural person who is registered as a tax agent shall forthwith notify the Board by which the tax agent was registered if:

                     (a)  the person becomes an undischarged bankrupt;

                     (b)  the person permanently ceases to carry on business as a tax agent; or

                     (c)  a person who is a registered nominee of the tax agent for the purposes of this Part ceases to be employed by the tax agent.

Penalty:  5 penalty units.

             (2)  An offence under subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

251KH  Tax agents that are partnerships

             (1)  A partnership that is registered as a tax agent shall forthwith notify the Board by which it was registered if:

                     (a)  a partner becomes an undischarged bankrupt;

                     (b)  a person becomes an executive officer of a partner that is a company;

                     (c)  a person who is a registered nominee of the partnership for the purposes of this Part and was employed by the partnership at the time the person was last registered as a nominee ceases to be employed by the partnership; or

                     (d)  the partnership permanently ceases to carry on business as a tax agent.

Penalty:  5 penalty units.

             (2)  An offence under subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

251KJ  Changes in the constitution of partnerships

             (1)  Where:

                     (a)  a partnership is registered as a tax agent; and

                     (b)  there is a change in the constitution of the partnership;

each person who was a partner immediately before the change shall forthwith notify the Board by which the tax agent was registered.

          (1A)  An offence under subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

             (2)  A person who was a partner in a partnership immediately before a change in the constitution of the partnership is not guilty of an offence against subsection (1) in relation to that change if another person who was a partner in the partnership immediately before that change complies with subsection (1).

Penalty:  5 penalty units.

Note:          A defendant bears an evidential burden in relation to the matters in subsection (2), see subsection 13.3(3) of the Criminal Code.

251KK  Tax agents that are companies

             (1)  A company that is registered as a tax agent shall forthwith notify the Board by which it was registered if:

                     (a)  the company goes into liquidation;

                     (b)  any person who is a nominee of the company for the purposes of this Part ceases to be employed by the company;

                     (c)  a person becomes an executive officer of the company; or

                     (d)  the company permanently ceases to carry on business as a tax agent.

             (2)  A registered tax agent that is a non‑exempt company shall forthwith notify the Board if it has reasonable grounds to believe that the company has ceased to be a company in which qualified directors have a substantial interest.

Penalty:  5 penalty units.

             (3)  An offence under this section is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.


 

Division 7Privileges and duties of registered tax agents

251L  Unregistered tax agents not to charge fees

             (1)  Subject to this section, a person who is not a registered tax agent must not knowingly or recklessly demand or receive any fee for:

                     (a)  preparing or lodging on behalf of a taxpayer a return, notice, statement, application or other document about the taxpayer’s liabilities under a taxation law; or

                     (b)  giving advice about a taxation law on behalf of a taxpayer; or

                     (c)  preparing or lodging on behalf of a taxpayer an objection under Part IVC of the Taxation Administration Act 1953 against an assessment, determination, notice or decision under a taxation law; or

                     (d)  applying for a review of, or instituting an appeal against, a decision on such an objection; or

                     (e)  on behalf of a taxpayer, dealing with the Commissioner or a person who is exercising powers or performing functions under a taxation law.

Penalty:  200 penalty units.

Note:          See section 4AA of the Crimes Act 1914 for the current value of a penalty unit.

             (5)  A person shall not be entitled to sue for, recover or set‑off any fee which he is prohibited by this section from demanding.

             (6)  Subsection (1) does not apply to the provision of a BAS service on behalf of a taxpayer by:

                     (a)  a member (except a student member or retired member) of a recognised professional association; or

                     (b)  a bookkeeper working under the direction of a registered tax agent; or

                     (c)  where the BAS service is under Part 2‑5 in Schedule 1 to the Taxation Administration Act 1953—a person who provides payroll services to an employer; or

                     (d)  where a BAS service relates to imports or exports to which an indirect tax law (within the meaning of subsection 995‑1(1) of the Income Tax Assessment Act 1997) applies—a customs broker licensed under Part XI of the Customs Act 1901.

             (7)  A BAS service is any of these:

                     (a)  preparing or lodging an approved form about a taxpayer’s liabilities, obligations or entitlements under a BAS provision;

                     (b)  giving advice about a BAS provision;

                     (c)  dealing with the Commissioner or a person who is exercising powers or performing functions under a taxation law in relation to a BAS provision.

             (8)  Subsection (1) does not apply to the provision of any of these services on behalf of a taxpayer by a barrister or solicitor who is acting in the course of his or her profession:

                     (a)  preparing or lodging a notice, application or other document about the taxpayer’s liabilities under a taxation law;

                     (b)  giving advice about a taxation law;

                     (c)  preparing or lodging an objection under Part IVC of the Taxation Administration Act 1953 against an assessment, determination, notice or decision under a taxation law;

                     (d)  applying for a review of, or instituting an appeal against, a decision on such an objection or undertaking any litigation or proceedings about a taxation law;

                     (e)  while acting for a trust or a deceased estate for which the barrister or solicitor is the trustee or legal personal representative, preparing or lodging a return or statement about the trust’s or estate’s liabilities, obligations or entitlements under a taxation law;

                      (f)  dealing with the Commissioner or a person who is exercising powers or performing functions under a taxation law about any of the matters specified in paragraphs (a) to (e).

             (9)  A member of a recognised professional association can provide BAS services through an entity for:

                     (a)  if the member is a partner in a partnership—the partnership; or

                     (b)  if the member is a director or employee of a company—the company.

           (10)  A defendant does not bear an evidential burden in relation to a matter specified in subsection (6) or (8).

251LA  Recognised professional associations

             (1)  A recognised professional association is an organisation that:

                     (a)  meets the requirements in subsections (2) to (10); or

                     (b)  is a charitable institution or a public educational institution:

                              (i)  that meets the requirements in subsections (2) to (4); and

                             (ii)  whose income is exempt from income tax under section 50‑5 of the Income Tax Assessment Act 1997; and

                            (iii)  whose sole or principal activity is providing education, training and information about taxation.

             (2)  The organisation must:

                     (a)  be administered by a committee of management elected by and accountable to its members; and

                     (b)  not be carried on for profit or gain (excluding a reasonable salary or honorarium) to:

                              (i)  an office holder of the organisation; or

                             (ii)  its members; or

                            (iii)  members of bodies (member bodies) that are its members; and

                            (iv)  any person who is a member of that committee of management.

             (3)  The individuals who are members of that committee must be of good fame, integrity and character.

             (4)  The organisation must have at least 1,000 financial members who have the right to vote at meetings of the organisation.

             (5)  An individual or member body must not be eligible for membership of the organisation unless the individual, or each individual who is a member of the member body (except a student member), has completed the requirements for:

                     (a)  a diploma or certificate in accounting from a college or institute of technical and further education involving at least 2 years’ full time, or 4 years’ part time, study; or

                     (b)  an Australian tertiary qualification in accountancy involving at least 3 years’ full time, or 6 years’ part time, study; or

                     (c)  some other similar qualification, or exemption from qualification, acceptable to the organisation; or

                     (d)  admission as a legal practitioner in Australia.

             (6)  Under the rules of the organisation, individuals who are its members or members of its member bodies and who carry on a profession must:

                     (a)  be subject to rules controlling their conduct in the practice of that profession; and

                     (b)  be subject to discipline for breaches of those rules; and

                     (c)  be required to undertake at least 15 hours of continuing professional education in each year (unless exempted in special circumstances); and

                     (d)  if they are permitted by that organisation to be in public practice—have professional indemnity insurance.

             (7)  The organisation must have in place adequate operational procedures to ensure it is properly managed and its rules are enforced.

             (8)  The organisation must have satisfactory arrangements in place for:

                     (a)  notifying clients of its members or of members of its member bodies as to how to make complaints; and

                     (b)  hearing and deciding those complaints; and

                     (c)  taking disciplinary action if complaints are justified.

             (9)  The organisation must have satisfactory arrangements in place for publishing annual statistics about:

                     (a)  the kinds and frequency of complaints (except complaints under this Act about registered tax agents); and

                     (b)  findings made as a result of the complaints; and

                     (c)  action taken as a result of those findings.

           (10)  The organisation must be able to pay its debts as they fall due.

251M  Negligence of registered tax agent etc.

             (1)  If, through the negligence of a registered tax agent, or of a person exempted under section 251L, a taxpayer becomes liable to pay a fine or other penalty, the general interest charge under a provision of this Act, or to pay shortfall interest charge, the registered tax agent, or the person, as the case may be, shall be liable to pay to the taxpayer the amount of that fine or other penalty, additional tax, general interest charge or shortfall interest charge, and that amount may be sued for and recovered by the taxpayer in any court of competent jurisdiction.

Note 1:       The general interest charge is worked out under Part IIA of the Taxation Administration Act 1953 and shortfall interest charge is worked out under Division 280 in Schedule 1 to that Act.

Note 2:       Subsection 8AAB(4) of that Act lists the provisions that apply the general interest charge.

             (2)  Nothing in this section shall exonerate the taxpayer from his liability.

251N  Preparation of returns etc. on behalf of registered tax agents

             (1)  A registered tax agent or a person exempted under section 251L shall not allow any person, not being his employee, a registered tax agent or, in the case of a partnership which is registered as a tax agent, a member of that partnership:

                     (a)  to prepare on his behalf, either directly or indirectly, his own or any other income tax return or objection; or

                     (b)  to conduct on his behalf, either directly or indirectly, any business of himself or any other person relating to any income tax return or income tax matter.

Penalty:  10 penalty units.

             (2)  A partnership or company which is registered as a tax agent shall not allow any person to do anything specified in paragraph (1)(a) or (b).

Penalty:  10 penalty units.

          (2A)  Subsection (2) does not apply to the extent that the person does the thing under the supervision and control of a registered nominee of the partnership or company.

Note:          A defendant bears an evidential burden in relation to the matters in subsection (2A), see subsection 13.3(3) of the Criminal Code.

          (2B)  A natural person who is registered as a tax agent must not allow any person to do anything specified in paragraph (1)(a) or (b).

Penalty:  10 penalty units.

          (2C)  Subsection (2B) does not apply to the extent that the person does the thing under the supervision and control of:

                     (a)  the tax agent; or

                     (b)  a registered nominee of the tax agent.

Note:          A defendant bears an evidential burden in relation to the matters in subsection (2C), see subsection 13.3(3) of the Criminal Code.

             (3)  Nothing in this section shall be construed as prohibiting the employment by a registered tax agent or person exempted under section 251L of solicitor or counsel to act in the course of his profession in the preparation of any objection or in any litigation or proceedings before a board, the Tribunal or a court, or in an advisory capacity either in connexion with the preparation of any such return or the conduct of any such business.

251O  Advertising etc. by persons other than registered tax agents

             (1)  Subject to this section, a person, not being a registered tax agent or a person exempted under section 251L, shall not, directly or indirectly:

                     (a)  describe himself as or represent himself to be a tax agent; or

                     (b)  advertise in any manner whatsoever that income tax returns will be prepared by him or that any other matter in connexion with income tax will be attended to by him.

Penalty:  10 penalty units.

             (2)  Paragraph (1)(b) does not apply in relation to advertising that relates to acts or things done or to be done:

                     (a)  by a solicitor or counsel acting in the course of his or her profession:

                              (i)  in the preparation of an objection;

                             (ii)  in litigation or proceedings before a board, the Tribunal or a court; or

                            (iii)  in an advisory capacity in connection with the preparation of an income tax return or with any income tax matter; or

                     (b)  by a person providing services on a voluntary basis under a scheme approved by the Commissioner by notice published in the Gazette.


 

Division 8Miscellaneous

251P  Offences by partnerships

                   Where, under any provision of this Part, an obligation is imposed on a partnership to do, or refrain from doing, anything, every partner shall, upon the refusal or failure of the partnership to comply with the obligations, unless he proves that he had no knowledge of the refusal or failure, be guilty of an offence, and be liable to the penalty provided in respect of the obligation:

Provided that not more than one partner shall be punished for one offence.

251Q  Removal of business to another State

                   Where a registered tax agent or a person exempted under section 251L removes his place of business, or if he has more than one place of business, his principal place of business, to another State, the Board in that State shall, for the purposes of this Part, be deemed to be the Board by which the tax agent or person was registered or exempted.

251QA  Review of decisions

                   Applications may be made to the Tribunal for review of the following decisions of a Board:

                     (a)  a decision refusing to register a person or a partnership as a tax agent (not being a decision under Subdivision D of Division 3);

                     (b)  a decision refusing to re‑register a tax agent;

                     (c)  a decision refusing to allow a later time for the making of an application for re‑registration as a tax agent;

                     (d)  a decision to suspend or cancel the registration of a tax agent;

                     (e)  a decision refusing to register a person as a nominee of a tax agent;

                      (f)  a decision refusing to re‑register a person as a nominee of a tax agent;

                     (g)  a decision refusing to allow a later time for the making of an application for re‑registration as a nominee of a tax agent;

                     (h)  a decision to cancel the registration of a nominee of a tax agent.

251QB   Statements to accompany notification of decisions

             (1)  Where a decision of a kind referred to in section 251QA is made and notice in writing of the decision is given to a person affected by the decision, that notice shall include a statement to the effect that a person whose interests are affected by the decision may, subject to the  Administrative Appeals Tribunal Act 1975, if dissatisfied with the decision, make application to the Tribunal for review of the decision.

             (2)  Any failure to comply with subsection (1) does not affect the validity of the decision.


 

Part VIIBMedicare levy and Medicare levy surcharge

  

251R  Interpretation

             (1)  In this Part, Medicare levy or levy means Medicare levy imposed as such by any Act as assessed under this Act.

          (1A)  In this Part, unless the contrary intention appears:

surcharge means Medicare levy surcharge imposed by the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Act 1999.

             (2)  If, during any period, 2 persons (whether of the same sex or different sexes):

                     (a)  had a relationship that was registered under a law of a State or Territory prescribed for the purposes of section 22B of the Acts Interpretation Act 1901 as a kind of relationship prescribed for the purposes of that section; or

                     (b)  lived together in a relationship as a couple on a genuine domestic basis, although not legally married to each other;

this Part and any Act imposing levy has effect in relation to the period as if the persons were married to each other.

          (2A)  If, during the period, either or both of the persons was legally married to another person, or in a relationship mentioned in paragraph (2)(a) with another person, this Part and any Act imposing levy has effect as if the person or persons were not legally married to, or in a relationship mentioned in paragraph (2)(a) with, the other person or persons.

             (3)  Subject to subsections (4), (5), (6), (6B), (6C) and (6D), a person shall be taken to have been a dependant of another person for the purposes of this Part during any part of the year of income in which:

                     (a)  the first‑mentioned person was a resident of Australia;

                     (b)  the first‑mentioned person was:

                              (i)  the spouse of the other person;

                             (ii)  a child of the other person less than 21 years of age; or

                            (iii)  a child of the other person not less than 21 years of age but less than 25 years of age and receiving full‑time education at a school, college or university; and

                     (c)  the other person contributed to the maintenance of the first‑mentioned person.

             (4)  A child referred to in subparagraph (3)(b)(iii) shall not be taken to have been a dependant of a person for the purposes of this Part during a period being the whole or a part of a year of income unless the person would be entitled to a rebate in respect of that child under section 159J in his assessment in respect of income of that year of income but for subsection 159J(1A).

             (5)  If, in relation to a period, being the whole or a part of a year of income:

                     (a)  the parents of a child referred to in paragraph (3)(b) lived separately and apart from each other; and

                     (b)  the child would, but for this subsection, be taken, for the purposes of this Part, to be a dependant of each of his or her parents in respect of that period; and

                     (c)  both of the parents or their spouses, being partners as defined in the A New Tax System (Family Assistance) Act 1999, are eligible for family tax benefit at the Part A rate under that Act in respect of that child (whether the child is an FTB child or a regular care child within the meaning of that Act) in respect of the period; and

                     (d)  the Secretary of the Department whose Minister administers that Act has determined, under subsection 22(6A) of that Act, the percentage of the period during which the child was, or will be, in the care of each parent or spouse, as the case requires;

the child is to be taken to be a dependant of each parent for the purposes of Part VIIB of this Act, for so much only of that period as represents that percentage of the period.

             (6)  For the purposes of paragraph (3)(c), a person shall be taken to have contributed to the maintenance of another person during any period during which the person and that other person resided together, unless the contrary is established to the satisfaction of the Commissioner.

          (6A)  A reference in subsections (6B), (6C) and (6D) to an eligible prescribed person in relation to a period is a reference to a person who would, apart from subsections 251U(2) and (3), be taken to have been a prescribed person, for the purposes of this Part and of any Act imposing levy, during that period by virtue of paragraph 251U(1)(a), (b), (c), (ca), (caa) or (cb).

          (6B)  For the purposes of this Part, where:

                     (a)  a person (in this subsection called the first person) was an eligible prescribed person in relation to a period in a year of income; and

                     (b)  apart from this subsection, another person (in this subsection called the leviable person) would be a dependant of the first person during that period; and

                     (c)  levy is payable by the leviable person upon the taxable income of the year of income;

the leviable person is not to be taken to have been a dependant of the first person during that period.

          (6C)  For the purposes of this Part, where:

                     (a)  a person (in this subsection called the first person) was an eligible prescribed person in relation to a period in a year of income; and

                     (b)  another person (in this subsection called the spouse) was the spouse of the first person during the whole of that period; and

                     (c)  the spouse was not an eligible prescribed person in relation to that period; and

                     (d)  levy is payable by the spouse upon the taxable income of the year of income; and

                     (e)  apart from this subsection, a child of both the first person and the spouse would be a dependant of both the first person and the spouse during that period;

that child is not to be taken to have been a dependant of the first person during that period.

          (6D)  Subject to subsection (6F), for the purposes of this Part, where:

                     (a)  a person (in this subsection and subsections (6E) to (6H) (inclusive) called the first person) was an eligible prescribed person in relation to a period in a year of income; and

                     (b)  another person (in this subsection called the spouse) was the spouse of the first person during the whole of that period; and

                     (c)  the spouse was an eligible prescribed person in relation to that period; and

                     (d)  apart from this subsection, levy would be payable by both the first person and the spouse upon their respective taxable incomes of the year of income; and

                     (e)  apart from this subsection, a child of both the first person and the spouse would be a dependant of both the first person and the spouse during that period; and

                      (f)  the first person and the spouse have entered into an agreement (in subsections (6E) to (6H) (inclusive) called the family agreement) stating that, for levy purposes, that child:

                              (i)  is not to be treated as a dependant of the first person during that period; and

                             (ii)  is to be treated as a dependant of the spouse during that period;

that child is not to be taken to be a dependant of the first person during that period.

           (6E)  The family agreement must be entered into on or before the date of lodgment of the return of income of the first person for the year of income concerned or within such further time as the Commissioner allows.

           (6F)  Subsection (6D) does not apply, and is taken never to have applied, if the first person fails to retain the family agreement until the end of:

                     (a)  5 years beginning on the date of lodgment of the first person’s return of income for the year of income concerned; or

                     (b)  a shorter period determined by the Commissioner in writing for the first person; or

                     (c)  a shorter period determined by the Commissioner by legislative instrument for a class of persons that includes the first person.

        (6FA)  A determination under paragraph (6F)(c) may specify different periods for different classes of taxpayers.

          (6G)  Where the family agreement is lost or destroyed and the Commissioner is satisfied that the first person has a document (in this subsection called the substitute family agreement) that:

                     (a)  is a copy of the family agreement; or

                     (b)  properly records all the matters set out in the family agreement and was in existence when the family agreement was lost or destroyed;

the substitute family agreement is to be taken, for the purposes of this section, to be, and to have been at all times after the family agreement was lost or destroyed, the family agreement.

          (6H)  Where the family agreement is lost or destroyed and the Commissioner is satisfied that:

                     (a)  the family agreement was lost or destroyed because of circumstances beyond the control of the first person; and

                     (b)  subsection (6G) does not apply;

subsection (6F) does not apply and is to be taken never to have applied.

           (6J)  Section 170 does not prevent the amendment of an assessment at any time for the purposes of giving effect to subsection (6F), (6G) or (6H).

             (7)  In this Act (other than this Part, the definition of year of tax in subsection 6(1) and Division 17 of Part III), unless the contrary intention appears, income tax or tax includes levy payable in accordance with this Part and surcharge.

             (8)  In determining for the purposes of this Part and of any Act imposing levy whether a person was, or but for subsection 251U(2) would have been, or was not, a prescribed person during the whole or a part of the year of income that commenced on 1 July 1983, that year of income shall be deemed to be constituted by the period commencing on 1 February 1984 and ending on 30 June 1984.

251S  Medicare levy

             (1)  Subject to this Part, a levy by the name of Medicare levy is levied, and shall be paid, at the rate applicable under the relevant Act imposing the levy, for the financial year that commenced on 1 July 1983, and for each succeeding financial year, upon:

                     (a)  the taxable income of the year of income of a person, not being a company or a person in the capacity of a trustee, who, at any time during the year of income, was a resident of Australia otherwise than by virtue of subsection 7A(2);

                     (b)  if the trustee of a trust estate is required to be assessed in pursuance of section 98 in respect of a share of the net income of the trust estate of the year of income, being a share to which a beneficiary who, at any time during the year of income, was a resident of Australia otherwise than by virtue of subsection 7A(2) is presently entitled—that share of that net income; and

                     (c)  if the trustee of a trust estate (other than a trust estate of a deceased person) is required to be assessed, and is liable to pay tax, in pursuance of section 99 or 99A in respect of the whole or a part of the net income of the trust estate of the year of income—that net income or that part of that net income, as the case may be.

Note:          Subdivision 61‑L (tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 might provide a tax offset for a person if Medicare levy surcharge (within the meaning of that Act) is payable by the person.

          (1A)  If the taxpayer is entitled to a tax offset under subsection 301‑20(2) of the Income Tax Assessment Act 1997 for a year of income, paragraph (1)(a) of this section applies as if the taxable income of the taxpayer of the year of income were reduced by the amount mentioned in subsection 301‑20(3) of that Act for the person for the year.

             (2)  Levy payable by a person in accordance with this Part is payable in addition to any tax payable by him in accordance with any other provision of this Act.

             (3)  In determining for the purposes of paragraph (1)(a) or (b) whether, in relation to the year of income commencing on 1 July 1985 or any subsequent year of income, a person was a resident of Australia otherwise than by virtue of subsection 7A(2), that subsection shall be applied as if the reference in that subsection to the Territory of Christmas Island were omitted.

             (4)  In determining for the purposes of paragraph (1)(a) or (b) whether, in relation to the 1991‑92 year of income or any subsequent year of income, a person was a resident of Australia otherwise than by virtue of subsection 7A(2), that subsection is to be applied as if the reference in that subsection to the Territory of Cocos (Keeling) Islands were omitted.

251T  Levy (other than certain levy increases) not payable by prescribed persons or by certain trustees

                   Notwithstanding anything contained in section 251S, Medicare levy (other than an increase in the levy payable under section 8B, 8C, 8D, 8E, 8F or 8G of the Medicare Levy Act 1986) is not payable by:

                     (a)  a person (not being a person in the capacity of a trustee) who was a prescribed person during the whole of the year of income;

                     (b)  a person in the capacity of a trustee of a trust that is a Territory trust for the purposes of Division 1A of Part III in relation to the year of income, in respect of income of the trust of the year of income; or

                     (c)  a person in the capacity of a trustee of a trust, in respect of a share of the net income of the trust estate of the year of income (being a share to which a beneficiary who was a prescribed person during the whole of the year of income is presently entitled) in respect of which the trustee is required to be assessed in pursuance of section 98.

251U  Prescribed persons

             (1)  Subject to this section, a person shall be taken to have been a prescribed person, for the purposes of this Part and of any Act imposing levy, during a particular period if:

                     (a)  the person was entitled to free medical treatment during the whole of that period in respect of every incapacity, disease or disabling condition because the person was a member of the Defence Force or was a relative of, or was otherwise associated with, a member of the Defence Force;

                     (b)  the person was entitled under the Veterans’ Entitlements Act 1986 or the Military Rehabilitation and Compensation Act 2004 to free medical treatment during the whole of that period in respect of every incapacity, disease or disabling condition;

                     (c)  the person was, during the whole of that period, a recipient of a sickness allowance under Part 2.14 of the Social Security Act 1991;

                    (ca)  the person was, during the whole of that period, a recipient of:

                              (i)  an age pension under Part 2.2 of the Social Security Act 1991; or

                             (ii)  a disability support pension under Part 2.3 of the Social Security Act 1991;

                            where the rate of the pension was calculated under section 1065 of the Social Security Act 1991;

                  (caa)  the person was, during the whole of that period, a recipient of a disability support pension under Part 2.3 of the Social Security Act 1991 where the rate of the pension was calculated under section 1066B of the Social Security Act 1991;

                    (cb)  the person was, during the whole of that period, a recipient of:

                              (i)  an age service pension under Division 3 of Part III of the Veterans’ Entitlements Act 1986; or

                             (ii)  an invalidity service pension under Division 4 of Part III of the Veterans’ Entitlements Act 1986; or

                            (iii)  a partner service pension under Division 5 of Part III of the Veterans’ Entitlements Act 1986;

                            where the rate of the pension was calculated under Method statement 2 in subpoint SCH6‑A1(3), or Method statement 4 in subpoint SCH6‑A1(5), in Schedule 6 to the Veterans’ Entitlements Act 1986;

                    (cc)  during the whole of that period:

                              (i)  the person was receiving income support supplement under Part IIIA of the Veterans’ Entitlements Act 1986; and

                             (ii)  the rate of the person’s income support supplement was worked out under Method statement 6 in subpoint SCH6‑A1(7) in Schedule 6 to the Veterans’ Entitlements Act 1986;

                     (d)  during the whole of that period the person was a non‑resident, or was a resident solely because subsection 7A(2) treats Norfolk Island as part of Australia;

                     (e)  during the whole of that period the person was:

                              (i)  the head of a diplomatic mission, or the head of a consular post, established in Australia;

                             (ii)  a member of the staff of a diplomatic mission, or a member of the consular staff of a consular post, established in Australia; or

                            (iii)  a member of the family of a person referred to in subparagraph (i) or (ii), being a member who forms part of the household of that person;

                            and was not an Australian citizen and was not ordinarily resident in Australia; or

                      (f)  the Minister for Health has certified that, had any service, treatment or care to which Medicare benefits under the Health Insurance Act 1973 relate been rendered to the person or to another person during that period, the first‑mentioned person would not have been entitled to Medicare benefits in respect of that service, treatment or care.

Note:          Section 960‑255 of the Income Tax Assessment Act 1997 may be relevant to determining family relationships for the purposes of subparagraph (1)(e)(iii).

             (2)  A person shall not be taken to have been a prescribed person, for the purposes of this Part and of any Act imposing levy, during a particular period unless every person who was a dependant of the first‑mentioned person during that period is to be taken, or but for this subsection would be taken, to have been a prescribed person, for the purposes of this Part and of any Act imposing levy, during that period.

             (3)  Where:

                     (a)  a person would not, but for this subsection, be taken to have been a prescribed person, for the purposes of this Part and of any Act imposing levy, during a particular period; and

                     (b)  the person would, but for subsection (2), be taken to have been a prescribed person, for the purposes of this Part and of any Act imposing levy, during that period by virtue of paragraph (1)(a), (b), (c), (ca), (caa) or (cb);

the person shall be taken to have been a prescribed person, for the purposes of this Part and of any Act imposing levy, during one‑half of that period.

             (4)  In this section:

                     (a)  expressions that are defined by the Vienna Convention on Diplomatic Relations referred to in the  Diplomatic Privileges and Immunities Act 1967 have the same respective meanings as in that Convention; and

                     (b)  expressions that are defined by the Vienna Convention on Consular Relations referred to in the Consular Privileges and Immunities Act 1972 have the same respective meanings as in that Convention.

251V  Subsections 251R(4), (5), (6B), (6C) and (6D) not to apply to certain medicare levy increases

             (1)  This section applies to a person during a period if, apart from this section, another person would be taken under subsection 251R(4), (5), (6B), (6C) or (6D) not to have been a dependant of the first‑mentioned person during the period.

             (2)  For the purposes of working out the amount of the increase in the levy (if any) payable by:

                     (a)  the first‑mentioned person under section 8B, 8C or 8D of the Medicare Levy Act 1986; or

                     (b)  a trustee under section 8E, 8F or 8G of that Act in relation to a share of the net income of the trust estate to which the first‑mentioned person is presently entitled;

subsection 251R(4), (5), (6B), (6C) or (6D), as the case requires, does not apply to the other person.

251VA  Subsection 251U(3) not to apply for certain medicare levy increases

             (1)  This section applies to a person, whether or not the person is a person to whom section 251V applies, during a period if, apart from this section, the person would be taken under subsection 251U(3) to be a prescribed person during one‑half of the period.

             (2)  For the purposes of working out the amount of the increase in the levy (if any) payable by:

                     (a)  the person under section 8B, 8C or 8D of the Medicare Levy Act 1986; or

                     (b)  a trustee under section 8E, 8F or 8G of that Act in relation to a share of the net income of the trust estate to which the person is presently entitled;

the person is taken not to be a prescribed person during the whole of the period.

251W  Regulations

             (1)  The regulations may make provision for and in relation to requiring any person to supply to the Commissioner for the purposes of this Part or of any Act imposing levy or surcharge such information as is prescribed, being information that is in the possession of the person or to which the person has access.

             (2)  In subsection (1), person includes any authority or officer of the Commonwealth or of a State.

251X  Notice of assessment to set out Medicare levy and surcharge

                   The notice of assessment to be served under section 174 on a taxpayer who must pay levy or surcharge for a year of income must specify the total of levy and surcharge (if any) payable by the taxpayer for the year of income.

251Z  Administration of Medicare levy surcharge Act

                   The Commissioner has the general administration of the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Act 1999.


 

Part VIIIMiscellaneous

  

252  Public officer of company

             (1)  Every company carrying on business in Australia, or deriving in Australia income from property, shall at all times, unless exempted by the Commissioner, be represented for the purposes of this Act by a public officer duly appointed by the company or by its duly authorized agent or attorney, and with respect to every such company and public officer the following provisions shall apply:

                     (a)  The company, if it has not appointed a public officer before the commencement of this Act, shall appoint a public officer within three months after the commencement of this Act or after the company commences to carry on business or derive income in Australia.

                     (b)  The company shall keep the office of the public officer constantly filled.

                     (c)  No appointment of a public officer shall be deemed to be duly made until after notice thereof in writing, specifying the name of the officer and an address for service upon him has been given to the Commissioner.

                     (d)  The company shall duly appoint a public officer when and as often as such an appointment becomes necessary.

                     (e)  Service of any document at the address for service, or on the public officer of the company, shall be sufficient service upon the company for all the purposes of this Act or the regulations, and if at any time there is no public officer then service upon any person acting or appearing to act in the business of the company shall be sufficient.

                      (f)  The public officer shall be answerable for the doing of all such things as are required to be done by the company under this Act or the regulations, and in case of default shall be liable to the same penalties.

                     (g)  Everything done by the public officer which he is required to do in his representative capacity shall be deemed to have been done by the company. The absence or non‑appointment of a public officer shall not excuse the company from the necessity of complying with any of the provisions of this Act or the regulations, or from any penalty for refusal or failure to comply therewith, but the company shall be liable to the provisions of this Act as if there were no requirement to appoint a public officer.

                     (h)  Any notice given to or requisition made upon the public officer shall be deemed to be given to or made upon the company.

                      (i)  Any proceedings under this Act taken against the public officer shall be deemed to have been taken against the company, and the company shall be liable jointly with the public officer for any penalty imposed upon him.

                      (j)  Notwithstanding anything contained in this section, and without in any way limiting, altering or transferring the liability of the public officer of a company, every notice, process or proceeding which under this Act or the regulations thereunder may be given to, served upon or taken against the company or its public officer may, if the Commissioner thinks fit, be given to, served upon or taken against any director, secretary or other officer of the company or any attorney or agent of the company and that director, secretary, officer, attorney or agent shall have the same liability in respect of that notice, process or proceeding as the company or public officer would have had if it had been given to, served upon, or taken against the company or public officer.

             (2)  A person is not capable of being a public officer of a company at a particular time unless the person:

                     (a)  is a natural person who has attained the age of 18 years;

                     (b)  is ordinarily resident:

                              (i)  in the case of a company that:

                                        (A)  at that time carries on business solely or principally in a prescribed Territory (in this paragraph referred to as the relevant prescribed Territory); or

                                        (B)  at that time does not carry on business solely or principally in a prescribed Territory, but derived not less than 50% of its income from sources in Australia and the prescribed Territories from sources in a particular prescribed Territory (in this paragraph referred to as the relevant prescribed Territory) during the year immediately preceding that time;

                                   in Australia or the relevant prescribed Territory; or

                             (ii)  in any other case—in Australia; and

                     (c)  is capable of understanding the nature of the person’s appointment as the public officer of the company.

             (3)  A company that contravenes paragraph (1)(d) is, in respect of each day on which it contravenes that paragraph (including the day of a conviction of an offence against this subsection or any subsequent day), guilty of an offence punishable on conviction by a fine not exceeding 1 penalty unit.

             (4)  An offence under subsection (3) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

             (5)  A reference in subsection (1) (other than in paragraph (a)) to this Act or the regulations includes a reference to Part III of the Taxation Administration Act 1953 to the extent to which that Part of that Act relates to this Act or the regulations.

             (6)  In subsection (2):

Australia does not include a prescribed Territory.

prescribed Territory means an external Territory referred to in subsection 7A (2).

252A  Public officer of trust estate

             (1)  Where, at any time after the expiration of the period of 90 days after the commencement of this section:

                     (a)  any business of a trust estate is carried on in Australia or any income from property (not being solely income in respect of which tax is payable under Division 11A of Part III) is derived by a trust estate from sources in Australia;

                     (b)  there is not a trustee of the trust estate who is a resident;

                     (c)  there is not in force in relation to the trust estate an exemption granted by the Commissioner under subsection (3); and

                     (d)  there is not in force in relation to the trust estate an appointment of a public officer made in accordance with subsection (5);

each person who, at that time, is a trustee of the trust estate is, in respect of each day on which the circumstances set out in paragraphs (a), (b), (c) and (d) are in existence (including the day of a conviction of an offence against this subsection or any subsequent day), guilty of an offence punishable on conviction by a fine not exceeding 1 penalty unit.

          (1A)  An offence under subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

             (2)  A reference in subsection (1) to the period of 90 days after the commencement of this section shall, in the application of that subsection in relation to a trust estate that, before the commencement of this section, did not carry on any business in Australia or derive income from property (not being solely income in respect of which tax is payable under Division 11A of Part III) from sources in Australia, be read as a reference to the period of 90 days after the date on which any business of the trust estate is commenced to be carried on in Australia, or the date on which the trust estate commences to derive such income from sources in Australia, whichever first occurs.

          (2A)  A person is not capable of being a public officer of a trust estate at a particular time unless the person:

                     (a)  is a natural person who has attained the age of 18 years;

                     (b)  is ordinarily resident:

                              (i)  in the case of a trust estate that:

                                        (A)  at that time carries on its business solely or principally in a prescribed Territory (in this paragraph referred to as the relevant prescribed Territory); or

                                        (B)  at that time does not carry on its business solely or principally in a prescribed Territory, but derived not less than 50% of its income from sources in Australia and the prescribed Territories from sources in a particular prescribed Territory (in this paragraph referred to as the relevant prescribed Territory) during the year immediately preceding that time;

                                   in Australia or the relevant prescribed Territory; or

                             (ii)  in any other case—in Australia; and

                     (c)  is capable of understanding the nature of the person’s appointment as the public officer of the trust estate.

             (3)  The Commissioner may, by writing signed by him, grant to the trustee of a trust estate an exemption from the provisions of subsection (1) in relation to the trust estate.

             (4)  An exemption under subsection (3) may be granted unconditionally or on such conditions as the Commissioner thinks fit and may be granted without limitation as to time or may be granted in respect of a period specified in the exemption.

             (5)  An appointment of a public officer of a trust estate for the purposes of this section shall be made by giving notice in writing to the Commissioner:

                     (a)  that is signed by a trustee of the trust estate or by a duly authorized agent or attorney of a trustee of a trust estate; and

                     (b)  that specifies the name of the public officer and an address in Australia for service upon the public officer of any documents that are required or permitted by or under this Act or the regulations to be served upon the public officer of the trust estate.

             (6)  The appointment of a public officer of a trust estate ceases to be in force if the public officer dies or lodges with the Commissioner a notice of his resignation as public officer of the trust estate.

             (7)  Where, by or under this Act or the regulations:

                     (a)  a document is permitted to be served upon or given to the trustee of a trust estate; or

                     (b)  a requisition is permitted or required to be made upon the trustee of a trust estate;

that document shall be deemed to have been served upon or given to the trustee if it is served upon the public officer of the trust estate or at the address for service of the public officer of the trust estate, or that requisition shall be deemed to have been made upon the trustee if it is made upon the public officer of the trust estate, as the case may be.

             (8)  A reference in subsection (7) to the service of a document upon the public officer of a trust estate, or the making of a requisition upon the public officer of a trust estate, shall, if there is not in force an appointment under this section of a public officer in relation to the trust estate, be read as a reference to any person acting or appearing to act in the business of the trust estate.

             (9)  The public officer of a trust estate shall be answerable for the doing of all such things as are required to be done by the trustee of the trust estate under this Act or the regulations, and in case of default shall be liable to the same penalties.

           (10)  Where any proceedings for an offence against this Act or the regulations are taken against the public officer, those proceedings shall be deemed to have also been taken against the trustee or trustees of the trust estate and the trustee or trustees shall be liable jointly with the public officer for any penalty in respect of the offence.

           (11)  Notwithstanding the preceding provisions of this section and without affecting any of the obligations or liabilities of the public officer of a trust estate, any notice, process or proceeding that, under this Act or the regulations, may be given to, served upon or taken against the trustee or public officer of the trust estate may, if the Commissioner thinks fit, be given to, served upon or taken against any agent or attorney of the trustee of the trust estate and that agent or attorney shall have the same liability in respect of that notice, process or proceeding as the trustee or public officer would have had if it had been given to, served upon or taken against the trustee or public officer.

           (12)  Everything done by the public officer of a trust estate that he is required to do in his capacity of public officer shall be deemed to have been done by the trustee of the trust estate.

           (13)  The absence or non‑appointment of a public officer shall not excuse the trustee of a trust estate from the necessity of complying with any of the provisions of this Act or the regulations, or from any penalty for refusal or failure to comply with any of those provisions, but the trustee shall be liable to the provisions of this Act and the regulations as if there were no requirement to appoint a public officer.

           (14)  A reference in this section to this Act or the regulations includes a reference to Part III of the Taxation Administration Act 1953 to the extent to which that Part of that Act relates to this Act or the regulations.

           (15)  In subsection (2A):

Australia does not include a prescribed Territory.

prescribed Territory means an external Territory referred to in subsection 7A(2).

254  Agents and trustees

             (1)  With respect to every agent and with respect also to every trustee, the following provisions shall apply:

                     (a)  He shall be answerable as taxpayer for the doing of all such things as are required to be done by virtue of this Act in respect of the income, or any profits or gains of a capital nature, derived by him in his representative capacity, or derived by the principal by virtue of his agency, and for the payment of tax thereon.

                     (b)  He shall in respect of that income, or those profits or gains, make the returns and be assessed thereon, but in his representative capacity only, and each return and assessment shall, except as otherwise provided by this Act, be separate and distinct from any other.

                     (c)  If he is a trustee of the estate of a deceased person, the returns shall be the same as far as practicable as the deceased person, if living, would have been liable to make.

                     (d)  He is hereby authorized and required to retain from time to time out of any money which comes to him in his representative capacity so much as is sufficient to pay tax which is or will become due in respect of the income, profits or gains.

                     (e)  He is hereby made personally liable for the tax payable in respect of the income, profits or gains to the extent of any amount that he has retained, or should have retained, under paragraph (d); but he shall not be otherwise personally liable for the tax.

                      (f)  He is hereby indemnified for all payments which he makes in pursuance of this Act or of any requirement of the Commissioner.

                     (g)  Where as one of 2 or more joint agents or trustees he pays any amount for which they are jointly liable, the other or others shall be liable to pay him each his equal share of the amount so paid.

                     (h)  For the purpose of insuring the payment of tax the Commissioner shall have the same remedies against attachable property of any kind vested in or under the control or management or in the possession of any agent or trustee, as he would have against the property of any other taxpayer in respect of tax.

             (2)  In subsection (1), tax includes the general interest charge under section 163AA, former section 170AA, subsection 204(3), former subsection 221AZMAA(1), former subsection 221AZP(1), former subsection 221YD(3) or former section 221YDB, additional tax under former Part VII and shortfall interest charge.

Note 1:       The general interest charge is worked out under Part IIA of the Taxation Administration Act 1953 and shortfall interest charge is worked out under Division 280 in Schedule 1 to that Act.

Note 2:       Subsection 8AAB(4) of that Act lists the provisions that apply the general interest charge.

             (3)  In paragraphs (1)(d) and (e), and in its first occurrence in paragraph (1)(h), tax includes, in addition to the things mentioned in subsection (2):

                     (a)  trustee beneficiary non‑disclosure tax within the meaning of Division 6D of Part III; and

                     (b)  general interest charge payable under section 102UP in respect of such tax.

255  Person in receipt or control of money from non‑resident

             (1)  With respect to every person having the receipt control or disposal of money belonging to a non‑resident, who derives income, or profits or gains of a capital nature, from a source in Australia or who is a shareholder, debenture holder, or depositor in a company deriving income, or profits or gains of a capital nature, from a source in Australia, the following provisions shall, subject to this Act, apply:

                     (a)  he shall when required by the Commissioner pay the tax due and payable by the non‑resident;

                     (b)  he is hereby authorized and required to retain from time to time out of any money which comes to him on behalf of the non‑resident so much as is sufficient to pay the tax which is or will become due by the non‑resident;

                     (c)  he is hereby made personally liable for the tax payable by him on behalf of the non‑resident to the extent of any amount that he has retained, or should have retained, under paragraph (b); but he shall not be otherwise personally liable for the tax;

                     (d)  he is hereby indemnified for all payments which he makes in pursuance of this Act or of any requirement of the Commissioner.

             (2)  Every person who is liable to pay money to a non‑resident shall be deemed to be a person having the control of money belonging to the non‑resident, and, subject to subsection (2A), all money due by him to the non‑resident shall be deemed to be money which comes to him on behalf of the non‑resident.

          (2A)  For the purposes of this section, money due by a person to a non‑resident from which an amount must be withheld under section 12‑325 in Schedule 1 to the Taxation Administration Act 1953 (about natural resource payments) or Subdivision 12‑H in that Schedule (about distributions to foreign residents from managed investment trusts) shall be deemed not to be money which comes to the person on behalf of the non‑resident.

             (3)  Where the Commonwealth, a State or an authority of the Commonwealth or a State has the receipt, control or disposal of money belonging to a non‑resident, this section (other than paragraph (1)(c)) applies to and in relation to the Commonwealth, the State or the authority, as the case may be, in the same manner as it applies to and in relation to any other person.

             (4)  In this section, tax includes the general interest charge under section 163AA, former section 170AA, subsection 204(3), subsection 221AZMAA(1), former subsection 221AZP(1), former subsection 221YD(3) or former section 221YDB, additional tax under former Part VII and shortfall interest charge.

Note 1:       The general interest charge is worked out under Part IIA of the Taxation Administration Act 1953 and shortfall interest charge is worked out under Division 280 in Schedule 1 to that Act.

Note 2:       Subsection 8AAB(4) of that Act lists the provisions that apply the general interest charge.

             (5)  This section applies to an equity holder in the same way as it applies to a shareholder.

257  Payment of tax by banker

                   Where any income of any person out of Australia is paid, or any proceeds of the disposal of an asset of any person out of Australia are paid, into the account of that person with a banker, the Commissioner may, by notice in writing to the banker, appoint him to be the person’s agent in respect of the money so paid so long as the banker is indebted in respect thereof, and thereupon the banker shall accordingly be that person’s agent.

260  Contracts to evade tax void

             (1)  Every contract, agreement, or arrangement made or entered into, orally or in writing, whether before or after the commencement of this Act, shall so far as it has or purports to have the purpose or effect of in any way, directly or indirectly:

                     (a)  altering the incidence of any income tax;

                     (b)  relieving any person from liability to pay any income tax or make any return;

                     (c)  defeating, evading, or avoiding any duty or liability imposed on any person by this Act; or

                     (d)  preventing the operation of this Act in any respect;

be absolutely void, as against the Commissioner, or in regard to any proceeding under this Act, but without prejudice to such validity as it may have in any other respect or for any other purpose.

             (2)  This section does not apply to any contract, agreement or arrangement made or entered into after 27 May 1981.

262  Periodical payments in the nature of income

                   Where under any contract agreement or arrangement made or entered into orally or in writing, either before or after the commencement of this Act, a person assigns, conveys, transfers or disposes of any property on terms and conditions which include the payment for the assignment, conveyance, transfer or disposal of the property by periodical payments which, in the opinion of the Commissioner, are either wholly or in part really in the nature of income of that person such of those payments as are derived in the year of income shall, to the extent to which they are in that opinion in the nature of income, be included in his assessable income.

262A  Keeping of records

             (1)  Subject to this section, a person carrying on a business must keep records that record and explain all transactions and other acts engaged in by the person that are relevant for any purpose of this Act.

Note:          There is an administrative penalty if you do not keep or retain records as required by this section: see section 288‑25 in Schedule 1 to the Taxation Administration Act 1953.

          (1A)  Without limiting subsection (1), if the person is an OBU (within the meaning of Division 9A of Part III), the person must, subject to this section, maintain the same accounting records in respect of, and separately account for, money used in its OB activities (within the meaning of that Division) as it would if it were a bank conducting banking activities with another person.

       (1AA)  Subsection (1A) does not require an OBU to maintain a separate nostro account or vostro account for its OBU activities. Nostro accounts and vostro accounts are accounts held or maintained by the OBU for the sole purpose of settling international transactions.

Note:          A defendant bears an evidential burden in relation to the matters in subsection (1AA), see subsection 13.3(3) of the Criminal Code.

          (1B)  Without limiting subsection (1), a foreign bank must maintain accounting records in respect of, and separately account for, money used in the activities of a permanent establishment in Australia through which the bank carries on banking business.

        (1BA)  Without limiting subsection (1), a foreign entity (as defined in the Income Tax Assessment Act 1997) that is a financial entity (as defined in that Act) must maintain accounting records in respect of, and separately account for, money used in the activities of a permanent establishment in Australia of the entity.

          (1C)  Without limiting subsection (1), if a trust is taken to be 2 separate trusts under section 50‑80 of the Income Tax Assessment Act 1997, the trustee must maintain accounting records in respect of, and separately account for, those 2 trusts.

          (1D)  A taxpayer who is a full self‑assessment taxpayer must:

                     (a)  keep a record containing particulars of the basis of the calculation of the amounts that the taxpayer specified under section 161AA in a return for a year of income; and

                     (b)  produce to the Commissioner, when and as required by the Commissioner under this Act, a document containing those particulars.

             (2)  The records to be kept under subsection (1) include:

                     (a)  any documents that are relevant for the purpose of ascertaining the person’s income and expenditure; and

                     (b)  documents containing particulars of any election, choice, estimate, determination or calculation made by the person under this Act and, in the case of an estimate, determination or calculation, particulars showing the basis on which and method by which the estimate, determination or calculation was made.

     (2AAA)  Subsection (1) applies to a participant in a forestry managed investment scheme in relation to the scheme even if the participant is not carrying on a business in relation to the scheme.

     (2AAB)  Subsection (2AAC) applies to the forestry manager of a forestry managed investment scheme if:

                     (a)  the forestry manager (or an associate of the forestry manager) receives an amount under the scheme; and

                     (b)  the amount is included in the forestry manager’s (or the associate’s) assessable income under section 15‑46 of the Income Tax Assessment Act 1997.

     (2AAC)  The records to be kept under subsection (1) by the forestry manager include records about the basis on which the scheme satisfies the requirement in paragraph 394‑10(1)(c) of the Income Tax Assessment Act 1997 (the 70% DFE rule).

     (2AAD)  Subsection (1) applies to a person who has a Division 230 financial arrangement even if the person is not carrying on a business in relation to the arrangement. However, that subsection only requires the person to keep records that, for the purposes of this Act, are relevant to the arrangement.

     (2AAE)  To avoid doubt, for the purposes of subsection (4), if the records mentioned in that subsection relate to a Division 230 financial arrangement that a person has, the transactions or acts mentioned in that subsection are taken to be completed at:

                     (a)  the end of the year of income in which the person ceases to have the arrangement; or

                     (b)  if:

                              (i)  the person applies the hedging financial arrangement method in Subdivision 230‑E of the Income Tax Assessment Act 1997 to determine the amount of one or more gains or losses the person makes from the arrangement; and

                             (ii)  determining the way in which those gains or losses are dealt with in accordance with subsection 230‑310(4) of that Act is possible only at a time after the end of the income year mentioned in paragraph (a);

                            the end of the year of income in which that time occurs.

       (2AA)  The records to be kept under subsection (1) include records required to be kept for the purposes of section 820‑960, 820‑980 or 820‑985 of the Income Tax Assessment Act 1997.

          (2A)  If an entity is required to withhold an amount under Division 12 in Schedule 1 to the Taxation Administration Act 1953, or to pay an amount to the Commissioner under Division 13 or 14 of that Schedule, the entity must keep records that record and explain all transactions and other acts engaged in by the entity that are relevant for the purposes of that Schedule.

             (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; and

                     (c)  for records required to be kept under section 820‑960 of the Income Tax Assessment Act 1997—comply with the applicable provisions of that section; and

                    (ca)  for records required to be kept under section 230‑355 of the Income Tax Assessment Act 1997—comply with the applicable provisions of that section; and

                     (d)  for records required to be kept under section 820‑980 of that Act—comply with subsections (2) and (3) of that section; and

                     (e)  for records required to be kept under section 820‑985 of that Act—comply with subsections (2) and (3) of that section.

             (4)  A person who has possession of any records kept or obtained under or for the purposes of this Act must retain those records until:

                     (a)  in a case to which paragraph (b) does not apply—the end of 5 years after those records were prepared or obtained, or the completion of the transactions or acts to which those records relate, whichever is the later; or

                     (b)  if the period (in this paragraph called the assessment period) within which the Commissioner may, under section 170, amend an assessment in respect of the person’s income of the year of income to which those records relate, or in which a transaction or act to which those records relate was completed, is extended under subsection 170(7):

                              (i)  the end of the period of 5 years referred to in paragraph (a); or

                             (ii)  the end of the assessment period as so extended;

                            whichever is the later.

     (4AAA)  Subsection (4) does not apply to any record required to be kept by a provision in Schedule 1 to the Taxation Administration Act 1953.

Note:          A defendant bears an evidential burden in relation to the matters in subsection (4AAA), see subsection 13.3(3) of the Criminal Code.

          (4A)  A person who makes an election under subsection 371(8) must retain the election until the end of 5 years after the election was made.

       (4AA)  A person who is a party to a joint election for roll‑over relief made under former section 59AA, 122R, 123F or 124AO or under section 124W must retain the election, or a copy, until the end of 5 years after the earlier of:

                     (a)  the disposal by the person of the property; or

                     (b)  the loss or destruction of the property.

     (4ACA)  Subsection (4AC) does not apply in relation to a disposal of property:

                     (a)  to which former subsection 58(1), 122JAA(1), 122JG(1), 123BBA(1), 123BF(1), 124AMAA(1), 124GA(1) or 124JD(1) applies; and

                     (b)  that occurs in the 1997‑98 year of income or a later year of income.

Note:          A defendant bears an evidential burden in relation to the matters in subsection (4ACA), see subsection 13.3(3) of the Criminal Code.

        (4AC)  If former subsection 58(1), subsection 73AA(1), 73E(1), 73F(1) or 73G(1), former subsection 122JAA(1), 122JG(1), 123BBA(1), 123BF(1), 124AMAA(1), 124GA(1) or 124JD(1) or subsection 124PA(1) applies to the disposal of property by the transferor referred to in that subsection to the transferee referred to in that subsection:

                     (a)  the transferor must give to the transferee, within the period specified in subsection (4AD), a notice containing such information about the transferor’s holding of the property as will enable the transferee to work out how former section 58, section 73AA, 73E, 73F or 73G, former section 122JAA, 122JG, 123BBA, 123BF, 124AMAA, 124GA or 124JD or section 124PA, as the case may be, will apply to the transferee’s holding of the property; and

                     (b)  the transferee must retain the notice, or a copy, until the end of 5 years after the earlier of:

                              (i)  the disposal by the person of the property; or

                             (ii)  the loss or destruction of the property.

       (4AD)  The notice referred to in subsection (4AC) must be given within 6 months after the later of the following:

                     (a)  the end of the year of income of the transferee in which the disposal occurred;

                     (b)  the commencement of subsection (4AC);

or within such further period as the Commissioner allows.

        (4AE)  A person who made an election under former paragraph 54A(1)(a) in relation to a unit of property must retain the election, or a copy, until the end of 5 years after the earlier of:

                     (a)  the disposal by the person of the property; or

                     (b)  the loss or destruction of the property.

        (4AF)  If:

                     (a)  a person (the transferor) disposes of, or of a lease of, any part of a building within the meaning of former Division 10C of Part III to another person (the transferee); and

                     (b)  either:

                              (i)  one or more deductions have been allowed to the transferor under former subsection 124ZC(2A) or (4A) in respect of qualifying hotel expenditure or qualifying apartment expenditure in respect of the building; or

                             (ii)  if there have been one or more prior successive owners or lessees of the building—one or more deductions have been allowed to any of the prior successive owners or lessees under former subsection 124ZC(2A) or (4A) in respect of qualifying hotel expenditure or qualifying apartment expenditure in respect of the building;

then:

                     (c)  the transferor must give to the transferee, within the period specified in subsection (4AG), a notice containing such information about the transferor’s holding or lease of the building as will enable the transferee to work out how former Division 10C of Part III applies to the transferee’s holding or lease of the building; and

                     (d)  the transferee must retain the notice, or a copy, until the end of 5 years after the earlier of:

                              (i)  the transferee ceasing to be the owner or lessee of the part of the building; or

                             (ii)  the destruction of the building.

        (4AG)  The notice referred to in subsection (4AF) must be given within 6 months after the later of the following:

                     (a)  the end of the year of income of the transferee in which the disposal occurred;

                     (b)  the commencement of subsection (4AF);

or within such further period as the Commissioner allows.

       (4AH)  If:

                     (a)  a person (the transferor) disposes of, or of a lease of, any part of a building within the meaning of former Division 10D of Part III to another person (the transferee); and

                     (b)  either:

                              (i)  one or more deductions have been allowed to the transferor under former subsection 124ZH(2A) in respect of qualifying expenditure in respect of the building; or

                             (ii)  if there have been one or more prior successive owners or lessees of the building—one or more deductions have been allowed to any of the prior successive owners or lessees under former subsection 124ZH(2A) in respect of qualifying expenditure in respect of the building;

then:

                     (c)  the transferor must give to the transferee, within the period specified in subsection (4AJ), a notice containing such information about the transferor’s holding or lease of the building as will enable the transferee to work out how former Division 10D of Part III applies to the transferee’s holding or lease of the building; and

                     (d)  the transferee must retain the notice, or a copy, until the end of 5 years after the earlier of:

                              (i)  the transferee ceasing to be the owner or lessee of the part of the building; or

                             (ii)  the destruction of the building.

         (4AJ)  The notice referred to in subsection (4AH) must be given within 6 months after the later of the following:

                     (a)  the end of the year of income of the transferee in which the disposal occurred;

                     (b)  the commencement of subsection (4AH);

or within such further period as the Commissioner allows.

      (4AJA)  If:

                     (a)  a person (the transferor) disposes of capital works within the meaning of Division 43 of the Income Tax Assessment Act 1997, being capital works begun after 26 February 1992, to another person (the transferee); and

                     (b)  a deduction has been allowed under former Division 10C or 10D of Part III of this Act, or under Division 43 of the Income Tax Assessment Act 1997, in respect of those capital works;

then:

                     (c)  the transferor must give the transferee, within 6 months after the end of the year of income in which the disposal occurred or within a further period allowed by the Commissioner, a notice containing such information as will allow the transferee to work out how Division 43 of the Income Tax Assessment Act 1997 will apply to the transferee in respect of the capital works; and

                     (d)  the transferee must retain the notice or a copy of it until the end of 5 years after the transferee disposes of the capital works or the capital works are destroyed, whichever is the earlier.

        (4AL)  A person who makes an election in accordance with subitem 22(3), 22A(3), 23(3) or 23A(2) of the Taxation Laws Amendment (Trust Loss and Other Deductions) Act 1998 must retain the election until the end of 5 years after the election was made.

             (5)  Nothing in this section requires a person to retain records or an election where:

                     (a)  the Commissioner has notified the person that retention of the records or election is not required; or

                     (b)  the person is a company that has gone into liquidation and finally ceased to exist.

Note:          A defendant bears an evidential burden in relation to the matters in subsection (5), see subsection 13.3(3) of the Criminal Code.

          (5A)  An offence under this section is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

             (6)  In this section:

associate has the same meaning as in the Income Tax Assessment Act 1997.

foreign bank means body corporate that is a foreign ADI (authorised deposit‑taking institution) for the purposes of the Banking Act 1959.

forestry managed investment scheme has the same meaning as in the Income Tax Assessment Act 1997.

forestry manager of a forestry managed investment scheme has the same meaning as in the Income Tax Assessment Act 1997.

participant in a forestry managed investment scheme has the same meaning as in the Income Tax Assessment Act 1997.

Penalty:  30 penalty units.

Note:          See section 4AA of the Crimes Act 1914 for the current value of a penalty unit.

263  Access to books etc.

             (1)  The Commissioner, or any officer authorized by him in that behalf, shall at all times have full and free access to all buildings, places, books, documents and other papers for any of the purposes of this Act, and for that purpose may make extracts from or copies of any such books, documents or papers.

             (2)  An officer is not entitled to enter or remain on or in any building or place under this section if, on being requested by the occupier of the building or place for proof of authority, the officer does not produce an authority in writing signed by the Commissioner stating that the officer is authorised to exercise powers under this section.

             (3)  The occupier of a building or place entered or proposed to be entered by the Commissioner, or by an officer, under subsection (1) shall provide the Commissioner or the officer with all reasonable facilities and assistance for the effective exercise of powers under this section.

Penalty:  30 penalty units.

Note:          See section 4AA of the Crimes Act 1914 for the current value of a penalty unit.

264  Commissioner may require information and evidence

             (1)  The Commissioner may by notice in writing require any person, whether a taxpayer or not, including any officer employed in or in connexion with any department of a Government or by any public authority:

                     (a)  to furnish him with such information as he may require; and

                     (b)  to attend and give evidence before him or before any officer authorized by him in that behalf concerning his or any other person’s income or assessment, and may require him to produce all books, documents and other papers whatever in his custody or under his control relating thereto.

             (2)  The Commissioner may require the information or evidence to be given on oath or affirmation and either verbally or in writing, and for that purpose he or the officers so authorized by him may administer an oath or affirmation.

             (3)  The regulations may prescribe scales of expenses to be allowed to persons required under this section to attend.

264AA  Reporting to Department of Primary Industries and Energy

Financial institution to provide quarterly information

             (1)  A financial institution that, at the end of any month in a quarter beginning on 1 January, 1 April, 1 July or 1 October in any year (including a quarter in which this section commences), holds any farm management deposit must, within 60 days after the end of the quarter, give the information in subsection (2) in writing to the Secretary to the Department of Primary Industries and Energy.

Penalty:  10 penalty units.

          (1A)  An offence under subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

Information required

             (2)  The information is:

                     (a)  the number of farm management deposits held at the end of each month in the quarter; and

                     (b)  the number of depositors in respect of such deposits at the end of each month in the quarter; and

                     (c)  the sum of the balances of such deposits at the end of each month in the quarter; and

                     (d)  subject to subsection (3), any other information, in relation to farm management deposits held by the institution at any time in the quarter, that is required by the regulations for the purposes of this section.

Regulations not to require identity of depositor

             (3)  The regulations must not, for the purposes of this section, require information that discloses the identity of a depositor or from which the identity could reasonably be inferred.

             (4)  The expressions “depositor”, “farm management deposit” and “financial institution” have the same meanings as in Schedule 2G.

264A  Offshore information notices

             (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.

264BB  Commissioner may require private health insurers to provide information

             (1)  The Commissioner may, by notice in writing, require a private health insurer to provide information relevant to the operation of this Act about each person who is covered at any time during a financial year specified in the notice by a complying health insurance policy issued by the insurer or who paid premiums under such a policy.

             (2)  The information that the Commissioner may require the private health insurer to provide includes the following:

                     (a)  the name, address and date of birth of each person mentioned in subsection (1);

                     (b)  the membership number of the policy;

                     (c)  the name, address and date of birth of any spouse of a person covered by the policy (other than a spouse permanently living separately and apart from the person);

                     (d)  whether the policy covers hospital treatment, general treatment or both;

                     (e)  the date on which the policy was issued;

                      (f)  whether the policy has terminated or been suspended, and, if it has, the date on which it terminated or was suspended;

                     (g)  the amount of the premium payable under the policy;

                     (h)  the period to which the premium relates;

                      (i)  any increase or decrease in the premium;

                      (j)  whether a payment in respect of a premium that was due within a period specified by the Commissioner was not paid.

             (3)  The information required by a notice under subsection (1) is to be provided:

                     (a)  in a form (including an electronic form) approved by the Commissioner; and

                     (b)  within the period specified in the notice.

             (4)  In this section, the following terms have the same meanings as in the Private Health Insurance Act 2007:

complying health insurance policy

general treatment

hospital treatment

private health insurer

265A  Release of liability of members of the Defence Force on death

             (1)  Subject to subsection (2), where, in respect of the income of any year of income, income tax is payable by the trustee of the estate of a deceased person who has been a member of the Defence Force, the trustee shall, by force of this section, be released from the payment of so much of that tax as remains after deducting any tax deductions unapplied:

                     (a)  where the assessable income of the year of income consists solely of pay and allowances earned as a member of the Defence Force—from the amount of income tax so payable by the trustee; or

                     (b)  where the assessable income of the year of income includes income other than such pay and allowances:

                              (i)  from the amount of income tax so payable by the trustee; or

                             (ii)  from the amount by which the income tax payable in respect of the income of the year of income has been increased by the inclusion of such pay and allowances in the assessable income of that year;

                            whichever is the less.

             (2)  Nothing in subsection (1) shall be construed so as to authorize or require the Commissioner to refund any amount paid as or for income tax by or on behalf of the taxpayer or his trustee.

             (3)  The provisions of subsection (1) do not apply in any case where the death of the taxpayer has occurred in circumstances (including the circumstances of his or her service) in which the Commonwealth would not be liable to pay pensions or compensation:

                     (a)  under Part II or IV of the Veterans’ Entitlements Act 1986 to the dependants of deceased members of the Forces or veterans; or

                     (b)  mentioned in paragraph 234(1)(b) of the Military Rehabilitation and Compensation Act 2004 to the wholly dependent partners of deceased members (within the meaning of that Act).

             (4)  Any decision of an authority constituted under the Repatriation Act 1920‑1962 on any question affecting the right of any dependants of a deceased member of the Forces to a pension under that Act or under the Repatriation (Far East Strategic Reserve) Act 1956‑1962 or the Repatriation (Special Overseas Service) Act 1962, or any decision of an authority constituted under the Veterans’ Entitlements Act 1986 on a question affecting the right of a dependant of a deceased veteran to a pension under Part II or IV of that Act, or any decision of the Military Rehabilitation and Compensation Commission established under section 361 of the Military Rehabilitation and Compensation Act 2004 on a question affecting the right of a dependant of a deceased member (within the meaning of that Act) to compensation under Chapter 5 of that Act, in respect of his or her death shall, so long as that decision has not been reversed or overruled, be conclusive evidence of the matters of fact or law so decided for the purposes of the application of subsection (3) in relation to that deceased member of the Forces.

             (5)  In this section:

tax deductions unapplied, in relation to a deceased person, means the total of any amounts withheld under paragraph 12‑45(1)(c) in Schedule 1 to the Taxation Administration Act 1953 from amounts earned by the deceased person as a member of the Defence Force where:

                     (a)  the amounts have not been credited in payment of income tax; and

                     (b)  the Commissioner has not made a payment in respect of them.

265B  Notices in relation to certain securities

             (1)  Subject to subsection (2), for the purposes of this section:

                     (a)  expressions used in this section that are also used in Division 16E of Part III have the same respective meanings as in that Division; and

                     (b)  sections 159GV (other than subsection 159GV(2)) and 159GZ apply as if references in those sections to this Division were references to section 265B.

             (2)  Subsection (1) applies as if paragraph (c) of the definition of qualifying security in subsection 159GP(1) were omitted.

             (3)  The holder of a security, not being a prescribed security within the meaning of section 26C, may apply at any time to the issuer for a notice under this section in relation to the security.

             (4)  Where the issuer of a security receives an application under subsection (3) in relation to the security, the issuer shall within 21 days of receipt of the application issue a notice in writing to the applicant, expressed to be issued under this section and identifying the security, that states that the notice was issued at a specified time on a specified date and:

                     (a)  where the security is not a qualifying security—that the security is not a qualifying security; or

                     (b)  where the security is a qualifying security—that:

                              (i)  the security is a qualifying security;

                             (ii)  the security was issued for a specified consideration;

                            (iii)  where the security was partially redeemed on one or more occasions before the time of issue of the notice—that the security was partially redeemed by a specified amount or amounts on a specified date or dates; and

                            (iv)  where the security was varied to become a qualifying security—the security was varied, for a specified consideration, to become a qualifying security.

266  Regulations

             (1)  The Governor‑General may make regulations, not inconsistent with this Act or the Income Tax Assessment Act 1997, prescribing all matters which by this Act or the Income Tax Assessment Act 1997 are required or permitted to be prescribed, or which are necessary or convenient to be prescribed for giving effect to this Act or the Income Tax Assessment Act 1997, and for prescribing penalties not exceeding a fine of 5 penalty units for offences against the regulations.


 

Part XAttribution of income in respect of controlled foreign companies

Division 1Preliminary

316  Object of Part

             (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).

             (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);

                     (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).

317  Interpretation

             (1)  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.

accruals tax law, in relation to a listed country, means a law of the listed country that is declared by regulations for the purposes of this definition to be an accruals tax law.

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 body corporate that is an ADI (authorised deposit‑taking institution) for the purposes 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 entity under the Financial Sector (Collection of Data) Act 2001;

                     (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.

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 former section 160ZZF and Divisions 5A, 5B, 7A and 17 of former Part IIIA of this Act or Divisions 122, 124 and 126, and section 118‑350, of the Income Tax Assessment Act 1997.

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 relationship means:

                     (a)  a relationship between 2 persons (whether of the same sex or different sexes) that is registered under a law of a State or Territory prescribed for the purposes of section 22B of the Acts Interpretation Act 1901 as a kind of relationship prescribed for the purposes of that section; or

                     (b)  a relationship between 2 persons (whether of the same sex or different sexes) who, although not legally married to each other, live with each other on a genuine domestic basis in a relationship as a couple.

depreciation provision means:

                     (a)  any of former sections 54 to 62 of Division 3 of Part III of this Act, any provision of former Divisions 10, 10AAA, 10AA, 10A, 10C and 10D of that Part; or

                     (b)  any provision of Division 40 of the Income Tax Assessment Act 1997 (other than Subdivision 40‑E) or of Division 43 of that Act; or

                     (c)  any provision of the former Division 42 of that Act (other than Subdivisions 42‑L and 42‑M), or the former Subdivisions 330‑A, 330‑C, 330‑H and 387‑G of that Act.

designated concession income, in relation to a listed country, means:

                     (a)  income or profits of a kind specified in the regulations if:

                              (i)  foreign tax imposed by a tax law of the country is not payable in respect of the income or profits because of a particular feature; or

                             (ii)  foreign tax imposed by a tax law of the country is payable in respect of the income or profits but there is a feature in relation to that tax;

                            and the feature is of a kind specified in the regulations; or

                     (b)  capital gains that would be made because of CGT event J1, if the assumptions in paragraphs 383(a) to (c) applied.

Note 1:       CGT event J1 is about companies ceasing to be related after a roll‑over.

Note 2:       Basically, the effect of those assumptions is that the company concerned is taken to be a taxpayer and a resident and CGT event J1 may therefore be taken to have happened.

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 of an asset includes:

                     (a)  redemption; and

                     (b)  CGT event J1 happening in relation to the asset (about companies ceasing to be related after a roll‑over) if the assumptions in paragraphs 383(a) to (c) applied.

Note:          Basically, the effect of those assumptions is that the company concerned is taken to be a taxpayer and a resident and CGT event J1 may therefore be taken to have happened.

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 International Tax 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; or

                            (ia)  concerning 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.

factoring income means income derived from carrying on a business of factoring.

FIF attribution account entity has the meaning given by section 601.

FIF attribution account payment has the meaning given by section 603.

FIF attribution debit has the meaning given by section 606.

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:

                     (a)  in relation to an attribution debit—has the meaning given by section 373; and

                     (b)  in relation to a FIF attribution debit—has the meaning given by section 607A.

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.

listed country has the meaning given by section 320.

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 (other than an eligible finance share dividend or a widely distributed finance share dividend) paid to a company where that company has a voting interest, within the meaning of section 334A, 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.

special excluded 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, where:

                     (a)  the income was derived by the company from a CFC; and

                     (b)  at all times during the statutory accounting period when the income accrued:

                              (i)  the CFC was an associate of the company; and

                             (ii)  the company was a resident of a particular listed country or a particular unlisted country; and

                            (iii)  the CFC was also a resident of that listed country or that unlisted country, as the case may be; and

                     (c)  the income was taxed in that listed country or that unlisted country, as the case may be, at the country’s normal company tax rate (see section 325); and

                     (d)  the income would not have been, in whole or in part, a notional allowable deduction of the CFC if it were assumed that the CFC had failed to pass the active income test in relation to any statutory accounting period of the CFC.

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)  a gain realised by the company in the statutory accounting period from disposing of a tainted commodity investment; or

                     (b)  a capital gain that the company would have made in the statutory accounting period because CGT event J1 would have happened in relation to a tainted commodity investment, if the assumptions in paragraphs 383(a) to (c) applied.

Note:          Basically, the effect of those assumptions is that the company concerned is taken to be a taxpayer and a resident and CGT event J1 may therefore be taken to have happened.

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)  a loss realised by the company in the statutory accounting period from disposing of a tainted commodity investment; or

                     (b)  a capital loss that the company would have made in the statutory accounting period because CGT event J1 would have happened in relation to a tainted commodity investment, if the assumptions in paragraphs 383(a) to (c) applied.

Note:          Basically, the effect of those assumptions is that the company concerned is taken to be a taxpayer and a resident and CGT event J1 may therefore be taken to have happened.

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 would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply); or

                     (c)  factoring income;

but does not include:

                     (d)  income (being interest, fees, commission or other amounts) derived by a person in respect of offshore banking transfers of the person; or

                     (e)  income consisting of dividends or non‑share dividends paid to a person by a company out of profits derived from the making of offshore banking transfers.

tainted rental income (other than special excluded 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 that country;

                     (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 that country;

                            (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 manages a trust if there is no trustee); or

                     (b)  as the case requires, a trust or trust estate.

transitional finance share has the meaning given by section 327B.

transitional finance share dividend means a dividend in respect of a transitional finance share.

unlisted country has the meaning given by section 320.

widely distributed finance share has the meaning given by section 327A.

widely distributed finance share dividend means a dividend in respect of a widely distributed finance share.

             (2)  Where, if all offshore borrowings made by persons when they were offshore banking units were taken to be tax exempt loan money of the persons for the purposes of Division 11A of Part III, an offshore loan, or other transfer, of an amount by a person would, for the purposes of that Division, be an offshore loan, or other transfer, of tax exempt loan money of the person, the offshore loan, or other transfer, of the amount is an offshore banking transfer of the person for the purposes of the definition of tainted interest income.

318  Associates

             (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 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 any other provision of this Act that has effect for the purposes of this section, a reference to the spouse of a person does not include:

                     (a)  a spouse who is legally married to the person but living separately and apart from the person on a permanent basis; or

                     (b)  a spouse within the meaning of paragraph (a) of the definition of spouse in subsection 995‑1(1) of the Income Tax Assessment Act 1997 who is living separately and apart from the person on a permanent basis.

319  Statutory accounting period of a company

             (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 subsections (4A) and (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.

          (4A)  Subject to subsection (5), if:

                     (a)  the election is made in the company’s statutory accounting period in which the company first became a CFC; and

                     (b)  the new day occurs after the election is made but before the old day;

then, subject to any further application of subsection (2):

                     (c)  that statutory accounting period finishes at the end of the new day; and

                     (d)  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.

             (6)  If:

                     (a)  the company is a CFC at the beginning of what is, disregarding this subsection, a statutory accounting period; and

                     (b)  the company ceases to exist before the end of the statutory accounting period;

the statutory accounting period ends immediately before the company ceases to exist.

             (7)  For the purposes of applying this section to a company, if:

                     (a)  the company is a CFC at a particular time; and

                     (b)  an entity is the only attributable taxpayer in relation to the company at that time; and

                     (c)  the entity’s attribution percentage in relation to the company is 100% at that time;

then, instead of a notice being given under subsection (2) by the company at that time, the notice may be given at that time by the entity.

320  Listed countries and unlisted countries

             (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.

section 404 country means a foreign country, or a part of a foreign country, that is declared by the regulations to be a section 404 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.

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

                   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.

322  Meaning of entitled to acquire

                   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.

323  State foreign taxes may be treated as federal foreign taxes

                   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.

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

             (1)  Subject to this section, 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, 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.

             (2)  If:

                     (a)  apart from this subsection and subsections (3) and (4), 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.

             (3)  Where:

                     (a)  an entity becomes a resident of a particular listed country (in this section called the current listed country) at a particular time (in this section called the residence‑change time); and

                     (b)  the entity owns an asset at the residence‑change time; and

                     (c)  the entity disposes of the asset while a resident of the current listed country;

then, for the purposes of this Part:

                     (d)  if, apart from this paragraph, the only part of a capital gain on the disposal of the asset that is subject to tax in the listed country is the part that relates to the period after the residence‑change time—the whole of the capital gain, whether it relates to the period before or after the residence‑change time, is, subject to subsection (4), taken to be subject to tax in the current listed country; and

                     (e)  subsection (4) applies.

             (4)  Where:

                     (a)  a capital gain on the disposal of the asset would, apart from this subsection and whether or not paragraph (3)(d) applies, be subject to tax in the current listed country; and

                     (b)  at a time or times when it owned the asset before the residence‑change time (but disregarding any time or times before a change of residence from an unlisted country to a listed country), the entity was a resident of one or more listed countries (each of which is in this subsection called a  previous listed country); and

                     (c)  if the entity had disposed of the asset when it ceased to be a resident of a particular previous listed country (in this subsection called the non‑taxing listed country), any capital gain on the disposal would not have been subject to tax in that country; and

                     (d)  if the entity had disposed of the asset when it ceased to be a resident of another previous listed country after the non‑taxing listed country, any capital gain on the disposal would not have been subject to tax in that other previous listed country to the extent that it relates to the period of residence by the entity in the non‑taxing listed country;

then, for the purposes of this Part, so much of the gain as relates to the period of residence in the non‑taxing listed country is taken not to be subject to tax in the current listed country.

Note:          Section 830‑75 of the Income Tax Assessment Act 1997 sets out additional circumstances, relating to entities that are foreign hybrids, in which a gain or profit is subject to tax in a listed country.

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

             (1)  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.

             (2)  For the purposes of this Part, a dividend or other amount of a particular kind is taken to be taxed in an unlisted country at the country’s normal tax rate if, and only if:

                     (a)  foreign tax is payable under a tax law of the unlisted 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 unlisted country; and

                     (b)  the tax law of the unlisted 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 unlisted or a listed country.

326  AFI subsidiary

             (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.

327  Eligible finance shares

                   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.

327A  Widely distributed finance shares

Meaning of widely distributed finance shares

             (1)  For the purposes of this Part, a share in a company is a widely distributed finance share if both:

                     (a)  either:

                              (i)  the company is an eligible listed company; or

                             (ii)  the aggregate of the eligible share interests in the company held by an eligible listed company is 90% or more; and

                     (b)  the share is a recognised finance share.

Extended meaning of widely distributed finance shares—funding of transitional finance shares

          (1A)  For the purposes of this Part, if:

                     (a)  apart from this subsection, shares (in this subsection called the test shares) in a company are not widely distributed finance shares; and

                     (b)  as a result of the operation of subsection 327B(3) in relation to the shares:

                              (i)  the shares are taken to be widely distributed finance shares for the purposes of section 327B; and

                             (ii)  shares in another company are transitional finance shares;

the test shares are taken to be, and to have been, widely distributed finance shares.

Meaning of eligible listed company

             (2)  For the purposes of this section, a company is an eligible listed company at a particular time during a statutory accounting period of the company if:

                     (a)  shares in the company (other than shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) are listed for quotation in the official list of a stock exchange in Australia or elsewhere; and

                     (b)  none of the following subparagraphs apply:

                              (i)  at any time during the statutory accounting period, a single entity, or less than 21 entities, held, or were entitled to acquire, 75% or more of the paid‑up share capital of the company (other than capital represented by shares entitled to a fixed rate of dividend only);

                             (ii)  at any time during the statutory accounting period, a single entity, or less than 21 entities held, or were entitled to acquire, 75% or more of the total rights (other than rights arising in respect of shares entitled to a fixed rate of dividend only) of shareholders to vote, or participate in any decision‑making, concerning any of the following:

                                        (A)  the making of distributions of capital or profits of the company to its shareholders;

                                        (B)  the constituent document of the company;

                                        (C)  any variation of the share capital of the company;

                            (iii)  75% or more of the total amount of all of the dividends paid by the company (other than dividends paid in respect of shares entitled to a fixed rate of dividend only) during the statutory accounting period was paid to a single entity or to less than 21 entities;

                            (iv)  dividends (other than dividends paid in respect of shares entitled to a fixed rate of dividend only) were not paid by the company during the statutory accounting period but it would be concluded that, if such dividends had been paid by the company during the statutory accounting period, 75% or more of those dividends would have been paid to a single entity or to less than 21 entities.

Meaning of recognised finance shares

             (3)  For the purposes of this section, shares in a company are recognised finance shares if all the following conditions are satisfied:

                     (a)  the shareholder is not an associate of the company;

                     (b)  having regard to:

                              (i)  the manner in which the amount of dividends in respect of the shares are to be calculated; and

                             (ii)  the conditions applicable to the payment of dividends in respect of the shares; and

                            (iii)  any other relevant matters;

                            the payment of the dividends in respect of the shares may reasonably be regarded as equivalent to the payment of interest on a loan;

                     (c)  having regard to:

                              (i)  the arrangements under which the shares were offered for subscription; and

                             (ii)  the ordinary business practices of brokers, agents, underwriters or other persons who took part in the arrangements for the issue of the shares; and

                            (iii)  the arrangements that were made for dealing with applications that were made for subscription of the shares; and

                            (iv)  any circumstances indicating the existence, at the time of the issue of the shares, of any arrangement for any of the shares to be offered for subscription, or purchased after subscription, by entities connected:

                                        (A)  with each other; or

                                        (B)  with the company issuing the shares; or

                                        (C)  with a person by whom the amounts raised by the subscription, or amounts derived directly or indirectly from those amounts, were intended to be used;

                            it is reasonable to regard the shares as having been issued with a view to public subscription or purchase or other wide distribution among investors.

Meaning of eligible share interest

             (4)  For the purposes of this section, a person holds an eligible share interest in a company at a particular time equal to the percentage of the company’s total paid‑up share capital (excluding recognised finance shares) beneficially owned by the person at that time.

Extended meaning of eligible share interest: tiers of companies

             (5)  For the purposes of this section, if:

                     (a)  a person holds an eligible share interest (including an eligible share interest that is taken to be held because of one or more previous applications of this subsection) in a company (in this subsection called the first level company); and

                     (b)  the first level company holds an eligible share interest in another company (in this subsection called the second level company);

the person is taken to hold an eligible share interest in the second level company equal to the percentage calculated using the formula:

where:

First level percentage means the percentage of the eligible share interest held by the person in the first level company.

Second level percentage means the percentage of the eligible share interest held by the first level company in the second level company.

Definitions

             (6)  In this section:

eligible listed company has the meaning given by subsection (2).

eligible share interest  has the meaning given by subsections (4) and (5).

recognised finance share has the meaning given by subsection (3).

327B  Transitional finance shares

Meaning of transitional finance shares

             (1)  For the purposes of this Part, shares (in this subsection called the test shares) in a company (in this subsection called the second company) are transitional finance shares at a particular time (in this subsection called the test time) if all of the following conditions are satisfied:

                     (a)  the test time is before 1 July 1998;

                     (b)  the test shares are finance shares;

                     (c)  during a period (in this subsection called the primary issue period) ending before the IP time, another company (in this subsection called the first company) issued widely distributed finance shares;

                     (d)  the issue of the widely distributed finance shares comprised the whole of a common issue of shares by the first company;

                     (e)  the issue of the test shares comprised the whole of a common issue of shares by the second company;

                      (f)  the test shares were simultaneously issued to the first company by the second company at, or within a reasonable time after, the end of the primary issue period;

                     (g)  the widely distributed finance shares were issued by the first company for the sole purpose of funding the first company’s acquisition of the test shares;

                     (h)  assuming that the test shares had been issued at the end of the primary issue period, the following conditions would have been satisfied at all times during the period commencing at the end of the primary issue period and ending at the test time:

                              (i)  the rights and obligations relating to the widely distributed finance shares are substantially similar to the rights and obligations relating to the test shares;

                             (ii)  the first company and the second company are under common ownership;

                      (i)  if, on the assumption that the dividends in respect of the test shares were instead payments of the interest, referred to in subsection (2), to which they may reasonably be regarded as equivalent, the following conditions would have been satisfied in relation to that interest:

                              (i)  the interest that accrued during the 24‑month period ending at the test time accrued at intervals not exceeding 12 months;

                             (ii)  the interest that accrued during the 12‑month period commencing 24 months before the test time was paid not later than 12 months after it accrued;

                            (iii)  the dividends paid in respect of the widely distributed finance shares during the 12‑month period ending at the test time are wholly attributable to the interest that accrued during the 12‑month period ending at the time the dividends were paid;

                            (iv)  the total amount of dividends paid in respect of the widely distributed finance shares during the 12‑month period ending at the test time is equal to, or approximately equal to, the total amount of interest to which the dividends are attributable.

Meaning of finance shares

             (2)  For the purposes of this section, shares in a company are finance shares if, and only if, having regard to:

                     (a)  the manner in which the amount of dividends in respect of the shares was to be calculated; and

                     (b)  the conditions applicable to the payment of dividends in respect of the shares; and

                     (c)  any other relevant matters;

the payment of the dividends in respect of the shares may reasonably be regarded as equivalent to the payment of interest on a loan.

Modification of widely distributed finance shares

             (3)  For the purposes of this section, in determining whether shares are widely distributed finance shares, if an asset is held by an entity as trustee for another entity who is absolutely entitled to the asset against the trustee, paragraph 327A(2)(b) has effect as if:

                     (a)  the asset were vested in the other entity instead of the trustee; and

                     (b)  if the asset is a share—any dividends paid in respect of the share were paid to the other entity instead of to the trustee.

Meaning of under common ownership

             (4)  For the purposes of this section, 2 companies are under common ownership at a particular time if, and only if:

                     (a)  another company (in this subsection called the third company) holds eligible share interests in each of the companies; and

                     (b)  the aggregate of the eligible share interests in each company held by the third company is 90% or more.

Meaning of eligible share interest

             (5)  For the purposes of this section, a person holds an eligible share interest in a company at a particular time equal to the percentage of the company’s total paid‑up share capital (excluding finance shares) beneficially owned by the person at that time.

Extended meaning of eligible share interest: tiers of companies

             (6)  For the purposes of this section, if:

                     (a)  a person holds an eligible share interest (including an eligible share interest that is taken to be held because of one or more previous applications of this subsection) in a company (in this subsection called the first level company); and

                     (b)  the first level company holds an eligible share interest in another company (in this subsection called the second level company);

the person is taken to hold an eligible share interest in the second level company equal to the percentage calculated using the formula:

where:

First level percentage means the percentage of the eligible share interest held by the person in the first level company.

Second level percentage means the percentage of the eligible share interest held by the first level company in the second level company.

Definitions

             (7)  In this section:

eligible share interest has the meaning given by subsections (5) and (6).

finance share has the meaning given by subsection (2).

under common ownership has the meaning given by subsection (4).

widely distributed finance share has a meaning affected by subsection (3).

328  Non‑resident family trusts

             (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 or post‑relationship 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 or post‑relationship 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 relationship; 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.

Note:          Section 960‑255 of the Income Tax Assessment Act 1997 may be relevant to determining relationships for the purposes of subparagraph (3)(a)(iii).

             (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 an item in any of the tables in Subdivision 30‑B of the Income Tax Assessment Act 1997, or item 2 of the table in section 30‑15 of that Act, 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.

329  Public unit trusts

                   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.

330  Tax detriment

             (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.

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

                   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, 332A 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.

332  Companies that are residents of listed countries

             (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.

332A  Companies that are residents of section 404 countries

             (1)  For the purposes of this Part, a company is a resident of a section 404 country at a particular time if, and only if, the company is, in accordance with subsection (2), a resident of a particular section 404 country at that time.

             (2)  For the purposes of this Part, a company is a resident of a particular section 404 country at a particular time if, and only if, all 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 section 404 country for the purposes of the tax law of the section 404 country;

                     (c)  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.

333  Companies that are residents of unlisted countries

             (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.

334A  Voting interests in companies

             (1)  For the purposes of this section, a company is taken to have a voting interest in another company if:

                     (a)  the first‑mentioned company is the beneficial owner of shares (other than eligible finance shares or widely distributed finance shares) in the other company that carry the right to exercise any of the voting power in the other company; and

                     (b)  there is no arrangement in force at the relevant time by virtue of which any person is in a position, or may become in a position, to affect that right;

and the extent of the voting interest is taken to be the total number of votes that, by virtue of that right, can be cast on a poll at, or arising out of, a general meeting of the other company as regards all questions that could be submitted to such a poll.

             (2)  For the purposes of paragraph (1)(b), a person is taken to be in a position to affect a right of a company if that person has a right, power or option (whether by virtue of any provision in the constituent document of any company or by virtue of any agreement or instrument or otherwise) to acquire that right or do an act or thing that would prevent the first‑mentioned company from exercising that right or receiving any benefits accruing by reason of that right.

             (3)  Despite paragraph (1)(b) and subsection (2), in determining for the purposes of this section:

                     (a)  whether a company has a voting interest in another company; and

                     (b)  the extent of that interest;

any appointment of a liquidator in respect of the other company is to be disregarded.

             (4)  For the purposes of this section, the voting power in a company is the maximum number of votes that can be cast on a poll at, or arising out of, a general meeting of a company as regards all questions that can be submitted to such a poll.

             (5)  In this section, arrangement includes:

                     (a)  any agreement, arrangement, understanding, promise or undertaking, whether expressed 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 unilateral or otherwise.

335  References extend to pre‑commencement matters and things

                   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

336  Australian entity

                   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.

337  Australian partnership

                   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.

338  Australian trust

                   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)

339  Controlled foreign entity (CFE)

                   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).

340  Controlled foreign company (CFC)

                   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).

341  Controlled foreign partnership (CFP)

                   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.

342  Controlled foreign trust (CFT)

                   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

343  Interpretation

                   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.

344  References to transfer of property or services

             (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.

345  Deemed transfers of property or services

             (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.

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

                   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.

347  Eligible transferor in relation to a discretionary trust

             (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.

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

             (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

349  Associate‑inclusive control interest in a company or trust

             (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.

350  Direct control interest in a company

             (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).

351  Direct control interest in a trust

             (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). 

352  Indirect control interest in a company or trust

             (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.

353  Control tracing interest in a company

             (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.

354  Control tracing interest in a CFP

                   Each partner in a CFP holds a control tracing interest in the CFP equal to 100%.

355  Control tracing interest in a CFT

             (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

356  Direct attribution interest in a CFC or CFT

             (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, widely distributed finance shares and transitional finance shares in a company are to be ignored for the purposes of the application of subsection (1) to the company.

          (4A)  Shares in a company that is treated as a real estate investment trust for the purposes of the Internal Revenue Code 1986 of the United States of America are to be ignored for the purposes of the application of subsection (1) to the company if the conditions in subsection (4B) or (4C) are satisfied.

          (4B)  The condition in this subsection is that the taxpayer who holds the shares satisfies the Commissioner that:

                     (a)  the shares that the taxpayer holds at the end of the entity’s statutory accounting period are held for the sole purpose of investing directly, or indirectly through one or more interposed entities, in:

                              (i)  a business conducted in the United States of America; or

                             (ii)  real property located in the United States of America; and

                     (b)  the company does not directly, or indirectly through one or more interposed entities:

                              (i)  have an interest in income or gains derived from sources outside the United States of America; or

                             (ii)  hold an interest in a FIF that is not resident in the United States of America; or

                            (iii)  hold real property that is not located in the United States of America.

          (4C)  The condition in this subsection is that the taxpayer who holds the shares satisfies the Commissioner that:

                     (a)  the shares that the taxpayer holds at the end of the entity’s statutory accounting period are held for the sole purpose of investing directly, or indirectly through one or more interposed entities, in:

                              (i)  a business conducted in the United States of America; or

                             (ii)  real property located in the United States of America; and

                     (b)  throughout the entity’s statutory accounting period, the total value of:

                              (i)  any interests that the company has in income or gains derived from sources outside the United States of America; and

                             (ii)  any interests that the company has in FIFs that are not resident in the United States of America; and

                            (iii)  any real property held by the company that is not located in the United States of America;

                            does not exceed 5% of the total value of all interests held by the company in other entities; and

                     (c)  throughout the entity’s statutory accounting period, the total value of assets held by the company that:

                              (i)  produce income from sources outside the United States of America; or

                             (ii)  if disposed of would give rise to a gain from a source outside the United States of America;

                            does not exceed 5% of the total value of all the assets held by the company.

          (4D)  For the purposes of subsection (4C), the value of interests and the value of assets is to be determined using the accounting records of 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).

357  Indirect attribution interest in a CFC or CFT

             (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.

358  Attribution tracing interest in a CFC

                   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.

359  Attribution tracing interest in a CFP

                   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.

360  Attribution tracing interest in a CFT

             (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 CAttributable taxpayers and attribution percentages

361  Attributable taxpayer in relation to a CFC or a CFT

             (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%.

             (3)  Subsections (1) and (2) have effect subject to section 768‑960 of the Income Tax Assessment Act 1997.

362  Attribution percentage of an attributable taxpayer

             (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

363  Attribution account entity

             (1)  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.

             (2)  If:

                     (a)  a company ceases to be resident in an unlisted country and becomes a Part X Australian resident; and

                     (b)  a taxpayer is an attributable taxpayer in relation to the company immediately before the time of the change of residence;

in determining whether an attribution debit arises for the company in relation to the taxpayer in respect of an attribution account payment made to the taxpayer or another attribution account entity, the company is taken to be an attribution account entity.

364  Attribution account percentage

                   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.

365  Attribution account payment

             (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 distribution that has been franked in accordance with section 202‑5 of the Income Tax Assessment Act 1997, or that has been franked with an exempting credit in accordance with section 208‑60 of that Act; 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.

366  Direct attribution account interest in a company

             (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 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, widely distributed finance shares and transitional finance shares in a company are to be ignored for the purposes of the application of subsection (1) to the company.

367  Direct attribution account interest in a partnership

             (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.

368  Direct attribution account interest in a trust

             (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 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 an accounting period 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 accounting period;

                             (ii)  the corpus of the trust as at the end of the accounting period; 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 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.

             (3)  Each entity that is an eligible transferor in relation to a trust at a particular time holds a direct attribution account interest in the trust at that time equal to:

                     (a)  if paragraph (b) does not apply—100%; or

                     (b)  if, because there are 2 or more eligible transferors in relation to the trust, the Commissioner reduces an attribution percentage under subsection 362(3) or (4) or subsection 362(5) applies—such lower percentage as the Commissioner considers reasonable in the circumstances.

             (4)  An entity that holds a direct attribution account interest in a trust at a particular time because of subsection (3) is not taken to hold any direct attribution account interest in the trust at that particular time because of subsection (1).

369  Indirect attribution account interest in an entity

             (1)  The indirect attribution account interest that an entity (in this section called the bottom entity) holds in another entity (in this section called the top entity) is calculated in accordance with this section.

             (2)  An interposed entity is not to be taken into account in calculating the indirect attribution account interest unless the entity is an attribution account entity.

             (3)  If there is only one entity interposed between the bottom entity and the top entity, the indirect attribution account interest is calculated by multiplying the direct attribution account interest that the bottom entity holds in the interposed entity by the direct attribution account 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 account interest is calculated:

                     (a)  by multiplying the direct attribution account interest that the bottom entity holds in the first interposed entity by the direct attribution account interest that the first interposed entity holds in the second interposed entity; and

                     (b)  by multiplying the result of the calculation in paragraph (a) by the direct attribution account 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 account interest is calculated:

                     (a)  by multiplying the direct attribution account interest that the bottom entity holds in the first interposed entity by the direct attribution account interest that the first interposed entity holds in the second interposed entity; and

                     (b)  by multiplying the result of the multiplication referred to in paragraph (a) by the direct attribution account interest that the second interposed entity holds in the third interposed entity;

and so on, ending with a multiplication by the direct attribution account 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 a direct attribution account interest in the second entity; and

                     (b)  the second entity has a direct attribution account interest in the third entity.

370  Attribution surplus

                   An attribution surplus for an attribution account entity in relation to a taxpayer exists at a particular time if the entity’s total attribution credits arising before that time in relation to the taxpayer exceed its total attribution debits arising before that time in relation to the taxpayer.

371  Attribution credit

             (1)  An attribution credit arises for an attribution account entity (in this section called the eligible entity) in relation to a taxpayer if:

                     (a)  an amount is included in the taxpayer’s assessable income under section 456 in respect of the attributable income of the eligible entity for a statutory accounting period; or

                    (aa)  both the following conditions apply:

                              (i)  an amount is included in the taxpayer’s assessable income under section 456 in respect of the attributable income of another attribution account entity (the other entity) for a statutory accounting period of the other entity;

                             (ii)  that amount was calculated by reference to another amount (the Part XI amount) that under Part XI was included in the attributable income of the other entity because the other entity had an interest in the eligible entity; or

                    (ab)  each of the following conditions applies:

                              (i)  an amount is included in the taxpayer’s assessable income under section 456 in respect of the attributable income of another attribution account entity (the other entity) for a statutory accounting period of the other entity;

                             (ii)  the amount so included was calculated by reference to another amount that under Part XI was included in the attributable income of the other entity because the other entity had an interest in another attribution account entity (the interposed entity);

                            (iii)  the other amount referred to in subparagraph (ii) of this paragraph was calculated by reference to an amount (the section 576 amount) that under section 576 was included in the notional income of the interposed entity because the interposed entity had an interest in the eligible entity; or

                     (b)  an amount is included in the taxpayer’s assessable income under section 457 as a result of a change of residence by the eligible entity; or

                     (d)  an attribution account payment that requires an attribution debit for another entity in relation to the taxpayer is made to the eligible entity.

             (2)  Subject to subsections (2A), (2B), (3) and (4), the amount of the attribution credit is equal to the amount included in assessable income or to the amount of the attribution debit, as the case may be.

          (2A)  If an attribution credit arises under paragraph (1)(aa) for an eligible entity, the amount of the attribution credit is to be worked out using the formula:

In the formula:

FIF income means the amount of the foreign investment fund income included, in relation to the eligible entity, under Part XI in the notional assessable income of the other entity for the statutory accounting period of the other entity referred to in paragraph (1)(aa).

Section 456 amount means the amount included in the taxpayer’s assessable income under section 456 in respect of the statutory accounting period referred to in paragraph (1)(aa) of the other entity.

Notional assessable income means the notional assessable income of the other entity under Part X for the statutory accounting period referred to in paragraph (1)(aa).

          (2B)  If an attribution credit arises under paragraph (1)(ab) for an eligible entity, the amount of the attribution credit is to be worked out using the formula:

For the purposes of this subsection:

FIF income means the amount worked out using the formula:

FIF income of the eligible entity means the amount of the foreign investment fund income included, in relation to the eligible entity, under section 576 in the notional income of the interposed entity referred to in subparagraph (1)(ab)(ii) for the notional accounting period of the interposed entity that ends during the statutory accounting period of the other entity referred to in subparagraph (1)(ab)(i).

Section 529 amount means the amount included in the notional assessable income of the other entity referred to in subparagraph (1)(ab)(i) under section 529 in respect of the statutory accounting period referred to in that subparagraph because of an interest that that other entity holds in the interposed entity.

Notional income of the interposed entity means the notional income of the interposed entity referred to in subparagraph (1)(ab)(ii) under Part XI for the notional accounting period of that entity that ends during the statutory accounting period of the other entity referred to in subparagraph (1)(ab)(ii).

Section 456 amount means the amount included in the taxpayer’s assessable income under section 456 in respect of the statutory accounting period referred to in subparagraph (1)(ab)(i) of the other entity referred to in that subparagraph.

Notional assessable income means the notional assessable income of the other entity referred to in subparagraph (1)(ab)(i) under Part X for the statutory accounting period referred to in that subparagraph.

          (2C)  If subsection (2A) applies to a taxpayer in respect of one or more eligible entities in respect of a particular section 456 amount, the amount of the attribution credit arising under paragraph (1)(a) for the other entity referred to in paragraph (1)(aa) is reduced by the attribution credit or the sum of the attribution credits that, except for subsection (2D), would arise for the eligible entity or eligible entities under subsection (2A).

          (2D)  If subsection (2B) applies to a taxpayer in respect of one or more eligible entities in respect of a particular amount included in the notional income of the interposed entity referred to in subparagraph (1)(ab)(ii), the amount of the attribution credit arising under paragraph (1)(aa) for the interposed entity is to be reduced by the attribution credit or the sum of the attribution credits arising for the eligible entity or eligible entities under subsection (2B).

             (4)  Where:

                     (a)  the attribution credit arises under paragraph (1)(d) in relation to an attribution account payment consisting of a non‑portfolio dividend paid to the eligible entity, where the eligible entity is a company; and

                     (b)  the eligible entity is or will be liable to pay an amount of foreign tax on the attribution account payment or on amounts that include the attribution account payment;

then the amount of the attribution credit is reduced by the amount calculated using the formula:

where:

Attribution account percentage  means the taxpayer’s attribution account percentage for the attribution account entity.

Foreign tax  means the amount of foreign tax, to the extent that it is attributable to the attribution account payment.

             (5)  The attribution credit arises:

                     (a)  in a paragraph (1)(a) case where subsection 319(6) does not apply to the statutory accounting period referred to in that paragraph—at the end of the statutory accounting period; or

                  (aaa)  in a paragraph (1)(a) case where subsection 319(6) applies to the statutory accounting period referred to in that paragraph—at the beginning of the statutory accounting period; or

                    (ab)  in a paragraph (1)(ab) case—at the end of the notional accounting period of the eligible entity that gave rise to the section 576 amount referred to in subparagraph (1)(ab)(iii); or

                     (b)  in a paragraph (1)(b) case—subject to subsection (8), at the time of the change of residence referred to in that paragraph; or

                     (d)  in a paragraph (1)(d) case—when the attribution account payment referred to in that paragraph is made.

             (6)  Where, apart from this subsection, an attribution credit would arise in relation to an attribution account entity for an Australian partnership or an Australian trust in respect of an amount included in the assessable income of the partnership or trust of a year of income under section 456 or 457, then, subject to subsection (7):

                     (a)  the attribution credit does not arise for the partnership or trust; and

                     (b)  an attribution credit arises in relation to the attribution account entity for:

                              (i)  any taxpayer for whom, as a result of the amount being so included, a tax detriment would arise in circumstances referred to in paragraphs 460(2)(a) and (b) or paragraphs 460(3)(a) and (b); and

                             (ii)  any taxpayer where, as a result of the amount being so included, a tax detriment would arise for the trustee of a trust in which the taxpayer is a beneficiary, in respect of an amount assessable to the trustee under section 98 in respect of the taxpayer’s share of the net income of the trust, in circumstances referred to in paragraph 460(4)(a); and

                            (iii)  any taxpayer in the capacity of trustee of a trust, where, as a result of the amount being so included, a tax detriment would arise for the taxpayer in respect of an amount assessable to the taxpayer under section 99 or 99A, in circumstances referred to in paragraph 460(4)(a); and

                     (c)  the amount of the attribution credit referred to in paragraph (b) equals the amount of the tax detriment, as reduced by any application of section 460; and

                     (d)  the attribution credit referred to in paragraph (b) arises at the time when the attribution credit referred to in paragraph (a) would, but for this subsection, have arisen.

             (7)  Subsection (6) does not apply to an Australian trust that is, in relation to the year of income referred to in that subsection:

                     (a)  a corporate unit trust within the meaning of Division 6B of Part III; or

                     (b)  a public trading trust within the meaning of Division 6C of that Part; or

                     (c)  a complying superannuation fund, a non‑complying superannuation fund, a complying approved deposit fund, a non‑complying approved deposit fund or a pooled superannuation trust.

             (8)  If:

                     (a)  a company ceases to be resident in an unlisted country and becomes a resident of a listed country; and

                     (b)  an amount (in this subsection called the section 457 amount) is included in a taxpayer’s assessable income under section 457 as a result of the change of residence; and

                     (c)  a particular part (in this subsection called the eligible part) of the section 457 amount is attributable to a hypothetical disposal of a particular asset of the company at the residence change time; and

                     (d)  it might reasonably be expected that, if and when the company actually disposes of the asset, so much of the gain derived by the company on the actual disposal of the asset that accrued before the residence change time will be subject to tax in the listed country;

the taxpayer may elect to defer the timing of so much of the paragraph (1)(b) attribution credit as is attributable to the eligible part from the time of the change of residence referred to in that paragraph until immediately before the payment by the company of a dividend out of the gain derived by the company on the actual disposal of the asset.

             (9)  An election for the purposes of subsection (8):

                     (b)  is irrevocable; and

                     (c)  has no effect unless it is made:

                              (i)  within 6 months after the end of the later of the following years of income:

                                        (A)  the year of income in which the residence change time took place;

                                        (B)  the year of income in which this subsection commenced; or

                             (ii)  within such further period as the Commissioner allows.

372  Attribution debit

             (1)  An attribution debit arises for an attribution account entity (in this section called the eligible entity) in relation to a taxpayer if:

                     (a)  the eligible entity makes an attribution account payment to the taxpayer or to another attribution account entity; and

                     (b)  immediately before the eligible entity makes the attribution account payment, there is an attribution surplus for the eligible entity in relation to the taxpayer.

             (2)  Subject to subsection (4), the amount of the debit is the lesser of:

                     (a)  the attribution surplus; and

                     (b)  whichever of the following is applicable:

                              (i)  if the attribution account payment is made to the taxpayer—the attribution account payment;

                             (ii)  in any other case—the taxpayer’s attribution account percentage (for the attribution account entity to which the payment is made) of the attribution account payment.

             (4)  Where:

                     (a)  the attribution account payment is made to an attribution account entity that is a trust; and

                     (b)  the attribution surplus, for the eligible entity, is in relation to the taxpayer in the capacity of trustee of the trust (because it is a surplus that resulted from an attribution credit or credits that arose under subparagraph 371(6)(b)(iii));

then the amount of the attribution debit is the lesser of:

                     (c)  the attribution surplus; and

                     (d)  any amount assessable to the taxpayer under section 99 or 99A in relation to the net income of the trust of the year of income in which the attribution account payment is made.

             (5)  The attribution debit arises when the attribution account payment is made.

373  Grossed‑up amount of an attribution debit

                   The grossed‑up amount in relation to an attribution debit is:

                     (a)  where subparagraph 372(2)(b)(i) applied in relation to the debit—the amount of the debit; or

                     (b)  where subparagraph 372(2)(b)(ii) applied in relation to the debit—the amount of the debit, divided by the attribution account percentage referred to in that subparagraph.


 

Division 7Calculation of attributable income of CFC

Subdivision ABasic principles

381  Separate attributable income for each attributable taxpayer

                   Where, at the end of a statutory accounting period (in this Division called the eligible period) of a company:

                     (a)  the company is a CFC; and

                     (b)  there are one or more attributable taxpayers in relation to the company;

the attributable income of the company (in this Division called the eligible CFC) for the eligible period is calculated separately for each such attributable taxpayer (in this Division called the eligible taxpayer) in accordance with this Division.

382  Attributable income is taxable income calculated on certain assumptions

             (1)  The attributable income is the amount that would be the eligible CFC’s taxable income for the eligible period if certain assumptions were made.

             (2)  For the purposes of describing those assumptions, amounts of assessable income, allowable deductions and exempt income that are to be taken into account in calculating the taxable income are referred to respectively as notional assessable income, notional allowable deductions and notional exempt income.

383  Basic assumptions

                   The assumptions are:

                     (a)  that the eligible CFC is a taxpayer and a resident, within the meaning of section 6, during the whole of the eligible period; and

                     (b)  that the eligible period is a year of income, being the year of income of the eligible taxpayer in which the eligible period ends; and

                     (c)  that this Act is modified in accordance with Subdivisions B to E; and

                     (d)  whichever of the assumptions in section 384 or 385 applies.

384  Additional assumption for unlisted country CFC

             (1)  Where the eligible CFC is a resident of an unlisted country at the end of the eligible period, it is to be assumed:

                     (a)  that the only amounts of notional assessable income are those to which subsection (2) applies; and

                     (b)  that all other income is notional exempt income.

             (2)  The amounts of notional assessable income are:

                     (a)  where the eligible CFC does not pass the active income test for the eligible period in relation to the eligible taxpayer—amounts that would be included in its notional assessable income for the eligible period under this Act as modified in accordance with Subdivisions B to E if the only income or other amounts derived by it during the eligible period, and any earlier statutory accounting period, were adjusted tainted income (within the meaning of section 386); and

                     (b)  amounts included in the notional assessable income of the eligible CFC for the eligible period under section 102AAZD of this Act as modified in accordance with Subdivisions B to E; and

                     (c)  amounts included in the notional assessable income of the eligible CFC for the eligible period under Division 6 of Part III of this Act as so modified; and

                    (ca)  amounts included in the notional assessable income of the eligible CFC for the eligible period under Part XI as so modified; and

                     (d)  amounts that would be included in the notional assessable income of the eligible CFC for the eligible period under Division 5 of Part III of this Act, as modified in accordance with Subdivisions B to E of this Division, in relation to any partnership if its net income included only:

                              (i)  where the eligible CFC does not pass the active income test for the eligible period in relation to the eligible taxpayer—amounts that would be included if the partnership derived only adjusted tainted income (within the meaning of section 386); and

                             (ii)  amounts included under section 102AAZD of this Act as modified in accordance with Subdivisions B to E of this Division; and

                            (iii)  amounts included under Division 6 of Part III of this Act as so modified; and

                            (iv)  amounts included under Part XI as so modified.

385  Additional assumption for listed country CFC

             (1)  Where the eligible CFC is a resident of a listed country at the end of the eligible period, it is to be assumed:

                     (a)  that the only amounts of notional assessable income are those to which subsection (2) applies; and

                     (b)  that all other income is notional exempt income.

             (2)  Subject to subsection (4), the amounts of notional assessable income are:

                     (a)  amounts that would be included in the notional assessable income of the eligible CFC for the eligible period under this Act as modified in accordance with Subdivisions B to E if the only income or other amounts derived during the eligible period, and any earlier statutory accounting period, by the eligible CFC were:

                              (i)  where the eligible CFC does not pass the active income test for the eligible period in relation to the eligible taxpayer—adjusted tainted income (within the meaning of section 386) that is eligible designated concession income in relation to the listed country or any other listed country; and

                             (ii)  income or other amounts, of a kind specified in the regulations, that:

                                        (A)  are not eligible designated concession income of the eligible CFC in relation to the listed country or any other listed country; and

                                        (B)  are not treated as derived from sources in the listed country for the purposes of the tax law of the listed country; and

                                        (C)  pass the test set out in subsection (2A); and

                     (b)  amounts included in the notional assessable income of the eligible CFC for the eligible period under section 102AAZD of this Act as modified in accordance with Subdivisions B to E; and

                     (c)  amounts included in the notional assessable income of the eligible CFC for the eligible period under Division 6 of Part III of this Act as so modified, where either of the following conditions (but not necessarily the same condition) is satisfied in relation to the listed country and each other listed country:

                              (i)  the amounts are not subject to tax in that listed country in a tax accounting period ending before the end of the eligible period or commencing during the eligible period;

                             (ii)  the amounts are subject to tax in that listed country in such a tax accounting period and are designated concession income in relation to the listed country; and

                    (ca)  amounts included in the notional assessable income of the eligible CFC for the eligible period under Part XI as so modified; and

                     (d)  amounts that would be included in the notional assessable income of the eligible CFC for the eligible period under Division 5 of Part III of this Act, as modified in accordance with Subdivisions B to E of this Division, in relation to any partnership if its net income included only:

                              (i)  where the eligible CFC does not pass the active income test for the eligible period in relation to the eligible taxpayer—amounts that would be included if the partnership derived only adjusted tainted income (within the meaning of section 386) that is eligible designated concession income in relation to the listed country or any other listed country; and

                             (ii)  amounts that would be included if the partnership derived only income or other amounts, of a kind specified in the regulations, that:

                                        (A)  are not eligible designated concession income of the partnership in relation to the listed country or any other listed country; and

                                        (B)  are not treated as derived from sources in the listed country for the purposes of the tax law of the listed country; and

                                        (C)  pass the test set out in subsection (2A); and

                            (iii)  amounts included under section 102AAZD of this Act as modified in accordance with Subdivisions B to E of this Division; and

                            (iv)  amounts included under Division 6 of Part III of this Act as so modified, where either of the following conditions (but not necessarily the same condition) is satisfied in relation to the listed country and each other listed country:

                                        (A)  the amounts are not subject to tax in that listed country in a tax accounting period ending before the end of the eligible period or commencing during the eligible period;

                                        (B)  the amounts are subject to tax in that listed country in such a tax accounting period and are designated concession income in relation to the listed country; and

                             (v)  amounts included under Part XI as so modified.

          (2A)  For the purposes of sub-subparagraphs (2)(a)(ii)(C) and (2)(d)(ii)(C), income or other amounts pass the test set out in this subsection if both:

                     (a)  the income or other amounts are adjusted tainted income (within the meaning of section 386); and

                     (b)  the income or other amounts are not subject to tax in the listed country or in any other listed country in a tax accounting period ending before the end of the eligible period or commencing during the eligible period.

             (3)  For the purposes of paragraph (2)(c) or (d), a reference in that paragraph to an amount being not subject to tax or subject to tax, as the case may be, includes a reference to another amount included in the net income of a partnership or trust, to which the first‑mentioned amount is attributable, being not subject to tax or subject to tax.

             (4)  Where the sum of the amounts to which paragraphs (2)(a) and (ca) would otherwise apply does not exceed the lesser of:

                     (a)  $50,000; and

                     (b)  5% of the gross turnover of the eligible CFC for the eligible period;

then that paragraph does not apply to those amounts.

             (5)  In determining for the purposes of paragraph (4)(b) the gross turnover of the eligible CFC for the eligible period, section 434 has effect as if:

                     (a)  subparagraph 434(1)(a)(i) were omitted; and

                     (b)  the words “, but not including amounts that are shown in those recognised accounts as amounts covered by section 436” were omitted from paragraphs 434(1)(b), (c) and (d); and

                     (c)  the words “(other than an exclusion of amounts shown in those recognised accounts as amounts covered by section 436)” were omitted from subsection 434(2).

386  Adjusted tainted income

             (1)  The references in sections 384, 385 and 457 to adjusted tainted income are references to amounts that would be passive income, tainted sales income or tainted services income if certain modifications were made to the provisions of Division 8.

             (2)  The modifications are:

                     (a)  that paragraphs 446(1)(k), (m) and (n) are replaced with the following:

                           “(k)  amounts derived from the disposal of tainted assets;

                            (m)  amounts derived from the disposal of tainted commodity investments;

                             (n)  amounts derived that are attributable to currency exchange rate fluctuations, except where under section 439 the amounts would, if they were currency exchange gains, relate to an active income transaction;”; and

                     (b)  that paragraph 446(1)(k) as so replaced does not apply to an amount derived from the disposal of a tainted asset in the circumstances referred to in paragraphs 450(2)(a) to (c) or (5)(a) to (c); and

                     (c)  that paragraph 446(1)(n) as so replaced does not apply to an amount derived where, if it were a currency exchange gain, paragraphs 450(3)(a) and (b) would apply to it; and

                     (d)  that the reference in subsection 450(7) to net gains that accrued to the company in respect of the disposal of tainted assets is replaced with a reference to amounts derived by the company from the disposal of tainted assets.

387  Reduction of attributable income because of interim dividends

             (1)  Where:

                     (a)  during the eligible period, the eligible CFC pays a dividend to the eligible taxpayer or to another entity; and

                     (b)  if the dividend is paid to the eligible taxpayer—the whole or part of the dividend is included in the assessable income of the eligible taxpayer of a year of income; and

                     (d)  the whole or part of the grossed‑up assessable component of the dividend may reasonably be regarded as having been paid out of the attributable income of the eligible CFC for the eligible period;

then, for the purposes of this Part, the attributable income of the eligible CFC for the eligible period in relation to the eligible taxpayer is reduced by an amount equal to the whole or the part of the grossed‑up assessable component of the dividend.

             (2)  In this section:

grossed‑up assessable component, in relation to a dividend the whole or part of which is included in the assessable income of the eligible taxpayer, means the amount of the whole or the part divided by the eligible taxpayer’s attribution percentage for the eligible CFC at the time of payment of the dividend.

Subdivision BGeneral modifications of Australian tax law

388  Double tax agreements to be disregarded

                   In calculating the attributable income of the eligible CFC, the International Tax Agreements Act 1953 is to be disregarded, except for the purpose of references in this Act to that Act.

389  Certain provisions to be disregarded in calculating attributable income

                   For the purpose of applying this Act in calculating the attributable income of the eligible CFC, the following provisions are to be disregarded:

                     (a)  except for the purposes of a reference in any other provision of this Part—sections 23AH, 23AI, 23AK and 128D, subsection 136AF(1A), Division 15 of Part III (other than subsection 148(1)) and sections 456, 457, 459A, 461 and 605;

                     (b)  except for the purposes of a reference in Division 6AAA of Part III or in any other provision of this Part—Part 3‑6 of the Income Tax Assessment Act 1997;

                    (ba)  Division 230 of the Income Tax Assessment Act 1997;

                     (c)  Division 820 of the Income Tax Assessment Act 1997.

389A  Other provisions to be disregarded in calculating attributable income

                   For the purpose of applying this Act in calculating the attributable income of the eligible CFC, the following provisions are to be disregarded:

                     (a)  Division 974 of the Income Tax Assessment Act 1997; and

                     (b)  any provision of this Act to the extent to which the operation of the provision depends on an expression whose meaning is given by Division 974 of the Income Tax Assessment Act 1997.

390  Elections to be made by eligible taxpayer

             (1)  For the purpose of applying this Act in calculating the attributable income of the eligible CFC, any declaration, election, choice or selection that may be made, any notice that may be given or any option that may be exercised, under this Act by the eligible CFC apart from this section is not to be made, given or exercised by the eligible CFC but instead may be made, given or exercised by the eligible taxpayer.

             (2)  The eligible taxpayer may make the declaration, election or selection, give the notice or exercise the option in the eligible taxpayer’s return of income of the year of income in which the eligible period ends or within such further period after the lodgment of the return as the Commissioner allows.

             (3)  Subsection (1) does not apply to an election under the CGT roll‑over provisions.

392  Notional assessable amounts are to be pre‑tax

             (1)  An amount included in the notional assessable income of the eligible CFC is an amount before the payment of any foreign tax or Australian tax in respect of the amount.

393  Notional allowable deduction for taxes paid

             (1)  Foreign tax or Australian tax paid by the eligible CFC in respect of amounts included in the notional assessable income of the eligible CFC for the eligible period, whether paid before, during or after that period, is a notional allowable deduction from the notional assessable income of the eligible CFC for the eligible period.

             (4)  Where a person pays an amount of tax that the person is liable to pay under subsection 148(3) of this Act, in its application apart from this Part, in respect of premiums paid or credited to the eligible CFC, then, for the purposes of subsection (1), the amount is taken to be Australian tax paid by the eligible CFC in respect of the premiums.

394  Notional allowable deduction for eligible finance share dividends, widely distributed finance share dividends and transitional finance share dividends

                   Where:

                     (a)  the eligible CFC pays an eligible finance share dividend, a widely distributed finance share dividend or a transitional finance share dividend during or after the eligible period; and

                     (b)  if, on the assumption that the dividend were instead a payment of the interest, referred to in paragraph 327(d) or 327A(3)(b) or subsection 327B(2), as the case requires, to which it may reasonably be regarded as equivalent, an amount (in this section called the interest equivalent) of that interest accruing during the eligible period would be a notional allowable deduction for the eligible period;

then the interest equivalent is a notional allowable deduction for the eligible period.

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

                   In determining whether expenditure incurred by the eligible CFC during the eligible period for the purpose of gaining or producing income or profits in a later statutory accounting period is a notional allowable deduction under a particular provision, it is to be assumed that:

                     (a)  there will be a requirement under this Division to calculate the attributable income of the eligible CFC for that later statutory accounting period; and

                     (b)  for that purpose, the eligible CFC will always be a resident of the listed country or unlisted country, as the case may be.

396  Modified application of sections 25A and 52

             (1)  For the purpose of applying this Act and the Income Tax Assessment Act 1997 in calculating the attributable income of an eligible CFC, sections 25A and 52 of this Act and sections 15‑15 and 25‑40 of the Income Tax Assessment Act 1997 do not apply in respect of the disposal of a non‑taxable Australian asset of the eligible CFC.

             (2)  A reference in subsection (1) to a non‑taxable Australian asset is a reference to a CGT asset other than one that has the necessary connection with Australia (within the meaning of the Income Tax Assessment Act 1997).

             (3)  The residency assumption is to be ignored in determining whether an asset is a taxable Australian asset for the purposes of this section.

397  Modified application of trading stock provisions

                   When applying this Act and the Income Tax Assessment Act 1997 in calculating the attributable income of the eligible CFC:

                     (a)  Subdivision B of Division 2 of Part III of this Act has effect as if the value of any article of trading stock to be taken into account at the beginning or end of a year of income were its cost price; and

                     (b)  Division 70 of the Income Tax Assessment Act 1997 has effect as if the value of any item of trading stock to be taken into account at the beginning or end of an income year were its cost.

398  Modified application of depreciation provisions

             (1)  Where property has been held by the eligible CFC in a non‑attributable income period in relation to the application of a depreciation provision to the property (in relation to the eligible CFC and the eligible taxpayer) prior to the eligible period, 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)  a notional allowable deduction to the eligible CFC; or

                     (b)  included in the notional assessable income of the eligible CFC;

as the case requires, for the eligible period in relation to the eligible taxpayer, in substitution for any amount that would otherwise be so included or allowable.

             (3)  For the purpose of exercising his or her power under subsection (2) to determine a notional allowable deduction in relation to:

                     (a)  former sections 54 to 62 of this Act; or

                     (b)  the former Division 42 (Depreciation) of the Income Tax Assessment Act 1997 (other than Subdivisions 42‑L and 42‑M); or

                     (c)  Division 40 of that Act (other than Subdivision 40‑E);

the Commissioner must assume that the property was used by the eligible CFC during any non‑attributable income period wholly and exclusively for the purpose of producing notional assessable income.

398A  Application of Division 3A of Part III

             (1)  Subject to subsection (2), Division 3A of Part III applies in calculating the attributable income of the eligible CFC.

             (2)  Section 82R does not apply, subject to subsection (3), to outgoings during the eligible period under a convertible note if:

                     (a)  the note was issued by the eligible CFC (whether or not the company concerned was a CFC at the time):

                              (i)  before 1 July 1990; or

                             (ii)  on or after 1 July 1990 and before 1 July 1992, where:

                                        (A)  the terms of the issue of the note were publicly announced by the eligible CFC before 1 July 1990; or

                                        (B)  the eligible CFC was, under a contract entered into before 1 July 1990, obliged to issue the note; and

                     (b)  at the end of each statutory accounting period of the eligible CFC preceding the eligible period and ending after 30 June 1990, the eligible taxpayer was an attributable taxpayer in relation to the eligible CFC; and

                     (c)  the eligible period begins before 1 July 2000.

             (3)  If:

                     (a)  the terms of a note to which subsection (2) would, apart from this subsection, apply are varied (otherwise than because of a compromise or arrangement approved by a court); and

                     (b)  the Commissioner considers that the variation is substantial enough to represent a new loan;

subsection (2) does not apply to outgoings under the note after the time at which the variation takes place.

399  Modifications of net income of partnerships and trusts

             (1)  If, in calculating the attributable income of the eligible CFC, it is necessary to determine the net income of a partnership or trust under section 90 or 95, it is to be assumed that:

                     (a)  the modifications of this Act in this Division (other than excluded modifications) apply to the partnership or the trust in the same way as they apply to the eligible CFC (except where a provision modified only applies to companies); and

                     (b)  for the purpose of applying those modifications, the partnership or trust is taken to be a resident of the same listed or unlisted country as the eligible CFC; and

                     (c)  the Income Tax Assessment Act 1997 is further modified by disregarding section 855‑50; and

                     (d)  for the purposes of applying Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 in accordance with the preceding paragraphs, the trust is a resident trust for CGT purposes.

             (2)  In this section:

excluded modifications means modifications made by sections 404 and 411 to 418 (inclusive).

399A  Modified application of bad debt etc. provisions

             (1)  For the purposes of applying this Act in calculating the attributable income of the eligible CFC for the eligible period:

                     (b)  section 63D of this Act is to be disregarded; and

                     (c)  subsection (2) of this section has effect.

             (2)  Where:

                     (a)  apart from this subsection, an amount would be a notional allowable deduction to the eligible CFC under section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997 in respect of the writing off of a debt as bad; and

                     (b)  the debt was created or acquired in the ordinary course of a money‑lending business of the eligible CFC that carries on that business; and

                     (c)  assuming that income:

                              (i)  that has been derived by the eligible CFC in respect of the debt; or

                             (ii)  that would have been reasonably likely to have been derived by the eligible CFC in respect of the debt if it had not become bad;

                            were instead derived by the eligible CFC during periods to which it may reasonably be attributed, there would be a part or parts (which part or the total of which parts is in this subsection called the notional exempt income period) of the period (in this subsection called the eligible debt holding period) beginning when the debt was so created or acquired, and ending when it was written off, in respect of which some or all of that income would not be included in the notional assessable income of the eligible CFC for any statutory accounting period;

then only a proportion of the amount referred to in paragraph (a) is a notional allowable deduction, being the proportion calculated using the following formula:

where:

Eligible debt holding period means the number of days in the eligible debt holding period.

Notional exempt income period means the number of days in the notional exempt income period.

Eligible debt term means:

                     (d)  where the debt was acquired from a person other than an associate—the number of days in the eligible debt holding period; or

                     (e)  in any other case—the number of days in the period beginning on the day on which the debt was created (whether by the eligible CFC or another person) and ending at the end of the day on which it was written off.

             (3)  For the purposes of subsection (2):

                     (a)  where a debt that is written off was acquired from another person, the creation and any previous acquisition of the debt is to be disregarded, other than for the purposes of paragraph (2)(e); and

                     (b)  if, on the assumption in paragraph (2)(c), income would be derived by the eligible CFC during a period before the first statutory accounting period of the eligible CFC beginning on or after 1 July 1990, then, in spite of anything in that paragraph, that income is taken not to be included in the notional assessable income of the eligible CFC for any statutory accounting period; and

                     (c)  it is to be assumed that, for any statutory accounting period for which there is no requirement to calculate the attributable income of the eligible CFC in relation to the eligible taxpayer, there is such a requirement.

             (4)  Where a part of a debt is written off as bad, the preceding provisions of this section apply as if the part were an entire debt that is written off as bad.

             (5)  This section has the same effect in relation to an allowable deduction under section 63E in respect of the whole or part of a debt that is extinguished as it has in relation to an allowable deduction under section 8‑1 or 25‑35  of the Income Tax Assessment Act 1997 in respect of the whole or part of a debt that is written off as bad.

400  Modified application of Division 13 of Part III

                   In calculating the attributable income of the eligible CFC:

                     (a)  for the purposes of section 136AC, the eligible CFC is to be treated as a resident or a non‑resident, within the meaning of that section, without regard to the residency assumption; and

                    (aa)  for the purposes of Division 13 of Part III, an agreement is not an international agreement if, at all times when the agreement was in force, all of the parties to the agreement were CFCs and were residents of the same listed country; 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 CFC in calculating its attributable income or in relation to any trust estate in calculating its attributable income under Division 6AAA of Part III; and

                                        (B)  the actual application of that section in relation to any taxpayer in calculating the taxable income of the taxpayer apart from this Part; 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 notional assessable income or notional allowable deductions in relation to the eligible CFC.

401  Reduction of capital proceeds where attributed income not distributed

             (1)  Where:

                     (a)  it is necessary, for the purposes of applying a provision of this Act in calculating the attributable income of the eligible CFC in relation to the eligible taxpayer, to take into account the capital proceeds from a CGT event happening in relation to a CGT asset, being an interest in an attribution account entity (in this section called the disposal entity); and

                     (b)  immediately before the CGT event takes place, either or both of the following conditions are satisfied:

                              (i)  there is an attribution surplus for the disposal entity in relation to the eligible taxpayer;

                             (ii)  there is an attribution surplus for one or more other attribution account entities in relation to the eligible taxpayer, where each such entity is one in which the eligible taxpayer has an indirect attribution account interest held through the disposal entity;

then:

                     (c)  for the purpose of calculating the attributable income, the capital proceeds that, apart from this section, would be taken into account under the provision referred to in paragraph (a) in respect of the CGT event is, subject to subsection (3), taken to be reduced by the grossed‑up amount of the attribution surplus, or the sum of the grossed‑up amounts of the attribution surpluses, as the case requires; and

                     (d)  for the purposes of this Act, attribution debits and credits arise in accordance with subsection (5).

             (3)  For the purposes of paragraph (1)(c):

                     (a)  a reference to the grossed‑up amount of an attribution surplus is a reference to the amount of the surplus divided by the eligible taxpayer’s attribution account percentage for the eligible CFC; and

                     (b)  where the CGT event causes the eligible taxpayer’s attribution account percentage for an attribution account entity in relation to which there is an attribution surplus to be reduced by a proportion, then only that proportion of the attribution surplus is, subject to this subsection, to be taken into account under that paragraph; and

                     (c)  where there is only one attribution surplus referred to in that paragraph and (after any application of paragraph (b) of this subsection) its grossed‑up amount exceeds the capital proceeds from the CGT event, then the surplus is only to be taken into account to the extent that its grossed‑up amount equals those capital proceeds; and

                     (d)  where there are 2 or more attribution surpluses referred to in paragraph (1)(c) and (after any application of paragraph (b) of this subsection) the sum of their grossed‑up amounts exceeds the capital proceeds from the CGT event, then:

                              (i)  if the taxpayer makes an election that for the purposes of this paragraph, a part of each surplus (after any application of paragraph (b)) such that the sum of the grossed‑up amounts of the parts to which the election relates equals those capital proceeds—only the part to which the election relates of each surplus is to be taken into account under paragraph (1)(c); or

                             (ii)  if subparagraph (i) does not apply—only a proportion of each surplus (after any application of paragraph (b)) is to be taken into account under paragraph (1)(c), being the proportion calculated using the formula:

                                   where:

                                   total grossed‑up surplus means the sum of the grossed‑up amounts of the attribution surpluses (after any application of paragraph (b)).

             (4)  An election for the purposes of paragraph (3)(d) must be made on or before the date of lodgment of the eligible taxpayer’s return of income for the year of income in which the eligible period ends or within such further period after the lodgment of the return as the Commissioner allows.

             (5)  For the purposes of this Act:

                     (a)  an attribution debit is taken to arise at the time of the disposal under section 372, in relation to the eligible taxpayer, for each attribution account entity (in this section called a surplus entity) in relation to which there is an attribution surplus to which paragraph (1)(c) applies; and

                     (b)  the amount of the attribution debit is equal to so much of the surplus as is taken into account under paragraph (1)(c); and

                     (c)  there is no grossed‑up amount in relation to the attribution debit under section 373; and

                     (d)  an attribution credit equal to the debit is taken to arise, at the time of the disposal or of the CGT event, under section 371 for the eligible CFC in relation to the eligible taxpayer.

          (6A)  In determining, for the purposes of this section, whether there was an attribution surplus immediately before a CGT event, and the amount of such a surplus, also take into account any attribution credit that later arises because the CGT event caused section 104‑175 of the Income Tax Assessment Act 1997 (as it notionally applies to the CGT event entity under this Division) to operate.

             (7)  In this section:

interest, in relation to an attribution account entity, means:

                     (a)  if the entity is a company—an interest in shares in the company, or an entitlement to acquire such an interest; or

                     (b)  if the entity is a partnership—an interest of a partner in the profits or property of the partnership, or an entitlement of a partner to acquire such an interest; or

                     (c)  if the entity is a trust—an entitlement of a beneficiary to a share of the income or corpus of the trust, or an entitlement of a beneficiary to acquire such an entitlement.

402  Additional notional exempt income—unlisted or listed country CFC

             (1)  This section applies where the eligible CFC is a resident of either a listed country or an unlisted country at the end of the eligible period.

             (2)  Each of the following is notional exempt income of the eligible CFC in relation to the eligible period:

                     (a)  income or other amounts derived by the eligible CFC in the eligible period that are included in the assessable income of the eligible CFC of any year of income for the purposes of this Act apart from this Part, other than amounts that are so included under section 143 (where the proviso to that section does not apply);

                     (b)  so much of a frankable distribution, paid to the eligible CFC in the eligible period, as is either the franked part of the distribution, or the part of the distribution that has been franked with an exempting credit;

                     (e)  a premium paid or credited to the eligible CFC in the eligible period, where, because of the application of subsection 148 (1) for the purposes of this Act apart from this Part, the premium is not, for those purposes, allowable as a deduction to the person referred to in subparagraph 148(1)(a)(i) and is not included in the assessable income of the eligible CFC.

          (2A)  If:

                     (a)  an amount would, apart from this subsection, be included in the notional assessable income of the eligible CFC for the eligible period under paragraph 384(2)(ca) or 385(2)(ca); and

                     (b)  at the end of the eligible period the CFC was authorised under the law of its place of residence to carry on life insurance business; and

                     (c)  at the end of that period the gross value of the CFC’s assets for use in carrying on life insurance business was 50% or more of the gross value of all of the CFC’s assets; and

                     (d)  during the eligible period a FIF within the meaning of Part XI managed funds of the CFC that were maintained by the CFC in a manner similar to the manner in which companies carrying on life insurance business in Australia maintain statutory funds under Part 4 of the Life Insurance Act 1995; and

                     (e)  the FIF was principally engaged during the eligible period in the management of funds of other persons by the investing of those funds at the discretion of the FIF;

then, so much of the amount referred to in paragraph (a) as relates to the FIF is notional exempt income of the eligible CFC in relation to the eligible period.

          (2B)  A reference in paragraph (2A)(c) to the gross value of an asset of the CFC at the end of the eligible period is a reference to that value as shown in a balance‑sheet of the CFC that was prepared as at the end of that period.

          (2C)  If, at the end of the eligible period, any of the CFC’s assets (the relevant assets) are for use partly in carrying on life insurance business and partly for other purposes, a reference in paragraph (2A)(c) to the gross value at the end of that period of the CFC’s assets for use in carrying on life insurance business is a reference to so much only of the gross value at the end of that period of the relevant assets as is proportionate to the extent to which they are for use at the end of that period in carrying on life insurance business.

             (3)  If:

                     (a)  an attribution account entity makes an attribution account payment to the eligible CFC in the eligible period; and

                     (b)  apart from this subsection, the whole or part of the attribution account payment would be included in the notional assessable income of the eligible CFC in relation to the eligible taxpayer for the eligible period; and

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

then so much (if any) of the whole or the part of the attribution account payment as does not exceed the grossed‑up amount of the attribution debit is notional exempt income of the eligible CFC for the eligible period.

             (4)  If:

                     (a)  a FIF attribution account entity makes a FIF attribution account payment to the eligible CFC in the eligible period; and

                     (b)  apart from this subsection, the whole or part of the FIF attribution account payment would be included in the notional assessable income of the eligible CFC in relation to the eligible taxpayer for the eligible period; and

                     (c)  on the making of the FIF attribution account payment, a FIF attribution debit arises for the FIF attribution account entity in relation to the eligible taxpayer;

so much (if any) of the whole or the part of the FIF attribution account payment as does not exceed the grossed‑up amount of the FIF attribution debit is notional exempt income of the eligible CFC for the eligible period.

403  Additional notional exempt income—unlisted country CFC

                   If the eligible CFC is a resident of an unlisted country at the end of the eligible period, the notional exempt income of the eligible CFC in relation to the eligible period includes income or profits derived by the eligible CFC in the eligible period in or in connection with carrying on business in a listed country at or through a permanent establishment of the eligible CFC in that listed country, where the income or profits are not eligible designated concession income in relation to any listed country in relation to the eligible period.

404  Additional notional exempt income—listed or section 404 country CFC

                   Where the eligible CFC is a resident of a listed country or a section 404 country at the end of the eligible period, a dividend paid to it in the eligible period by a company that is a resident of a listed country or a section 404 country is notional exempt income.

Subdivision CModifications relating to Australian capital gains tax

405  Interpretation

             (1)  In this Subdivision:

commencing day has the meaning given by section 406.

commencing day asset has the meaning given by section 406.

             (3)  Some provisions of this Subdivision say that a payment can include giving property. To the extent that one does, use the market value of the property in working out the amount of the payment.

406  Meaning of commencing day and commencing day asset

             (1)  For the purposes of applying this Act in calculating the attributable income of the eligible CFC, the eligible CFC’s commencing day is the later of:

                     (a)  the last day of the most recent period during which there was not an attributable taxpayer with an attribution percentage (greater than nil) in relation to the eligible CFC; and

                     (b)  30 June 1990.

Example:    If a taxpayer became an attributable taxpayer with an attribution percentage (greater than nil) in relation to the eligible CFC at 3 pm on 20 October 2004 and there were no other such attributable taxpayers at that time, the commencing day is 20 October 2004.

             (2)  For the purposes of applying this Act in calculating the attributable income of the eligible CFC, a commencing day asset of the eligible CFC is a CGT asset (other than one that is taxable Australian property) owned by the eligible CFC at the end of its commencing day.

             (3)  In determining whether a CGT asset is taxable Australian property, disregard the residency assumption.

408  Certain capital gains and losses disregarded

                   If a CFC makes a capital gain or capital loss from a CGT event that is not disregarded under Subdivision 855‑A of the Income Tax Assessment Act 1997, or would have made a capital gain from the event apart from indexation, disregard the CGT event in calculating the attributable income of the eligible CFC.

408A  Certain events before commencing day ignored

                   For the purposes of applying this Act in calculating the attributable income of an eligible CFC, if the eligible CFC’s commencing day is after 30 June 1995, Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 do not apply to CGT events involving the eligible CFC before the end of the commencing day.

409  Losses before 30 June 1990 to be disregarded

                   For the purposes of applying this Act in calculating the attributable income of the eligible CFC, capital losses incurred before the end of 30 June 1990 are disregarded.

410  General modifications—CGT

                   For the purposes of applying this Act in calculating the attributable income of the eligible CFC, Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply as if these provisions were disregarded:

                     (a)  section 116‑85 (about section 47A of this Act applying to a rolled‑over asset);

                     (b)  section 116‑95 (about a company changing residence from an unlisted country);

                     (c)  section 118‑12 (about assets used to produce exempt income etc.);

                     (d)  section 855‑45 (about an individual or company becoming an Australian resident);

                     (e)  section 855‑55 (about a CFC becoming an Australian resident);

                      (f)  Subdivision 170‑B (about transfer of net capital losses within company groups).

411  Commencing day assets taken to have been acquired on commencing day

             (1)  Subject to this section, for the purposes of applying this Act in calculating the attributable income of the eligible CFC, a commencing day asset of the eligible CFC is taken to have been acquired, for the purposes of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about CGT), by it on its commencing day.

             (3)  Subsection (1) does not apply for the purposes of determining the cost base to the eligible CFC of an asset.

412  Cost base of commencing day asset

             (1)  For the purposes of applying this Act in calculating the attributable income of the eligible CFC, the following provisions have effect.

             (2)  The first element of the cost base of each commencing day asset of the eligible CFC is the greater of the asset’s market value (at the end of the eligible CFC’s commencing day) and the asset’s cost base (on that day).

             (3)  The first element of the reduced cost base of each commencing day asset of the eligible CFC is the lesser of the asset’s market value (at the end of the eligible CFC’s commencing day) and the asset’s cost base (on that day).

413  Adjustment of cost base as at commencing day—return of capital

             (1)  For the purposes of applying this Act in calculating the attributable income of the eligible CFC, the following provisions have effect.

             (2)  Where:

                     (a)  commencing day assets of the eligible CFC consist of shares in a company; and

                     (b)  at any time during the period commencing at the time when the eligible CFC acquired the shares and ending at the end of the eligible CFC’s commencing day, the company paid an amount that was not a dividend to the eligible CFC in respect of the shares;

the cost base to the eligible CFC of the shares as at the eligible CFC’s commencing day is to be reduced by that amount.

             (3)  Where:

                     (a)  a commencing day asset of the eligible CFC consists of an interest or unit in a trust; and

                     (b)  at any time during the period commencing at the time when the eligible CFC acquired the interest or unit and ending at the end of the eligible CFC’s commencing day, the trustee of the trust paid an amount to the eligible CFC in respect of the interest or unit, being an amount that would not have been notional assessable income of the eligible CFC;

the cost base to the eligible CFC of the interest or unit as at the eligible CFC’s commencing day is to be reduced by so much of the amount as is not attributable to a deduction allowed under Division 43 of the Income Tax Assessment Act 1997 or former Division 10C or 10D of Part III of this Act.

             (4)  The payment referred to in subsection (2) or (3) can include giving property: see subsection 405(3).

414  Exercise of rights

             (1)  For the purposes of applying this Act in calculating the attributable income of the eligible CFC, the following provisions have effect.

             (2)  Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (3) and (4) of this section apply if the eligible CFC exercises rights or options as mentioned in that section to acquire:

                     (a)  shares in a company, or options to acquire shares in a company; or

                     (b)  units in a unit trust, or options to acquire units in a unit trust;

and those rights or options are commencing day assets of the eligible CFC.

             (3)  The first element of the cost base of the shares, units or options is the sum of:

                     (a)  the amount paid to exercise the rights or options; and

                     (b)  the greater of the market value of the rights or options (at the end of the eligible CFC’s commencing day) and the cost base of the rights or options (on that day).

             (4)  The first element of the reduced cost base of the shares, units or options is the sum of:

                     (a)  the amount paid to exercise the rights or options; and

                     (b)  the lesser of the market value of the rights or options (at the end of the eligible CFC’s commencing day) and the cost base of the rights or options (on that day).

             (5)  The payment referred to in subsection (3) or (4) can include giving property: see subsection 405(3).

             (6)  For indexation purposes, the amount referred to in paragraph (3)(b) is taken to have been incurred on the eligible CFC’s commencing day.

418  Options

             (1)  For the purposes of applying this Act in calculating the attributable income of the eligible CFC, the following provisions have effect.

             (2)  Subsection 104‑30(5) of the Income Tax Assessment Act 1997 applies to an option granted by the eligible CFC as if the reference in that subsection to 20 September 1985 were a reference to the day after the eligible CFC’s commencing day.

             (3)  Section 134‑1 of the Income Tax (Transitional Provisions) Act 1997 does not apply to an option granted to the eligible CFC.

418A  Effect of change of residence from Australia to listed or unlisted country

             (1)  For the purposes of applying this Act in calculating the attributable income of the eligible CFC, where:

                     (a)  disregarding the residency assumption, at any time (in this section called the residence‑change time) during the eligible period or an earlier statutory accounting period beginning on or after the day following the eligible CFC’s commencing day, the eligible CFC ceased to be a resident within the meaning of section 6 and became a resident of a listed country or an unlisted country; and

                     (b)  the eligible CFC owned a CGT asset at the residence‑change time; and

                     (c)  a CGT event happens in relation to the asset during the eligible period;

then sections 411 to 414 (inclusive) apply, in addition to any application apart from this section but subject to subsection (2) of this section, to the asset as if:

                     (d)  any reference in those sections to a commencing day asset were a reference to the asset; and

                     (e)  any reference in those sections relating to the eligible CFC’s commencing day or the day following the eligible CFC’s commencing day were a reference relating respectively to the residence‑change time or a time immediately after the residence‑change time; and

                      (f)  if section 104‑160 of the Income Tax Assessment Act 1997 (CGT event I1) applied to the change of residence for the purposes of the application of this Act apart from this Part:

                              (i)  section 412 applies as if subsections 412(2) and (3) referred only to the market value of the asset concerned; and

                             (ii)  section 414 applies as if paragraphs 414(3)(b) and (4)(b) referred only to the market value of the asset concerned.

             (2)  Where the asset is a commencing day asset, sections 411 to 414 (inclusive) do not apply, in spite of anything contained in those sections, to the asset except in accordance with subsection (1) of this section.

419  Modified application of Subdivision 126‑B of the Income Tax Assessment Act 1997

             (1)  For the purposes of applying this Act in calculating the attributable income of the eligible CFC, Subdivision 126‑B of the Income Tax Assessment Act 1997 has effect as if the table in subsection 126‑50(5) of that Act were omitted and the following table were substituted:

 

Additional requirements

Item

The originating CFC’s residency status

The recipient company’s residency status

This requirement must be satisfied

1

A resident of a listed country at the time of the trigger event

Either:

(a) a resident of that listed country at that time; or

(b) an Australian resident at that time

It does not matter what the roll‑over asset is

2

A resident of a listed country at the time of the trigger event

A resident of a particular unlisted country at that time

The asset must have been used (just before that time) in connection with a permanent establishment of the originating CFC in any unlisted country at or through which the originating CFC carried on business just before that time

3

A resident of an unlisted country at the time of the trigger event

Either:

(a) a resident of an unlisted country at that time; or

(b) an Australian resident at that time

It does not matter what the roll‑over asset is

             (2)  The residency assumption is ignored for the purpose of applying the table in subsection (1).

421  Elections under CGT roll‑over provisions

             (1)  Subject to this section, for the purpose of applying this Act in calculating the attributable income of the eligible CFC for the eligible period, any election or choice that may be made, by the eligible CFC, or by the eligible CFC and another entity, apart from this section, under any of the CGT roll‑over provisions:

                     (a)  on or before the date of lodgment of a particular return of income; or

                     (b)  within such further period as the Commissioner allows;

is to be made instead:

                     (c)  if there is only one attributable taxpayer in relation to the eligible CFC at the end of the eligible period—on or before the date of lodgment of the taxpayer’s return of income of the year of income in which the end of the eligible period occurs; or

                     (d)  if there are 2 or more attributable taxpayers in relation to the eligible CFC at the end of the eligible period:

                              (i)  if the taxpayers’ returns of income of the year of income in which the end of the eligible period occurs are lodged on different dates—on or before the later or latest of those dates; or

                             (ii)  if the taxpayers’ returns of income of the year of income in which the end of the eligible period occurs are lodged on the same date—on or before that date; or

                     (e)  in any case—within such further period as the Commissioner allows.

          (1A)  For the purposes of applying subsection (1) to an eligible CFC in relation to an eligible period, if:

                     (a)  an entity (the designated entity) is the only attributable taxpayer in relation to the eligible CFC at the end of the eligible period; and

                     (b)  the designated entity’s attribution percentage in relation to the company is 100% at the end of the eligible period;

then, instead of the election or choice being given by the eligible CFC, or by the eligible CFC and another entity (which other entity may be the designated entity), the election or choice may be given by:

                     (c)  the designated entity; or

                     (d)  if the designated entity is not the same as the other entity—the designated entity and the other entity;

as the case requires.

             (2)  Except in accordance with subsection (3), subsection (1) does not apply to an election or choice in respect of the disposal of an asset if the disposal is, or apart from an election or choice in accordance with subsection 438(3A) would be, taken into account in determining under Division 8 whether the eligible CFC passes the active income test in relation to the eligible period.

             (3)  If an election or choice is made under a CGT roll‑over provision in accordance with subsection 438(3A), that election or choice also has effect as if it were made under the CGT roll‑over provision in accordance with subsection (1) of this section.

422  Adjustment of capital proceeds where change of residence by eligible CFC from unlisted to listed country

             (1)  For the purposes of applying this Act in calculating the attributable income of the eligible CFC, in relation to the eligible period in relation to the eligible taxpayer, the following provisions have effect.

             (2)  This section sets out what happens if:

                     (a)  the eligible CFC ceases at a time (the residency change time), during the eligible period or an earlier statutory accounting period, to be a resident of an unlisted country and becomes a resident of a listed country; and

                     (b)  subsection 457(3) does not apply to the change of residence; and

                     (c)  because of the change in its residency status, an amount is included in the eligible taxpayer’s assessable income under section 457 (including because of paragraph 58(1)(d) of the Taxation Laws Amendment (Foreign Income) Act 1990); and

                     (d)  a CGT event happens during the eligible period in relation to a CGT asset (the CFC asset) that the eligible CFC owned since the residency change time.

             (3)  If the conditions in subsection (4) are satisfied, the capital proceeds from the CGT event are reduced by the amount worked out under subsection (5). If the conditions in subsection (6) are satisfied, those capital proceeds are increased by the amount worked out under subsection (7).

Reduction of capital proceeds

             (4)  If all the eligible CFC’s assets were disposed of at the residency change time for their market values in the circumstances mentioned in subparagraph 457(2)(a)(ii):

                     (a)  distributable profits of the eligible CFC of a particular amount (the distributable profit amount) would be created, or its distributable profits would be increased by an amount (also the distributable profit amount); and

                     (b)  the eligible CFC would have made a profit (the CFC asset profit) on the disposal of the CFC asset.

             (5)  The capital proceeds are reduced by:

where:

total asset profits is the sum of the profits that the eligible CFC would have made if all its assets were disposed of at the residency change time for their market values (ignoring disposals that would not result in a profit).

Increase in capital proceeds

             (6)  If all the eligible CFC’s assets were disposed of at the residency change time for their market values in the circumstances mentioned in subparagraph 457(2)(a)(ii):

                     (a)  the distributable profits of the eligible CFC would be reduced by an amount (the distributable profit reduction amount); and

                     (b)  the eligible CFC would have made a loss (the CFC asset loss) on the disposal of the CFC asset.

             (7)  The capital proceeds are increased by:

where:

total asset losses is the sum of the losses that the eligible CFC would have made if all its assets were disposed of at the residency change time for their market values (ignoring disposals that would not result in a loss).

423  Adjustment of capital proceeds where section 47A applies to rolled‑over assets

             (1)  For the purposes of applying this Act in calculating the attributable income of the eligible CFC, in relation to the eligible period in relation to the eligible taxpayer, the following provision has effect.

             (2)  The capital proceeds from a CGT event that happens in relation to a CGT asset of the eligible CFC during the eligible period are reduced if:

                     (a)  either:

                              (i)  because of Division 17 of former Part IIIA of this Act, that Part did not apply to the disposal of the asset to the eligible CFC by another CFC during the eligible period or an earlier statutory accounting period; or

                             (ii)  there was a roll‑over under Division 122, 124 or 126 of the Income Tax Assessment Act 1997 (except under Subdivision 124‑J, 124‑K or 124‑L of that Act) for a CGT event (the earlier CGT event) that happened during that period in relation to the asset and involving the eligible CFC and another CFC; and

                     (b)  the eligible taxpayer was an attributable taxpayer in relation to both CFC’s at the time of the disposal or the earlier CGT event; and

                     (c)  the other CFC is taken, under section 47A of this Act, to have paid the eligible CFC a dividend in relation to the disposal or the earlier CGT event; and

                     (d)  an amount is included in the attributable taxpayer’s assessable income in respect of the dividend under section 456 of this Act.

             (3)  The reduction is the lesser of:

                     (a)  the amount of the dividend; and

                     (b)  the amount of any capital gain that:

                              (i)  apart from Division 17 of former Part IIIA of this Act, would have accrued to the other CFC in respect of the disposal if the consideration in respect of the disposal had been the market value of the asset at the time of the disposal; or

                             (ii)  the other CFC would have made from the earlier CGT event apart from the roll‑over if the capital proceeds from that event had been the market value of the asset at the time of that event.

Subdivision DModifications relating to losses

425  Sometimes‑exempt income etc.

             (1)  Where an amount is not included in the eligible CFC’s notional assessable income for a statutory accounting period (being the eligible period or an earlier period) in relation to the eligible taxpayer because:

                     (a)  the eligible CFC passes the active income test for the period in relation to the eligible taxpayer; or

                     (b)  subsection 385 (4) applies;

then the amount is sometimes‑exempt income of the eligible CFC for the period in relation to the eligible taxpayer.

             (2)  Where an amount would, disregarding section 431, only be a notional allowable deduction of the eligible CFC for a statutory accounting period (being the eligible period or an earlier period) in relation to the eligible taxpayer if the eligible CFC’s sometimes‑exempt income for the period in relation to the eligible taxpayer were instead notional assessable income, then the amount is a sometimes‑exempt deduction of the eligible CFC for the period in relation to the eligible taxpayer.

             (3)  Where the eligible CFC’s sometimes‑exempt deductions for a statutory accounting period (being the eligible period or an earlier period) in relation to the eligible taxpayer exceed its sometimes‑exempt income for the period in relation to the taxpayer, the excess is a (sometimes‑exempt income) loss of the eligible CFC for the period in relation to the eligible taxpayer.

             (4)  Where an eligible CFC’s sometimes‑exempt income for a statutory accounting period (being the eligible period or an earlier period) in relation to the eligible taxpayer exceeds its sometimes‑exempt deductions for the period in relation to the taxpayer, the excess is a (sometimes‑exempt income) gain of the eligible CFC for the period in relation to the eligible taxpayer.

426  Creation of loss

                   For the purposes of this Subdivision, if:

                     (a)  the amount of the eligible CFC’s notional allowable deductions (other than under section 431) for a statutory accounting period (being the eligible period or an earlier period) are applied as follows:

                              (i)  they are applied first against any notional assessable income of the eligible CFC class for the period;

                             (ii)  any excess is then applied against any (sometimes‑exempt income) gain for the period; and

                     (b)  there is any amount remaining;

then the amount remaining is a loss of the eligible CFC for the period.

427  Certain provisions to be disregarded

                   For the purposes of applying this Act and the Income Tax Assessment Act 1997 in calculating the attributable income of an eligible CFC, disregard the following:

                     (b)  Division 36, section 165‑120 and Subdivisions 170‑A, 709‑D and 719‑I of the Income Tax Assessment Act 1997 (except for the purpose of a reference to any of those provisions in any other provision of this Act, as applied in accordance with this Division);

                    (ba)  Subdivisions 165‑CC and 165‑CD of the Income Tax Assessment Act 1997.

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

                   For the purposes of applying this Subdivision in calculating the attributable income of the eligible CFC for the eligible period, it is to be assumed that, for any earlier statutory accounting period (when the eligible CFC existed) for which there was no requirement to calculate its attributable income in relation to the eligible taxpayer, there were such a requirement (except for the purpose of applying section 398).

429  Notional allowable deduction for (sometimes‑exempt income) loss

                   The amount of any (sometimes‑exempt income) loss of the eligible CFC for the eligible period class is a notional allowable deduction for the period from the notional assessable income of the eligible CFC.

431  Deduction etc. for previous period loss

             (1)  Where there are one or more losses of the eligible CFC of any statutory accounting period before the eligible period, the losses, to the extent they have not been previously taken into account under this section in respect of any such period, are to be taken into account in accordance with this section.

             (2)  The losses are to be taken into account as follows:

                     (a)  they are to be applied first against any (sometimes‑exempt income) gain for the eligible period, to the extent that the gain has not already been applied under section 426 in determining whether there is a loss for the eligible period;

                     (b)  any excess is then a notional allowable deduction for the eligible period, but only to the extent that the deduction does not exceed the amount of the notional assessable income for the period as reduced by notional allowable deductions other than under this section;

                     (c)  where there are 2 or more losses, they are to be taken into account in the order in which they arose.

             (3)  A loss for a statutory accounting period is only to be taken into account under subsection (2) if the eligible CFC was a CFC at the end of that statutory accounting period and each following statutory accounting period before the eligible period.

             (4)  A loss for a statutory accounting period is to be taken into account under subsection (2) only if:

                     (a)  where the eligible CFC is a resident of a listed country at the end of the eligible period:

                              (i)  the eligible CFC is a resident of a listed country at the end of that statutory accounting period; and

                             (ii)  if there are any statutory accounting periods (the intervening periods) occurring between that statutory accounting period and the eligible period—the eligible CFC was a resident of a listed country at the end of each of the intervening periods; or

                     (b)  where the eligible CFC is a resident of an unlisted country at the end of the eligible period:

                              (i)  the eligible CFC is a resident of an unlisted country at the end of that statutory accounting period; and

                             (ii)  if there are any statutory accounting periods (also the intervening periods) occurring between that statutory accounting period and the eligible period—the eligible CFC was a resident of an unlisted country at the end of each of the intervening periods.

          (4A)  If:

                     (a)  at the end of both t