Part VIIB—Medicare levy and Medicare levy surcharge
251R Interpretation
(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 2E 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 Medicare 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 Medicare 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 is entitled to a notional tax offset in respect of that child under Subdivision 961‑A of the Income Tax Assessment Act 1997.
(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 Families Secretary has determined, under Subdivision D of Division 1 of Part 3 of that Act, each parent’s or spouse’s percentage of care for the child during a care period (within the meaning of that Act);
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 corresponds with that percentage of care.
(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 Medicare levy, during that period by virtue of paragraph 251U(1)(a), (b), (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) Medicare 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) Medicare 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, Medicare 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 Medicare 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 Medicare levy payable in accordance with this Part and Medicare levy (fringe benefits) 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 a 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;
(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 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; and
(d) if the trustee of an AMIT is required to be assessed in pursuance of subsection 276‑405(2) of the Income Tax Assessment Act 1997 in respect of an amount mentioned in that subsection—that amount; and
(e) if the trustee of an AMIT is required to be assessed in pursuance of subsection 276‑415(2) of the Income Tax Assessment Act 1997 in respect of an amount mentioned in that subsection—that amount; and
(f) if the trustee of an AMIT is required to be assessed in pursuance of subsection 276‑420(2) of the Income Tax Assessment Act 1997 in respect of an amount mentioned in that subsection—that amount.
Note 1: 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.
Note 2: The tax offset for foreign income tax under Division 770 of the Income Tax Assessment Act 1997 can be applied against your liability to pay Medicare levy or Medicare levy (fringe benefits) surcharge: see item 22 of the table in subsection 63‑10(1) of that Act.
(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 the person in accordance with any other provision of this Act.
251T Medicare levy (other than Medicare levy surcharge) 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; 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 Medicare 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; or
(b) the person was entitled under the Veterans’ Entitlements Act 1986, the Military Rehabilitation and Compensation Act 2004, the Australian Participants in British Nuclear Tests and British Commonwealth Occupation Force (Treatment) Act 2006 or the Treatment Benefits (Special Access) Act 2019 to free medical treatment during the whole of that period in respect of every incapacity, disease or disabling condition; or
(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; or
(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; or
(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; or
(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; or
(d) during the whole of that period the person was a non‑resident; or
(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; or
(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 Health Minister 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 Medicare 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 Medicare 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 Medicare 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 Medicare levy, during that period by virtue of paragraph (1)(a), (b), (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 Medicare 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 Medicare levy surcharge
(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 Medicare 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 Medicare levy surcharge
(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 Medicare 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 Medicare levy or Medicare levy (fringe benefits) 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 Medicare levy or Medicare levy (fringe benefits) 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 (fringe benefits) surcharge Act
The Commissioner has the general administration of the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Act 1999.
Part VIII—Miscellaneous
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 the officer 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.
Note: See section 253 for alternative ways to give a notice to, or serve a process on, a company (through its officers, attorneys or agents).
(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 the officer is required to do in the officer’s 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 the 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; and
(b) is ordinarily resident 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) commits, 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), 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.
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; and
(b) is ordinarily resident 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 or her, 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 the officer’s 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 the officer is required to do in the officer’s 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.
253 Notifying and serving companies
For the purposes of this Act, or a regulation under this Act, if the Commissioner thinks fit, a notice or process may be given to, or served on, a company by giving the notice to, or serving the process on:
(a) a director, the secretary or another officer of the company; or
(b) an attorney or agent of the company.
Note: See paragraph 252(1)(e) for alternative ways to serve documents on a company (through its public officer or someone else acting or appearing to act for the company).
254 Agents and trustees
(1) With respect to every agent and with respect also to every trustee, the following provisions shall apply:
(a) He or she 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 or her in his or her representative capacity, or derived by the principal by virtue of his or her agency, and for the payment of tax thereon.
(b) He or she shall in respect of that income, or those profits or gains, make the returns and be assessed thereon, but in his or her 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 or she 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 or she is hereby authorized and required to retain from time to time out of any money which comes to him or her in his or her 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 or she 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 or she has retained, or should have retained, under paragraph (d); but he or she shall not be otherwise personally liable for the tax.
(f) He or she is hereby indemnified for all payments which he or she 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 or she pays any amount for which they are jointly liable, each other one is liable to pay him or her an 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 the Commissioner would have against the property of any other taxpayer in respect of tax.
(2) Subsection (1) applies to the following in the same way as it applies to tax:
(a) the general interest charge under:
(i) former section 163AA, former section 170AA, former subsection 204(3), former subsection 221AZMAA(1), former subsection 221AZP(1), former subsection 221YD(3) or former section 221YDB of this Act;
(ii) section 5‑15 of the Income Tax Assessment Act 1997;
(b) additional tax under former Part VII of this Act;
(c) 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) the person shall when required by the Commissioner pay the tax due and payable by the non‑resident;
(b) the person is hereby authorized and required to retain from time to time out of any money which comes to the person 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) the person is hereby made personally liable for the tax payable by the person on behalf of the non‑resident to the extent of any amount that the person has retained, or should have retained, under paragraph (b); but the person shall not be otherwise personally liable for the tax;
(d) the person is hereby indemnified for all payments which the person 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 the person to the non‑resident shall be deemed to be money which comes to the person 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 withholding MITs) shall be deemed not to be money which comes to the person on behalf of the non‑resident.
(2B) For the purposes of subsection (2A), if an entity must pay an amount to the Commissioner under Subdivision 12A‑C in Schedule 1 to the Taxation Administration Act 1953 in respect of money due by the entity to a non‑resident, treat that amount as being an amount that must be withheld from the money under Subdivision 12‑H in that Schedule.
(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) This section applies to the following in the same way as it applies to tax:
(a) the general interest charge under:
(i) former section 163AA, former section 170AA, former subsection 204(3), former subsection 221AZMAA(1), former subsection 221AZP(1), former subsection 221YD(3) or former section 221YDB of this Act;
(ii) section 5‑15 of the Income Tax Assessment Act 1997;
(b) additional tax under former Part VII of this Act;
(c) 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 the banker 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 the person’s 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 or 820‑980 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.
(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, 124AO or 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), or former subsection 122JAA(1), 122JG(1), 123BBA(1), 123BF(1), 124AMAA(1), 124GA(1), 124JD(1) or 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, or former section 122JAA, 122JG, 123BBA, 123BF, 124AMAA, 124GA, 124JD or 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.
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;
(ga) whether the premium has been reduced under section 23‑1 of the Private Health Insurance Act 2007, and if so, the amount of the reduction;
(gb) the name, address and date of birth of a participant (within the meaning of the Private Health Insurance Act 2007) in the premiums reduction scheme (within the meaning of that Act) in respect of the policy;
(gc) whether the premium has been increased in accordance with Division 34 of the Private Health Insurance Act 2007, and if so, the amount of the increase;
(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 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 X—Attribution of income in respect of controlled foreign companies
Division 1—Preliminary
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 2E 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.
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, in relation to an attribution debit, has the meaning given by section 373.
gross tainted turnover has the meaning given by section 435.
gross turnover has the meaning given by section 434.
group includes:
(a) one entity alone; and
(b) a number of entities the members of which are not in any way associated with each other nor acting together.
income interest in a partnership means an interest in the profits of the partnership.
income interest in a trust means an interest in the income of the trust.
indirect attribution account interest has the meaning given by section 369.
indirect attribution interest has the meaning given by section 357.
indirect control interest has the meaning given by section 352.
IP time means 7.30 p.m., by standard time in the Australian Capital Territory, on 12 April 1989.
law, in relation to a listed country or an unlisted country, means a law of that listed country or unlisted country, or of any part of, or place in, that listed country or unlisted country.
lease includes a sublease and, in relation to a company title interest in land, includes an agreement similar to a lease or sublease.
leased includes let on hire (including a letting on hire that is described in the relevant agreement as a lease) under an agreement other than a hire‑purchase agreement.
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.
transitional finance share has the meaning given by section 327B.
transitional finance share dividend means a dividend in respect of a transitional finance share.
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.
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.
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 deductible gift recipients 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.
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 2—Types of entity
Subdivision A—Australian 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 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 B—Controlled 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 C—Eligible 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 3—Control interests, attribution interests, attributable taxpayers and attribution percentages
Subdivision A—Control 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 B—Attribution 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 (within the meaning of former Part XI) 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 (within the meaning of former Part XI) 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 C—Attributable 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 4—Attribution 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;
(ca) where a beneficiary of a trust is specifically entitled to an amount of a capital gain or a franked distribution of the trust for a year of income:
(i) in the case of a capital gain—the amount mentioned in subsection 115‑225(1) in respect of the beneficiary; or
(ii) in the case of a franked distribution—the amount mentioned in subsection 207‑37(1) in respect of the beneficiary;
to the extent that it is not covered under paragraph (c);
(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).