(a) a person pays or credits any money or gives property to the company and the company credits its share capital account with the amount of the money or the value of the property; and
(b) the company pays or credits any money, or distributes property to another person, and debits its share capital account with the amount of the money or the value of the property so paid, credited or distributed.
(6) Where a place is, by virtue of paragraph (d) of the definition of permanent establishment in subsection (1), a permanent establishment of a person, the person shall, for the purposes of this Act, be deemed to be carrying on at or through that permanent establishment the business of selling the goods manufactured, assembled, processed, packed or distributed by the other person at the place that is that permanent establishment.
6AB Foreign income and foreign tax
(1) A reference in this Act to foreign income is a reference to income (including superannuation lump sums and employment termination payments) derived from sources in a foreign country or foreign countries, and includes a reference to an amount included in assessable income under section 102AAZD, 456, 457 or 459A of this Act, or section 305‑70 of the Income Tax Assessment Act 1997.
(1C) A reference in this Act to foreign income includes a reference to an amount included in assessable income under:
(a) Division 301 of the Income Tax Assessment Act 1997 in its application under section 301‑5 of the Income Tax (Transitional Provisions) Act 1997; or
(b) Division 302 of the Income Tax Assessment Act 1997 in its application under section 302‑5 of the Income Tax (Transitional Provisions) Act 1997.
(2) A reference in this Act to foreign tax is a reference to tax imposed by a law of a foreign country, being:
(a) tax upon income; or
(b) tax upon profits or gains, whether of an income or capital nature; or
(c) any other tax, being a tax that is subject to an agreement having the force of law under the International Tax Agreements Act 1953;
but does not include a unitary tax or a credit absorption tax.
(5B) This section applies to a non‑share dividend in the same way as it applies to a dividend.
(6) In this section:
credit absorption tax means a tax imposed by a law of a foreign country to the extent that the tax would not have been payable if the taxpayer concerned or another taxpayer had not been entitled to an offset in respect of the tax under Division 770 of the Income Tax Assessment Act 1997.
law, in relation to a foreign country, means a law of that country, or of any part of, or place in, that country.
unitary tax means tax imposed by a law of a foreign country, being a law which, for the purposes of taxing income, profits or gains of a company derived from sources within that country, takes into account, or is entitled to take into account, income, losses, outgoings or assets of the company (or of a company that for the purposes of that law is treated as being associated with the company) derived, incurred or situated outside that country, but does not include tax imposed by that law if that law only takes those matters into account:
(a) if such an associated company is a resident for the purposes of that law; or
(b) for the purposes of granting any form of relief in relation to tax imposed on dividends received by one company from another company.
6B Income beneficially derived
(1) For the purposes of this Act, an amount of income derived by a person, not being a dividend paid by a company to the person as a shareholder in the company, shall be deemed to be attributable to a dividend:
(a) if the person derived the amount of income by reason of being the beneficial owner of the share in respect of which the dividend was paid; or
(b) if the person derived the amount of income as a beneficiary in a trust estate and the amount of income can be attributed, directly or indirectly, to the dividend or to an amount that is deemed, by any application or successive applications of this subsection, to be an amount of income attributable to the dividend.
(1A) For the purposes of this Act, an amount of income derived by a person, being income other than passive income, is to be taken to be income attributable to passive income:
(a) if the person derived the amount of income by reason of being beneficially entitled to an amount representing passive income; or
(b) if the person derived the amount of income as a beneficiary in a trust estate and the amount of income can be attributed, directly or indirectly, to passive income or to an amount that is taken, by any application or successive applications of this subsection, to be an amount of income attributable to passive income.
(2) For the purposes of this Act, an amount of income derived by a person, being income other than interest income, shall be deemed to be income attributable to interest income:
(a) if the person derived the amount of income by reason of being beneficially entitled to an amount representing interest income; or
(b) if the person derived the amount of income as a beneficiary in a trust estate and the amount of income can be attributed, directly or indirectly, to interest income or to an amount that is deemed, by any application or successive applications of this subsection, to be an amount of income attributable to interest income.
(2A) For the purposes of this Act, an amount of income derived by a person shall be deemed to be income derived from a particular source:
(a) except where paragraph (b) applies:
(i) if the person derived the amount of income by reason of being beneficially entitled to an amount that is derived from that source; or
(ii) if the person derived the amount of income as a beneficiary in a trust estate and the amount of income can be attributed, directly or indirectly, to income derived from that source or to an amount that is deemed, by any other application or applications of this subsection, to be an amount that is income derived from that source; or
(b) if the income so derived is, by virtue of subsection (1), (1A) or (2), attributable to a dividend, passive income or interest income derived from that source.
(3) Where a beneficiary in a trust estate is presently entitled to income of the trust estate, that income shall, for the purposes of this section, be deemed to be an amount of income derived by the person.
(4) This section:
(a) applies to a non‑share equity interest in the same way as it applies to a share; and
(b) applies to an equity holder in the same way as it applies to a shareholder; and
(c) applies to a non‑share dividend in the same way as it applies to a dividend.
6BA Taxation treatment of certain shares
(1) This section applies if a shareholder holds shares in a company (the original shares) and the company issues other shares (the bonus shares) in respect of the original shares.
(2) If the bonus shares are a dividend, or taken to be a dividend (including as a result of section 45C), the consideration for the acquisition of the shares for the purposes of this Act is so much of the dividend as is:
(a) included in the taxpayer’s assessable income; and
(b) is not rebatable under section 46A.
(3) If the bonus shares are issued for no consideration and are not a dividend or taken to be a dividend, then for the purposes of this Act, in determining:
(a) the value of such of the original shares and bonus shares as the taxpayer elects under section 70‑45 of the Income Tax Assessment Act 1997 to value at cost; and
(b) where any of the original shares or any of the bonus shares are not articles of trading stock of the taxpayer:
(i) the amount or value of the consideration paid in respect of the acquisition of any of those shares for the purposes of Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997; or
(ii) the amount of any profit or loss arising on the sale or disposal of any of those shares;
any amounts paid or payable by the taxpayer in respect of the original shares (whether on purchase of the shares, on application for or allotment of the shares, to meet calls or otherwise) shall be deemed to have been paid or to be payable by the taxpayer in respect of the original shares and the bonus shares in such proportions as the Commissioner considers appropriate in the circumstances.
(4) A company issues shares for no consideration if:
(a) it credits its capital account with profits in connection with the issue of the shares; or
(b) it credits its capital account with the amount of any dividend to a shareholder and the shareholder does not have a choice whether to be paid the dividend or to be issued with the shares.
This subsection does not limit the generality of subsection (3).
Note: A company that makes a credit covered by paragraph (a) or (b) will have a tainted share capital account.
(5) Subject to subsection (6), if a shareholder has a choice whether to be paid a dividend or to be issued shares and the shareholder chooses to be issued with shares:
(a) the dividend is taken to be credited to the shareholder; and
(b) the dividend is taken to have been paid out of profits; and
(c) subsections (2) and (3) apply in working out the consideration for the acquisition of the shares for the purposes of this Act.
However, the share capital account of the company does not become a tainted share capital account as a result of the crediting of the dividend to the share capital account.
(6) Subsection (5) does not apply if:
(a) a shareholder in a listed public company has a choice whether to be paid a dividend (other than a minimally franked dividend within the meaning of subsection 45(3)) or to be issued shares and the shareholder chooses to be issued with shares; and
(b) the company does not credit the share capital account in connection with the issue of those shares.
Note: If subsection (5) does not apply because of this subsection, subsection (3) will apply.
(7) This section (other than subsection (6)):
(a) applies to a non‑share equity interest in the same way as it applies to a share; and
(b) applies to an equity holder in the same way as it applies to a shareholder; and
(c) applies to a non‑share dividend in the same way as it applies to a dividend.
6C Source of royalty income derived by a non‑resident
(1) This section applies to income that is derived on or after 1 July 1968 by a non‑resident and consists of royalty that:
(a) is paid or credited to the non‑resident by the Commonwealth, by a State, by an authority of the Commonwealth or of a State or by a person who is, or by persons at least one of whom is, a resident and is not an outgoing wholly incurred by the Commonwealth, the State, the authority or that person or those persons in carrying on business in a country outside Australia at or through a permanent establishment of the Commonwealth, the State, the authority or that person or those persons in that country; or
(b) is paid or credited to the non‑resident by a person who is, or by persons each of whom is, a non‑resident and is, or is in part, an outgoing incurred by that person or those persons in carrying on business in Australia at or through a permanent establishment of that person or those persons in Australia.
(1A) For the purposes of Division 5 and Division 6 of Part III, but subject to subsections (3) and (4), income to which this section applies shall be deemed to be attributable to sources in Australia.
(2) For the purposes of sections 6‑5 and 6‑10 of the Income Tax Assessment Act 1997, but subject to subsections (3) and (4), income to which this section applies shall be deemed to have been derived from a source in Australia.
(3) Where:
(a) income to which this section applies is paid or credited to the non‑resident by whom it is derived by the Commonwealth, by a State, by an authority of the Commonwealth or of a State or by a person who is, or by persons at least one of whom is, a resident; and
(b) the royalty of which the income consists is, in part, an outgoing incurred by the Commonwealth, the State, the authority or that person or those persons in carrying on business in a country outside Australia at or through a permanent establishment of the Commonwealth, the State, the authority or that person or those persons in that country;
subsection (2) has effect in relation to so much only of the income as is attributable to so much of the royalty as is not an outgoing so incurred.
(4) Where:
(a) income to which this section applies is paid or credited to the non‑resident by whom it is derived by a person who, or by persons each of whom, is a non‑resident; and
(b) the royalty of which the income consists is, in part only, an outgoing incurred by the person or persons by whom it is paid or credited in carrying on business in Australia at or through a permanent establishment of that person or those persons in Australia;
subsection (2) has effect in relation to so much only of the income as is attributable to so much of the royalty as is an outgoing so incurred.
(5) In subsection (6), a reference to a relevant person is a reference to the Commonwealth, a State, an authority of the Commonwealth or of a State or a person who is, or persons at least 1 of whom is, a resident.
(6) For the purposes of paragraphs (1)(a) and (3)(b), where:
(a) royalty is paid or credited, after the commencement of this subsection, to a non‑resident by a relevant person carrying on business in a country outside Australia; and
(b) the royalty or a part of the royalty:
(i) is incurred by the relevant person in gaining or producing income that is derived by the relevant person otherwise than in carrying on business in a country outside Australia at or through a permanent establishment of the relevant person in that country or is incurred by the relevant person for the purpose of gaining or producing income to be so derived; or
(ii) is incurred by the relevant person in carrying on business for the purpose of gaining or producing income and is reasonably attributable to income that is derived, or may be derived, by the relevant person otherwise than in so carrying on business at or through a permanent establishment of the relevant person in a country outside Australia;
the royalty or the part of the royalty, as the case may be, is not an outgoing incurred by the relevant person in carrying on business in a country outside Australia at or through a permanent establishment of the relevant person in that country.
(7) For the purposes of paragraphs (1)(b) and (4)(b), where:
(a) royalty is paid or credited, after the commencement of this subsection, to a non‑resident by another person or other persons (in this subsection referred to as the payer), being:
(i) another person who is carrying on business in Australia and is a non‑resident; or
(ii) other persons who are carrying on business in Australia and each of whom is a non‑resident; and
(b) the royalty or a part of the royalty:
(i) is incurred by the payer in gaining or producing income that is derived by the payer in carrying on business in Australia at or through a permanent establishment of the payer in Australia or is incurred by the payer for the purpose of gaining or producing income to be so derived; or
(ii) is incurred by the payer in carrying on a business for the purpose of gaining or producing income and is reasonably attributable to income that is derived, or may be derived, by the payer in so carrying on business at or through a permanent establishment of the payer in Australia;
the royalty or the part of the royalty, as the case may be, is an outgoing incurred by the payer in carrying on business in Australia at or through a permanent establishment of the payer in Australia.
6CA Source of natural resource income derived by a non‑resident
(1) In this section:
double tax agreement means an agreement within the meaning of the International Tax Agreements Act 1953.
natural resource income means income that:
(a) is derived by a non‑resident; and
(b) is calculated, in whole or in part, by reference to the value or quantity of natural resources produced, recovered or produced and recovered, in Australia after 7 April 1986;
but does not include:
(c) income that consists of royalty; or
(d) income where:
(i) on 7 April 1986, the non‑resident had a continuing entitlement to receive the income;
(ii) the income was derived by the non‑resident pursuant to that continuing entitlement;
(iii) the non‑resident was, at 5 o’clock in the afternoon, by standard time in the Australian Capital Territory on 7 April 1986, a resident, within the meaning of a double tax agreement, of a foreign country in respect of which the double tax agreement was in force;
(iv) before 8 April 1986, the Commissioner had given a statement in writing to the effect that income tax would be levied on 50% of income included in a specified class of income; and
(v) the income is included in that class of income.
(2) For the purposes of Divisions 5 and 6 of Part III, natural resource income shall be deemed to be attributable to sources in Australia.
(3) For the purposes of section 255 of this Act and sections 6‑5 and 6‑10 of the Income Tax Assessment Act 1997, natural resource income shall be deemed to have been derived from a source in Australia.
6D Some tax offsets under the 1997 Assessment Act are treated as credits
A tax offset under a provision of the Income Tax Assessment Act 1997 that corresponds to a provision of this Act that provides for a credit is taken to be a credit for the purposes of this Act.
Note: All other tax offsets under the Income Tax Assessment Act 1997 are treated as rebates: see section 160ADA.
6F Dual resident investment company
(1) For the purposes of this Act, a company (other than a company in the capacity of trustee) is a dual resident investment company in relation to a year of income if: