(b) by reason of the ownership by the taxpayer of the relevant property, an amount (in this subsection referred to as the relevant amount) would, apart from the operation of the relevant exempting provisions, be included, under Division 5, in the assessable income of the taxpayer of a year of income (in this subsection referred to as the relevant year of income);
(c) apart from this Division, the relevant amount would not be included in the assessable income of the taxpayer of the relevant year of income; and
(d) so much of the amount or value of the consideration provided by the taxpayer under or in connection with the tax avoidance agreement as the Commissioner is satisfied was provided in respect of the acquisition by the taxpayer of the relevant property substantially exceeds the amount or value of the consideration that might reasonably be expected to have been provided by the taxpayer in respect of the acquisition of the relevant property if the taxpayer were liable to pay tax, in respect of any income derived by the taxpayer from the relevant property, at the public company rate applicable for the financial year in which the taxpayer acquired the relevant property;
the diverted income of the taxpayer of the relevant year of income shall include the relevant amount.
(3) Where:
(a) a taxpayer, not being a taxpayer in the capacity of a trustee, has acquired property (in this subsection referred to as the relevant property), being a beneficial interest in a trust estate, under a tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of a tax avoidance agreement;
(b) by reason of the ownership by the taxpayer of the relevant property, an amount (in this subsection referred to as the relevant amount) would, apart from the operation of the relevant exempting provisions, be included, under Division 6, in the assessable income of the taxpayer of a year of income (in this subsection referred to as the relevant year of income);
(c) apart from this Division, the relevant amount would not be included in the assessable income of the taxpayer of the relevant year of income; and
(d) so much of the amount or value of the consideration provided by the taxpayer under or in connection with the tax avoidance agreement as the Commissioner is satisfied was provided in respect of the acquisition by the taxpayer of the relevant property substantially exceeds the amount or value of the consideration that might reasonably be expected to have been provided by the taxpayer in respect of the acquisition of the relevant property if the taxpayer were liable to pay tax, in respect of any income derived by the taxpayer from the relevant property, at the public company rate applicable for the financial year in which the taxpayer acquired the relevant property;
the diverted income of the taxpayer of the relevant year of income shall include the relevant amount.
(4) Where:
(a) a taxpayer, being a taxpayer in the capacity of a trustee of a trust estate, has acquired property (in this subsection referred to as the relevant property) under a tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of a tax avoidance agreement;
(b) by reason that the taxpayer derives any income from the relevant property, an amount (in this subsection referred to as the relevant amount) would, apart from the operation of the relevant exempting provisions, be included in the assessable income of the trust estate of a year of income otherwise than under Division 5, section 97, section 99B or section 100;
(c) apart from this Division, the relevant amount would not be included in the assessable income of the trust estate of the year of income; and
(e) so much of the amount or value of the consideration provided by the taxpayer under or in connection with the tax avoidance agreement as the Commissioner is satisfied was provided in respect of the acquisition by the taxpayer of the relevant property substantially exceeds the amount or value of the consideration that might reasonably be expected to have been provided by the taxpayer in respect of the acquisition of the relevant property if the taxpayer were liable to pay tax, in respect of any income derived by the taxpayer from the relevant property, at the public company rate applicable for the financial year in which the taxpayer acquired the relevant property;
the diverted trust income of the trust estate of the year of income shall include the relevant amount.
(5) Where:
(a) a taxpayer, being a taxpayer in the capacity of a trustee of a trust estate, has acquired property (in this subsection referred to as the relevant property), being an interest in a partnership, under a tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of a tax avoidance agreement;
(b) by reason of the ownership by the taxpayer of the relevant property, an amount (in this subsection referred to as the relevant amount) would, apart from the operation of the relevant exempting provisions, be included, under Division 5, in the assessable income of the trust estate of a year of income (in this subsection referred to as the relevant year of income);
(c) apart from this Division, the relevant amount would not be included in the assessable income of the trust estate of the relevant year of income; and
(e) so much of the amount or value of the consideration provided by the taxpayer under or in connection with the tax avoidance agreement as the Commissioner is satisfied was provided in respect of the acquisition by the taxpayer of the relevant property substantially exceeds the amount or value of the consideration that might reasonably be expected to have been provided by the taxpayer in respect of the acquisition of the relevant property if the taxpayer were liable to pay tax, in respect of any income derived by the taxpayer from the relevant property, at the public company rate applicable for the financial year in which the taxpayer acquired the relevant property;
the diverted trust income of the trust estate of the relevant year of income shall include the relevant amount.
(6) Where:
(a) a taxpayer, being a taxpayer in the capacity of a trustee of a trust estate (in this subsection referred to as the relevant trust estate), has acquired property (in this subsection referred to as the relevant property), being a beneficial interest in another trust estate, under a tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of a tax avoidance agreement;
(b) by reason of the ownership by the taxpayer of the relevant property, an amount (in this subsection referred to as the relevant amount) would, apart from the operation of the relevant exempting provisions, be included, under section 97, 99B or 100, in the assessable income of the relevant trust estate of a year of income (in this subsection referred to as the relevant year of income);
(c) apart from this Division, the relevant amount would not be included in the assessable income of the relevant trust estate of the relevant year of income; and
(e) so much of the amount or value of the consideration provided by the taxpayer under or in connection with the tax avoidance agreement as the Commissioner is satisfied was provided in respect of the acquisition by the taxpayer of the relevant property substantially exceeds the amount or value of the consideration that might reasonably be expected to have been provided by the taxpayer in respect of the acquisition of the relevant property if the taxpayer were liable to pay tax, in respect of any income derived by the taxpayer from the relevant property, at the public company rate applicable for the financial year in which the taxpayer acquired the relevant property;
the diverted trust income of the relevant trust estate of the relevant year of income shall include the relevant amount.
(8) Where:
(a) a deduction is allowable or deductions are allowable, in calculating the net income of a partnership or trust estate of a year of income, in respect of losses or outgoings (in this subsection referred to as the relevant losses or outgoings) incurred under or in connection with a tax avoidance agreement;
(b) if no deduction were allowable, in calculating that net income, in respect of the relevant losses or outgoings and no relevant exempting provisions were applicable in relation to a taxpayer, an amount would be included in the assessable income of the taxpayer of a year of income by reason that the taxpayer owned an interest in the partnership or a beneficial interest in the trust estate or owned an interest in any other partnership or a beneficial interest in any other trust estate; and
(c) if the deduction or deductions were allowed, in calculating that net income, in respect of the relevant losses or outgoings and no relevant exempting provision were applicable in relation to the taxpayer:
(i) no amount would be included in the assessable income of the taxpayer of the year of income by reason that the taxpayer owned an interest in a partnership or a beneficial interest in a trust estate as mentioned in paragraph (b); or
(ii) an amount would be included in the assessable income of the taxpayer of the year of income by reason that the taxpayer owned an interest in a partnership or a beneficial interest in a trust estate as mentioned in paragraph (b) but the amount that would be so included in that assessable income would be less than the amount referred to in paragraph (b);
then, for the purposes of the application of subsections (2), (3), (5) and (6) in relation to the taxpayer in relation to the tax avoidance agreement, no deduction shall be allowed in respect of the relevant losses or outgoings in calculating the net income of the partnership or trust estate referred to in paragraph (a).
(10) For the purposes of the application of subsection (8), a reference to a deduction that is allowable in calculating the net income of a partnership does not include a reference to a deduction allowable to the partnership in respect of expenditure taken under sections 70‑90 and 70‑95 and subsection 70‑100(3) of the Income Tax Assessment Act 1997 to have been incurred in the acquisition of trading stock by the partnership.
(11) In determining for the purposes of this section the amount or value of the consideration that might reasonably be expected to have been provided by a taxpayer in respect of the acquisition of property by the taxpayer if the taxpayer were liable to pay tax in respect of any income derived by the taxpayer from the property at the public company rate applicable for the financial year in which the taxpayer acquired the property, the possibility that the taxpayer would be entitled to a rebate of tax in respect of any of that income shall be disregarded.
(12) In determining for the purposes of this section whether an amount would, apart from the operation of the relevant exempting provisions, be included in the assessable income of a taxpayer or a trust estate of a year of income, section 128D of this Act and section 802‑15 of the Income Tax Assessment Act 1997 shall be disregarded.
(13) For the purposes of this section, where:
(a) a taxpayer acquired property, being an interest in a trust estate or partnership, before the time when a tax avoidance agreement was entered into; and
(b) under the tax avoidance agreement, or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance agreement, the amount of the share (in this subsection referred to as the relevant share) of the taxpayer of the income of the trust estate or partnership of any year of income was or is increased;
the following provisions apply:
(c) the property referred to in paragraph (a) shall be taken to have been acquired by the taxpayer under the tax avoidance agreement; and
(d) any consideration provided by the taxpayer in respect of the increase in the amount of the relevant share shall be taken to be consideration provided by the taxpayer in respect of the acquisition of the property referred to in paragraph (a).
(14) For the purposes of the application of this section in relation to the acquisition of property by a person under a tax avoidance agreement, the Commissioner may be satisfied that consideration provided by the person under or in connection with the tax avoidance agreement was provided by the person in respect of the acquisition of the property notwithstanding, in a case where the person acquired property from another person, that the consideration was not provided to that other person.
121H Assessment of diverted income and diverted trust income
(1) A taxpayer, not being a taxpayer in the capacity of a trustee of a trust estate, shall be assessed and is liable to pay tax, at the rate declared by the Parliament for the purposes of this Division, upon the diverted income of the taxpayer of the year of income.
(2) A taxpayer in the capacity of a trustee of a trust estate shall be assessed and is liable to pay tax, at the rate declared by the Parliament for the purposes of this Division, upon the diverted trust income of the trust estate of the year of income.
121J Ascertainment of diverted income or diverted trust income deemed to be an assessment
The ascertainment of the amount of the diverted income or diverted trust income and of the tax payable thereon shall, for all purposes of this Act be deemed to be an assessment.
121K Application of International Tax Agreements Act
For the purposes of sections 15 and 16 of the International Tax Agreements Act 1953, any amount that is included in the diverted income or diverted trust income of a taxpayer of a year of income shall be deemed to be included in the assessable income of the taxpayer of the year of income.
121L Division applies notwithstanding exemption under other laws
This Division has effect notwithstanding anything contained in any law of the Commonwealth other than this Act.
Commonwealth Coat of Arms of Australia
Income Tax Assessment Act 1936
No. 27, 1936
Compilation No. 190
Compilation date: 1 January 2026
Includes amendments: Act No. 9, 2025
This compilation is in 7 volumes
Volume 1: sections 1‑78A
Volume 2: sections 79A‑121L
Volume 3: sections 124ZM‑204
Volume 4: sections 251R‑468
Volume 5: Schedules
Volume 6: Endnotes 1‑4
Volume 7: Endnote 5
Each volume has its own contents
About this compilation
This compilation
This is a compilation of the Income Tax Assessment Act 1936 that shows the text of the law as amended and in force on 1 January 2026 (the compilation date).
The notes at the end of this compilation (the endnotes) include information about amending laws and the amendment history of provisions of the compiled law.
Uncommenced amendments
The effect of uncommenced amendments is not shown in the text of the compiled law. The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. Any uncommenced amendments affecting the law are accessible on the Register (www.legislation.gov.au).
Application, saving and transitional provisions
If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes.
Editorial changes
For more information about any editorial changes made in this compilation, see the endnotes.
Presentational changes
The Legislation Act 2003 provides for First Parliamentary Counsel to make presentational changes to a compilation. Presentational changes are applied to give a more consistent look and feel to legislation published on the Register, and enable the user to more easily navigate those documents.
Modifications
If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. Any modifications affecting the law are accessible on the Register.
Self‑repealing provisions
If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes.
Contents
Part III—Liability to taxation
Division 10E—PDFs (pooled development funds)
Subdivision A—Shares in PDFs
124ZM Treatment distributions to shareholders in PDF
124ZN Exemption of income from sale of shares in a PDF
124ZO Shares in a PDF are not trading stock
124ZQ Effect of company becoming a PDF
124ZR Effect of company ceasing to be a PDF
Subdivision B—The taxable income of PDFs
124ZS Definitions
124ZTA Taxable income in first year as PDF if PDF component is nil
124ZT SME assessable income
124ZU SME income component
124ZV Unregulated investment component
Subdivision C—Adjustments of the tax treatment of capital gains and capital losses of PDFs
124ZW Definitions
124ZX Companies to which this Subdivision applies
124ZY Classes of assessable income
124ZZ Treatment of capital gains
124ZZA Allocation of gain amounts and loss amounts to classes of assessable income
124ZZB Assessable income etc. in relation to capital gains
124ZZD No net capital loss
Division 11—Interest paid by companies on bearer debentures
126 Interest paid by a company on bearer debentures
127 Credit for tax paid by company
128 Assessments of tax
Division 11A—Dividends, interest and royalties paid to non‑residents and to certain other persons
Subdivision A—General
128AAA Application of Division to non‑share dividends
128A Interpretation
128AA Deemed interest in respect of transfers of certain securities