(f) the eligible proportion in relation to such an interest.
(2) For the purposes of applying section 159GZZZG or 159GZZZH in accordance with subsection (1):
(a) any interest of an entity that is an eligible interest for the purposes of the application of that section apart from subsection (1) shall be taken not to be an eligible interest; and
(b) any eligible interest of an eligible entity (including the natural person) held in the actual holding company referred to in subsection (1), or in any eligible entity interposed between the natural person and that holding company, shall be taken not to be an eligible interest.
Division 16K—Effect of buy‑backs of shares
Subdivision AA—Application of Division to non‑share equity interests
159GZZZIA Application of Division to non‑share dividends
(1) This Division:
(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.
(2) Paragraph (1)(a) does not apply to subsection 159GZZZP(1).
Subdivision A—Interpretation
159GZZZJ Interpretation
In this Division:
buy‑back has the meaning given by paragraph 159GZZZK(a).
off‑market purchase has the meaning given by paragraph 159GZZZK(d).
on‑market purchase has the meaning given by paragraph 159GZZZK(c).
purchase price has the meaning given by section 159GZZZM.
seller has the meaning given by paragraph 159GZZZK(b).
159GZZZK Explanation of terms
For the purposes of this Division, where a company buys a share in itself from a shareholder in the company:
(a) the purchase is a buy‑back; and
(b) the shareholder is the seller; and
(c) if:
(i) the share is listed for quotation in the official list of a stock exchange in Australia or elsewhere; and
(ii) the buy‑back is made in the ordinary course of trading on that stock exchange;
the buy‑back is an on‑market purchase; and
(d) if the buy‑back is not covered by paragraph (c)—the buy‑back is an off‑market purchase.
159GZZZL Special buy‑backs not made in ordinary course of trading on a stock exchange
For the purposes of this Division, a buy‑back is not made in the ordinary course of trading on a stock exchange in Australia if, when reported to the stock exchange, the transaction under which the buy‑back is made, is, under the stock exchange’s rules, described as special.
For the purposes of this Division, the purchase price in respect of a buy‑back of a share is:
(a) if the seller has received or is entitled to receive an amount or amounts of money as a result of or in respect of the buy‑back—that amount or the sum of those amounts; or
(b) if the seller has received or is entitled to receive property other than money as a result of or in respect of the buy‑back—the market value of that property at the time of the buy‑back; or
(c) if the seller has received or is entitled to receive both an amount or amounts of money and property other than money as a result of or in respect of the buy‑back—the sum of that amount or those amounts and the market value of that property at the time of the buy‑back.
Subdivision B—Company buying‑back shares
159GZZZN Buy‑back and cancellation disregarded for certain purposes
If a company buys‑back a share then the buy‑back, and any subsequent cancellation of the share, are disregarded for the purposes of:
(a) determining for the purposes of this Act:
(i) whether an amount is included in the assessable income of the company under a provision of this Act (other than a provision of Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997 (about CGT)); or
(ii) whether an amount is allowable as a deduction to the company; or
(b) determining whether the company makes a capital gain or capital loss.
Subdivision C—Off‑market purchases
159GZZZP Part of off‑market purchase price is a dividend if the company is not a listed public company
(1) For the purposes of this Act, but subject to subsection (1A), where a buy‑back of a share or non‑share equity interest by a company is an off‑market purchase, the difference between:
(a) the purchase price; and
(b) the part (if any) of the purchase price in respect of the buy‑back of the share or non‑share equity interest which is debited against amounts standing to the credit of:
(i) the company’s share capital account if it is a share that is bought back; or
(ii) the company’s share capital account or non‑share capital account if it is a non‑share equity interest that is bought back;
is taken to be a dividend paid by the company:
(c) to the seller as a shareholder in the company; and
(d) out of profits derived by the company; and
(e) on the day the buy‑back occurs.
(1A) If the dividend is included to any extent in the seller’s assessable income of any year of income, it is not taken into account to that extent under section 118‑20 of the Income Tax Assessment Act 1997.
(2) The remainder of the purchase price is taken not to be a dividend for the purposes of this Act.
(3) This section does not apply if the company is a listed public company.
159GZZZPA No part of off‑market purchase price is a dividend if the company is a listed public company
For the purposes of this Act, where a buy‑back of a share by a listed public company is an off‑market purchase, no part of the purchase price in respect of the buy‑back of the share is taken to be a dividend.
159GZZZQ Consideration in respect of off‑market purchase
(1) Subject to this section, if a buy‑back of a share is an off‑market purchase, then:
(a) in determining, for the purposes of this Act:
(i) whether an amount is included in the assessable income of the seller under a provision of this Act other than Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about CGT); or
(ii) whether an amount is allowable as a deduction to the seller; or
(b) whether the seller makes a capital gain or capital loss;
in respect of the buy‑back, the seller is taken to have received or to be entitled to receive, as consideration in respect of the sale of the share, an amount equal to the purchase price in respect of the buy‑back.
Deemed consideration increased to market value
(2) If apart from this section:
(a) the purchase price in respect of the buy‑back;
is less than:
(b) the amount that would have been the market value of the share at the time of the buy‑back if the buy‑back did not occur and was never proposed to occur;
then, subject to subsection (3), in making the determinations mentioned in paragraphs (1)(a) and (b), the amount of consideration that the seller is taken to have received or to be entitled to receive in respect of the sale of the share is equal to the market value mentioned in paragraph (b) of this subsection.
Deemed consideration reduced where dividend assessable etc.
(3) Subject to subsections (3A) and (8), if there is a reduction amount in respect of the buy‑back (see subsection (4)), then, in making the determinations mentioned in paragraphs (1)(a) and (b), the amount of consideration that the seller is taken to have received or to be entitled to receive in respect of the sale of the share, after any application of subsection (2), is reduced by the reduction amount.
(3A) Subsection (3) does not apply if the buy‑back is by a listed public company.
Reduction amount
(4) The following steps are to be taken in working out whether there is a reduction amount in respect of the buy‑back:
(a) first, work out whether the whole or part of the purchase price in respect of the buy‑back is taken to be a dividend by section 159GZZZP;
(b) second, for any amount satisfying paragraph (a), work out whether the whole or part of it is either:
(i) included in the seller’s assessable income of any year of income (disregarding section 128D of this Act and section 802‑15 of the Income Tax Assessment Act 1997); or
(ii) an eligible non‑capital amount (see subsection (5)).
The amount worked out is the reduction amount in respect of the buy‑back.
Eligible non‑capital amount
(5) An amount is an eligible non‑capital amount if it is neither:
(a) debited against a share capital account or a reserve to the extent that it consists of profits from the revaluation of assets of the company that have not been disposed of by the company; nor
(b) attributable, either directly or indirectly, to amounts that were transferred from such an account or reserve of the company.
Debit for deemed dividend
(7) For the purposes of subsection (5), an amount of the purchase price that is taken to be a dividend by section 159GZZZP is taken to have been debited against the account or reserves against which the purchase price was debited, and to the same extent.
Offsetable amount excluded from reduction where loss
(8) If:
(aa) the seller is a corporate tax entity; and
(a) the amount of consideration that the seller is taken by subsection (1) or (2) to have received or to be entitled to receive in respect of the sale of the share is, apart from this subsection, reduced by a reduction amount under subsection (3); and
(b) the dividend mentioned in paragraph (4)(a), so far as it does not exceed the reduction amount, consists to any extent of an offsetable amount (see subsection (9)); and
(c) disregarding this subsection, as a result of the operation of this section:
(i) for the purposes of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about CGT), the seller incurs a capital loss or an increased capital loss (which loss or increase is the loss amount) in respect of the buy‑back; or
(ii) a loss, or an increased loss, (which loss or increase is also the loss amount) in respect of the buy‑back is allowable as a deduction to the seller under a provision of a Part of this Act other than Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997; or
(iii) the amount of a deduction allowable from the seller’s assessable income of any year of income in respect of the issue or acquisition of the share exceeds, or exceeds by a greater amount, (the excess or increased excess is also the loss amount) the amount included in the seller’s assessable income of any year of income in respect of the buy‑back of the share;
then the reduction in the amount of the consideration under subsection (3) is instead a reduction equal to:
(d) the reduction amount;
less:
(e) so much of the offsetable amount as does not exceed the loss amount.
Meaning of offsetable amount
(9) For the purposes of subsection (8), if the seller is entitled to a tax offset under Division 207 of the Income Tax Assessment Act 1997 in the seller’s assessment for a year of income in respect of the dividend, the dividend consists of an offsetable amount worked out using the formula:
Start formula start fraction Amount of offset over Corporate tax rate end fraction end formula
Subdivision D—On‑market purchases
159GZZZR No part of on‑market purchase price is a dividend
For the purposes of this Act, where a buy‑back by a company of a share is an on‑market purchase, no part of the purchase price in respect of the buy‑back of the share is taken to be a dividend.
159GZZZS Consideration in respect of on‑market purchase
Where a buy‑back is an on‑market purchase, then:
(a) in determining, for the purposes of this Act:
(i) whether an amount is included in the assessable income of the seller under a provision of this Act other than Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about CGT); or
(ii) whether an amount is allowable as a deduction to the seller; or
(b) whether the seller makes a capital gain or capital loss;
in respect of the buy‑back, the seller is taken to have received or to be entitled to receive, as consideration in respect of the sale of the share, the purchase price in respect of the buy‑back of the share.
Division 17—Rebates
Subdivision A—Concessional rebates
159H Application
This Subdivision applies in relation to an assessment in respect of the income of a taxpayer if and only if:
(a) the taxpayer is a resident and is not a company, and the assessment is not in respect of income derived by him or her in a representative capacity as an agent or trustee; or
(b) both of the following requirements are satisfied:
(i) the taxpayer is a trustee who is liable to be assessed under section 98 in respect of a share of the net income of a trust estate in respect of a beneficiary;
(ii) the beneficiary is a resident and is not a company.
Subdivision AB—Lump sum payments in arrears
159ZR Interpretation
(1) In this Subdivision, unless the contrary intention appears:
accrual year, in relation to the total arrears amount, means a year of income in which any part of the total arrears amount accrued.
annual arrears amount, in relation to an accrual year, means so much of the total arrears amount as accrued in that year.
associate has the same meaning as in section 318.
BSWAT payment amount means a payment amount paid to a person under the Business Services Wage Assessment Tool Payment Scheme Act 2015.
current year means the year of income for which the rebate is being calculated.
distant accrual year means an accrual year that is not a recent accrual year.
eligible income means:
(a) salary or wages to the extent to which they accrued during a period ending more than 12 months before the date on which they are paid;
(b) salary or wages paid to a person after re‑instatement to duty following a period of suspension of the person from duty, to the extent to which the salary or wages accrued during the period of suspension;
(c) a payment covered by section 12‑80 or 12‑120 in Schedule 1 to the Taxation Administration Act 1953;
(d) a Commonwealth education or training payment (see subsection 6(1));
(e) a payment that is covered by Division 52, 53 or 55 of the Income Tax Assessment Act 1997, but that is not exempt from income tax under that Division;
(f) a payment under a law of a foreign country that is similar to a payment covered by paragraph (e);
but does not include so much of any such amount as was taken into account in calculating the amount of a tax reimbursement payment by the Commonwealth that was authorised under section 65 of the Public Governance, Performance and Accountability Act 2013 (which deals with act of grace payments by the Commonwealth).
eligible lump sum, in relation to a year of income, means a lump sum payment of eligible income received on or after 1 July 1986 that is included in the assessable income of the year of income and accrued, in whole or in part, in an earlier year or years of income.
gross tax means the tax payable before the allowance of any rebates or credits.
law of a foreign country includes a law of any part of, or place in, a foreign country.
normal taxable income is the amount that would be the taxable income if:
(a) no amount were included in assessable income under Division 82, section 83‑10 or 83‑80 or Division 301 or 302 of the Income Tax Assessment Act 1997 or Division 82 of the Income Tax (Transitional Provisions) Act 1997; and
(b) the taxable income were reduced by any above‑average special professional income included in the taxable income under section 405‑15 of the Income Tax Assessment Act 1997; and
(c) no amount were included in assessable income under section 102‑5 of the Income Tax Assessment Act 1997 (about including net capital gains in assessable income).
notional tax amount has the meaning given by sections 159ZRC and 159ZRD.
rebated tax means the tax payable after the allowance of any tax offset under Division 82, 83, 301 or 302 of the Income Tax Assessment Act 1997, subsection 392‑35(2) of that Act (which allows some primary producers tax offsets) or Division 82 of the Income Tax (Transitional Provisions) Act 1997, but before the allowance of any other tax offsets or any credits.
rebate year means a year of income for which the conditions in paragraphs 159ZRA(1)(a) and (b) are satisfied.
recent accrual year, in relation to the total arrears amount, means:
(a) if there are 3 or more accrual years for the total arrears amount—the most recent 2 of those years; or
(b) in any other case—the accrual year, or each of the accrual years, for the total arrears amount.
salary or wages means payments covered by sections 12‑35, 12‑40 (except payments of remuneration to a director of the company who is also an associate of the company), 12‑45, 12‑80, 12‑110, 12‑115 and 12‑120 in Schedule 1 to the Taxation Administration Act 1953.
total arrears amount, in relation to a year of income, means the aggregate of the eligible lump sums included in the assessable income of the year of income to the extent to which those eligible lump sums accrued in an earlier year or years of income.
(2) This Subdivision applies in relation to a BSWAT payment amount as if:
(a) the BSWAT payment amount were an eligible lump sum accrued wholly in an earlier year or years of income; and
(b) the wages by reference to which the BSWAT payment amount was worked out were eligible income accrued in the year of income to which the wages relate.
159ZRA Eligibility for rebate
(1) Where:
(a) the assessable income of the taxpayer of a year of income (in this Subdivision called the current year) includes one or more eligible lump sums; and
(b) the total arrears amount is not less than 10% of the amount (if any) remaining after deducting that total arrears amount from the normal taxable income of the current year;
the taxpayer is entitled to a rebate of tax, in the taxpayer’s assessment for the current year, of the amount (if any) calculated in accordance with this Subdivision.
(2) The rebate is only available to a natural person (otherwise than in the capacity of a trustee).
159ZRB Calculation of rebate
The rebate is calculated in accordance with the formula: