(b) for the purposes of determining whether this Part applies to the scheme because of section 177DA or 177J.
177D Schemes to which this Part applies
Scheme for purpose of obtaining a tax benefit
(1) This Part applies to a scheme if it would be concluded (having regard to the matters in subsection (2)) that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme did so for the purpose of:
(a) enabling a taxpayer (a relevant taxpayer) to obtain a tax benefit in connection with the scheme; or
(b) enabling the relevant taxpayer and another taxpayer (or other taxpayers) each to obtain a tax benefit in connection with the scheme;
whether or not that person who entered into or carried out the scheme or any part of the scheme is the relevant taxpayer or is the other taxpayer or one of the other taxpayers.
Have regard to certain matters
(2) For the purpose of subsection (1), have regard to the following matters:
(a) the manner in which the scheme was entered into or carried out;
(b) the form and substance of the scheme;
(c) the time at which the scheme was entered into and the length of the period during which the scheme was carried out;
(d) the result in relation to the operation of this Act that, but for this Part, would be achieved by the scheme;
(e) any change in the financial position of the relevant taxpayer that has resulted, will result, or may reasonably be expected to result, from the scheme;
(f) any change in the financial position of any person who has, or has had, any connection (whether of a business, family or other nature) with the relevant taxpayer, being a change that has resulted, will result or may reasonably be expected to result, from the scheme;
(g) any other consequence for the relevant taxpayer, or for any person referred to in paragraph (f), of the scheme having been entered into or carried out;
(h) the nature of any connection (whether of a business, family or other nature) between the relevant taxpayer and any person referred to in paragraph (f).
Note: Section 960‑255 of the Income Tax Assessment Act 1997 may be relevant to determining family relationships for the purposes of paragraphs (f) and (h).
Tax benefit
(3) Despite subsection (1), this Part applies to the scheme only if the relevant taxpayer has obtained, or would but for section 177F obtain, a tax benefit in connection with the scheme.
When schemes entered into etc.
(4) Despite subsection (1), this Part applies to the scheme only if:
(a) the scheme has been or is entered into after 27 May 1981; or
(b) the scheme has been or is carried out or commenced to be carried out after that day (and is not a scheme that was entered into on or before that day).
Schemes outside Australia
(5) This section applies whether or not the scheme has been or is entered into or carried out in Australia or outside Australia or partly in Australia and partly outside Australia.
177DA Schemes that limit a taxable presence in Australia
Scheme for a purpose including obtaining a tax benefit etc.
(1) Without limiting section 177D, this Part also applies to a scheme if:
(a) under, or in connection with, the scheme:
(i) a foreign entity makes a supply to an Australian customer of the foreign entity; and
(ii) activities are undertaken in Australia directly in connection with the supply; and
(iii) some or all of those activities are undertaken by an Australian entity who, or are undertaken at or through an Australian permanent establishment of an entity who, is an associate of or is commercially dependent on the foreign entity; and
(iv) the foreign entity derives ordinary income, or statutory income, from the supply; and
(v) some or all of that income is not attributable to an Australian permanent establishment of the foreign entity; and
(b) it would be concluded (having regard to the matters in subsection (2)) that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme did so for a principal purpose of, or for more than one principal purpose that includes a purpose of:
(i) enabling a taxpayer (a relevant taxpayer) to obtain a tax benefit, or both to obtain a tax benefit and to reduce one or more of the relevant taxpayer’s liabilities to tax under a foreign law, in connection with the scheme; or
(ii) enabling the relevant taxpayer and another taxpayer (or other taxpayers) each to obtain a tax benefit, or both to obtain a tax benefit and to reduce one or more of their liabilities to tax under a foreign law, in connection with the scheme;
whether or not that person who entered into or carried out the scheme or any part of the scheme is the relevant taxpayer or is the other taxpayer or one of the other taxpayers; and
(c) the foreign entity is a significant global entity for a year of income in which the relevant taxpayer, or one or more other taxpayers, would (but for this Part):
(i) obtain a tax benefit; or
(ii) reduce one or more of their liabilities to tax under a foreign law;
in connection with the scheme.
Have regard to certain matters
(2) For the purposes of paragraph (1)(b), have regard to the following matters:
(a) the matters in subsection 177D(2);
(b) the extent to which the activities that contribute to bringing about the contract for the supply are performed, and are able to be performed, by:
(i) the foreign entity; or
(ii) another entity referred to in subparagraph (1)(a)(iii); or
(iii) any other entities;
(c) the result, in relation to the operation of any foreign law relating to taxation, that (but for this Part) would be achieved by the scheme.
Deferral of foreign tax liabilities
(3) For the purposes of paragraph (1)(b), a deferral of a taxpayer’s liabilities to tax under a foreign law is taken to be a reduction of those liabilities, unless there are reasonable commercial grounds for the deferral.
Tax benefit
(4) Despite subsection (1), this Part applies to the scheme because of this section only if the relevant taxpayer has obtained, or would but for section 177F obtain, a tax benefit in connection with the scheme.
Commissioner not required to enquire into foreign tax matters
(5) The Commissioner is required to have regard to a matter referred to in paragraph (2)(c) only so far as information relevant to that matter is available to the Commissioner, and is not required to acquire further information in order to have regard to that matter.
Schemes outside Australia
(6) This section applies whether or not the scheme has been or is entered into or carried out in Australia or outside Australia or partly in Australia and partly outside Australia.
Income from supply by trust estate or partnership
(7) Subsection (8) applies if:
(a) both of the following conditions are satisfied:
(i) a trust estate or partnership makes a supply to an entity;
(ii) that entity would be an Australian customer of the trust estate or partnership if the trust estate or partnership were a foreign entity; and
(b) because of the supply, an amount of ordinary income, or statutory income, is included in the assessable income of the trust estate or partnership (as worked out for the purposes of working out its net income for a year of income); and
(c) the trust estate or partnership has a foreign entity participant at any time in that year of income; and
(d) any of the following conditions are satisfied at the time the supply is made:
(i) the trust estate or partnership is connected with (within the meaning of the Income Tax Assessment Act 1997) a foreign entity;
(ii) the trust estate or partnership would be an affiliate (within the meaning of that Act) of a foreign entity if the trust estate or partnership were an individual or a company;
(iii) the trust estate or partnership and a foreign entity are members of the same global group.
(8) For the purposes of this section:
(a) treat the foreign entity mentioned in paragraph (7)(d) as having made the supply; and
(b) treat the entity mentioned in subparagraph (7)(a)(ii) as being an Australian customer of the foreign entity; and
(c) treat the foreign entity as having derived the ordinary income, or statutory income, from the supply.
177E Stripping of company profits
(1) Where:
(a) as a result of a scheme that is, in relation to a company:
(i) a scheme by way of or in the nature of dividend stripping; or
(ii) a scheme having substantially the effect of a scheme by way of or in the nature of a dividend stripping;
any property of the company is disposed of;
(b) in the opinion of the Commissioner, the disposal of that property represents, in whole or in part, a distribution (whether to a shareholder or another person) of profits of the company (whether of the accounting period in which the disposal occurred or of any earlier or later accounting period);
(c) if, immediately before the scheme was entered into, the company had paid a dividend out of profits of an amount equal to the amount determined by the Commissioner to be the amount of profits the distribution of which is, in his or her opinion, represented by the disposal of the property referred to in paragraph (a), an amount (in this subsection referred to as the notional amount) would have been included, or might reasonably be expected to have been included, by reason of the payment of that dividend, in the assessable income of a taxpayer of a year of income; and
(d) the scheme has been or is entered into after 27 May 1981, whether in Australia or outside Australia;
the following provisions have effect:
(e) the scheme shall be taken to be a scheme to which this Part applies;
(f) for the purposes of section 177F, the taxpayer shall be taken to have obtained a tax benefit in connection with the scheme that is referable to the notional amount not being included in the assessable income of the taxpayer of the year of income; and
(g) the amount of that tax benefit shall be taken to be the notional amount.
(2) Without limiting the generality of subsection (1), a reference in that subsection to the disposal of property of a company shall be read as including a reference to:
(a) the payment of a dividend by the company;
(b) the making of a loan by the company (whether or not it is intended or likely that the loan will be repaid);
(c) a bailment of property by the company; and
(d) any transaction having the effect, directly or indirectly, of diminishing the value of any property of the company.
(2A) 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.
(3) In this section, property includes a chose in action and also includes any estate, interest, right or power, whether at law or in equity, in or over property.
177EA Creation of franking debit or cancellation of franking credits
(1) In this section, unless the contrary intention appears:
relevant circumstances has a meaning affected by subsection (17).
relevant taxpayer has the meaning given by subsection (3).
scheme for a disposition, in relation to membership interests or an interest in membership interests, has a meaning affected by subsection (14).
(2) An expression used in this section that is defined in the Income Tax Assessment Act 1997 has the same meaning as in that Act, except to the extent that its meaning is extended by subsection (16), (18) or (19), or affected by subsection (15).
Application of section
(3) This section applies if:
(a) there is a scheme for a disposition of membership interests, or an interest in membership interests, in a corporate tax entity; and
(b) either:
(i) a frankable distribution has been paid, or is payable or expected to be payable, to a person in respect of the membership interests; or
(ii) a frankable distribution has flowed indirectly, or flows indirectly or is expected to flow indirectly, to a person in respect of the interest in membership interests, as the case may be; and
(c) the distribution was, or is expected to be, a franked distribution or a distribution franked with an exempting credit; and
(d) except for this section, the person (the relevant taxpayer) would receive, or could reasonably be expected to receive, imputation benefits as a result of the distribution; and
(e) having regard to the relevant circumstances of the scheme, it would be concluded that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme did so for a purpose (whether or not the dominant purpose but not including an incidental purpose) of enabling the relevant taxpayer to obtain an imputation benefit.
Bare acquisition of membership interests or interest in membership interests
(4) It is not to be concluded for the purposes of paragraph (3)(e) that a person entered into or carried out a scheme for a purpose mentioned in that paragraph merely because the person acquired membership interests, or an interest in membership interests, in the entity.
Commissioner to determine franking debit or deny franking credit
(5) The Commissioner may make, in writing, either of the following determinations:
(a) if the corporate tax entity is a party to the scheme, a determination that a franking debit or exempting debit of the entity arises in respect of each distribution made to the relevant taxpayer or that flows indirectly to the relevant taxpayer;
(b) a determination that no imputation benefit is to arise in respect of a distribution or a specified part of a distribution that is made, or that flows indirectly, to the relevant taxpayer.
A determination does not form part of an assessment.
Notice of determination
(6) If the Commissioner makes a determination under subsection (5), the Commissioner must:
(a) in respect of a determination made under paragraph (5)(a)—serve notice in writing of the determination on the corporate tax entity; or
(b) in respect of a determination made under paragraph (5)(b)—serve notice in writing of the determination on the relevant taxpayer.
Publication of determination in relation to listed public company denying imputation benefit
(7) If the Commissioner makes a determination under paragraph (5)(b), in respect of a distribution made by a listed public company, the Commissioner is taken to have served notice in writing of the determination on the relevant taxpayer if the Commissioner causes the notice to be published in a manner that results in the notice being accessible to the public and reasonably prominent. The notice is taken to have been served on the day on which the publication takes place.
Objections
(9) If a taxpayer to whom a determination relates is dissatisfied with the determination, the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953.
Effect of determination of franking debit or exempting debit
(10) If the Commissioner makes a determination under paragraph (5)(a):
(a) on the day on which notice in writing of the determination is served on the entity, a franking debit or exempting debit of the corporate tax entity arises in respect of the distribution; and
(b) the amount of the franking debit or exempting debit is such amount as is stated in the Commissioner’s determination, being an amount that:
(i) the Commissioner considers reasonable in the circumstances; and
(ii) does not exceed the amount of the franking debit or exempting debit of the entity arising under item 1 of the table in section 205‑30 of the Income Tax Assessment 1997 or item 2 of the table in section 208‑120 of that Act in respect of the distribution.
Effect of determination that no imputation benefit is to arise
(11) If the Commissioner makes a determination under paragraph (5)(b), the determination has effect according to its terms.
Application of section to non‑share dividends
(12) This section:
(a) applies to a non‑share equity interest in the same way as it applies to a membership interest; and
(b) applies to an equity holder in the same way as it applies to a member; and
(c) applies to a non‑share dividend in the same way as it applies to a distribution.
Meaning of interest in membership interests
(13) A person has an interest in membership interests if:
(a) the person has any legal or equitable interest in the membership interests; or
(b) the person is a partner in a partnership and:
(i) the assets of the partnership include, or will include, the membership interests; or
(ii) the partnership derives, or will derive, income indirectly through interposed companies, trusts or partnerships, from distributions made on the membership interests; or
(c) the person is a beneficiary of a trust (including a potential beneficiary of a discretionary trust) and:
(i) the membership interests form, or will form, part of the trust estate; or
(ii) the trust derives, or will derive, income indirectly through interposed companies, trusts or partnerships, from distributions made on the membership interests.
Meaning of scheme for a disposition
(14) A scheme for a disposition of membership interests or an interest in membership interests includes, but is not limited to, a scheme that involves any of the following:
(a) issuing the membership interests or creating the interest in membership interests;
(b) entering into any contract, arrangement, transaction or dealing that changes or otherwise affects the legal or equitable ownership of the membership interests or interest in membership interests;
(c) creating, varying or revoking a trust in relation to the membership interests or interest in membership interests;
(d) creating, altering or extinguishing a right, power or liability attaching to, or otherwise relating to, the membership interests or interest in membership interests;