(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.
(5) For the purposes of this section, treat foreign GloBE tax (within the meaning of the Income Tax Assessment Act 1997) as not being foreign tax.
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.
(3) For the purposes of this section, treat foreign GloBE tax (within the meaning of the Income Tax Assessment Act 1997) as not being foreign tax.
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:
Start formula First level percentage times Second level percentage end 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;