(h) assuming that the test shares had been issued at the end of the primary issue period, the following conditions would have been satisfied at all times during the period commencing at the end of the primary issue period and ending at the test time:
(i) the rights and obligations relating to the widely distributed finance shares are substantially similar to the rights and obligations relating to the test shares;
(ii) the first company and the second company are under common ownership;
(i) if, on the assumption that the dividends in respect of the test shares were instead payments of the interest, referred to in subsection (2), to which they may reasonably be regarded as equivalent, the following conditions would have been satisfied in relation to that interest:
(i) the interest that accrued during the 24‑month period ending at the test time accrued at intervals not exceeding 12 months;
(ii) the interest that accrued during the 12‑month period commencing 24 months before the test time was paid not later than 12 months after it accrued;
(iii) the dividends paid in respect of the widely distributed finance shares during the 12‑month period ending at the test time are wholly attributable to the interest that accrued during the 12‑month period ending at the time the dividends were paid;
(iv) the total amount of dividends paid in respect of the widely distributed finance shares during the 12‑month period ending at the test time is equal to, or approximately equal to, the total amount of interest to which the dividends are attributable.
Meaning of finance shares
(2) For the purposes of this section, shares in a company are finance shares if, and only if, having regard to:
(a) the manner in which the amount of dividends in respect of the shares was to be calculated; and
(b) the conditions applicable to the payment of dividends in respect of the shares; and
(c) 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.
Modification of widely distributed finance shares
(3) For the purposes of this section, in determining whether shares are widely distributed finance shares, if an asset is held by an entity as trustee for another entity who is absolutely entitled to the asset against the trustee, paragraph 327A(2)(b) has effect as if:
(a) the asset were vested in the other entity instead of the trustee; and
(b) if the asset is a share—any dividends paid in respect of the share were paid to the other entity instead of to the trustee.
Meaning of under common ownership
(4) For the purposes of this section, 2 companies are under common ownership at a particular time if, and only if:
(a) another company (in this subsection called the third company) holds eligible share interests in each of the companies; and
(b) the aggregate of the eligible share interests in each company held by the third company is 90% or more.
Meaning of eligible share interest
(5) 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 finance shares) beneficially owned by the person at that time.
Extended meaning of eligible share interest: tiers of companies
(6) 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
(7) In this section:
eligible share interest has the meaning given by subsections (5) and (6).
finance share has the meaning given by subsection (2).
under common ownership has the meaning given by subsection (4).
widely distributed finance share has a meaning affected by subsection (3).
328 Non‑resident family trusts
(1) Subject to subsections (4) and (5), for the purposes of this Part, a trust is a non‑resident family trust in relation to a natural person at a particular time if, and only if, at that time:
(a) the trust is either:
(i) a post‑marital or post‑relationship family trust in relation to the natural person; or
(ii) a family relief trust in relation to the natural person; and
(b) the trust is constituted by:
(i) a deed of trust or other instrument; or
(ii) an order or declaration of a court.
(2) For the purposes of this section, a trust is a post‑marital or post‑relationship family trust in relation to a natural person at a particular time if:
(a) either of the following conditions is satisfied:
(i) the trust was created pursuant to:
(A) a decree or order of dissolution or annulment of marriage, being a dissolution or annulment that, because of the Family Law Act 1975, has effect, or continues to have effect in Australia or is recognised as valid in Australia; or
(B) a decree or order of judicial separation or a similar decree or order;
(ii) the trust was created in consequence of the break‑down of a de facto relationship; and
(b) at that time, the only persons who benefit, or are capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust (which persons are in subsections (4) and (5) called the primary potential beneficiaries) are natural persons who:
(i) are not Part X Australian residents at that time; and
(ii) are covered by any of the following categories:
(A) the spouse or former spouse of the natural person;
(B) a child of the natural person;
(C) a child of the former spouse of the natural person, being a child who was such a child at a time when the former spouse was the spouse of the natural person;
(D) a child of the spouse of the natural person.
(3) For the purposes of this section, a trust is a family relief trust in relation to a natural person at a particular time (in this subsection called the test time) if:
(a) the only persons who benefit, or are capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust (which persons are in subsections (4) and (5) called the primary potential beneficiaries) are natural persons who:
(i) are identified by name in the trust deed or instrument, or in the court order or declaration, constituting the trust; and
(ii) are not Part X Australian residents at that time; and
(iii) are covered by any of the following categories:
(A) the spouse or former spouse of the natural person;
(B) a parent of the natural person or of the natural person’s spouse or former spouse;
(C) a child of the natural person or of the natural person’s spouse or former spouse;
(D) a grandparent of the natural person;
(E) a grandchild of the natural person;
(F) a brother or sister of the natural person or of the natural person’s spouse or former spouse;
(G) a child of a brother or sister mentioned in sub‑subparagraph (F); and
(b) the trust was established, and is operated, for the relief of persons who are in necessitous circumstances; and
(c) any of the following conditions is satisfied:
(i) at the test time, the assets of the trust are not excessive having regard to the requirements, or likely requirements, of the primary potential beneficiaries;
(ii) no transfers of property or services to the trust were made during the period (in this paragraph called the test period) commencing at the IP time and ending at the test time;
(iii) immediately after each transfer of property or services to the trust made during the test period, the assets of the trust were not excessive having regard to the requirements, or likely requirements, of the beneficiaries at the time of the transfer.
Note: Section 960‑255 of the Income Tax Assessment Act 1997 may be relevant to determining relationships for the purposes of subparagraph (3)(a)(iii).
(4) Subsection (1) does not prevent a trust from being a non‑resident family trust in relation to a natural person at a particular time if, in the event of the death of a particular primary potential beneficiary at that time, one or more natural persons (which persons are in subsection (5) called the secondary potential beneficiaries) who:
(a) are not Part X Australian residents at that time; and
(b) are children of the primary potential beneficiary;
would benefit, or be capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust.
(5) Subsections (1) and (4) do not prevent a trust from being a non‑resident family trust in relation to a natural person at a particular time if, in the event of the death of all of the primary potential beneficiaries and all of the secondary potential beneficiaries at that time, there are one or more deductible gift recipients covered by an item in any of the tables in Subdivision 30‑B of the Income Tax Assessment Act 1997, or item 2 of the table in section 30‑15 of that Act, that would benefit, or be capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust.
(6) For the purposes of this section, if, at a particular time, an entity holds an interest in, or right to benefit under, a trust that is dependent on the death of one or more natural persons, then, the entity is taken to be an entity who, in the event of the death of that natural person or those natural persons immediately after that time, would benefit under the trust.
(7) A reference in this section to a natural person does not include a reference to a natural person in the capacity of a trustee.
329 Public unit trusts
For the purposes of this Part, a unit trust is a public unit trust at a particular time if, assuming that the 12 month period ending at that time had been a year of income, the unit trust would have been a public unit trust at all times during the year of income for the purposes of Division 6AAA of Part III.
330 Tax detriment
(1) For the purposes of this Part, each of the following is a tax detriment to a partner in a partnership:
(a) an increase in an amount included under section 92 in the partner’s assessable income in respect of an interest in the net income of the partnership;
(b) a reduction in an amount allowable under section 92 as a deduction to the partner in respect of the partner’s interest in a partnership loss of the partnership;
(c) a combination of such a reduction to nil and such an increase.
(2) For the purposes of this Part, an increase in an amount included under section 97, 98A or 100 in the assessable income of a beneficiary in respect of a share of the net income of a trust is a tax detriment to the beneficiary.
(3) For the purposes of this Part, an increase (including from nil) in an amount assessable to a trustee under section 98 in respect of a beneficiary’s share of, or under section 99 or 99A in respect of the whole or a part of, the net income of a trust is a tax detriment to the trustee.
(4) The amount of the tax detriment is equal to the amount of the increase or reduction or, where paragraph (1)(c) applies, the sum of the amounts of the reduction and increase.
331 Company deemed to be treated as a resident of a listed country or an unlisted country for the purposes of the tax law of that country
If the tax law of a listed country or an unlisted country adopts some criterion other than treatment as a resident as the criterion for applying a worldwide source tax base to a company, then, sections 332, 332A and 333 have effect, in relation to that tax law, as if that criterion were the same as treatment as a resident of the listed country or the unlisted country for the purposes of that tax law.
332 Companies that are residents of listed countries
(1) For the purposes of this Part, a company is a resident of a listed country at a particular time if, and only if, the company is, in accordance with subsection (2), a resident of a particular listed country at that time.
(2) For the purposes of this Part, a company is a resident of a particular listed country at a particular time if, and only if, both of the following conditions are satisfied at that time:
(a) the company is not a Part X Australian resident;
(b) the company is treated as a resident of the listed country for the purposes of the tax law of the listed country.
333 Companies that are residents of unlisted countries
(1) For the purposes of this Part, a company is a resident of an unlisted country at a particular time if, and only if:
(a) the company is, in accordance with subsection (2), a resident of a particular unlisted country at that time; or
(b) paragraph (a) does not apply and the company is at that time neither:
(i) a Part X Australian resident; nor
(ii) a resident of a particular listed country.
(2) For the purposes of this Part, a company is a resident of a particular unlisted country (in this section called the unlisted country of residence) at a particular time if, and only if:
(a) the company is not a Part X Australian resident at that time; and
(b) the company is not treated as a resident of a listed country at that time for the purposes of the tax law of the listed country; and
(c) any of the following subparagraphs applies:
(i) both of the following conditions are satisfied at that time:
(A) the company is treated as a resident of the unlisted country of residence for the purposes of the tax law of the unlisted country of residence;
(B) the company is not treated as a resident of any other unlisted country for the purposes of the tax law of the unlisted country;
(ii) both of the following conditions are satisfied at that time:
(A) the company is treated as a resident of the unlisted country of residence and at least one other unlisted country for the purposes of the tax laws of each of those unlisted countries;
(B) the company is incorporated in the unlisted country of residence;
(iii) both of the following conditions are satisfied at that time:
(A) the company is not treated as a resident of any unlisted country for the purposes of the tax law of the unlisted country;
(B) the company’s management and control is solely or principally located in the unlisted country of residence.
(iv) all of the following conditions are satisfied at that time:
(A) the company is not treated as a resident of any unlisted country for the purposes of the tax law of the unlisted country;
(B) the company’s management and control is not solely or principally located in the unlisted country of residence;
(C) the company is incorporated in the unlisted country of residence.
334A Voting interests in companies
(1) For the purposes of this section, a company is taken to have a voting interest in another company if:
(a) the first‑mentioned company is the beneficial owner of shares (other than eligible finance shares or widely distributed finance shares) in the other company that carry the right to exercise any of the voting power in the other company; and
(b) there is no arrangement in force at the relevant time by virtue of which any person is in a position, or may become in a position, to affect that right;
and the extent of the voting interest is taken to be the total number of votes that, by virtue of that right, can be cast on a poll at, or arising out of, a general meeting of the other company as regards all questions that could be submitted to such a poll.
(2) For the purposes of paragraph (1)(b), a person is taken to be in a position to affect a right of a company if that person has a right, power or option (whether by virtue of any provision in the constituent document of any company or by virtue of any agreement or instrument or otherwise) to acquire that right or do an act or thing that would prevent the first‑mentioned company from exercising that right or receiving any benefits accruing by reason of that right.
(3) Despite paragraph (1)(b) and subsection (2), in determining for the purposes of this section:
(a) whether a company has a voting interest in another company; and
(b) the extent of that interest;
any appointment of a liquidator in respect of the other company is to be disregarded.
(4) For the purposes of this section, the voting power in a company is the maximum number of votes that can be cast on a poll at, or arising out of, a general meeting of a company as regards all questions that can be submitted to such a poll.
(5) In this section, arrangement includes:
(a) any agreement, arrangement, understanding, promise or undertaking, whether expressed or implied, and whether or not enforceable, or intended to be enforceable, by legal proceedings; and
(b) any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise.
335 References extend to pre‑commencement matters and things
Unless otherwise expressly provided, references in this Part are to matters and things whether occurring before or after the commencement of this Part.
Division 2—Types of entity
Subdivision A—Australian entities
336 Australian entity
For the purposes of this Part, each of the following is an Australian entity:
(a) an Australian partnership;
(b) an Australian trust;
(c) an entity (other than a partnership or trust) that is a Part X Australian resident.