and, at the test time, the transferor entity is an Australian entity or a CFE.
(2) For the purposes of subsection (1), the arm’s length amount in relation to a transfer of property or services to a trust is the amount that the trustee could reasonably be expected to have been required to pay to obtain the property or services concerned from the transferor under a transaction where the parties were dealing with each other at arm’s length in relation to the transaction.
Division 3—Control interests, attribution interests, attributable taxpayers and attribution percentages
Subdivision A—Control interests
349 Associate‑inclusive control interest in a company or trust
(1) Subject to this section, the associate‑inclusive control interest that an entity (in this section called the lower entity) holds in a company or trust at a particular time is the aggregate of:
(a) the direct control interest in the company or trust that the lower entity holds at that time; and
(b) the indirect control interests in the company or trust that the lower entity holds at that time; and
(c) the direct control interests in the company or trust held at that time by associates of the lower entity; and
(d) the indirect control interests in the company or trust held at that time by associates of the lower entity.
(2) In calculating the associate‑inclusive control interest that the lower entity holds in the company or trust:
(a) an indirect control interest of the lower entity is not to be counted under paragraph (1)(b) to the extent to which it is calculated by reference to:
(i) a direct control interest in the company or trust that is taken into account under paragraph (1)(c); or
(ii) an indirect control interest in the company or trust that is taken into account under paragraph (1)(d); and
(b) an indirect control interest of an associate of the lower entity is not to be counted under paragraph (1)(d) to the extent to which it is calculated by reference to:
(i) a direct control interest in the company or trust that is taken into account under paragraph (1)(a) or (c); or
(ii) an indirect control interest in the company or trust that is taken into account under paragraph (1)(b) or (d).
(3) If, apart from this subsection, both of the following things would be counted in calculating the associate‑inclusive control interest that the lower entity holds in the company or trust:
(a) the holding of a direct control interest by the lower entity or any other entity;
(b) an entitlement to acquire that direct control interest;
only one of those things is to be taken into account.
(4) For the purpose of determining any of the following matters:
(a) whether the aggregate of the associate‑inclusive control interests that a group of entities holds in a company is not less than 50%;
(b) whether a single Australian entity has an associate‑inclusive control interest in a company of not less than 40%;
(c) whether the aggregate of the associate‑inclusive control interests that a group of entities holds in a trust is not less than 50%;
(d) whether the associate‑inclusive control interest that an Australian entity holds in a CFC is not less than 10%;
(e) whether the associate‑inclusive control interest that an Australian entity holds in a company is not less than 1%;
if, apart from this subsection, an entity, or each of 2 or more entities, would hold a direct control interest, or control tracing interest, in another entity (in this subsection called the higher entity) equal to 100%:
(f) only one of those entities is to be taken to hold a direct control interest, or control tracing interest, as the case may be, in the higher entity equal to 100%; and
(g) no other entity (whether or not the entity would, apart from this subsection hold a direct control interest, or control tracing interest, of 100%) is to be taken to hold any direct control interest, or control tracing interest, as the case may be, in the higher entity.
(5) For the purpose of calculating the aggregate of the associate‑inclusive control interests that a group of entities holds in a company or trust:
(a) if a particular direct control interest or indirect control interest that an entity holds in another entity would be counted more than once because the entity is an associate of one or more other entities in the group, that interest is to be counted only once; and
(b) if both of the following things would, but for this subsection, be counted in calculating the aggregate of the associate‑inclusive control interests that a group of entities holds in a company or trust:
(i) the holding of a direct control interest by an entity;
(ii) an entitlement to acquire that direct control interest;
only one of those things is to be counted.
(6) If it is necessary for the purposes of this section to decide:
(a) which one of 2 things is to be taken into account for the purposes of subsection (3) or (5); or
(b) which one of 2 or more entities is to be chosen for the purposes of paragraph (4)(f);
the Commissioner may make that decision.
350 Direct control interest in a company
(1) Subject to subsection (7), an entity holds a direct control interest in a company at a particular time equal to the percentage that the entity holds, or is entitled to acquire, at that time of:
(a) the total paid‑up share capital of the company; or
(b) the total rights of shareholders to vote, or participate in any decision‑making, concerning any of the following:
(i) the making of distributions of capital or profits of the company to its shareholders;
(ii) the constituent document of the company;
(iii) any variation of the share capital of the company; or
(c) the total rights to distributions of capital or profits of the company to its shareholders on winding‑up; or
(d) the total rights to distributions of capital or profits of the company to its shareholders, otherwise than on winding‑up;
or, if different percentages are applicable under the preceding paragraphs, the greater or greatest of those percentages.
(2) If the percentage of total rights to vote or participate in decision‑making differs as between differing types of decision‑making, the highest of those percentages applies for the purposes of paragraph (1)(b).
(3) For the purposes of the application of subsection (1) to a company, the percentage that an entity holds, or is entitled to acquire, at a particular time (in this subsection called the test time) in a statutory accounting period of the company, of the total rights to distributions of capital or profits of the company to its shareholders on winding‑up is to be worked out by:
(a) ascertaining whichever of the following is applicable:
(i) the capital of the company as at the end of the statutory accounting period;
(ii) the profits of the company for the statutory accounting period; and
(b) assuming that the rights to such distributions that the entity holds, or is entitled to acquire, at the test time were the same at all other times during the statutory accounting period; and
(c) ascertaining the percentage concerned:
(i) at the end of the statutory accounting period instead of at the test time; and
(ii) on that assumption.
(4) For the purposes of the application of subsection (1) to a company, the percentage that an entity holds, or is entitled to acquire, at a particular time (in this subsection called the test time) in a statutory accounting period of the company, of the total rights to distributions of capital or profits of the company to its shareholders, otherwise than on winding‑up, is to be worked out by:
(a) ascertaining whichever of the following is applicable:
(i) the capital of the company as at the end of the statutory accounting period;
(ii) the profits of the company for the statutory accounting period; and
(b) assuming that the rights to such distributions that the entity holds, or is entitled to acquire, at the test time were the same at all other times during the statutory accounting period; and
(c) ascertaining the percentage concerned:
(i) at the end of the statutory accounting period instead of at the test time; and
(ii) on that assumption.
(5) Eligible finance shares in a company are to be ignored for the purposes of the application of subsection (1) to the company.
(6) If, at a particular time, a company is controlled by a group of 5 or fewer Australian entities, either alone or together with associates (whether or not any associate is also an Australian entity), each Australian entity in that group of 5 or fewer holds a direct control interest in the company equal to 100%.
(7) An entity that holds a direct control interest in a company at a particular time because of subsection (6) is not to be taken to hold any direct control interest in the company at that time because of subsection (1).
351 Direct control interest in a trust
(1) An entity that is a beneficiary in a trust holds a direct control interest in the trust at a particular time equal to:
(a) the percentage of the income of the trust represented by the share of the income to which the beneficiary is entitled, or that the beneficiary is entitled to acquire; or
(b) the percentage of the corpus of the trust represented by the share of the corpus to which the beneficiary is entitled, or that the beneficiary is entitled to acquire;
or, if those percentages differ, the greater of those percentages.
(2) For the purposes of the application of subsection (1) to a trust:
(a) the percentage of the income of the trust represented by the share of the income to which the beneficiary is entitled, or that the beneficiary is entitled to acquire; or
(b) the percentage of the corpus of the trust represented by the share of the corpus to which the beneficiary is entitled, or that the beneficiary is entitled to acquire;
at a particular time (in this subsection called the test time) in a year of income of the trust, is to be worked out by:
(c) ascertaining whichever of the following is applicable:
(i) the income of the trust for the year of income;
(ii) the corpus of the trust as at the end of the year of income; and
(d) assuming that the share to which the entity is entitled, or that the entity is entitled to acquire, at the test time was the same at all other times during the year of income; and
(e) ascertaining the percentage concerned:
(i) at the end of the year of income instead of at the test time; and
(ii) on that assumption.
(3) Each entity that is an eligible transferor in relation to a trust at a particular time holds a direct control interest in the trust at that time equal to 100%.
(4) An entity that holds a direct control interest in a trust at a particular time because of subsection (3) is not to be taken to hold any direct control interest in the trust at that time because of subsection (1).
352 Indirect control interest in a company or trust
(1) An indirect control interest that an entity (in this section called the bottom entity) holds in a company or trust at a particular time is calculated in accordance with this section.
(2) An interposed entity is not to be taken into account in calculating an indirect control interest unless the entity is a CFE.
(3) If there is only one entity interposed between the bottom entity and the company or trust, the indirect control interest is calculated by multiplying the control tracing interest that the bottom entity holds in the interposed entity by the control tracing interest that the interposed entity holds in the company or trust.
(4) If there are 2 entities interposed between the bottom entity and the company or trust, the indirect control interest is calculated:
(a) by multiplying the control tracing interest that the bottom entity holds in the first interposed entity by the control tracing interest that the first interposed entity holds in the second interposed entity; and
(b) by multiplying the result of the calculation referred to in paragraph (a) by the control tracing interest that the second interposed entity holds in the company or trust.
(5) If there are 3 or more entities interposed between the bottom entity and the company or trust, the indirect control interest is calculated:
(a) by multiplying the control tracing interest that the bottom entity holds in the first interposed entity by the control tracing interest that the first interposed entity holds in the second interposed entity; and
(b) by multiplying the result of the calculation referred to in paragraph (a) by the control tracing interest that the second interposed entity holds in the third interposed entity;
and so on, ending with a multiplication by the control tracing interest that the last interposed entity holds in the company or trust.
(6) For the purposes of this section, an entity (in this subsection called the second entity) is interposed between 2 other entities (in this subsection called the first entity and the third entity respectively) if, and only if:
(a) the first entity has a control tracing interest in the second entity; and
(b) the second entity has a control tracing interest in the third entity.
353 Control tracing interest in a company
(1) Subject to this section, an entity (in this subsection called the lower entity) holds a control tracing interest in a company at a particular time equal to the direct control interest in the company that the lower entity holds at that time.
(2) An entity (in this subsection called the lower entity) holds a control tracing interest in a company at a particular time equal to 100% if:
(a) the aggregate of the direct control interests in the company held at that time by the lower entity and its associates is not less than 50%; or
(b) both of the following conditions are satisfied:
(i) the aggregate of the direct control interests in the company held at that time by the lower entity and its associates is not less than 40%;
(ii) at that time, the company is not controlled by a group of entities not being or including the lower entity or any of its associates; or
(c) at that time, the company is controlled by the lower entity, either alone or together with associates.
354 Control tracing interest in a CFP
Each partner in a CFP holds a control tracing interest in the CFP equal to 100%.
355 Control tracing interest in a CFT
(1) An entity that is an eligible transferor at a particular time in relation to a CFT holds a control tracing interest in the CFT at that time equal to 100%.
(2) Subject to subsection (4), an entity (in this subsection called the lower entity) that is a beneficiary in a CFT holds a control tracing interest in the trust at a particular time equal to:
(a) the percentage of the income of the CFT represented by the share of the income to which the lower entity is entitled, or that the lower entity is entitled to acquire; or
(b) the percentage of the corpus of the CFT represented by the share of the corpus to which the lower entity is entitled, or that the lower entity is entitled to acquire;
or, if those percentages differ, the greater of those percentages.
(3) For the purposes of the application of subsection (2) to a trust:
(a) the percentage of the income of the trust represented by the share of the income to which the beneficiary is entitled, or that the beneficiary is entitled to acquire; or
(b) the percentage of the corpus of the trust represented by the share of the corpus to which the beneficiary is entitled, or that the beneficiary is entitled to acquire;
at a particular time (in this subsection called the test time) in a year of income of the trust, is to be worked out by:
(c) ascertaining whichever of the following is applicable:
(i) the income of the trust for the year of income;
(ii) the corpus of the trust as at the end of the year of income; and
(d) assuming that the share to which the entity is entitled, or that the entity is entitled to acquire, at the test time was the same at all other times during the year of income; and
(e) ascertaining the percentage concerned:
(i) at the end of the year of income instead of at the test time; and
(ii) on that assumption.
(4) If the percentage calculated under subsection (2) is not less than 50%, the lower entity holds a control tracing interest in the CFT equal to 100%.
(5) An entity that holds a control tracing interest in a CFT at a particular time because of subsection (1) is not to be taken to hold any control tracing interest in the CFT at that time because of subsection (2) or (4).
Subdivision B—Attribution interests
356 Direct attribution interest in a CFC or CFT
(1) An entity holds a direct attribution interest in a CFC at a particular time equal to the percentage that the entity holds, or is entitled to acquire, at that time of:
(a) the total paid‑up share capital of the CFC; or
(b) the total rights of shareholders to vote, or participate in any decision‑making, concerning any of the following:
(i) the making of distributions of capital or profits of the CFC to its shareholders;
(ii) the constituent document of the CFC;
(iii) any variation of the share capital of the CFC; or
(c) the total rights to distributions of capital or profits of the CFC to its shareholders on winding‑up; or
(d) the total rights to distributions of capital or profits of the CFC to its shareholders, otherwise than on winding‑up;
or, if different percentages are applicable under the preceding paragraphs, the greater or greatest of those percentages.
(2) For the purposes of the application of subsection (1) to a company, the percentage that an entity holds, or is entitled to acquire, at a particular time (in this subsection called the test time) in a statutory accounting period of the company, of the total rights to distributions of capital or profits of the company to its shareholders on winding‑up is to be worked out by:
(a) ascertaining whichever of the following is applicable: