(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.
(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, 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.
(4) Eligible finance shares, widely distributed finance shares and transitional finance shares in a company are to be ignored for the purposes of the application of subsection (1) to the company.
(4A) Shares in a company that is treated as a real estate investment trust for the purposes of the Internal Revenue Code 1986 of the United States of America are to be ignored for the purposes of the application of subsection (1) to the company if the conditions in subsection (4B) or (4C) are satisfied.
(4B) The condition in this subsection is that the taxpayer who holds the shares satisfies the Commissioner that:
(a) the shares that the taxpayer holds at the end of the entity’s statutory accounting period are held for the sole purpose of investing directly, or indirectly through one or more interposed entities, in:
(i) a business conducted in the United States of America; or
(ii) real property located in the United States of America; and
(b) the company does not directly, or indirectly through one or more interposed entities:
(i) have an interest in income or gains derived from sources outside the United States of America; or
(ii) hold an interest in a FIF (within the meaning of former Part XI) that is not resident in the United States of America; or
(iii) hold real property that is not located in the United States of America.
(4C) The condition in this subsection is that the taxpayer who holds the shares satisfies the Commissioner that:
(a) the shares that the taxpayer holds at the end of the entity’s statutory accounting period are held for the sole purpose of investing directly, or indirectly through one or more interposed entities, in:
(i) a business conducted in the United States of America; or
(ii) real property located in the United States of America; and
(b) throughout the entity’s statutory accounting period, the total value of:
(i) any interests that the company has in income or gains derived from sources outside the United States of America; and
(ii) any interests that the company has in FIFs (within the meaning of former Part XI) that are not resident in the United States of America; and
(iii) any real property held by the company that is not located in the United States of America;
does not exceed 5% of the total value of all interests held by the company in other entities; and
(c) throughout the entity’s statutory accounting period, the total value of assets held by the company that:
(i) produce income from sources outside the United States of America; or
(ii) if disposed of would give rise to a gain from a source outside the United States of America;
does not exceed 5% of the total value of all the assets held by the company.
(4D) For the purposes of subsection (4C), the value of interests and the value of assets is to be determined using the accounting records of the company.
(5) An entity that is an eligible transferor at a particular time in relation to a CFT holds a direct attribution interest in the CFT at that time equal to 100%.
(6) Subsection (5) does not apply if:
(a) the eligible transferor is a natural person (other than a natural person in the capacity of a trustee); and
(b) the CFT is a non‑resident family trust in relation to the natural person.
(7) An entity (in this subsection called the lower entity) that is a beneficiary in a CFT holds a direct attribution interest in the CFT 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.
(8) An entity that holds a direct attribution interest in a CFT at a particular time because of subsection (5) is not to be taken to hold any direct attribution interest in the CFT at that time because of subsection (7).
357 Indirect attribution interest in a CFC or CFT
(1) An indirect attribution interest that an entity (in this section called the bottom entity) holds in a CFC or CFT (in this section called the top entity) 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 attribution interest unless the entity is a CFE.
(3) If there is only one entity interposed between the bottom entity and the top entity, the indirect attribution interest is calculated by multiplying the attribution tracing interest that the bottom entity holds in the interposed entity by the attribution tracing interest that the interposed entity holds in the top entity.
(4) If there are 2 entities interposed between the bottom entity and the top entity, the indirect attribution interest is calculated:
(a) by multiplying the attribution tracing interest that the bottom entity holds in the first interposed entity by the attribution 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 attribution tracing interest that the second interposed entity holds in the top entity.
(5) If there are 3 or more entities interposed between the bottom entity and the top entity, the indirect attribution interest is calculated:
(a) by multiplying the attribution tracing interest that the bottom entity holds in the first interposed entity by the attribution 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 attribution tracing interest that the second interposed entity holds in the third interposed entity;
and so on, ending with a multiplication by the attribution tracing interest that the last interposed entity holds in the top entity.
(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 an attribution tracing interest in the second entity; and
(b) the second entity has an attribution tracing interest in the third entity.
358 Attribution tracing interest in a CFC
An entity holds an attribution tracing interest in a CFC at a particular time equal to the direct attribution interest in the CFC that the entity holds at that time.
359 Attribution tracing interest in a CFP
An entity that is a partner in a CFP holds an attribution tracing interest in the CFP at a particular time equal to the percentage that the entity holds, or is entitled to acquire, at that time of:
(a) the total interests in the profits of the CFP; or
(b) the total interests in the CFP property;
or, if those percentages differ, the greater of those percentages.
360 Attribution tracing interest in a CFT
(1) An entity that is an eligible transferor at a particular time in relation to a CFT holds an attribution tracing interest in the CFT at that time equal to 100%.
(2) Subsection (1) does not apply if:
(a) the eligible transferor is a natural person (other than a natural person in the capacity of a trustee); and
(b) the CFT is a non‑resident family trust in relation to the natural person.
(3) An entity (in this subsection called the lower entity) that is a beneficiary in a CFT holds an attribution tracing interest in the CFT 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.
(4) An entity that holds an attribution tracing interest in a CFT at a particular time because of subsection (1) is not to be taken to hold any attribution tracing interest in the CFT at that time because of subsection (3).
Subdivision C—Attributable taxpayers and attribution percentages
361 Attributable taxpayer in relation to a CFC or a CFT
(1) An entity (in this subsection called the test entity) is an attributable taxpayer in relation to a CFC at a particular time if, at that time:
(a) the test entity is an Australian entity whose associate‑inclusive control interest in the CFC is at least 10%; or
(b) all of the following subparagraphs apply:
(i) the CFC is a CFC at that time only because of paragraph 340(c);
(ii) the CFC is controlled by any group of 5 or fewer Australian entities, either alone or together with associates (whether or not any associate is also an Australian entity);
(iii) the test entity is an Australian 1% entity and is included in that group of 5 or fewer Australian entities.
(2) An entity (in this subsection called the test entity) is an attributable taxpayer in relation to a CFT at a particular time if, at that time, the test entity is an Australian entity whose associate‑inclusive control interest in the CFT is at least 10%.
(3) Subsections (1) and (2) have effect subject to section 768‑960 of the Income Tax Assessment Act 1997.
362 Attribution percentage of an attributable taxpayer
(1) Subject to this section, the attribution percentage of an attributable taxpayer in relation to a CFC or CFT at a particular time is the sum of:
(a) the direct attribution interest in the CFC or CFT held by the taxpayer at that time; and
(b) the aggregate of the indirect attribution interests in the CFC or CFT held by the taxpayer at that time.
(2) If, apart from this subsection, both of the following things would be counted in calculating the attribution percentage of an attributable taxpayer in relation to a CFC or CFT at a particular time:
(a) the holding of a direct attribution interest in an entity by any other entity;
(b) an entitlement to acquire that direct attribution interest;
only one of those things is to be taken into account.
(3) If:
(a) in calculating the percentage that would be the attribution percentage of an attributable taxpayer (apart from this subsection and subsection (5)) in relation to a CFC at a particular time (in this subsection called the test time) regard was had to an attribution tracing interest of an eligible transferor in relation to a CFT, being an attribution tracing interest determined under subsection 360(1); and
(b) the attribution percentage referred to in paragraph (a) is greater than it would have been apart from subsection 360(1); and
(c) there are other eligible transferors in relation to the CFT at the test time; and
(d) the attributable taxpayer gives to the Commissioner, in accordance with a form approved, in writing, by the Commissioner, such information as is required by the form to be given;
the Commissioner may reduce the attribution percentage referred to in paragraph (a) by such amount as the Commissioner considers reasonable in the circumstances.
(4) If:
(a) in calculating the percentage that would be the attribution percentage of an attributable taxpayer (apart from this subsection and subsection (5)) in relation to a CFT (in this subsection called the attributing CFT) at a particular time (in this subsection called the test time) regard was had to:
(i) a direct attribution interest of the attributable taxpayer in relation to the attributing CFT, being direct attribution interest determined under subsection 356(2); or
(ii) an attribution tracing interest of an eligible transferor in relation to another CFT (in this subsection called the interposed CFT); and
(b) the attribution percentage referred to in paragraph (a) is greater than it would have been apart from subsection 356(2) or 360(1), as the case may be; and
(c) at the test time, there are other eligible transferors in relation to the attributing CFT or the interposed CFT, as the case may be; and
(d) the attributable taxpayer gives to the Commissioner such information, and produces to the Commissioner such documents, as the Commissioner requires in connection with the operation of this subsection;
the Commissioner may reduce the attribution percentage referred to in paragraph (a) by such amount as the Commissioner considers reasonable in the circumstances.
(5) If, apart from this subsection, the aggregate of the attribution percentages of all the attributable taxpayers in relation to a CFC or CFT at a particular time would exceed 100%, the attribution percentage of each of those attributable taxpayers is the percentage calculated using the formula:
Start formula start fraction Individual percentage over Total percentage end fraction times 100 end formula
where:
Individual percentage means the percentage that would, apart from this subsection, be the attribution percentage of the attributable taxpayer concerned.
Total percentage means the aggregate of the percentages that would, apart from this subsection, be the attribution percentages of all the attributable taxpayers.
Division 4—Attribution accounts
363 Attribution account entity
(1) Each of the following is an attribution account entity:
(a) a company that is not a Part X Australian resident;
(b) a partnership;
(c) a trust.
(2) If:
(a) a company ceases to be resident in an unlisted country and becomes a Part X Australian resident; and
(b) a taxpayer is an attributable taxpayer in relation to the company immediately before the time of the change of residence;
in determining whether an attribution debit arises for the company in relation to the taxpayer in respect of an attribution account payment made to the taxpayer or another attribution account entity, the company is taken to be an attribution account entity.
364 Attribution account percentage
The attribution account percentage of a taxpayer in relation to an entity is the sum of the taxpayer’s direct attribution account interest and indirect attribution account interest or interests in the entity.
365 Attribution account payment
(1) Each of the following is an attribution account payment:
(a) a dividend paid by a company to a shareholder;
(b) the individual interest of a partner in the net income (within the meaning of section 90) of a partnership of a year of income;
(c) where a beneficiary of a trust is presently entitled to a share of the income of the trust—that share of the net income (within the meaning of section 95) of the trust of a year of income;
(ca) where a beneficiary of a trust is specifically entitled to an amount of a capital gain or a franked distribution of the trust for a year of income:
(i) in the case of a capital gain—the amount mentioned in subsection 115‑225(1) in respect of the beneficiary; or
(ii) in the case of a franked distribution—the amount mentioned in subsection 207‑37(1) in respect of the beneficiary;
to the extent that it is not covered under paragraph (c);
(d) the whole or part of the net income of a trust of a year of income that is assessable to the trustee under section 99 or 99A;
(e) an amount of trust property that would be included in the assessable income of a beneficiary of a year of income under section 99B if:
(i) the beneficiary were a resident, within the meaning of section 6, at a time during the year of income; and
(ii) paragraph 99B(2)(c) were replaced by a paragraph referring to any attribution account payment under paragraph (c) or (d) of this subsection.
(2) The attribution account payment is taken to be made:
(a) in a paragraph (1)(b) case—by the partnership to the partner; and
(b) in a paragraph (1)(c) or (e) case—by the trust to the beneficiary; and
(c) in a paragraph (1)(d) case—by the trust to the trustee;
and, in any such case, to be made at the end of the year of income.
(3) Where:
(a) an attribution credit arises for a company in relation to a taxpayer under paragraph 371(1)(b) as a result of a change of residence whereby the company becomes a Part X Australian resident; and