(d) any amount assessable to the taxpayer under section 99 or 99A in relation to the net income of the trust of the year of income in which the attribution account payment is made.
(5) The attribution debit arises when the attribution account payment is made.
373 Grossed‑up amount of an attribution debit
The grossed‑up amount in relation to an attribution debit is:
(a) where subparagraph 372(2)(b)(i) applied in relation to the debit—the amount of the debit; or
(b) where subparagraph 372(2)(b)(ii) applied in relation to the debit—the amount of the debit, divided by the attribution account percentage referred to in that subparagraph.
Division 7—Calculation of attributable income of CFC
Subdivision A—Basic principles
381 Separate attributable income for each attributable taxpayer
Where, at the end of a statutory accounting period (in this Division called the eligible period) of a company:
(a) the company is a CFC; and
(b) there are one or more attributable taxpayers in relation to the company;
the attributable income of the company (in this Division called the eligible CFC) for the eligible period is calculated separately for each such attributable taxpayer (in this Division called the eligible taxpayer) in accordance with this Division.
382 Attributable income is taxable income calculated on certain assumptions
(1) The attributable income is the amount that would be the eligible CFC’s taxable income for the eligible period if certain assumptions were made.
(2) For the purposes of describing those assumptions, amounts of assessable income, allowable deductions and exempt income that are to be taken into account in calculating the taxable income are referred to respectively as notional assessable income, notional allowable deductions and notional exempt income.
383 Basic assumptions
The assumptions are:
(a) that the eligible CFC is a taxpayer and a resident, within the meaning of section 6, during the whole of the eligible period; and
(b) that the eligible period is a year of income, being the year of income of the eligible taxpayer in which the eligible period ends; and
(c) that this Act is modified in accordance with Subdivisions B to E; and
(d) whichever of the assumptions in section 384 or 385 applies.
384 Additional assumption for unlisted country CFC
(1) Where the eligible CFC is a resident of an unlisted country at the end of the eligible period, it is to be assumed:
(a) that the only amounts of notional assessable income are those to which subsection (2) applies; and
(b) that all other income is notional exempt income.
(2) The amounts of notional assessable income are:
(a) where the eligible CFC does not pass the active income test for the eligible period in relation to the eligible taxpayer—amounts that would be included in its notional assessable income for the eligible period under this Act as modified in accordance with Subdivisions B to E if the only income or other amounts derived by it during the eligible period, and any earlier statutory accounting period, were adjusted tainted income (within the meaning of section 386); and
(b) amounts included in the notional assessable income of the eligible CFC for the eligible period under section 102AAZD of this Act as modified in accordance with Subdivisions B to E; and
(c) amounts included in the notional assessable income of the eligible CFC for the eligible period under Division 6 of Part III of this Act as so modified; and
(d) amounts that would be included in the notional assessable income of the eligible CFC for the eligible period under Division 5 of Part III of this Act, as modified in accordance with Subdivisions B to E of this Division, in relation to any partnership if its net income included only:
(i) where the eligible CFC does not pass the active income test for the eligible period in relation to the eligible taxpayer—amounts that would be included if the partnership derived only adjusted tainted income (within the meaning of section 386); and
(ii) amounts included under section 102AAZD of this Act as modified in accordance with Subdivisions B to E of this Division; and
(iii) amounts included under Division 6 of Part III of this Act as so modified.
385 Additional assumption for listed country CFC
(1) Where the eligible CFC is a resident of a listed country at the end of the eligible period, it is to be assumed:
(a) that the only amounts of notional assessable income are those to which subsection (2) applies; and
(b) that all other income is notional exempt income.
(2) Subject to subsection (4), the amounts of notional assessable income are:
(a) amounts that would be included in the notional assessable income of the eligible CFC for the eligible period under this Act as modified in accordance with Subdivisions B to D if the only income or other amounts derived during the eligible period, and any earlier statutory accounting period, by the eligible CFC were:
(i) where the eligible CFC does not pass the active income test for the eligible period in relation to the eligible taxpayer—adjusted tainted income (within the meaning of section 386) that is eligible designated concession income in relation to the listed country or any other listed country; and
(ii) income or other amounts, of a kind specified in the regulations, that:
(A) are not eligible designated concession income of the eligible CFC in relation to the listed country or any other listed country; and
(B) are not treated as derived from sources in the listed country for the purposes of the tax law of the listed country; and
(C) pass the test set out in subsection (2A); and
(b) amounts included in the notional assessable income of the eligible CFC for the eligible period under section 102AAZD of this Act as modified in accordance with Subdivisions B to D; and
(c) amounts included in the notional assessable income of the eligible CFC for the eligible period under Division 6 of Part III of this Act as so modified, where either of the following conditions (but not necessarily the same condition) is satisfied in relation to the listed country and each other listed country:
(i) the amounts are not subject to tax in that listed country in a tax accounting period ending before the end of the eligible period or commencing during the eligible period;
(ii) the amounts are subject to tax in that listed country in such a tax accounting period and are designated concession income in relation to the listed country; and
(d) amounts that would be included in the notional assessable income of the eligible CFC for the eligible period under Division 5 of Part III of this Act, as modified in accordance with Subdivisions B to D of this Division, in relation to any partnership if its net income included only:
(i) where the eligible CFC does not pass the active income test for the eligible period in relation to the eligible taxpayer—amounts that would be included if the partnership derived only adjusted tainted income (within the meaning of section 386) that is eligible designated concession income in relation to the listed country or any other listed country; and
(ii) amounts that would be included if the partnership derived only income or other amounts, of a kind specified in the regulations, that:
(A) are not eligible designated concession income of the partnership in relation to the listed country or any other listed country; and
(B) are not treated as derived from sources in the listed country for the purposes of the tax law of the listed country; and
(C) pass the test set out in subsection (2A); and
(iii) amounts included under section 102AAZD of this Act as modified in accordance with Subdivisions B to D of this Division; and
(iv) amounts included under Division 6 of Part III of this Act as so modified, where either of the following conditions (but not necessarily the same condition) is satisfied in relation to the listed country and each other listed country:
(A) the amounts are not subject to tax in that listed country in a tax accounting period ending before the end of the eligible period or commencing during the eligible period;
(B) the amounts are subject to tax in that listed country in such a tax accounting period and are designated concession income in relation to the listed country.
(2A) For the purposes of sub‑subparagraphs (2)(a)(ii)(C) and (2)(d)(ii)(C), income or other amounts pass the test set out in this subsection if both:
(a) the income or other amounts are adjusted tainted income (within the meaning of section 386); and
(b) the income or other amounts are not subject to tax in the listed country or in any other listed country in a tax accounting period ending before the end of the eligible period or commencing during the eligible period.
(3) For the purposes of paragraph (2)(c) or (d), a reference in that paragraph to an amount being not subject to tax or subject to tax, as the case may be, includes a reference to another amount included in the net income of a partnership or trust, to which the first‑mentioned amount is attributable, being not subject to tax or subject to tax.
(4) Where the sum of the amounts to which paragraph (2)(a) would otherwise apply does not exceed the lesser of:
(a) $50,000; and
(b) 5% of the gross turnover of the eligible CFC for the eligible period;
then that paragraph does not apply to those amounts.
(5) In determining for the purposes of paragraph (4)(b) the gross turnover of the eligible CFC for the eligible period, section 434 has effect as if:
(a) subparagraph 434(1)(a)(i) were omitted; and
(b) the words “, but not including amounts that are shown in those recognised accounts as amounts covered by section 436” were omitted from paragraphs 434(1)(b), (c) and (d); and
(c) the words “(other than an exclusion of amounts shown in those recognised accounts as amounts covered by section 436)” were omitted from subsection 434(2).
386 Adjusted tainted income
(1) The references in sections 384, 385 and 457 to adjusted tainted income are references to amounts that would be passive income, tainted sales income or tainted services income if certain modifications were made to the provisions of Division 8.
(2) The modifications are:
(a) that paragraphs 446(1)(k), (m) and (n) are replaced with the following:
“(k) amounts derived from the disposal of tainted assets;
(m) amounts derived from the disposal of tainted commodity investments;
(n) amounts derived that are attributable to currency exchange rate fluctuations, except where under section 439 the amounts would, if they were currency exchange gains, relate to an active income transaction;”; and
(b) that paragraph 446(1)(k) as so replaced does not apply to an amount derived from the disposal of a tainted asset in the circumstances referred to in paragraphs 450(2)(a) to (c) or (5)(a) to (c); and
(c) that paragraph 446(1)(n) as so replaced does not apply to an amount derived where, if it were a currency exchange gain, paragraphs 450(3)(a) and (b) would apply to it; and
(d) that the reference in subsection 450(7) to net gains that accrued to the company in respect of the disposal of tainted assets is replaced with a reference to amounts derived by the company from the disposal of tainted assets.
387 Reduction of attributable income because of interim dividends
(1) Where:
(a) during the eligible period, the eligible CFC pays a dividend to the eligible taxpayer or to another entity; and
(b) if the dividend is paid to the eligible taxpayer—the whole or part of the dividend is included in the assessable income of the eligible taxpayer of a year of income; and
(d) the whole or part of the grossed‑up assessable component of the dividend may reasonably be regarded as having been paid out of the attributable income of the eligible CFC for the eligible period;
then, for the purposes of this Part, the attributable income of the eligible CFC for the eligible period in relation to the eligible taxpayer is reduced by an amount equal to the whole or the part of the grossed‑up assessable component of the dividend.
(2) In this section:
grossed‑up assessable component, in relation to a dividend the whole or part of which is included in the assessable income of the eligible taxpayer, means the amount of the whole or the part divided by the eligible taxpayer’s attribution percentage for the eligible CFC at the time of payment of the dividend.
Subdivision B—General modifications of Australian tax law
388 Double tax agreements to be disregarded
In calculating the attributable income of the eligible CFC, the International Tax Agreements Act 1953 is to be disregarded, except for the purpose of references in this Act to that Act.
389 Certain provisions to be disregarded in calculating attributable income
For the purpose of applying this Act in calculating the attributable income of the eligible CFC, the following provisions are to be disregarded:
(a) except for the purposes of a reference in any other provision of this Part—sections 23AH, 23AI, 23AK and 128D, Division 15 of Part III (other than subsection 148(1)) and sections 456, 457, 459A and 461;
(b) except for the purposes of a reference in Division 6AAA of Part III or in any other provision of this Part—Part 3‑6 of the Income Tax Assessment Act 1997;
(ba) Division 230 of the Income Tax Assessment Act 1997;
(c) Division 820 of the Income Tax Assessment Act 1997;
(d) Division 832 of the Income Tax Assessment Act 1997 (about hybrid mismatch rules).
389A Other provisions to be disregarded in calculating attributable income
For the purpose of applying this Act in calculating the attributable income of the eligible CFC, the following provisions are to be disregarded:
(a) Division 974 of the Income Tax Assessment Act 1997; and
(b) any provision of this Act to the extent to which the operation of the provision depends on an expression whose meaning is given by Division 974 of the Income Tax Assessment Act 1997.
390 Elections to be made by eligible taxpayer
(1) For the purpose of applying this Act in calculating the attributable income of the eligible CFC, any declaration, election, choice or selection that may be made, any notice that may be given or any option that may be exercised, under this Act by the eligible CFC apart from this section is not to be made, given or exercised by the eligible CFC but instead may be made, given or exercised by the eligible taxpayer.
(2) The eligible taxpayer may make the declaration, election or selection, give the notice or exercise the option in the eligible taxpayer’s return of income of the year of income in which the eligible period ends or within such further period after the lodgment of the return as the Commissioner allows.
(3) Subsection (1) does not apply to an election under the CGT roll‑over provisions.
392 Notional assessable amounts are to be pre‑tax
(1) An amount included in the notional assessable income of the eligible CFC is an amount before the payment of any foreign tax or Australian tax in respect of the amount.
393 Notional allowable deduction for taxes paid
(1) Foreign tax or Australian tax paid by the eligible CFC in respect of amounts included in the notional assessable income of the eligible CFC for the eligible period, whether paid before, during or after that period, is a notional allowable deduction from the notional assessable income of the eligible CFC for the eligible period.
(2) For the purposes of subsection (1), foreign tax mentioned in that subsection does not include any of the following:
(a) foreign IIR tax (within the meaning of the Income Tax Assessment Act 1997);
(b) foreign UTPR tax (within the meaning of that Act);
(c) a tax specified in regulations made for the purposes of this paragraph.
(4) Where a person pays an amount of tax that the person is liable to pay under subsection 148(3) of this Act, in its application apart from this Part, in respect of premiums paid or credited to the eligible CFC, then, for the purposes of subsection (1), the amount is taken to be Australian tax paid by the eligible CFC in respect of the premiums.
394 Notional allowable deduction for eligible finance share dividends, widely distributed finance share dividends and transitional finance share dividends
Where:
(a) the eligible CFC pays an eligible finance share dividend, a widely distributed finance share dividend or a transitional finance share dividend during or after the eligible period; and
(b) if, on the assumption that the dividend were instead a payment of the interest, referred to in paragraph 327(d) or 327A(3)(b) or subsection 327B(2), as the case requires, to which it may reasonably be regarded as equivalent, an amount (in this section called the interest equivalent) of that interest accruing during the eligible period would be a notional allowable deduction for the eligible period;
then the interest equivalent is a notional allowable deduction for the eligible period.
395 Expenditure incurred to produce income or profits in later statutory accounting periods
In determining whether expenditure incurred by the eligible CFC during the eligible period for the purpose of gaining or producing income or profits in a later statutory accounting period is a notional allowable deduction under a particular provision, it is to be assumed that:
(a) there will be a requirement under this Division to calculate the attributable income of the eligible CFC for that later statutory accounting period; and
(b) for that purpose, the eligible CFC will always be a resident of the listed country or unlisted country, as the case may be.