so much (if any) of the whole or the part of the FIF attribution account payment as does not exceed the grossed‑up amount of the post FIF abolition debit is notional exempt income of the eligible CFC for the eligible period.
(5) For the purposes of subsection (4), the grossed‑up amount of the post FIF abolition debit is:
(a) where subparagraph 23AK(3)(b)(i) applied in relation to the debit—the amount of the debit; or
(b) where subparagraph 23AK(3)(b)(ii) applied in relation to the debit—the amount of the debit, divided by the FIF attribution account percentage referred to in that subparagraph.
403 Additional notional exempt income—unlisted country CFC
If the eligible CFC is a resident of an unlisted country at the end of the eligible period, the notional exempt income of the eligible CFC in relation to the eligible period includes income or profits derived by the eligible CFC in the eligible period in or in connection with carrying on business in a listed country at or through a permanent establishment of the eligible CFC in that listed country, where the income or profits are not eligible designated concession income in relation to any listed country in relation to the eligible period.
404 Application of Subdivision 768‑A of the Income Tax Assessment Act 1997
(1) For the purpose of applying Subdivision 768‑A of the Income Tax Assessment Act 1997 (about returns on foreign investment) in calculating the attributable income of the eligible CFC, disregard section 389A of this Act (which is about disregarding Division 974 of the Income Tax Assessment Act 1997 and certain other provisions).
(2) For the purpose of applying this Act in calculating the attributable income of the eligible CFC, disregard paragraph 768‑5(1)(d) of the Income Tax Assessment Act 1997 if:
(a) the eligible CFC receives, either directly or indirectly through one or more interposed trusts or partnerships, a foreign equity distribution (within the meaning of the Income Tax Assessment Act 1997) from a company; and
(b) at the time the distribution is made, both the eligible CFC and the company are residents of the same listed country or unlisted country.
Subdivision C—Modifications relating to Australian capital gains tax
405 Interpretation
(1) In this Subdivision:
commencing day has the meaning given by section 406.
commencing day asset has the meaning given by section 406.
(3) Some provisions of this Subdivision say that a payment can include giving property. To the extent that one does, use the market value of the property in working out the amount of the payment.
406 Meaning of commencing day and commencing day asset
(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, the eligible CFC’s commencing day is the later of:
(a) the last day of the most recent period during which there was not an attributable taxpayer with an attribution percentage (greater than nil) in relation to the eligible CFC; and
(b) 30 June 1990.
Example: If a taxpayer became an attributable taxpayer with an attribution percentage (greater than nil) in relation to the eligible CFC at 3 pm on 20 October 2004 and there were no other such attributable taxpayers at that time, the commencing day is 20 October 2004.
(2) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, a commencing day asset of the eligible CFC is a CGT asset (other than one that is taxable Australian property) owned by the eligible CFC at the end of its commencing day.
(3) In determining whether a CGT asset is taxable Australian property, disregard the residency assumption.
408 Certain capital gains and losses disregarded
If a CFC makes a capital gain or capital loss from a CGT event that is not disregarded under Subdivision 855‑A of the Income Tax Assessment Act 1997, or would have made a capital gain from the event apart from indexation, disregard the CGT event in calculating the attributable income of the eligible CFC.
408A Certain events before commencing day ignored
For the purposes of applying this Act in calculating the attributable income of an eligible CFC, if the eligible CFC’s commencing day is after 30 June 1995, Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 do not apply to CGT events involving the eligible CFC before the end of the commencing day.
409 Losses before 30 June 1990 to be disregarded
For the purposes of applying this Act in calculating the attributable income of the eligible CFC, capital losses incurred before the end of 30 June 1990 are disregarded.
410 General modifications—CGT
For the purposes of applying this Act in calculating the attributable income of the eligible CFC, Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply as if these provisions were disregarded:
(a) section 116‑85 (about section 47A of this Act applying to a rolled‑over asset);
(b) section 116‑95 (about a company changing residence from an unlisted country);
(c) section 118‑12 (about assets used to produce exempt income etc.);
(d) section 855‑45 (about an individual or company becoming an Australian resident);
(e) section 855‑55 (about a CFC becoming an Australian resident);
(f) Subdivision 170‑B (about transfer of net capital losses within company groups).
411 Commencing day assets taken to have been acquired on commencing day
(1) Subject to this section, for the purposes of applying this Act in calculating the attributable income of the eligible CFC, a commencing day asset of the eligible CFC is taken to have been acquired, for the purposes of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about CGT), by it on its commencing day.
(3) Subsection (1) does not apply for the purposes of determining the cost base to the eligible CFC of an asset.
412 Cost base of commencing day asset
(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, the following provisions have effect.
(2) The first element of the cost base of each commencing day asset of the eligible CFC is the greater of the asset’s market value (at the end of the eligible CFC’s commencing day) and the asset’s cost base (on that day).
(3) The first element of the reduced cost base of each commencing day asset of the eligible CFC is the lesser of the asset’s market value (at the end of the eligible CFC’s commencing day) and the asset’s cost base (on that day).
413 Adjustment of cost base as at commencing day—return of capital
(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, the following provisions have effect.
(2) Where:
(a) commencing day assets of the eligible CFC consist of shares in a company; and
(b) at any time during the period commencing at the time when the eligible CFC acquired the shares and ending at the end of the eligible CFC’s commencing day, the company paid an amount that was not a dividend to the eligible CFC in respect of the shares;
the cost base to the eligible CFC of the shares as at the eligible CFC’s commencing day is to be reduced by that amount.
(3) Where:
(a) a commencing day asset of the eligible CFC consists of an interest or unit in a trust; and
(b) at any time during the period commencing at the time when the eligible CFC acquired the interest or unit and ending at the end of the eligible CFC’s commencing day, the trustee of the trust paid an amount to the eligible CFC in respect of the interest or unit, being an amount that would not have been notional assessable income of the eligible CFC;
the cost base to the eligible CFC of the interest or unit as at the eligible CFC’s commencing day is to be reduced by so much of the amount as is not attributable to a deduction allowed under Division 43 of the Income Tax Assessment Act 1997 or former Division 10C or 10D of Part III of this Act.
(4) The payment referred to in subsection (2) or (3) can include giving property: see subsection 405(3).
414 Exercise of rights
(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, the following provisions have effect.
(2) Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (3) and (4) of this section apply if the eligible CFC exercises rights or options as mentioned in that section to acquire:
(a) shares in a company, or options to acquire shares in a company; or
(b) units in a unit trust, or options to acquire units in a unit trust;
and those rights or options are commencing day assets of the eligible CFC.
(3) The first element of the cost base of the shares, units or options is the sum of:
(a) the amount paid to exercise the rights or options; and
(b) the greater of the market value of the rights or options (at the end of the eligible CFC’s commencing day) and the cost base of the rights or options (on that day).
(4) The first element of the reduced cost base of the shares, units or options is the sum of:
(a) the amount paid to exercise the rights or options; and
(b) the lesser of the market value of the rights or options (at the end of the eligible CFC’s commencing day) and the cost base of the rights or options (on that day).
(5) The payment referred to in subsection (3) or (4) can include giving property: see subsection 405(3).
(6) For indexation purposes, the amount referred to in paragraph (3)(b) is taken to have been incurred on the eligible CFC’s commencing day.
418 Options
(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, the following provisions have effect.
(2) Subsection 104‑30(5) of the Income Tax Assessment Act 1997 applies to an option granted by the eligible CFC as if the reference in that subsection to 20 September 1985 were a reference to the day after the eligible CFC’s commencing day.
(3) Section 134‑1 of the Income Tax (Transitional Provisions) Act 1997 does not apply to an option granted to the eligible CFC.
418A Effect of change of residence from Australia to listed or unlisted country
(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, where:
(a) disregarding the residency assumption, at any time (in this section called the residence‑change time) during the eligible period or an earlier statutory accounting period beginning on or after the day following the eligible CFC’s commencing day, the eligible CFC ceased to be a resident within the meaning of section 6 and became a resident of a listed country or an unlisted country; and
(b) the eligible CFC owned a CGT asset at the residence‑change time; and
(c) a CGT event happens in relation to the asset during the eligible period;
then sections 411 to 414 (inclusive) apply, in addition to any application apart from this section but subject to subsection (2) of this section, to the asset as if:
(d) any reference in those sections to a commencing day asset were a reference to the asset; and
(e) any reference in those sections relating to the eligible CFC’s commencing day or the day following the eligible CFC’s commencing day were a reference relating respectively to the residence‑change time or a time immediately after the residence‑change time; and
(f) if section 104‑160 of the Income Tax Assessment Act 1997 (CGT event I1) applied to the change of residence for the purposes of the application of this Act apart from this Part:
(i) section 412 applies as if subsections 412(2) and (3) referred only to the market value of the asset concerned; and
(ii) section 414 applies as if paragraphs 414(3)(b) and (4)(b) referred only to the market value of the asset concerned.
(2) Where the asset is a commencing day asset, sections 411 to 414 (inclusive) do not apply, in spite of anything contained in those sections, to the asset except in accordance with subsection (1) of this section.
419 Modified application of Subdivision 126‑B of the Income Tax Assessment Act 1997
(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, Subdivision 126‑B of the Income Tax Assessment Act 1997 has effect as if the table in subsection 126‑50(5) of that Act were omitted and the following table were substituted:
Additional requirements
Item The originating CFC’s residency status The recipient company’s residency status This requirement must be satisfied
1 A resident of a listed country at the time of the trigger event Either:(a) a resident of that listed country at that time; or(b) an Australian resident at that time It does not matter what the roll‑over asset is
2 A resident of a listed country at the time of the trigger event A resident of a particular unlisted country at that time The asset must have been used (just before that time) in connection with a permanent establishment of the originating CFC in any unlisted country at or through which the originating CFC carried on business just before that time
3 A resident of an unlisted country at the time of the trigger event Either:(a) a resident of an unlisted country at that time; or(b) an Australian resident at that time It does not matter what the roll‑over asset is
(2) The residency assumption is ignored for the purpose of applying the table in subsection (1).
421 Elections under CGT roll‑over provisions
(1) Subject to this section, for the purpose of applying this Act in calculating the attributable income of the eligible CFC for the eligible period, any election or choice that may be made, by the eligible CFC, or by the eligible CFC and another entity, apart from this section, under any of the CGT roll‑over provisions:
(a) on or before the date of lodgment of a particular return of income; or
(b) within such further period as the Commissioner allows;
is to be made instead:
(c) if there is only one attributable taxpayer in relation to the eligible CFC at the end of the eligible period—on or before the date of lodgment of the taxpayer’s return of income of the year of income in which the end of the eligible period occurs; or
(d) if there are 2 or more attributable taxpayers in relation to the eligible CFC at the end of the eligible period:
(i) if the taxpayers’ returns of income of the year of income in which the end of the eligible period occurs are lodged on different dates—on or before the later or latest of those dates; or
(ii) if the taxpayers’ returns of income of the year of income in which the end of the eligible period occurs are lodged on the same date—on or before that date; or
(e) in any case—within such further period as the Commissioner allows.
(1A) For the purposes of applying subsection (1) to an eligible CFC in relation to an eligible period, if:
(a) an entity (the designated entity) is the only attributable taxpayer in relation to the eligible CFC at the end of the eligible period; and
(b) the designated entity’s attribution percentage in relation to the company is 100% at the end of the eligible period;
then, instead of the election or choice being given by the eligible CFC, or by the eligible CFC and another entity (which other entity may be the designated entity), the election or choice may be given by:
(c) the designated entity; or
(d) if the designated entity is not the same as the other entity—the designated entity and the other entity;
as the case requires.
(2) Except in accordance with subsection (3), subsection (1) does not apply to an election or choice in respect of the disposal of an asset if the disposal is, or apart from an election or choice in accordance with subsection 438(3A) would be, taken into account in determining under Division 8 whether the eligible CFC passes the active income test in relation to the eligible period.
(3) If an election or choice is made under a CGT roll‑over provision in accordance with subsection 438(3A), that election or choice also has effect as if it were made under the CGT roll‑over provision in accordance with subsection (1) of this section.
422 Adjustment of capital proceeds where change of residence by eligible CFC from unlisted to listed country
(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, in relation to the eligible period in relation to the eligible taxpayer, the following provisions have effect.
(2) This section sets out what happens if:
(a) the eligible CFC ceases at a time (the residency change time), during the eligible period or an earlier statutory accounting period, to be a resident of an unlisted country and becomes a resident of a listed country; and
(b) subsection 457(3) does not apply to the change of residence; and
(c) because of the change in its residency status, an amount is included in the eligible taxpayer’s assessable income under section 457 (including because of paragraph 58(1)(d) of the Taxation Laws Amendment (Foreign Income) Act 1990); and
(d) a CGT event happens during the eligible period in relation to a CGT asset (the CFC asset) that the eligible CFC owned since the residency change time.
(3) If the conditions in subsection (4) are satisfied, the capital proceeds from the CGT event are reduced by the amount worked out under subsection (5). If the conditions in subsection (6) are satisfied, those capital proceeds are increased by the amount worked out under subsection (7).
Reduction of capital proceeds
(4) If all the eligible CFC’s assets were disposed of at the residency change time for their market values in the circumstances mentioned in subparagraph 457(2)(a)(ii):
(a) distributable profits of the eligible CFC of a particular amount (the distributable profit amount) would be created, or its distributable profits would be increased by an amount (also the distributable profit amount); and
(b) the eligible CFC would have made a profit (the CFC asset profit) on the disposal of the CFC asset.