5Primary taxable amounts

##### 5 Primary taxable amounts (1) Where: (a) under a scheme entered into, whether in Australia or outside Australia, on or after 1 January 1972 and before 4 December 1980, some or all of the shares in a company were sold; (b) the sale or sales of the shares referred to in paragraph (a) occurred before the commencement of this Act; (c) immediately before the first sale time, the person or persons who sold the shares referred to in paragraph (a) was or were, by virtue of rights attaching to the shares, capable of controlling more than 90% of the voting power in the company; (d) the total consideration paid or given in respect of the sale or sales under the scheme of the shares referred to in paragraph (a) exceeds an amount ascertained in accordance with the formula A ‑ (L \+ T), where: A is the total value, immediately before the last sale time, of the assets of the company; L is the total amount of the liabilities of the company immediately before the last sale time; and T is the amount of the company tax liability of the company immediately before the last sale time, reduced by any part of that company tax liability that is taken into account in ascertaining component L; (e) an assessment of ordinary company tax or undistributed profits tax has been made under the Assessment Act, whether before or after the commencement of this Act, in relation to the company in relation to a year of income (in this subsection referred to as the relevant year of income), being the year of income in which the last sale time occurred or a preceding year of income; (f) the period for objecting against the assessment has expired and any objection against the assessment has been finalised; (g) at any time (in this subsection referred to as the relevant time) after the commencement of this Act, there remains unpaid an amount (in this subsection referred to as the overdue company tax) of ordinary company tax or undistributed profits tax, as the case may be, due and payable by the company in relation to the relevant year of income; (h) before the relevant time, an arrangement or transaction (whether or not the arrangement or transaction was, or was part of, the scheme) was entered into that secured or achieved the result that: (i) in a case to which subparagraph (ii) does not apply—at the relevant time, the company was unable, having regard to other debts of the company, to pay to the Commissioner all the company tax due and payable by the company at the relevant time; or (ii) if the company ceased to exist before the relevant time—immediately before the company ceased to exist, the company would have been unable, having regard to other debts of the company, to pay to the Commissioner all the company tax that would have been due and payable by the company immediately before it ceased to exist if the company tax due and payable by the company at the relevant time had been due and payable by the company immediately before it ceased to exist; and (j) if the company carried on a business immediately before the last sale time, not being a business that consisted only of deriving income from property—the company did not continue to carry on that business after the last sale time; the following provisions have effect: (k) if all the shares referred to in paragraph (a) were sold under the scheme by one person—a primary taxable amount equal to the overdue company tax shall be taken to exist at the relevant time in relation to that person; or (m) in any other case—a primary taxable amount shall be taken to exist at the relevant time in relation to each person who, as the holder or one of the joint holders of any of the shares referred to in paragraph (a), sold the shares, or his interest in the shares, as the case may be, under the scheme and that primary taxable amount is an amount ascertained in accordance with the formula  where: O is the amount of the overdue company tax; C is the number of whole dollars in the amount or value of the consideration paid or given in respect of the sale of the shares or interest by the person; and S is the number of whole dollars in the amount or value of the total consideration paid or given in respect of the sale or sales under the scheme of all the shares referred to in paragraph (a). (2) Where: (a) under a scheme entered into, whether in Australia or outside Australia, on or after 1 January 1972 and before 4 December 1980, some or all of the shares in one or more companies were sold; (b) the sale or sales of the shares referred to in paragraph (a) occurred before the commencement of this Act; (c) immediately before the first sale time, the person or persons who sold the shares referred to in paragraph (a) was or were, by virtue of rights attaching to the shares, capable of controlling, either directly or through one or more interposed companies, trustees or partnerships, more than 90% of the voting power in each of 2 or more companies (in this subsection referred to as the eligible companies); (d) the total consideration paid or given in respect of the sale or sales under the scheme of the shares referred to in paragraph (a) exceeds an amount ascertained in accordance with the formula A ‑ (L \+ T), where: A is the aggregate of the total values, immediately before the last sale time, of the assets of the eligible companies; L is the aggregate of the total amounts of the liabilities of the eligible companies immediately before the last sale time; and T is the aggregate of the amounts of the company tax liabilities of the eligible companies immediately before the last sale time reduced by any part of those company tax liabilities that is taken into account in ascertaining component L; (e) an assessment of ordinary company tax or undistributed profits tax has been made under the Assessment Act, whether before or after the commencement of this Act, in relation to a company (in this subsection referred to as the taxable company), being one of the eligible companies, in relation to a year of income (in this subsection referred to as the relevant year of income), being the year of income in which the last sale time occurred or a preceding year of income; (f) the period for objecting against the assessment has expired and any objection against the assessment has been finalised; (g) at any time (in this subsection referred to as the relevant time) after the commencement of this Act, there remains unpaid an amount (in this subsection referred to as the overdue company tax) of ordinary company tax or undistributed profits tax, as the case may be, due and payable by the taxable company in relation to the relevant year of income; (h) before the relevant time, an arrangement or transaction (whether or not the arrangement or transaction was, or was part of, the scheme) was entered into that secured or achieved the result that: (i) in a case to which subparagraph (ii) does not apply—at the relevant time, the taxable company was unable, having regard to other debts of the taxable company, to pay to the Commissioner all the company tax due and payable by the taxable company at the relevant time; or (ii) if the taxable company ceased to exist before the relevant time—immediately before the taxable company ceased to exist, the taxable company would have been unable, having regard to other debts of the taxable company, to pay to the Commissioner all the company tax that would have been due and payable by the taxable company immediately before it ceased to exist if the company tax due and payable by the taxable company at the relevant time had been due and payable by the taxable company immediately before it ceased to exist; and (j) if the taxable company carried on a business immediately before the last sale time, not being a business that consisted only of deriving income from property—the taxable company did not continue to carry on that business after the last sale time; the following provisions have effect: (k) if all the shares referred to in paragraph (a) were sold under the scheme by one person—a primary taxable amount equal to the overdue company tax shall be taken to exist at the relevant time in relation to that person; (m) if all the shares referred to in paragraph (a) were shares in the same company and paragraph (k) does not apply—a primary taxable amount shall be taken to exist at the relevant time in relation to each person who, as the holder or one of the joint holders of any of the shares referred to in paragraph (a), sold the shares, or his interest in the shares, as the case may be, under the scheme and that primary taxable amount is an amount ascertained in accordance with the formula  where: O is the amount of the overdue company tax; C is the number of whole dollars in the amount or value of the consideration paid or given in respect of the sale of the shares or interest by the person; and S is the number of whole dollars in the amount or value of the total consideration paid or given in respect of the sale or sales under the scheme of all the shares referred to in paragraph (a); or (n) if the shares referred to in paragraph (a) were shares in 2 or more companies and paragraph (k) does not apply—a primary taxable amount shall be taken to exist at the relevant time in relation to each person who, as the holder or one of the joint holders of any of the shares referred to in paragraph (a) that were shares in a company (in this paragraph referred to as the prescribed company), being the taxable company or another company that, immediately before the first sale time, was related to the taxable company, sold the shares, or his interest in the shares, as the case may be, under the scheme and that primary taxable amount is an amount ascertained in accordance with the formula  where: O is the amount of the overdue company tax; C is the number of whole dollars in the amount or value of the consideration paid or given in respect of the sale of the shares or interest by the person; N is the number of whole dollars in: (i) where the prescribed company is the taxable company—the value, immediately before the first sale time, of all the shares referred to in paragraph (a) that were shares in the taxable company; or (ii) in any other case—the amount equal to so much of the value of the assets of the prescribed company immediately before the first sale time as was attributable to the net worth of the taxable company immediately before that time; S is the number of whole dollars in the amount or value of the total consideration paid or given in respect of the sale or sales under the scheme of all the shares referred to in paragraph (a) that were shares in the prescribed company; and W is the number of whole dollars in the net worth of the taxable company immediately before the first sale time. (3) Where subsection (2) applies in relation to the sale of shares in a company, subsection (1) does not apply in relation to that sale. (4) Where a primary taxable amount exists or existed in relation to a person in relation to an amount of company tax payable by a company and: (a) the Commissioner, having regard to: (i) circumstances relating to the sale of the shares or the interest in shares to which the primary taxable amount relates; (ii) circumstances, whether occurring before or after that sale, that caused or contributed to the failure of the company to pay that company tax; and (iii) such other circumstances as the Commissioner considers relevant; considers it unreasonable that the primary taxable amount should be taken to exist or to have existed in relation to the person; or (b) if the primary taxable amount is less than $100—the Commissioner considers that the primary taxable amount should not be taken to exist or to have existed in relation to the person; the primary taxable amount shall not be taken to exist or to have existed in relation to the person. (5) Subsections (1) and (2) do not apply in relation to the sale of shares or of an interest in shares by a person who was a bare trustee in respect of those shares or that interest but, where, but for this subsection and subsection (4), a primary taxable amount (in this subsection referred to as the trustee’s taxable amount) would exist in relation to the person at a particular time in relation to such a sale: (a) if there was only one beneficiary in the trust estate—a primary taxable amount equal to the trustee’s taxable amount shall be taken to exist at that time in relation to the beneficiary; and (b) if there were 2 or more beneficiaries in the trust estate—a primary taxable amount shall be taken to exist at that time in relation to each of those beneficiaries and, in relation to each beneficiary, that primary taxable amount is an amount ascertained by multiplying the interest in the trust estate of the beneficiary concerned, expressed as a fraction of the aggregate of the interests in the trust estate of the beneficiaries, by the trustee’s taxable amount. (6) For the purposes of paragraphs (1)(c) and (2)(c), where: (a) under the scheme referred to in paragraph (1)(a) or (2)(a), as the case may be, a person sold all of his shares in a company; and (b) immediately before the time of sale of those shares, the person held an office in the company by virtue of which the person was capable of controlling any of the voting power in the company; the person shall be deemed to have been capable of controlling that voting power immediately before the first sale time by virtue of rights attaching to those shares. (7) For the purposes of the application of paragraphs (1)(d) and (2)(d) in relation to a sale or sales of shares under a scheme: (a) the total value of the assets of a company immediately before the last sale time shall, subject to subsection (8), be taken to be: (i) where, for the purposes of the sale or sales of the shares under the scheme, it was agreed by the parties to the sale or to each of the sales that the assets of the company were to be taken to have a particular value—that value; and (ii) in any other case—such amount as the Commissioner determines; (b) the total amount of the liabilities of a company immediately before the last sale time shall be taken to be: (i) where, for the purposes of the sale or sales of the shares under the scheme, it was agreed by the parties to the sale or to each of the sales that the total amount of the liabilities of the company was to be taken to be a particular amount—that amount; and (ii) in any other case—such amount as the Commissioner determines; and (c) the amount of the company tax liability of a company immediately before the last sale time shall be taken to be the aggregate of the following amounts: (i) any amount of ordinary company tax or undistributed profits tax payable by the company immediately before the last sale time; (ii) any amount of ordinary company tax (not including additional tax payable under section 207 of the Assessment Act) that, immediately before the last sale time, might reasonably have been expected to become payable by the company at a later time in relation to the year of income in which the last sale time occurred or a preceding year of income; and (iii) any amount of undistributed profits tax (not including additional tax payable under section 207 of the Assessment Act) that, immediately before the last sale time, might reasonably have been expected to become payable by the company at a later time in relation to the year of income in which the last sale time occurred or a preceding year of income. (8) The total value of the assets of a company at a particular time ascertained in accordance with paragraph (7)(a) for the purposes of the application of paragraph (2)(d) in relation to the company shall be reduced by an amount equal to so much of that total value as is attributable, by virtue of the beneficial ownership by the company of shares in another company that, for the purposes of that application of that paragraph, is one of the eligible companies referred to in that paragraph, to the value of the assets of that other company. (9) In determining for the purposes of subsection (7) whether, immediately before the last sale time in relation to a sale or sales of shares under a scheme, it might reasonably have been expected that ordinary company tax or undistributed profits tax would become payable by a company at a later time in relation to the year of income in which the last sale time occurred or a preceding year of income: (a) full knowledge of the affairs of the company shall be assumed to have existed; (b) it shall be assumed that the company would continue to exist; (c) in the case of the year of income in which the last sale time occurred, it shall be assumed that the ordinary company tax or the undistributed profits tax, as the case may be, payable by the company in relation to that year of income would be ascertained on the basis that, except for the purpose of ascertaining the prescribed distribution period in relation to the year of income, the year of income ended immediately before the last sale time; and (d) it shall be assumed that the company would, after the last sale time, pay only those dividends (if any) that the company in fact paid after the last sale time. (10) For the purposes of paragraphs (1)(f) and (2)(f), an objection against an assessment shall be taken to have been finalised if: (a) there is no proceeding that has been instituted in relation to the objection under Division 2 of Part V of the Assessment Act that has not been determined; and (b) the time for instituting proceedings under that Division in relation to the objection has expired. (11) For the purposes of paragraph (10)(a), any proceeding under Division 2 of Part V of the Assessment Act that has lapsed or otherwise been terminated shall be taken to have been determined. (12) For the purposes of paragraph (10)(b), the time for instituting a proceeding in relation to an objection under Division 2 of Part V of the Assessment Act shall not be taken not to have expired by reason only of the possibility that an extension of that time might be granted. (13) For the purposes of the application of paragraph (2)(n) in relation to a sale or sales of shares under a scheme: (a) a company shall be taken to be related to another company immediately before the first sale time if, and only if, immediately before that time, a reduction in the value of any shares in the other company could reasonably be expected to result in the reduction of the value in the shares of the first‑mentioned company; and (b) a reference to the net worth of a company immediately before the first sale time is a reference to the value of the assets of the company immediately before that time reduced by the total amount of the liabilities of the company immediately before that time. (14) For the purposes of the application of paragraph (13)(b) in relation to a sale or sales of shares under a scheme: (a) the value of the assets of a company immediately before the first sale time shall be taken to be: (i) where, for the purposes of the sale or sales of the shares under the scheme, it was agreed by the parties to the sale or to each of the sales that the assets of the company were to be taken to have a particular value—that value; and (ii) in any other case—such amount as the Commissioner determines; and (b) the total amount of the liabilities of a company immediately before the first sale time shall be taken to be: (i) where, for the purposes of the sale or sales of the shares under the scheme, it was agreed by the parties to the sale or to each of the sales that the total amount of the liabilities of the company was to be taken to be a particular amount—that amount; and (ii) in any other case—such amount as the Commissioner determines. (15) In this section: (a) a reference to an arrangement or transaction includes a reference to both an arrangement and a transaction and to any series or combination of arrangements or transactions or arrangements and transactions; and (b) a reference to an arrangement includes a reference to an arrangement, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings. (16) A primary taxable amount may be taken to exist at a particular time in relation to a company or the trustee of a trust estate notwithstanding that the company or trust estate has ceased to exist before that time.