6Secondary taxable amounts

##### 6 Secondary taxable amounts (1) Where: (a) at any time (in this subsection referred to as the relevant time) a vendors taxable amount exists in relation to a company or in relation to a person in the capacity of trustee of a trust estate; and (b) at the relevant time, the company or the trust estate, as the case may be, no longer exists; and (c) an assessment of the recoupment tax payable on the vendors taxable amount was not made before that company or trust estate, as the case may be, ceased to exist; a secondary taxable amount shall be taken to exist at the relevant time in relation to each person who, if there had been a distribution (in this subsection referred to as the capital distribution) of capital of the company or of corpus of the trust estate, as the case may be, immediately before the relevant distribution time, of an amount equal to the distribution amount in relation to the vendors taxable amount, would have had a right, as a shareholder in the company or as a beneficiary in the trust estate, as the case may be, to receive the whole or a part of the capital distribution and, in relation to each such person, the secondary taxable amount is: (d) if only one person would have had such a right—an amount equal to the vendors taxable amount; (e) if 2 or more persons would have had such a right and paragraph (f) does not apply—an amount ascertained in accordance with the formula , where: A is the vendors taxable amount; B is the number of whole dollars in the amount that the person concerned would have received in the event of the capital distribution being made; and C is the number of whole dollars in the amount of the capital distribution; and (f) if 2 or more persons would have had such a right and the vendors taxable amount is a prescribed taxable amount by virtue of subsection (4), (5), (6), (8), (9) or (10)—such part of the vendors taxable amount as the Commissioner, having regard to the matters specified in subsection (16), determines. (2) Where: (a) at any time (in this subsection referred to as the relevant time) a vendors taxable amount exists in relation to a company (in this subsection referred to as the relevant company) or in relation to a person in the capacity of a trustee of a trust estate (in this subsection referred to as the relevant trust estate) in relation to a sale of shares or of an interest in shares; (b) after the time of sale of the shares or interest referred to in paragraph (a) and before the relevant time: (i) if the vendors taxable amount exists in relation to the relevant company: (A) some or all of the shares in the relevant company were sold; or (B) some or all of the shares in another company that, immediately before the time of sale of the shares or interest referred to in paragraph (a), was a holding company of the relevant company, were sold; or (ii) if the vendors taxable amount exists in relation to the trustee of the relevant trust estate: (A) any beneficial interest in the relevant trust estate was sold; or (B) any beneficial interest in another trust estate that, immediately before the time of sale of the shares or interest referred to in paragraph (a) was a holding trust estate in relation to the relevant trust estate, was sold; and (c) the Commissioner is of the opinion that, by reason of a circumstance mentioned in paragraph (b), it would be unreasonable that the relevant company or the trustee of the relevant trust estate, as the case may be, be liable to pay recoupment tax on the vendors taxable amount; the following provisions have effect: (d) a secondary taxable amount shall be taken to exist at the relevant time in relation to each person who, if there had been a distribution (in this subsection referred to as the capital distribution) of capital of the relevant company or of corpus of the relevant trust estate, as the case may be, immediately before the relevant distribution time, of an amount equal to the distribution amount in relation to the vendors taxable amount, would have had a right, as a shareholder in the relevant company or as a beneficiary in the relevant trust estate, as the case may be, to receive the whole or a part of the capital distribution and, in relation to each such person, the secondary taxable amount is: (i) if only one person would have had such a right—an amount equal to the vendors taxable amount; (ii) if 2 or more persons would have had such a right and subparagraph (iii) does not apply—an amount ascertained in accordance with the formula , where: A is the vendors taxable amount; B is the number of whole dollars in the amount that the person would have received in the event of the capital distribution being made; and C is the number of whole dollars in the amount of the capital distribution; and (iii) if 2 or more persons would have had such a right and the vendors taxable amount is a prescribed taxable amount by virtue of subsection (4), (5), (6), (8), (9) or (10)—such part of the vendors taxable amount as the Commissioner, having regard to the matters specified in subsection (16), determines; and (e) the relevant company or the trustee of the relevant trust estate, as the case may be, is not liable, and shall be deemed never to have been liable, to pay recoupment tax on the vendors taxable amount referred to in paragraph (a). (3) Where at any time (in this subsection referred to as the relevant time): (a) there remains unpaid an amount of recoupment tax payable on a vendors taxable amount by a company or a person in the capacity of trustee of a trust estate; and (b) the Commissioner is of the opinion that the recoupment tax, or part of the recoupment tax, is unlikely to be paid; a secondary taxable amount shall be taken to exist at the relevant time in relation to each person who, if there had been a distribution (in this subsection referred to as the capital distribution) of capital of the company or of corpus of the trust estate, as the case may be, immediately before the relevant distribution time of an amount equal to the distribution amount in relation to the vendors taxable amount, would have had a right, as a shareholder in the company or as a beneficiary in the trust estate, as the case may be, to receive the whole or a part of the capital distribution and, in relation to each such person, the secondary taxable amount is: (c) if only one person would have had such a right—an amount equal to the amount of the recoupment tax; (d) if 2 or more persons would have had such a right and paragraph (e) does not apply—an amount ascertained in accordance with the formula , where: A is the amount of the recoupment tax; B is the number of whole dollars in the amount that the person concerned would have received in the event of the capital distribution being made; and C is the number of whole dollars in the amount of the capital distribution; and (e) if 2 or more persons would have had such a right and the vendors taxable amount is a prescribed taxable amount by virtue of subsection (4), (5), (6), (8), (9) or (10)—such part of the amount of the recoupment tax as the Commissioner, having regard to the matters specified in subsection (16), determines. (4) For the purposes of the application of subsection (1), (2) or (3) in relation to: (a) a vendors taxable amount that exists in relation to a company; or (b) recoupment tax payable by a company on a vendors taxable amount; at a particular time (in this subsection referred to as the relevant time), where, after the sale of the shares or interest in shares to which the vendors taxable amount relates and before the relevant time, a person, as a shareholder in the company, received the whole or any part of a distribution of capital of the company on the winding‑up of the company or a reduction of capital of the company, the vendors taxable amount is a prescribed taxable amount for the purposes of this section and that person shall be deemed to be a person who, if there had been a distribution of capital of the company immediately before the relevant distribution time, would have had a right, as a shareholder in the company, to receive part of the distribution of capital (whether or not the person or the company existed immediately before the sale of the shares or interest). (5) For the purposes of the application of subsection (1), (2) or (3) in relation to a company (in this subsection referred to as the relevant company) in relation to a sale or sales of shares (in this subsection referred to as the original shares) under a scheme in relation to: (a) a primary taxable amount that exists in relation to the relevant company; or (b) recoupment tax payable by the relevant company on a primary taxable amount; at a particular time (in this subsection referred to as the relevant time), where: (c) the following conditions are satisfied: (i) before the relevant time and under a scheme, whether entered into in Australia or outside Australia and whether entered into before or after the commencement of this Act, property of the relevant company was transferred to a person (in this subsection referred to as the transferee) by way of loan and: (A) after the transfer, a person (in this subsection referred to as the recipient) or persons (in this subsection referred to as the recipients), whether or not that person was or those persons included the transferee, acquired (whether or not for consideration), as assignee or assignees of rights under the agreement relating to the making of the loan, the right to recover from the transferee the whole or a part of the loan; or (B) the person to whom the loan was or is to be repaid has released or abandoned, or may reasonably be expected to release, abandon or fail to demand repayment of, the loan or a part of the loan; and (ii) the Commissioner is of the opinion that the transfer of property referred to in subparagraph (i) would not have occurred if the original shares had not been sold by the relevant company; (d) the following conditions are satisfied: (i) before the relevant time, the relevant company: (A) as settlor of a trust, transferred property to the trustee of a trust estate (in this subsection referred to as the recipient trust estate); or (B) otherwise than as settlor, transferred property by way of gift to the trustee of a trust estate (in this subsection also referred to as the recipient trust estate); (ii) at the time of the transfer referred to in subparagraph (i), the relevant company or an associate of the relevant company was a beneficiary of the recipient trust estate or could have become a beneficiary of the recipient trust estate by the exercise of a power of appointment by the trustee of the recipient trust estate or another person; and (iii) the Commissioner is of the opinion that the transfer of property referred to in subparagraph (i) would not have occurred if the original shares had not been sold by the relevant company; or (e) the following conditions are satisfied: (i) before the relevant time, the relevant company acquired redeemable shares in another company (in this subsection also referred to as the recipient) or acquired redeemable units in a unit trust (in this subsection referred to as the recipient unit trust); (ii) the redemption value of the redeemable shares or of the redeemable units, as the case may be, is less than the amount or value of the consideration paid or given by the relevant company in respect of the acquisition of the redeemable shares or the redeemable units, as the case may be; and (iii) the Commissioner is of the opinion that the acquisition referred to in subparagraph (i) would not have occurred if the original shares had not been sold by the relevant company; the primary taxable amount is a prescribed taxable amount for the purposes of this section and: (f) in a case to which sub‑subparagraph (c)(i)(A) applies—the recipient or each of the recipients, as the case may be, referred to in that sub‑subparagraph; (g) in a case to which sub‑subparagraph (c)(i)(B) applies—the transferee referred to in subparagraph (c)(i); (h) in a case to which paragraph (d) applies—the trustee of the recipient trust estate referred to in that paragraph; or (j) in a case to which paragraph (e) applies—the recipient or the trustee of the recipient unit trust, as the case may be, referred to in that paragraph; shall be deemed to be a person who, if there had been a distribution of capital of the relevant company immediately before the relevant distribution time, would have had a right, as a shareholder in the relevant company, to receive part of the distribution. (6) For the purposes of the application of subsection (1), (2) or (3) in relation to a company (in this subsection referred to as the relevant company) in relation to: (a) a vendors taxable amount (in this subsection referred to as the relevant vendors taxable amount) that exists in relation to the relevant company; or (b) recoupment tax payable by the relevant company on a vendors taxable amount (in this subsection also referred to as the relevant vendors taxable amount); at a particular time (in this subsection referred to as the relevant time), where: (c) before the relevant time and under a scheme, whether entered into in Australia or outside Australia and whether entered into before or after the commencement of this Act: (i) any corpus of a trust estate was paid to, or applied for the benefit of, the relevant company or the relevant company received a distribution of capital of another company on a winding‑up or reduction of capital of the other company; and (ii) a person (in this subsection referred to as the recipient) acquired property from the relevant company (otherwise than by way of a distribution of capital to the person as a shareholder), whether by loan or otherwise, whether or not for consideration and whether before or after the payment or application, or the receipt, as the case may be, referred to in subparagraph (i); (d) the relevant vendors taxable amount was ascertained by reference to, or to recoupment tax on, a vendors taxable amount that existed in relation to the trustee of the trust estate, or the other company, as the case may be, referred to in subparagraph (c)(i); and (e) the Commissioner is of the opinion that the acquisition of property by the recipient would not have occurred unless the payment or application of the corpus of the trust estate, or the distribution of capital of the other company, as the case may be, referred to in subparagraph (c)(i) had been made, or was to be made, as the case may be, under the scheme; the relevant vendors taxable amount is a prescribed taxable amount for the purposes of this section and the recipient shall be deemed to be a person who, if there had been a distribution of capital of the relevant company immediately before the relevant distribution time, would have had a right, as a shareholder in the relevant company, to receive part of the distribution of capital. (7) Where subsection (6) applies in relation to the acquisition of property by a person from a company, that acquisition of property shall, for the purposes of any other application of subsection (6) and any application of subsection (10), be deemed to be a distribution of capital of the company received by that person at the time when the property was acquired. (8) For the purposes of the application of subsection (1), (2) or (3) in relation to: (a) a vendors taxable amount that exists in relation to the trustee of a trust estate; or (b) recoupment tax payable by the trustee of a trust estate on a vendors taxable amount; at a particular time (in this subsection referred to as the relevant time), where, after the sale of the shares or interest in shares to which the eligible taxable amount relates and before the relevant time, any of the corpus of the trust estate was paid to, or applied for the benefit of, a person as a beneficiary in the trust estate, the vendors taxable amount is a prescribed taxable amount for the purposes of this section and the person shall be deemed to be a person who, if there had been a distribution of corpus of the trust estate immediately before the relevant distribution time, would have had a right, as a beneficiary in the trust estate, to receive the whole or a part of the distribution. (9) For the purposes of the application of subsection (1), (2) or (3) in relation to the trustee of a trust estate (in this subsection referred to as the relevant trust estate) in relation to a sale or sales of shares (in this subsection referred to as the original shares) under a scheme in relation to: (a) a primary taxable amount that exists in relation to the trustee of the relevant trust estate; or (b) recoupment tax payable by the trustee of the relevant trust estate on a primary taxable amount; at a particular time (in this subsection referred to as the relevant time), where: (c) the following conditions are satisfied: (i) before the relevant time and under a scheme, whether entered into in Australia or outside Australia and whether entered into before or after the commencement of this Act, property of the relevant trust estate was transferred to a person (in this subsection referred to as the transferee) by way of loan and: (A) after the transfer a person (in this subsection referred to as the recipient) or persons (in this subsection referred to as the recipients), whether or not that person was or those persons included the transferee, acquired (whether or not for consideration), as assignee or assignees of rights under the agreement relating to the making of the loan, the right to recover from the transferee the whole or a part of the loan; or (B) the person to whom the loan was, or is, to be repaid has released or abandoned, or may reasonably be expected to release, abandon or fail to demand repayment of, the loan or a part of the loan; and (ii) the Commissioner is of the opinion that the transfer of property referred to in subparagraph (i) would not have occurred if the original shares had not been sold by the trustee of the relevant trust estate; (d) the following conditions are satisfied: (i) before the relevant time, the trustee of the relevant trust estate: (A) as settlor of a trust, transferred property of the relevant trust estate to the trustee of another trust estate (in this subsection referred to as the recipient trust estate); or (B) otherwise than as settlor, transferred property of the relevant trust estate by way of gift to the trustee of another trust estate (in this subsection also referred to as the recipient trust estate); (ii) at the time of the transfer referred to in subparagraph (i), a beneficiary of the relevant trust estate or an associate of a beneficiary of the relevant trust estate was a beneficiary of the recipient trust estate or could have become a beneficiary of the recipient trust estate by the exercise of a power of appointment by the trustee of the recipient trust estate or another person; and (iii) the Commissioner is of the opinion that the transfer of property referred to in subparagraph (i) would not have occurred if the original shares had not been sold by the trustee of the relevant trust estate or another person; or (e) the following conditions are satisfied: (i) before the relevant time, the trustee of the relevant trust estate acquired redeemable shares in a company (in this subsection also referred to as the recipient) or acquired redeemable units in a unit trust (in this subsection referred to as the recipient unit trust); (ii) the redemption value of the redeemable shares or of the redeemable units, as the case may be, is less than the amount or value of the consideration paid or given by the trustee of the relevant trust estate in respect of the acquisition of the redeemable shares or the redeemable units, as the case may be; and (iii) the Commissioner is of the opinion that the acquisition referred to in subparagraph (i) would not have occurred if the original shares had not been sold by the trustee of the relevant trust estate; the primary taxable amount is a prescribed taxable amount for the purposes of this section and: (f) in a case to which sub‑subparagraph (c)(i)(A) applies—the recipient or each of the recipients, as the case may be, referred to in that sub‑subparagraph; (g) in a case to which sub‑subparagraph (c)(i)(B) applies—the transferee referred to in subparagraph (c)(i); (h) in a case to which paragraph (d) applies—the trustee of the recipient trust estate referred to in that paragraph; or (j) in a case to which paragraph (e) applies—the recipient or the trustee of the recipient unit trust, as the case may be, referred to in that paragraph; shall be deemed to be a person who, if there had been a distribution of corpus of the relevant trust estate immediately before the relevant distribution time, would have had a right, as a beneficiary in the relevant trust estate, to receive part of the distribution. (10) For the purposes of the application of subsection (1), (2) or (3) in relation to the trustee of a trust estate (in this subsection referred to as the relevant trust estate) in relation to: (a) a vendors taxable amount (in this subsection referred to as the relevant vendors taxable amount) that exists in relation to the trustee of the relevant trust estate; or (b) recoupment tax payable by the trustee of the relevant trust estate on a vendors taxable amount (in this subsection also referred to as the relevant vendors taxable amount); at a particular time (in this subsection referred to as the relevant time), where: (c) before the relevant time and under a scheme, whether entered into in Australia or outside Australia and whether entered into before or after the commencement of this Act: (i) any corpus of another trust estate was paid to, or applied for the benefit of, the trustee of the relevant trust estate or the trustee of the relevant trust estate received a distribution of capital of a company on a winding‑up or reduction of capital of the company; and (ii) a person (in this subsection referred to as the recipient) acquired property of the relevant trust estate (otherwise than by way of a distribution of corpus to the person as a beneficiary in the relevant trust estate), whether by loan or otherwise, whether or not for consideration and whether before or after the payment or application, or the receipt, as the case may be, referred to in subparagraph (i); (d) the relevant vendors taxable amount was ascertained by reference to, or to recoupment tax on, a vendors taxable amount that existed in relation to the trustee of the other trust estate, or the company, as the case may be, referred to in subparagraph (c)(i); and (e) the Commissioner is of the opinion that the acquisition of property by the recipient would not have occurred unless the payment or application of the corpus of the other trust estate, or the distribution of capital of the company, as the case may be, referred to in subparagraph (c)(i) had been made, or was to be made, as the case may be, under the scheme; the relevant vendors taxable amount is a prescribed taxable amount for the purposes of this section and the recipient shall be deemed to be a person who, if there had been a distribution of corpus of the relevant trust estate immediately before the relevant distribution time, would have had a right, as a beneficiary in the relevant trust estate, to receive the whole or a part of the distribution. (11) Where subsection (10) applies in relation to the acquisition by a person of property of a trust estate, that acquisition of property shall, for the purposes of any application of subsection (6) and any other application of subsection (10), be deemed to be a distribution of corpus of the trust estate received by that person, as a beneficiary in the trust estate, at the time when the property was acquired. (12) For the purposes of this section, the distribution amount in relation to a vendors taxable amount is: (a) if the vendors taxable amount is a primary taxable amount—the consideration paid or given in respect of the sale of the shares or the interest in shares to which the primary taxable amount relates; and (b) if the vendors taxable amount is a secondary taxable amount—an amount that bears to the amount that is the distribution amount in relation to the vendors taxable amount by reference to which, or to recoupment tax on which, the secondary taxable amount was ascertained the same proportion as the secondary taxable amount bears to that vendors taxable amount or that recoupment tax, as the case may be. (13) For the purposes of this section, the relevant distribution time in relation to a vendors taxable amount that exists in relation to a company or the trustee of a trust estate is: (a) if the company or trust estate did not exist at the time of sale of the shares or interest in shares to which the vendors taxable amount relates—the time when the company or trust estate commenced to exist; or (b) in any other case—the time of sale of the shares or interest in shares to which the primary taxable amount relates; or, if the Commissioner is of the opinion that that time is inappropriate, such later time as the Commissioner determines. (14) For the purposes of this section: (a) a company is a holding company of another company at a particular time if the company has a controlling interest in the other company at that time; and (b) a trust estate is a holding trust estate in relation to another trust estate at a particular time if the trustee of the first‑mentioned trust estate has a beneficial interest in the other trust estate at that time. (15) For the purposes of subsection (14): (a) where a company has a controlling interest in a second company that has a controlling interest in a third company (including a controlling interest that the second company has in the third company by another application or other applications of this paragraph), the first‑mentioned company shall be deemed to have a controlling interest in the third company; and (b) where the trustee of a trust estate has a beneficial interest in a second trust estate and the trustee of the second trust estate has a beneficial interest in a third trust estate (including a beneficial interest that the trustee of the second trust estate has in the third trust estate by another application or other applications of this paragraph), the trustee of the first‑mentioned trust estate shall be deemed to have a beneficial interest in the third trust estate. (16) In determining, in accordance with paragraph (1)(f), subparagraph (2)(d)(iii) or paragraph (3)(e), the amount of the secondary taxable amount that is to be taken to exist in relation to each of 2 or more persons by the application of subsection (1), (2) or (3), as the case may be, in relation to a vendors taxable amount that exists in relation to a company or the trustee of a trust estate, the Commissioner shall have regard to: (a) the rights (if any) that any of those persons would, but for subsections (4), (5), (6), (8), (9) and (10), have had in respect of the capital distribution referred to in subsection (1), (2) or (3), as the case may be; (b) the amount of any distribution of capital of the company or of corpus of the trust estate, as the case may be, to which subsection (4) or (8) applies in relation to any of those persons in relation to the vendors taxable amount; (c) the amount or value of any property acquired by any of those persons from the company or trust estate, as the case may be, being property to which paragraph (5)(c) or (d), subsection (6), paragraph (9)(c) or (d) or subsection (10) applies in relation to the person concerned in relation to the vendors taxable amount; (d) the consideration paid or given in respect of the acquisition by the company or the trustee of the trust estate of redeemable shares or redeemable units from any of those persons, being redeemable shares or redeemable units to which paragraph (5)(e) or (9)(e) applies in relation to the person concerned in relation to the vendors taxable amount, and the redemption value of those redeemable shares or redeemable units; and (e) such other matters as the Commissioner considers relevant. (17) For the purposes of subsections (5) and (9): (a) redemption value, in relation to redeemable shares or redeemable units means: (i) if the redeemable shares or the redeemable units, as the case may be, have been redeemed—the amount for which they were redeemed; and (ii) in any other case—the amount that, in the opinion of the Commissioner, might reasonably be expected to be the amount for which the redeemable shares or the redeemable units, as the case may be, would be redeemed if they were redeemed at the relevant time referred to in subsection (5) or (9), as the case may be; (b) a share in a company is a redeemable share if: (i) the share is, or at the option of the company is to be, liable to be redeemed; or (ii) the share was issued in pursuance of, or as part of, an agreement or arrangement, whether oral or in writing and whether entered into before or after the commencement of this Act, that had the purpose, or purposes that included the purpose, of enabling the company, by means of the redemption, purchase or cancellation, or of a reduction in the paid‑up value, of that share or of any other share in the company, to pay, transfer or apply to, on behalf of or at the direction of the person to whom the share was issued or any other person, whether upon the exercise of an option by the company or by any other person or not, any money or other property other than shares in the company; (c) a unit in a unit trust is a redeemable unit if: (i) the unit is, or at the option of the trustee of the unit trust is to be, liable to be redeemed; or (ii) the unit was issued in pursuance of, or as part of, an agreement or arrangement, whether oral or in writing and whether entered into before or after the commencement of this Act, that had the purpose, or purposes that included the purpose, of enabling the trustee of the unit trust, by means of the redemption, purchase or cancellation of the unit or of any other unit in the unit trust or of a distribution of corpus of the unit trust, to pay, transfer or apply to, on behalf of or at the direction of the person to whom the unit was issued or any other person, whether upon the exercise of an option by the trustee of the unit trust or by any other person or not, any money or other property other than units in the unit trust; (d) a person to whom redeemable shares or redeemable units were issued or allotted shall be taken to have acquired those redeemable shares or redeemable units; and (e) a reference to the consideration paid or given by a person in respect of the acquisition of redeemable shares in a company or redeemable units in a unit trust includes a reference to any payment or other consideration given by the person to the company or to the trustee of the unit trust, as the case may be, in respect of the redeemable shares or redeemable units, whether as payment of a premium in respect of the redeemable shares or redeemable units or otherwise and whether on application for, or on allotment of, the redeemable shares or redeemable units or otherwise. (18) Where a secondary taxable amount exists or existed in relation to a person and: (a) the Commissioner, having regard to: (i) the circumstances by reason of which the secondary taxable amount exists or existed; and (ii) such other circumstances as the Commissioner considers relevant; considers it unreasonable that the secondary taxable amount should be taken to exist or to have existed in relation to the person; or (b) if the secondary taxable amount is less than $100—the Commissioner considers that the secondary taxable amount should not be taken to exist or to have existed in relation to the person; the secondary taxable amount shall not be taken to exist or to have existed in relation to the person. (19) A secondary 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. (20) For the purposes of this section, a distribution of capital of a company shall be taken to have been received by a person although it is not actually paid over to the person but is re‑invested, accumulated, capitalised, carried to any reserve, sinking fund or insurance fund however designated, or otherwise dealt with on behalf of the person or as the person directs. (21) In this section, unless the contrary intention appears, recoupment tax includes late payment tax.