Income Tax Assessment Act 1936
PART X
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ATTRIBUTION OF INCOME IN RESPECT OF CONTROLLED FOREIGN COMPANIES
Division 7
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Calculation of attributable income of CFC
Subdivision B
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General modifications of Australian tax law
SECTION 401
REDUCTION OF DISPOSAL CONSIDERATION OR CAPITAL PROCEEDS IF ATTRIBUTED INCOME NOT DISTRIBUTED
401(1)
If:
(a) it is necessary, for the purposes of applying a provision of this Act in calculating the attributable income of the eligible CFC in relation to the eligible taxpayer, to take into account:
(b) immediately before the disposal or CGT event takes place, either or both of the following conditions are satisfied:
(c) for the purpose of calculating the attributable income, the consideration or capital proceeds that, apart from this section, would be taken into account under the provision referred to in paragraph (a) in respect of the disposal or CGT event is, subject to subsection (3), taken to be reduced by the grossed-up amount of the attribution surplus, or the sum of the grossed-up amounts of the attribution surpluses, as the case requires; and
(d) for the purposes of this Act, attribution debits and credits arise in accordance with subsection (5).
401(3)
For the purposes of paragraph (1)(c):
(a) a reference to the grossed-up amount of an attribution surplus is a reference to the amount of the surplus divided by the eligible taxpayer ' s attribution account percentage for the eligible CFC; and
(b) where the disposal of the asset, or the CGT event, causes the eligible taxpayer ' s attribution account percentage for an attribution account entity in relation to which there is an attribution surplus to be reduced by a proportion, then only that proportion of the attribution surplus is, subject to this subsection, to be taken into account under that paragraph; and
(c) where there is only one attribution surplus referred to in that paragraph and (after any application of paragraph (b) of this subsection) its grossed-up amount exceeds the consideration in respect of the disposal or the capital proceeds from the CGT event, then the surplus is only to be taken into account to the extent that its grossed-up amount equals the consideration or those capital proceeds; and
(d) where there are 2 or more attribution surpluses referred to in paragraph (1)(c) and (after any application of paragraph (b) of this subsection) the sum of their grossed-up amounts exceeds the consideration in respect of the disposal or the capital proceeds from the CGT event, then:
401(4)
An election for the purposes of paragraph (3)(d) must be made on or before the date of lodgment of the eligible taxpayer's return of income for 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.
401(5)
For the purposes of this Act:
(a) an attribution debit is taken to arise at the time of the disposal under section 372 , in relation to the eligible taxpayer, for each attribution account entity (in this section called a " surplus entity " ) in relation to which there is an attribution surplus to which paragraph (1)(c) applies; and
(b) the amount of the attribution debit is equal to so much of the surplus as is taken into account under paragraph (1)(c); and
(c) there is no grossed-up amount in relation to the attribution debit under section 373 ; and
(d) an attribution credit equal to the debit is taken to arise, at the time of the disposal or of the CGT event, under section 371 for the eligible CFC in relation to the eligible taxpayer.
401(6)
(Repealed by No 143 of 2007 )
401(6A)
In determining, for the purposes of this section, whether there was an attribution surplus immediately before a CGT event, and the amount of such a surplus, also take into account any attribution credit that later arises because the CGT event caused section 104-175 of the Income Tax Assessment Act 1997 (as it notionally applies to the disposal entity under this Division) to operate.
401(7)
In this section:
(a) if the entity is a company - an interest in shares in the company, or an entitlement to acquire such an interest; or
(b) if the entity is a partnership - an interest of a partner in the profits or property of the partnership, or an entitlement of a partner to acquire such an interest; or
(c) if the entity is a trust - an entitlement of a beneficiary to a share of the income or corpus of the trust, or an entitlement of a beneficiary to acquire such an entitlement.
View history note
Hide history noteIf:
(a) it is necessary, for the purposes of applying a provision of this Act in calculating the attributable income of the eligible CFC in relation to the eligible taxpayer, to take into account:
(i) the amount of consideration received, entitled to be received or taken to have been received, by the eligible CFC in respect of the disposal of an asset; or
being an asset that is an interest in an attribution account entity (the disposal entity ); and
(ii) the capital proceeds from a CGT event happening in relation to a CGT asset;
(b) immediately before the disposal or CGT event takes place, either or both of the following conditions are satisfied:
(i) there is an attribution surplus for the disposal entity in relation to the eligible taxpayer;
(ii) there is an attribution surplus for one or more other attribution account entities in relation to the eligible taxpayer, where each such entity is one in which the eligible taxpayer has an indirect attribution account interest held through the disposal entity;
then:
(c) for the purpose of calculating the attributable income, the consideration or capital proceeds that, apart from this section, would be taken into account under the provision referred to in paragraph (a) in respect of the disposal or CGT event is, subject to subsection (3), taken to be reduced by the grossed-up amount of the attribution surplus, or the sum of the grossed-up amounts of the attribution surpluses, as the case requires; and
(d) for the purposes of this Act, attribution debits and credits arise in accordance with subsection (5).
401(3)
For the purposes of paragraph (1)(c):
(a) a reference to the grossed-up amount of an attribution surplus is a reference to the amount of the surplus divided by the eligible taxpayer ' s attribution account percentage for the eligible CFC; and
(b) where the disposal of the asset, or the CGT event, causes the eligible taxpayer ' s attribution account percentage for an attribution account entity in relation to which there is an attribution surplus to be reduced by a proportion, then only that proportion of the attribution surplus is, subject to this subsection, to be taken into account under that paragraph; and
(c) where there is only one attribution surplus referred to in that paragraph and (after any application of paragraph (b) of this subsection) its grossed-up amount exceeds the consideration in respect of the disposal or the capital proceeds from the CGT event, then the surplus is only to be taken into account to the extent that its grossed-up amount equals the consideration or those capital proceeds; and
(d) where there are 2 or more attribution surpluses referred to in paragraph (1)(c) and (after any application of paragraph (b) of this subsection) the sum of their grossed-up amounts exceeds the consideration in respect of the disposal or the capital proceeds from the CGT event, then:
(i) if the taxpayer makes an election that for the purposes of this paragraph, a part of each surplus (after any application of paragraph (b)) such that the sum of the grossed-up amounts of the parts to which the election relates equals the consideration or those capital proceeds - only the part to which the election relates of each surplus is to be taken into account under paragraph (1)(c); or
(ii) if subparagraph (i) does not apply - only a proportion of each surplus (after any application of paragraph (b)) is to be taken into account under paragraph (1)(c), being the proportion calculated using the formula:
Consideration Total grossed-up surplus where:
consideration
means the amount of the consideration or the capital proceeds.total grossed-up surplus
means the sum of the grossed-up amounts of the attribution surpluses (after any application of paragraph (b)).
401(4)
An election for the purposes of paragraph (3)(d) must be made on or before the date of lodgment of the eligible taxpayer's return of income for 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.
401(5)
For the purposes of this Act:
(a) an attribution debit is taken to arise at the time of the disposal under section 372 , in relation to the eligible taxpayer, for each attribution account entity (in this section called a " surplus entity " ) in relation to which there is an attribution surplus to which paragraph (1)(c) applies; and
(b) the amount of the attribution debit is equal to so much of the surplus as is taken into account under paragraph (1)(c); and
(c) there is no grossed-up amount in relation to the attribution debit under section 373 ; and
(d) an attribution credit equal to the debit is taken to arise, at the time of the disposal or of the CGT event, under section 371 for the eligible CFC in relation to the eligible taxpayer.
401(6)
(Repealed by No 143 of 2007 )
401(6A)
In determining, for the purposes of this section, whether there was an attribution surplus immediately before a CGT event, and the amount of such a surplus, also take into account any attribution credit that later arises because the CGT event caused section 104-175 of the Income Tax Assessment Act 1997 (as it notionally applies to the disposal entity under this Division) to operate.
401(7)
In this section:
interest
, in relation to an attribution account entity, means:
(a) if the entity is a company - an interest in shares in the company, or an entitlement to acquire such an interest; or
(b) if the entity is a partnership - an interest of a partner in the profits or property of the partnership, or an entitlement of a partner to acquire such an interest; or
(c) if the entity is a trust - an entitlement of a beneficiary to a share of the income or corpus of the trust, or an entitlement of a beneficiary to acquire such an entitlement.
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