Taxation Laws Amendment Act (No. 2) 1999 (93 of 1999)

Schedule 7   Distributions to beneficiaries and partners that are equivalent to interest

Income Tax Assessment Act 1936

2   After section 45Z

Insert:

45ZA Trustee or partnership not entitled to intercorporate dividend rebate for distribution that is equivalent to interest

(1) This section applies if:

(a) an amount (the distributed amount ) is included in the assessable income of a taxpayer that:

(i) is a company; and

(ii) is a beneficiary in a trust estate or a partner in a partnership; and

(b) an amount (the attributable amount ) that is the whole or a part of the distributed amount was attributable to the payment of a dividend by a company; and

(c) the attributable amount was paid to the taxpayer:

(i) in respect of an interest in the trust or partnership that was created before the commencing time and either was acquired on or after 2 July 1998 or was created or acquired for a term that was extended at or after the commencing time; or

(ii) in respect of an interest in the trust or partnership that was created at or after the commencing time; or

(iii) under a finance arrangement (including an arrangement extending an earlier arrangement) to which the trustee of the trust, or the partnership, is a party and which was or is entered into at or after the commencing time; and

(d) the payment to the taxpayer of the attributable amount or the distributed amount may reasonably be regarded as equivalent to the payment of interest on a loan.

(2) In determining whether the payment of the attributable amount or the distributed amount may reasonably be regarded as equivalent to the payment of interest on a loan, regard is to be had to:

(a) the way in which the amount was calculated; and

(b) the conditions applying to the payment of the amount; and

(c) any other relevant matters.

(3) The taxpayer is not entitled to a rebate of tax under section 46 or 46A (as the section concerned has effect under section 45Z) in respect of the attributable amount.

(4) In this section:

arrangement means any agreement, arrangement or understanding, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.

associate has the meaning given by section 318 but includes:

(a) in relation to a trustee - the controller of the trust; and

(b) in relation to a company that is a member of a wholly-owned group (determined in accordance with Subdivision 975-W of theIncome Tax Assessment Act 1997) - any other company that is a member of the group.

commencing time means 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997.

controller , in relation to a trust, means a person:

(a) who beneficially owns, or is able in any way, whether directly or indirectly, to control the application of, more than 50% of the interests in the trust property or in the trust income; or

(b) who has power to appoint or remove the trustee of the trust; or

(c) according to whose directions, instructions or wishes the trustee of the trust is accustomed or under an obligation, whether formal or informal, to act.

finance includes money (including money in the currency of a foreign country) raised by the issue of shares or the creation of an interest in a trust or partnership.

finance arrangement , in relation to a trustee or a partnership, means an arrangement entered into or carried out by any of the parties to the arrangement for the purpose, or for purposes that include the purpose:

(a) of enabling the trustee or partnership, or the company referred to in paragraph (1)(b), or an associate of the trustee, partnership or company, to obtain finance (whether by way of renewal or otherwise); or

(b) of enabling the trustee or partnership, or the company referred to in paragraph (1)(b), or an associate of the trustee, partnership or company, to obtain an extension of the period for which finance was obtained under an earlier arrangement.

interest , in relation to a trust that is a discretionary trust, includes a right to receive, at the discretion of the trustee of the trust, benefits under the trust.

loan includes the provision of credit or any other form of financial accommodation.

paid : an attributable amount or distributed amount is taken to have been paid to a taxpayer if it is included in the taxpayer's assessable income.