Tax Laws Amendment (2006 Measures No. 4) Act 2006 (168 of 2006)
Schedule 4 CGT and foreign residents
Part 2 Other amendments
Income Tax Assessment Act 1997
12 After Subdivision 960-G
Insert:
Subdivision 960-GP - Participation interests in entities
Table of sections
960-180 Total participation interest
960-185 Indirect participation interest
960-190 Direct participation interest
960-195 Non-portfolio interest test
960-180 Total participation interest
An entity's total participation interest at a particular time in another entity is the sum of:
(a) the entity's *direct participation interest in the other entity at that time; and
(b) the entity's *indirect participation interest in the other entity at that time.
960-185 Indirect participation interest
(1) Work out the indirect participation interest that an entity (the holding entity ) holds at a particular time in another entity (the test entity ) by multiplying:
(a) the holding entity's *direct participation interest (if any) in another entity (the intermediate entity ) at that time;
by:
(b) the sum of:
(i) the intermediate entity's direct participation interest (if any) in the test entity at that time; and
(ii) the intermediate entity's indirect participation interest (if any) in the test entity at that time (as worked out under one or more other applications of this section).
(2) If there is more than one intermediate entity to which paragraph (1)(a) applies at that time, the holding entity's indirect participation interest is the sum of the percentages worked out under subsection (1) in relation to each of those intermediate entities.
960-190 Direct participation interest
(1) Use the following table to work out the direct participation interest that one entity holds in another entity.
|
Direct participation interest |
||
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If the other entity is this kind of entity: |
the direct participation interest that the first entity holds in the other entity is: |
|
|
1 |
A company (within the meaning of Part X of the Income Tax Assessment Act 1936) |
the direct control interest (within the meaning of section 350 of the Income Tax Assessment Act 1936) that the first entity holds in the other entity |
|
2 |
A trust (within the meaning of Part X of the Income Tax Assessment Act 1936) |
the direct control interest (within the meaning of section 351 of the Income Tax Assessment Act 1936) that the first entity holds in the other entity |
|
3 |
A *partnership |
the direct control interest (within the meaning of section 350 of the Income Tax Assessment Act 1936) that the first entity would hold in the other entity, if the assumptions in subsection (3) of this section were made |
(2) For the purposes of subsection (1):
(a) apply sections 350 and 351 of the Income Tax Assessment Act 1936 as if those sections apply for the purposes of this Division rather than only for the purposes of Part X of that Act; and
(b) do not apply subsections 350(6) and (7) and 351(3) and (4) of that Act.
(3) For the purposes of item 3 of the table in subsection (1), assume that:
(a) the *partnership is a company; and
(b) the partners in the partnership are shareholders in the company; and
(c) the total amount of assets or capital contributed to the partnership is the total paid-up share capital of the company; and
(d) a partner's right of distribution of capital, assets or profits on the dissolution of the partnership is a shareholder's right to distribution of capital or profits of the company on winding-up; and
(e) a partner's right of distribution of capital, assets or profits otherwise than on the dissolution of the partnership is a shareholder's right to distribution of capital or profits of the company otherwise than on winding-up.
960-195 Non-portfolio interest test
An interest held by an entity (the holding entity ) in another entity (the test entity ) passes the non-portfolio interest test at a time if the sum of the *direct participation interests held by the holding entity and its *associates in the test entity at that time is 10% or more.