INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 7 - Private companies  

SECTION 105AAA   DIVIDENDS PAID IN FIRST 2 MONTHS OF PRESCRIBED PERIOD NOT TO BE TAKEN INTO ACCOUNT IN CERTAIN CIRCUMSTANCES  

105AAA(1)   [Compliance with beneficial ownership of shares test insufficient]  

Notwithstanding section 105A but subject to section 105AAB , an amount paid in a dividend by a private company during the first 2 months of the period that is the prescribed period in relation to the year of income shall not be taken into account in ascertaining whether the company is deemed to have made a sufficient distribution in relation to the year of income if -

(a) where the amount was paid before the last day of that period of 2 months, the company derived, during the part of that period of 2 months that followed the day on which the amount was paid, income that the company would not have derived if the company had not paid the amount in a dividend;

(b) a person other than the company will, either directly or in directly, receive any benefit or obtain any advantage in relation to the application of this Act as a result of the operation of any agreement, scheme, arrangement, understanding, transaction, course of conduct or course of business that would not have been entered into or carried out if the company had not paid the amount in a dividend;

(c) where the amount was paid before the last day of that period of 2 months, the affairs or business operations of the company were, during the part of that period of 2 months that followed the day on which the amount was paid, managed or conducted without proper regard to the rights, powers or interests of continuing shareholders in the company; or

(d) where the amount was paid otherwise than on the first day or the last day of that period of 2 months, at any time during the part of that period of 2 months that followed the day on which the amount was paid the voting power in the company was, either directly or through one or more interposed companies, trustees or partnerships, controlled by a person who did not, either directly or through one or more interposed companies, trustees or partnerships, control the voting power in the company at all times during the part of that period of 2 months that commenced on the first day of that period and ended on the day on which the amount was paid, and that person acquired the control of that voting power for the purpose, or for purposes that included the purpose, of receiving any benefit or obtaining any advantage in relation to the application of this Act or of securing that another person would receive such a benefit or obtain such an advantage.

105AAA(2)   [Application of subsec (1)(a)]  

Paragraph (1)(a) applies notwithstanding that the income was derived by the company in the course of ordinary family or commercial dealing but that paragraph does not apply where the continuing shareholders will benefit from the derivation of the income to an extent that the Commissioner considers to be fair and reasonable having regard to their rights and interests in the company.

105AAA(3)   [Deemed receipt of benefit, etc, for subsec (1)(b) purposes]  

Without limiting the generality of paragraph (1)(b), a person shall be deemed, for the purposes of that paragraph, to receive a benefit or obtain an advantage in relation to the application of this Act if the person is not liable to pay income tax in respect of a year of income, or the liability of the person to pay income tax in respect of a year of income is reduced, by reason that the person has not derived income that the person would have derived if the agreement, scheme, arrangement, understanding, transaction, course of conduct or course of business had not been entered into or carried out.

105AAA(4)   [Application of subsec (1)(b)]  

Paragraph (1)(b) applies notwithstanding that the agreement, scheme, arrangement, understanding, transaction, course of conduct or course of business was entered into or carried out in the course of ordinary family or commercial dealing but that paragraph does not apply in relation to a benefit or advantage that is received or obtained by a person who had a shareholding interest in the company during the part of the period of 2 months that followed the day on which the amount was paid, being a benefit or advantage that the Commissioner considers to be fair and reasonable having regard to that shareholding interest.

105AAA(5)   [Shareholding interest defined]  

For the purposes of this section -

(a) a person has a shareholding interest in a company if he is the beneficial owner of, or of an interest in, any shares in the company; and

(b) where a person has a shareholding interest in a company that has a shareholding interest in another company (including a shareholding interest that the company has in that other company by any other application or applications of this paragraph) that person shall be deemed to have a shareholding interest in that other company.

105AAA(6)   [Identification of continuing shareholders]  

For the purposes of the application of this section in relation to an amount paid in a dividend by a company, a reference in this section to continuing shareholders in the company shall -

(a) if subsection 105A(5) applies for the purpose of determining whether the amount is to be taken into account in ascertaining whether the company is deemed to have made a sufficient distribution in relation to the year of income - be read as a reference to persons referred to in subsection 105A(5) ; and

(b) if subsection 105A(9) applies for the purpose referred to in paragraph (a) - be read as a reference to persons referred to in subsection 105A(9) .

105AAA(7)   [Management, etc, of company's affairs for subsec (1)(c) purposes]  

In determining for the purposes of this section whether the affairs or business operations of a company were managed or conducted as mentioned in paragraph (1)(c), regard shall be had to any act or thing done in the course of the management or conduct of those affairs or business operations, irrespective of the purpose or purposes for which that act or thing was done and notwithstanding that the doing of that act or thing took place in the course of ordinary family or commercial dealing.

105AAA(8)   [Interpretation]  

For the purposes of this section, it shall be taken that -

(a) income would not have been derived by a company if a particular act had not been done;

(b) income would have been derived by a person if a particular act had not been done; or

(c) an agreement, scheme, arrangement, understanding, transaction, course of conduct or course of business would not have been entered into or carried out if a particular act had not been done,

where the income would not have been derived by the company, the income would have been derived by the person, or the agreement, scheme, arrangement, understanding, transaction, course of conduct or course of business would not have been entered into or carried out, as the case may be, if none of 2 or more acts (including that act) had been done.

105AAA(9)   [The ``doing of an act'']  

A reference in subsection (8) to the doing of an act includes a reference to the happening of an event or the existence of a matter or circumstance.