INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 2A - Calculation of taxable income  

Subdivision B - Calculation of taxable income where disqualifying event occurs  

SECTION 50K   SPECIAL PROVISIONS RELATING TO BENEFICIAL OWNERSHIP OF, OR RIGHTS ATTACHED TO, SHARES  

50K(1)   [Effect of section]  

The succeeding provisions of this section have effect where:

(a) for the purposes of the application of subsection 50D(2) , it is necessary to determine whether, at any time, a person beneficially owned shares in a company or whether certain rights were attached to shares in a company;

(b) for the purposes of determining, in accordance with section 50H , whether a disqualifying event is deemed to have occurred in relation to a company at a time during a year of income, it is necessary to determine whether a person beneficially owned shares in any company, or whether certain rights were attached to shares in any company, at any time during that year of income; or

(c) for the purposes of the application of section 50J , it is necessary to determine whether a person at any time beneficially owned shares in a company otherwise than by the operation of that section, or whether certain rights were attached at any time to shares in a company that were beneficially owned by a person otherwise than by the operation of that section.

50K(1A)   [Trustee of family trust]  

If the trustee of a family trust (within the meaning of section 272-75 of Schedule 2F ) owns shares in a company, the trustee is taken to be the beneficial owner of the shares.

50K(2)   [Deceased shareholder]  

Shares in a company that were beneficially owned at any time by a natural person shall be deemed to have been beneficially owned by the same person at a later time if the person has died and, at that later time, the shares were owned by the trustee of his estate in his capacity as trustee of that estate or were beneficially owned by a person who received the shares as a beneficiary in that estate.

50K(3)   [Redeemable shares]  

Redeemable shares beneficially owned by a person at any time shall be taken not to have been owned by the person at that time.

50K(4)   [Shares deemed to be redeemable]  

For the purposes of subsection (3), a share issued by a company shall be deemed to be a redeemable share if -

(a) the share is, or at the option of the company is to be, liable to be redeemed; or

(b) the share was issued in pursuance of, or as part of, an agreement, whether oral or in writing and whether entered into before or after the commencement of this subsection, 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.

50K(5)   [Agreement relating to beneficial ownership]  

Where -

(a) a person beneficially owned shares in a company, or a company claims that a person beneficially owned shares in a company, at a time (in this subsection referred to as the ``relevant time'') during a year of income;

(b) before or during the year of income, an agreement was entered into, or a right, power or option (including a contingent right, power or option) was granted, being an agreement, right, power or option that, in any way, directly or indirectly, related to, affected or depended for its operation on -

(i) the beneficial interest of the person in the shares, or the value of that interest;

(ii) the right of that person to sell, or otherwise dispose of, that interest, or any such sale or other disposition;

(iii) any rights carried by the shares, or the exercise of any such rights; or

(iv) any dividends that might be paid, or any distribution of capital that might be made, in respect of the shares, or the payment of any such dividends or the making of any such distribution of capital; and

(c) the agreement was entered into or the right, power or option was granted or acquired, for the purpose, or for purposes that included the purpose of securing that a person who, if the agreement had not been entered into or the right, power or option had not been granted or acquired, would have been liable to pay income tax in respect of a year of income would not be liable to pay income tax in respect of that year of income or would be liable to pay less income tax in respect of that year of income than the person would have been liable to pay if the agreement had not been entered into, or the right, power or option had not been granted, as the case may be,

the Commissioner may treat the shares as not having been beneficially owned by the person at the relevant time.

50K(6)   [Shares deemed to carry rights]  

Where the Commissioner is satisfied that, by virtue of a provision in the constituent document of a company as in force at any time during the year of income or by virtue of an agreement made before the end of the year of income, shares in the company have commenced, or will or may commence at any time, to carry certain rights (whether or not any of those rights had previously been carried by those shares), those shares shall be deemed to have carried those rights at all times during the year of income when the provision in the constituent document was in force, or after the time when the agreement was entered into, as the case may be.

50K(7)   [Shares deemed not to have carried rights]  

Where the Commissioner is satisfied that, by virtue of a provision in the constituent document of a company as in force at any time during the year of income or by virtue of an agreement made before the end of the year of income, shares in the company have ceased, or will or may cease, at any time, to carry rights that those shares carried at any time during the year of income, those shares shall be deemed not to have carried those rights at any time when the provision in the constituent document was in force, or at any time after the time the agreement was entered into, as the case may be.

50K(8)   [Agreement, etc, need not be enforceable]  

A reference in this section to an agreement, right, power or option shall be read as including a reference to an agreement, right, power or option that is not enforceable by legal proceedings whether or not it was intended to be so enforceable.

50K(9)   [Arrangement need not be formal]  

For the purposes of this section, an arrangement or understanding, whether formal or informal and whether express or implied, shall be deemed to be an agreement.