Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS  

Division 116 - Capital proceeds  

Special rules  

SECTION 116-95   Company changes residence from an unlisted country  

116-95(1)    
This section sets out what happens if:

(a) a *CFC ceases at a time (the residency change time ) to be a resident of an *unlisted country and becomes a resident of a *listed country; and

(aa) subsection 457(3) of the Income Tax Assessment Act 1936 does not apply to the change of residence; and

(b) because of the change in its residency status, an amount is included in an entity ' s assessable income under section 457 of the Income Tax Assessment Act 1936 (including because of paragraph 58(1)(d) of the Taxation Laws Amendment (Foreign Income) Act 1990 ); and

(c) a *CGT event happens in relation to a *CGT asset (the CFC asset ) that is *taxable Australian property and that the CFC owned since the residency change time.

116-95(2)    
If the conditions in subsection (3) are satisfied, the *capital proceeds from the *CGT event are reduced by the amount worked out under subsection (4). If the conditions in subsection (5) are satisfied, those capital proceeds are increased by the amount worked out under subsection (6).

Reduction of capital proceeds

116-95(3)    

If all the *CFC ' s assets were *disposed of at the residency change time for their *market values in the circumstances mentioned in subparagraph 457(2)(a) (ii) of the Income Tax Assessment Act 1936 :

(a) *distributable profits of the CFC of a particular amount (the distributable profit amount ) would be created, or its distributable profits would be increased by an amount (also the distributable profit amount ); and

(b) the CFC would have made a profit (the CFC asset profit ) on the disposal of the CFC asset.

116-95(4)    

The *capital proceeds are reduced by:

Distributable profit amount

×

CFC asset profit     Total asset profits

where:

total asset profits
is the sum of the profits that the CFC would have made if all its assets were *disposed of at the residency change time for their *market values (ignoring disposals that would not result in a profit).

Increase in capital proceeds

116-95(5)    

If all the *CFC ' s assets were *disposed of at the residency change time for their *market values in the circumstances mentioned in subparagraph 457(2)(a) (ii) of the Income Tax Assessment Act 1936 :

(a) the *distributable profits of the CFC would be reduced by an amount (the distributable profit reduction amount ); and

(b) the CFC would have made a loss (the CFC asset loss ) on the disposal of the CFC asset.

116-95(6)    

The *capital proceeds are increased by:

Distributable profit reduction amount

×

CFC asset loss     Total asset losses

where:

total asset losses
is the sum of the losses that the CFC would have made if all its assets were *disposed of at the residency change time for their *market values (ignoring disposals that would not result in a loss).

Note:

This section is disregarded in calculating the attributable income of a CFC: see section 410 of the Income Tax Assessment Act 1936 .