Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-5 - CORPORATE TAXPAYERS AND CORPORATE DISTRIBUTIONS  

Division 165 - Income tax consequences of changing ownership or control of a company  

Subdivision 165-CD - Reductions after alterations in ownership or control of loss company  

Operative provisions

SECTION 165-115X   Relevant equity interest  

165-115X(1)    
An entity (not an individual) has a relevant equity interest in a *loss company at a particular time if:

(a) at that time the entity has a controlling stake in the loss company (see section 165-115Z ); and

(b) at that time the entity has an interest (an equity ) that gives, or interests (each of which is also called an equity ) that between them give, the entity:

(i) the control of, or the ability to control, 10% or more of the voting power in the loss company (either directly, or indirectly through one or more interposed entities); or

(ii) the right to receive (either directly, or indirectly through one or more interposed entities) 10% or more of any dividends that the loss company may pay; or

(iii) the right to receive (either directly, or indirectly through one or more interposed entities) 10% or more of any distribution of capital of the loss company; and

(c) the equity or each equity is either:

(i) an interest (including a *share or shares, or an option or right to acquire a share or shares) in the loss company; or

(ii) an interest (including an option or right to acquire an interest) held by the entity directly in another entity that has a relevant equity interest or relevant debt interest in the loss company.

Note:

For paragraph (b), Division 167 has special rules for working out rights to voting power, dividends and capital distributions in a company whose shares do not all carry the same rights to those matters.

165-115X(2)    
The equity or equities constitute the entity ' s relevant equity interest in the *loss company.

165-115X(2A)    

A *widely held company that, apart from this subsection, would have a relevant equity interest in a *loss company at a particular time does not have such an interest at that time.

165-115X(2B)    

Subsection (2A) does not apply if:

(a) an entity has a controlling stake in the loss company (see section 165-115Z ); and

(b) that entity has a direct or indirect interest in, or is owed a debt by, the *widely held company, being an interest or debt in respect of which:

(i) the entity could, if a *CGT event happened in respect of the interest or debt, make a *capital loss (other than a capital loss that would be disregarded) that reflects any part of the loss company ' s overall loss; or

(ii) the entity has deducted or can deduct, or could deduct at a later time, an amount in respect of the cost of the *acquisition, or a net loss on the *disposal, of the interest or debt, where the deduction reflected or would have reflected, or would reflect, as the case may be, any part of the company ' s overall loss.

165-115X(2C)    

Subsection (2A) does not apply in respect of a particular time if an entity that had a direct or indirect interest in, or was owed a debt by, the *widely held company at an earlier time, and had a controlling stake in the loss company (see section 165-115Z ) at the earlier time:

(a) made a capital loss (other than a capital loss that was disregarded) because a *CGT event happened in respect of the interest or debt, where the capital loss reflected any part of the *loss company ' s overall loss; or

(b) has deducted or could have deducted at an earlier time, or could deduct at a later time, an amount in respect of the cost of the *acquisition, or a net loss on the *disposal, of the interest or debt, where the deduction reflected or would have reflected, or would reflect, as the case may be, any part of the company ' s overall loss.

165-115X(3)    
An entity (the first entity ) that, apart from this subsection, would have a relevant equity interest in a *loss company at a particular time does not have such an interest if, at that time, there is no other entity that has a direct or indirect interest in, or is owed a debt by, the first entity, being an interest or debt in respect of which:

(a) the other entity could, if a *CGT event happened in respect of the interest or debt, make a *capital loss (other than a capital loss that would be disregarded) that reflects any part of the loss company ' s overall loss; or

(b) the other entity has deducted or can deduct, or could deduct at a later time:

(i) an amount in respect of the cost of the *acquisition of the interest or debt; or

(ii) a net loss on the *disposal of the interest or debt;

where the deduction reflected, or would reflect, any part of the loss company ' s overall loss.

165-115X(3A)    

Subsection (3) does not apply if the first entity is a *widely held company.

165-115X(4)    

Subsection (3) does not apply to the first entity in respect of a particular time if an entity that had a direct or indirect interest in, or was owed a debt by, the first entity at an earlier time:

(a) made a capital loss (other than a capital loss that was disregarded) because a *CGT event happened in respect of the interest or debt, where the capital loss reflected any part of the *loss company ' s overall loss; or

(b) has deducted or could have deducted at an earlier time, or could deduct at a later time, an amount in respect of the cost of the *acquisition, or a net loss on the *disposal, of the interest or debt, where the deduction reflected or would have reflected, or would reflect, as the case may be, any part of the company ' s overall loss.

165-115X(5)    
An individual is not taken to have a relevant equity interest in a *loss company at any time.

165-115X(6)    
A partnership that consists only of individuals is not taken to have a relevant equity interest in a *loss company at any time.

165-115X(7)    
If section 106-30 , 106-50 or 106-60 would treat an act referred to in that section that is done in relation to an interest as having been done by an individual, the interest is not a relevant equity interest.