Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 768 - Foreign non-assessable income and gains  

Subdivision 768-G - Reduction in capital gains and losses arising from CGT events in relation to certain voting interests in active foreign companies  

Types of assets of a foreign company

SECTION 768-540   Active foreign business assets of a foreign company  

768-540(1)    
An asset is, at a particular time, an active foreign business asset of a company (the foreign company ) that is a foreign resident if, at that time:

(a) the asset is an *asset included in the total assets of the company; and

(b) the asset satisfies any of these conditions:

(i) the asset is used, or held ready for use, by the company in the course of carrying on a *business;

(ii) the asset is goodwill;

(iii) the asset is a *share; and

(c) the asset is not any of the following:

(i) *taxable Australian property;

(ii) a *membership interest in a company that is an Australian resident;

(iii) a membership interest in a *resident trust for CGT purposes;

(iv) an option or right to acquire a membership interest mentioned in subparagraph (ii) or (iii); and

(d) the asset is not covered by subsection (2); and

(e) if the foreign company is an AFI subsidiary (within the meaning of Part X of the Income Tax Assessment Act 1936 ) whose sole or principal business is financial intermediary business - the asset is not covered under subsection (4).

768-540(2)    
An asset is covered by this subsection if it is:

(a) a financial instrument (other than a *share or a trade debt); or

(b) either:

(i) an eligible finance share (within the meaning of Part X of the Income Tax Assessment Act 1936 ); or

(ii) a widely distributed finance share (within the meaning of that Part); or

(c) an interest in a trust or *partnership; or

(d) a *life insurance policy; or

(e) a right or option in respect of:

(i) a financial instrument; or

(ii) an interest in a company, trust or partnership; or

(iii) a life insurance policy; or

(f) cash or cash equivalent; or

(g) an asset whose main use in the course of carrying on the *business mentioned in subparagraph (1)(b)(i) is to *derive interest, an *annuity, rent, *royalties or foreign exchange gains unless:

(i) the asset is an intangible asset and has been substantially developed, altered or improved by the foreign company so that its *market value has been substantially enhanced; or

(ii) its main use for deriving rent was only temporary.

768-540(3)    
If, at the time mentioned in subsection (1), the foreign company is an AFI subsidiary (within the meaning of Part X of the Income Tax Assessment Act 1936 ) whose sole or principal business is financial intermediary business (within the meaning of that Part), subsection (2) operates as if:

(a) paragraphs (2)(a) and (f) were omitted; and

(b) paragraph (2)(g) did not contain a reference to interest, an *annuity or foreign exchange gains; and

(c) subparagraph (2)(e)(i) were omitted and the following subparagraph were substituted:

(i) a financial instrument, other than an asset mentioned in paragraph 450(1)(b) of the Income Tax Assessment Act 1936 ; or

768-540(4)    
The asset is covered under this subsection if:

(a) all of these conditions are satisfied:

(i) the asset is an asset mentioned in subparagraph 450(4)(b) (i) or (ii) of the Income Tax Assessment Act 1936 ;

(ii) the asset was acquired from another entity;

(iii) either of the conditions mentioned in subparagraph 450(6)(c)(i) and (ii) of the Income Tax Assessment Act 1936 were satisfied in relation to the other entity at the time of the acquisition; or

(b) both of these conditions are satisfied:

(i) the asset relates to a debt to which factoring income (within the meaning of Part X of the Income Tax Assessment Act 1936 ) of the foreign company relates;

(ii) the condition in paragraph 450(8)(b) of the Income Tax Assessment Act 1936 is satisfied in relation to the debt.