New International Tax Arrangements Act 2004 (73 of 2004)

Schedule 1   Foreign investment funds

Income Tax Assessment Act 1936

8   After Division 11 of Part XI

Insert:

Division 11A - Exemption for virtual PST assets, segregated exempt assets and interests held by complying superannuation entities etc.

519A Objects of Division

The objects of this Division are:

(a) to exempt taxpayers from taxation under this Part in respect of foreign investment fund income that would otherwise be taken to accrue from virtual PST assets or segregated exempt assets; and

(b) to exempt taxpayers who are trustees of complying superannuation entities or certain fixed trusts from taxation under this Part in respect of foreign investment fund income.

519B Exemption

Virtual PST assets and segregated exempt assets

(1) The operative provision does not apply to a taxpayer in respect of an interest in a FIF that is a virtual PST asset or a segregated exempt asset of the taxpayer.

Complying superannuation entities

(2) If a taxpayer is the trustee of a complying superannuation entity in relation to a year of income, the operative provision does not apply to the taxpayer in relation to a FIF in respect of the notional accounting period of the FIF that ends in the year of income.

Fixed trusts with various fixed entitlements

(3) If:

(a) a taxpayer is the trustee of a fixed trust (an interposed fixed trust ) at the end of a year of income; and

(b) one of the following subparagraphs (whether or not the same subparagraph) applies in relation to each of the fixed entitlements to shares of the income and capital of the trust at the end of the year of income:

(i) it is a virtual PST asset;

(ii) it is a segregated exempt asset;

(iii) it is held by the trustee of a complying superannuation entity;

(iv) it is held by the trustee of an interposed fixed trust within the meaning of this subsection or subsection (4);

the operative provision does not apply to the taxpayer in relation to a FIF in respect of the notional accounting period of the FIF that ends in the year of income.

Fixed trusts with some fixed entitlements held by former complying superannuation entities

(4) If a taxpayer is the trustee of a fixed trust (an interposed fixed trust ) at the end of a year of income, where:

(a) some of the fixed entitlements to shares of the income and capital of the trust are held by the trustees of entities that:

(i) are not complying superannuation entities in relation to the year of income; but

(ii) acquired their fixed entitlements in previous years of income and were complying superannuation entities in relation to those years; and

(b) one of the following subparagraphs (whether or not the same subparagraph) applies in relation to each of the other fixed entitlements to shares of the income and capital of the trust at the end of the year of income:

(i) it is a virtual PST asset;

(ii) it is a segregated exempt asset;

(iii) it is held by the trustee of a complying superannuation entity;

(iv) it is held by the trustee of an interposed fixed trust within the meaning of this subsection or subsection (3); and

(c) the market value at the end of the year of income of the fixed entitlements to which paragraph (a) applies is not more than 5% of the market value at that time of all of the fixed entitlements to income and capital of the trust;

the operative provision does not apply to the taxpayer in relation to a FIF in respect of the notional accounting period of the FIF that ends in the year of income.

(5) In determining for the purposes of subparagraph (4)(a)(ii) whether an entity was a complying superannuation entity in relation to the year of income in which it acquired the fixed entitlements mentioned in that subparagraph, disregard any notice issued after the end of that year of income under section 40 of the Superannuation Industry (Supervision) Act 1993 to the effect that the entity was not a complying superannuation entity in relation to the year of income.