Taxation Laws Amendment Act (No. 1) 2004 (101 of 2004)
Schedule 10 Foreign hybrids
Part 3 Amendment of the Income Tax (Transitional Provisions) Act 1997
38 At the end of Part 4-5
Add:
Division 830 - Application of the foreign hybrid rules
Table of sections
830-1 Standard application
830-5 Election to extend standard application for foreign hybrids
830-10 Election to extend standard application for CFCs with direct or indirect interests in foreign hybrid
830-15 Modified version of income tax law to apply for certain past income years
830-20 Modifications of income tax law
830-1 Standard application
Foreign hybrids
(1) Division 830 of the Income Tax Assessment Act 1997 applies to assessments for the 2003-2004 income year, and each later income year, of a taxpayer who will as a result be a partner in an entity that is a foreign hybrid in relation to that income year.
CFCs that are, directly or indirectly, partners in foreign hybrids
(2) Division 830 of the Income Tax Assessment Act 1997 applies for the purpose of working out the attributable income, in relation to an attributable taxpayer, for:
(a) the statutory accounting period that starts on 1 July 2003 or on the day on which, as a result of an election under subsection 319(2) of the Income Tax Assessment Act 1936, the statutory accounting period that would otherwise start on 1 July 2003 starts; and
(b) each later statutory accounting period;
of a CFC that:
(c) will as a result be a partner in an entity that is a foreign hybrid in relation to that statutory accounting period; or
(d) has, directly or indirectly through one or more other entities, an interest in another entity that will, as a result, be a foreign hybrid in relation to that statutory accounting period.
830-5 Election to extend standard application for foreign hybrids
(1) If a taxpayer will, as a result of making an election under this subsection, be a partner in an entity that is a foreign hybrid in relation to the 2002-2003 income year, the taxpayer may elect that Division 830 of the Income Tax Assessment Act 1997 applies to the taxpayer's assessment for the 2002-2003 income year.
(2) If:
(a) a taxpayer is, as a result of subsection 830-1(1) of this Act, a partner in an entity that is a foreign hybrid in relation to the 2003-2004 income year; and
(b) the entity is a foreign hybrid in relation to that income year in a case where the requirements in subsection 830-15(3) of the Income Tax Assessment Act 1997 are satisfied;
the taxpayer may elect that Division 830 of the Income Tax Assessment Act 1997 applies to the taxpayer's assessment for the 2002-2003 income year as if the entity were a foreign hybrid in relation to that income year.
(3) A taxpayer must make an election under this section:
(a) on or before the day on which the taxpayer lodges its income tax return for the 2003-2004 income year; or
(b) within a further time allowed by the Commissioner.
(4) The election is irrevocable.
830-10 Election to extend standard application for CFCs with direct or indirect interests in foreign hybrid
(1) If:
(a) an entity is an attributable taxpayer in relation to a CFC at the end of the statutory accounting period that starts on 1 July 2002 or on the day on which, as a result of an election under subsection 319(2) of the Income Tax Assessment Act 1936, the statutory accounting period that would otherwise start on 1 July 2002 starts; and
(b) either:
(i) if the attributable taxpayer makes an election under this subsection, the CFC will, as a result, be a partner in an entity that is a foreign hybrid in relation to that statutory accounting period; or
(ii) the CFC has, directly or indirectly through one or more other entities, an interest in another entity that, if the attributable taxpayer makes an election under this subsection, will, as a result, be a foreign hybrid in relation to that statutory accounting period;
the attributable taxpayer may elect that Division 830 of the Income Tax Assessment Act 1997 applies for the purpose of working out the attributable income of the CFC for the statutory accounting period.
(2) If:
(a) for the purpose of working out the attributable income of a CFC in relation to an attributable taxpayer, a CFC:
(i) is, as a result of subsection 830-1(2) of this Act, a partner in an entity that is a foreign hybrid in relation to the statutory accounting period mentioned in paragraph (a) of that subsection; or
(ii) has, directly or indirectly through one or more other entities, an interest in another entity that is, as a result of subsection 830-1(2) of this Act, a foreign hybrid in relation to that statutory accounting period; and
(b) the entity mentioned in subparagraph (a)(i) or (ii) is also a foreign hybrid in relation to that statutory accounting period in a case where the requirements in subsection 830-15(3) of the Income Tax Assessment Act 1997 are satisfied;
the attributable taxpayer may elect that Division 830 of the Income Tax Assessment Act 1997 applies for the purpose of working out the attributable income of the CFC, in relation to the attributable taxpayer, for the preceding statutory accounting period.
(3) An attributable taxpayer must make an election under this section:
(a) on or before the day on which it lodges its income tax return for the 2003-2004 income year; or
(b) within a further time allowed by the Commissioner.
(4) The election is irrevocable.
830-15 Modified version of income tax law to apply for certain past income years
Basic rule
(1) Subject to subsection (3), if:
(a) an income year (the past income year ) of a taxpayer started before:
(i) if section 830-5 of this Act does not apply to the taxpayer - the 2003-2004 income year; or
(ii) if that section applies to the taxpayer - the 2002-2003 income year; and
(b) either:
(i) a statutory accounting period of a CFC, in relation to which the taxpayer was an attributable taxpayer at the end of that period and had an attribution percentage greater than nil, ended in the past income year; or
(ii) the taxpayer had an interest in a FIF at the end of the past income year; and
(c) the CFC or FIF would have been a foreign hybrid in relation to the past income year under:
(i) section 830-10 of the Income Tax Assessment Act 1997 (disregarding paragraph (1)(e) of that section); or
(ii) section 830-15 of that Act (disregarding paragraph (1)(d) and subsection (3) of that section);
if that section had been in force in the past income year;
then, for the purposes mentioned in subsection (2) of this section, the Income Tax Assessment Act 1936 applies with the modifications set out in section 830-20 of this Act in working out:
(d) the attributable income of the CFC for the statutory accounting period that ended in the past income year; or
(e) the notional income of the FIF for the notional accounting period that ends in the past income year.
Purposes
(2) The purposes are:
(a) any amendment of an assessment of the taxpayer for the past income year made before the commencement of this section; and
(b) the making of an assessment of the taxpayer for the past income year between the commencement of this section and the end of 30 June 2004; and
(c) any amendment of such an assessment; and
(d) the making of any assessment of the taxpayer for the past income year that takes place after 30 June 2004 and before the end of the time within which, if that assessment had been made on 1 July 2004, the Commissioner could amend the assessment under paragraph 170(2)(b), (c) or (d) of the Income Tax Assessment Act 1936; and
(e) any amendment of such an assessment.
Exception
(3) If:
(a) apart from this subsection, subsection (1) would apply to a taxpayer in relation to a CFC for a past income year; and
(b) before the commencement of this section, the taxpayer lodged its income tax return for the past income year; and
(c) the taxpayer prepared the income tax return on the basis that, for the purposes of Part X of the Income Tax Assessment Act 1936, the CFC was a resident of no particular unlisted country;
then subsection (1) does not apply to the taxpayer in relation to the CFC for the past income year unless:
(d) if there is only one past income year to which paragraphs (a) to (c) of this subsection apply - the taxpayer elects that the subsection applies for the past income year; or
(e) if there is more than one past income year to which paragraphs (a) to (c) of this subsection apply - the taxpayer elects that the subsection applies for all of those past income years.
(4) The taxpayer must make the election:
(a) on or before the day on which the taxpayer lodges its income tax return for the 2003-2004 income year; or
(b) within a further time allowed by the Commissioner.
(5) The election is irrevocable.
830-20 Modifications of income tax law
(1) This section sets out the modifications of the Income Tax Assessment Act 1936 that, if section 830-15 of this Act so provides, apply in working out for a taxpayer:
(a) the attributable income of a CFC for the statutory accounting period that ended in an income year; or
(b) the notional income of a FIF for the notional accounting period that ended in an income year.
CFC - residence
(2) If the CFC is not a resident of a particular listed country or a particular unlisted country for the purposes of Part X of the Income Tax Assessment Act 1936 (including after applying section 331 of that Act), then for the purposes of that Part, the CFC is taken to be a resident of the country under whose laws it was formed.
CFC - foreign tax paid by taxpayer
(3) For the purpose of subsection 393(1) of the Income Tax Assessment Act 1936, if the taxpayer paid foreign tax (the actual foreign tax ) on its interest in an amount included in the notional assessable income of the CFC for the statutory accounting period, then the CFC is taken to have paid foreign tax in respect of the amount equal to the actual foreign tax divided by the taxpayer's direct attribution interest in the CFC at the end of the statutory accounting period.
CFC - foreign tax paid by another CFC
(4) For the purpose of subsection 393(1) of the Income Tax Assessment Act 1936, if:
(a) on the assumption in paragraph 830-15(1)(c) of this Act, another CFC (the tracing CFC ) would have been a partner in the foreign entity that the CFC mentioned in subsection (1) of this section (the foreign hybrid CFC ) would have been; and
(b) the taxpayer had an attribution tracing interest in the tracing CFC that was taken into account in calculating the taxpayer's attribution percentage for the foreign hybrid CFC at the end of the statutory accounting period; and
(c) the tracing CFC paid foreign tax (the actual foreign tax ) on its interest in an amount included in the notional assessable income of the foreign hybrid CFC for the statutory accounting period;
then the foreign hybrid CFC is taken to have paid foreign tax, in respect of the amount included in its notional assessable income, equal to the actual foreign tax divided by the tracing CFC's direct attribution interest in the foreign hybrid CFC at the end of the statutory accounting period.
FIF - foreign tax paid by taxpayer
(5) For the purpose of section 573 of the Income Tax Assessment Act 1936, if the taxpayer paid foreign tax (the actual foreign tax ) on its interest in an amount included in the notional income of the FIF for the notional accounting period, then the FIF is taken to have paid foreign tax in respect of that amount equal to the actual foreign tax divided by the attribution percentage applicable under section 581 of that Act to the taxpayer in respect of the taxpayer's interests in the FIF at the end of the notional accounting period.