New International Tax Arrangements (Foreign-owned Branches and Other Measures) Act 2005 (64 of 2005)

Schedule 3   Australian permanent establishments of foreign financial entities

Part 3   Thin capitalisation

Income Tax Assessment Act 1997

17   Sections 820-597 and 820-599

Repeal the sections, substitute:

820-597 Choice by head company of consolidated group or MEC group

(1) This section applies if there is a period (the grouping period ) for which all these conditions are met:

(a) the period was all or part of an income year of the *head company of a *consolidated group or *MEC group;

(b) the consolidated group or MEC group existed throughout the period;

(c) the head company and an entity (the establishment entity ) covered by one of the following subparagraphs are both members of the same *wholly-owned group throughout the period:

(i) a *foreign bank that carried on its banking *business in Australia through at least one *Australian permanent establishment at each time in the period;

(ii) a *foreign entity that was a *financial entity and had at least one Australian permanent establishment at each time in the period;

(d) there is not a longer period in the income year for which the conditions in paragraphs (a), (b) and (c) are met in relation to the head company and the establishment entity.

Note: It does not matter whether the income year ended on the same day for the head company and the establishment entity.

(2) The *head company may choose to have all of the *Australian permanent establishments of the establishment entity treated as part of the head company for the grouping period for the purposes of this Division.

(3) If the conditions in subsection (1) are met in relation to the *head company and more than one other establishment entity, the head company may make a different choice in relation to each of the other establishment entities.

820-599 Choice by Australian resident company outside consolidatable group and MEC group

(1) This section applies if there is a period (also the grouping period ) for which all these conditions are met:

(a) the period was all or part of an income year of a company (the single company );

(b) throughout the period the single company:

(i) was an *Australian entity; and

(ii) was not a *prescribed dual resident; and

(iii) was not a *member of a *consolidatable group; and

(iv) was not a member of a *consolidated group; and

(v) was not a member of a *MEC group;

(c) the single company and an entity (the establishment entity ) covered by one of the following subparagraphs are both members of the same *wholly-owned group throughout the period:

(i) a *foreign bank that carried on its banking *business in Australia through at least one *Australian permanent establishment at each time in the period;

(ii) a *foreign entity that was a *financial entity and had at least one Australian permanent establishment at each time in the period;

(d) there is not a longer period in the income year for which the conditions in paragraphs (a), (b) and (c) are met in relation to the single company and the establishment entity.

Note: It does not matter whether the income year ended on the same day for the single company and the establishment entity.

(2) The single company may choose to have all of the *Australian permanent establishments of the establishment entity treated as part of the single company for the grouping period for the purposes of this Division.

(3) If the conditions in subsection (1) are met in relation to the single company and more than one other establishment entity, the single company may make a different choice in relation to each of the other establishment entities.