Tax Laws Amendment (2007 Measures No. 1) Act 2007 (56 of 2007)

Schedule 3   Employee share schemes and stapled securities

Part 2   Consequential amendments

Income Tax Assessment Act 1997

24   Subsections 703-35(1), (2), (3) and (4)

Repeal the subsections, substitute:

(1) The object of this section is to ensure that an entity (the first entity ) is not prevented from being a *subsidiary member of a *consolidated group or *consolidatable group just because there are minor holdings of *membership interests in an entity (the employee share scheme entity ) issued under *arrangements for employee shareholdings. (It does not matter whether the employee share scheme entity is the first entity or is interposed between the first entity and a *member of the group.)

Note: A company that is prevented from being a subsidiary member of a consolidated group may be a head company (so there could be 2 consolidated or consolidatable groups, instead of the one that this section ensures exists).

(2) This Part (except Division 719) operates as if an entity that meets the requirement of subsection (3) at a particular time were a *wholly-owned subsidiary of an entity (the holding entity ) at the time.

(3) The entity must be one that would be a *wholly-owned subsidiary of the holding entity at the time if the *membership interests in the entity that are to be disregarded under subsection (4) did not exist.

(4) Disregard:

(a) each of the *shares described in subsection (5) if the total number of those shares is not more than 1% of the number of ordinary shares in the company; and

(b) each of the *membership interests in an entity described in subsection (7) if the total number of those membership interests is not more than 1% of the number of membership interests of that kind in the entity.