Tax and Superannuation Laws Amendment (2015 Measures No. 2) Act 2015 (130 of 2015)
Schedule 4 Company losses
Part 1 Changes in company ownership
Division 1 Main amendments
Income Tax Assessment Act 1997
1 After Division 166
Insert:
Division 167 - Companies whose shares carry unequal rights to dividends, capital distributions or voting power
Table of Subdivisions
Guide to Division 167
167-A Rights to dividends or capital distributions
167-B Voting power
Guide to Division 167
167-1 What this Division is about
This Division modifies the way conditions relating to this Part apply to companies whose shares:
(a) do not all carry the same rights to dividends or capital distributions; or
(b) do not all carry the same voting rights, or do not carry all of the voting rights in the company.
Subdivision 167-A - Rights to dividends or capital distributions
Guide to Subdivision 167-A
167-5 What this Subdivision is about
Companies whose shares do not all carry the same rights to dividends or capital distributions may test the possession of those rights similarly to companies whose shares are all of a single class with the same rights.
167-7 Simplified outline of this Subdivision
If a condition of the continuity of ownership test cannot be worked out for a company:
(a) because of its unequal share structure; or
(b) because of a holding company's unequal share structure;
an entity can choose to reconsider that condition in up to 3 ways.
The first way involves disregarding debt interests.
The second way involves disregarding debt interests and secondary share classes.
The third way involves disregarding those shares, and treating the remaining shares as carrying certain percentages of the rights to receive dividends and capital distributions.
The second way can only be tried after the first way, while the third way can only be tried after the second way.
Table of sections
Operative provisions
167-10 When this Subdivision applies
167-15 First way - disregard debt interests
167-20 Second way - also disregard secondary share classes
167-25 Third way - treat remaining shares as having fixed rights to dividends and capital distributions
167-30 Fixing rights if practicable to work out market values
167-35 Fixing rights if impracticable to work out market values etc.
167-40 The valuing times for conditions listed in subsection 167-10(1)
Operative provisions
167-10 When this Subdivision applies
When this Subdivision applies
(1) This Subdivision applies in relation to a company if:
(a) as described in the following table, a condition (the unsatisfied condition ) cannot be worked out for the company for a particular period (the test period ); and
(b) at one or more times during the test period:
(i) the company; or
(ii) a company that has a *shareholding interest in it;
(an unequally structured company ) has an *unequal share structure.
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Conditions that can be reconsidered under this Subdivision |
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Item |
Column 1
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Column 2
that cannot be worked out for: |
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1 |
(a) subsection 165-12(3) or (4); (b) paragraph 165-37(1)(b) or (c); (c) subsection 165-123(3) or (4); (d) paragraph 175-10(3)(b) or (c), 175-45(3)(b) or (c) or 175-85(3)(b) or (c); (e) subparagraph (b)(ii) or (iii) of the definition of eligible Division 166 company in subsection 995-1(1) |
a period that is all or part of the period to which that provision relates |
Note: Each of these conditions is about rights to the company's dividends or capital distributions.
(2) This Subdivision also applies in relation to a company if:
(a) as described in the following table, a condition (the unsatisfied condition ) cannot be worked out for the company for a particular time (the test time ); and
(b) at the test time, the company, or a company that has a *shareholding interest in it, (an unequally structured company ) has an *unequal share structure.
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Conditions that can be reconsidered under this Subdivision |
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Item |
Column 1
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Column 2
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1 |
(a) paragraph 165-115C(1)(b) or (c) or 165-115L(1)(b) or (c); (b) subparagraph 165-115X(1)(b)(ii) or (iii); (c) paragraph 165-115Z(1)(b) or (c); (d) subsection 166-145(3) or (4); (e) subparagraph 166-175(1)(e)(ii) or (iii); (f) paragraph 166-225(1)(b) or (c); (g) subparagraph 166-230(1)(a)(ii) or (iii); (h) paragraph 166-240(1)(b) or (c); (i) subparagraph 166-255(1)(e)(ii) or (iii) or 166-260(1)(e)(ii) or (iii); (j) paragraph 166-260(3)(b) or (c) or 166-270(2)(c); (k) paragraph 170-260(3)(b) or (c) or 170-265(2)(b) or (c) |
a time that is the time, or one of the times, to which that provision relates |
Note 1: Each of these conditions is about rights to the company's dividends or capital distributions.
Note 2: If a condition cannot be worked out for several of the times to which the provision relates, apply this Subdivision separately for each of those times.
Meaning of unequal share structure
(3) A company has an unequal share structure at a particular time if, at that time:
(a) the company's *shares do not all carry the same rights to *dividends, or capital distributions, of the company; or
(b) some or all of the company's shares carry discretionary rights to dividends, or capital distributions, of the company; or
(c) the company is a *co-operative company that has *on issue one or more interests (other than shares) in the company's capital.
167-15 First way - disregard debt interests
(1) The unsatisfied condition may be reconsidered by disregarding any *debt interests in each unequally structured company.
(2) The way an entity prepares its *income tax return is sufficient evidence of it choosing to work out the unsatisfied condition under subsection (1).
167-20 Second way - also disregard secondary share classes
(1) This section applies in relation to each unequally structured company if:
(a) despite section 167-15, the unsatisfied condition cannot be worked out; and
(b) on the last day of the test period or at the test time (as appropriate), there is *on issue in that company one or more classes of *shares (the secondary share classes ) other than:
(i) the class or classes of ordinary or common shares that represent the majority of that company's value; and
(ii) *debt interests; and
(c) it is reasonable to conclude that the total *market value of the secondary share classes does not exceed 25% of the total market value of all of that company's shares (other than debt interests); and
(d) for one or more of the secondary share classes, it is reasonable to conclude that the market value of each of them does not exceed 10% of the total market value of all of that company's shares (other than debt interests).
Note: This section can apply separately for each unequally structured company.
(2) For the purposes of subsection (1), use *market values on the last day of the test period, or at the test time, (as appropriate).
(3) The unsatisfied condition may be reconsidered by disregarding:
(a) those of the secondary share classes that, under paragraph (1)(d), caused this section to apply; and
(b) any *debt interests in that company.
(4) The way an entity prepares its *income tax return is sufficient evidence of it choosing to work out the unsatisfied condition under subsection (3).
167-25 Third way - treat remaining shares as having fixed rights to dividends and capital distributions
When this section applies
(1) This section applies if, despite sections 167-15 and 167-20, the unsatisfied condition cannot be worked out for the test period or test time (as appropriate).
How to fix rights to dividends and capital distributions
(2) The unsatisfied condition may be reconsidered by applying subsections (3) and (4) to each unequally structured company. When doing this for an unsatisfied condition listed in subsection 167-10(1), assume:
(a) that the test period consists only of the valuing times worked out under section 167-40; and
(b) that each of those valuing times is a test time.
(3) Firstly, disregard any *debt interests in that company and any of its *shares that can be disregarded under subsection 167-20(3).
(4) Secondly, treat each of that company's remaining *shares *on issue at the test time as having at that time the percentage of the rights to receive *dividends, and capital distributions, worked out either:
(a) under section 167-30; or
(b) under section 167-35 if:
(i) it is not reasonably practicable to work out the market values of each of those remaining shares; or
(ii) the sum of the *market values of all of those remaining shares is nil.
Note: The remaining shares are those remaining after disregarding the shares mentioned in subsection (3).
Evidence of a choice under this section
(5) The way an entity prepares its *income tax return is sufficient evidence of it choosing to work out the unsatisfied condition under this section.
167-30 Fixing rights if practicable to work out market values
Each remaining *share is treated at the test time as carrying the following percentage of the rights to receive *dividends, and capital distributions, from the company:
where market value is worked out at the test time.
167-35 Fixing rights if impracticable to work out market values etc.
(1) Each remaining *share is treated at the test time as carrying such a percentage of the rights to receive *dividends, and capital distributions, from the company as is reasonable worked out:
(a) at the test time; and
(b) having regard to the purpose of the unsatisfied condition.
(2) In working out what is reasonable for subsection (1), have regard to the following:
(a) the company's *constitution;
(b) any agreements between the company and either or both of the following:
(i) any or all of the shareholders in the company;
(ii) any or all of the *associates of a shareholder in the company;
(c) any statement by the company of its policy in paying *dividends or making capital distributions;
(d) the ability of an entity to control (whether directly, or indirectly through one or more interposed entities) how the company pays dividends or makes capital distributions;
(e) how the company has previously paid dividends or made capital distributions;
(f) whether all classes of *shares carry substantially the same rights to receive dividends and capital distributions;
(g) the principle that:
(i) a *tax loss or bad debt should only be deductible; and
(ii) a *net capital loss should only be applied;
if a majority of the persons entitled to the benefits of dividend and capital distributions of the company is maintained.
167-40 The valuing times for conditions listed in subsection 167-10(1)
(1) For the purposes of subsection 167-25(2), the valuing times for the test period are:
(a) the time the test period starts; and
(b) the time just before, and the time just after, any of the following events that happen during the test period:
(i) the issue of *shares of a class of remaining shares;
(ii) the variation of rights attached to any remaining shares to receive *dividends or capital distributions;
(iii) the redemption or cancellation of any remaining shares; and
(c) the time the test period ends.
(2) For paragraph (1)(b), disregard a time if it is outside the test period.
Subdivision 167-B - Voting power
Guide to Subdivision 167-B
167-75 What this Subdivision is about
Companies whose shares:
(a) do not all carry the same voting rights; or
(b) do not carry all of the voting rights in the company;
may test the possession of voting rights similarly to companies whose shares are all of a single class with the same rights.
Table of sections
Operative provisions
167-80 When this Subdivision applies
167-85 Different method for working out voting power
167-90 Dual listed companies
Operative provisions
167-80 When this Subdivision applies
(1) For the purposes of this Part, voting power in a company at one or more times can be worked out under section 167-85 if:
(a) the company's *shares do not all, at those times, carry the same voting rights for all matters affecting the company; or
(b) the company's shares do not carry all of the voting rights in the company;
whether this is because of the company's *constitution, an *arrangement or some other reason.
Note: Disregard dual listed company voting shares (see section 167-90).
(2) Further, if those times are consecutive times during a period, the voting power in the company can be worked out under section 167-85 as if that period consists only of:
(a) the time that period starts; and
(b) each later time (if any) during that period when there is a change in the maximum number of votes any entity could cast on a poll described in paragraph 167-85(1)(a) or (b).
167-85 Different method for working out voting power
(1) An entity may choose whether voting power in the company at a particular time is worked out solely by reference to:
(a) the maximum number of votes that could be cast on a poll on the election of a director of the company, if such a poll were to be held at that time; or
(b) the maximum number of votes that could be cast on a poll on an amendment to the company's *constitution, other than an amendment altering:
(i) the rights carried by any of the company's *shares; or
(ii) other forms of voting power in the company;
if such a poll were to be held at that time.
(2) The way the entity prepares its *income tax return is sufficient evidence of it making a choice under subsection (1).
167-90 Dual listed companies
For the purposes of this Subdivision, disregard *shares that are *dual listed company voting shares.