Income Tax Assessment Act 1936

PART X - ATTRIBUTION OF INCOME IN RESPECT OF CONTROLLED FOREIGN COMPANIES  

Division 9 - Attribution of attributable income and other amounts  

SECTION 456A   REDUCTION OF SECTION 456 ASSESSABILITY WHERE ITEM SUBJECT TO FOREIGN ACCRUALS TAX  

456A(1)   [Conditions for reduction of assessable amount]  

Where:

(a) apart from this section, an amount (in this section called the otherwise assessable section 456 amount ) is included in the assessable income of a year of income of an attributable taxpayer in relation to a CFC under section 456 , in relation to the attributable income of the CFC of a statutory accounting period; and

(b) an attribution tracing interest of the attributable taxpayer, or of an interposed entity, in a CFE was taken into account in calculating the attributable taxpayer's attribution percentage for the CFC; and

(c) foreign tax is payable by the CFE under an accruals tax law of a listed country in respect of an amount that is calculated by reference to an item of net income or net profit of the CFC, where the amount is taxed in the listed country:

(i) at that country's normal company tax rate; and

(ii) in a tax accounting period commencing or ending:

(A) in the year of income of the attributable taxpayer; or

(B) in the statutory accounting period of the CFC; and

(d) the item constitutes the whole or part (which whole or part is in this section called the foreign accruals-taxed attributable income ) of the attributable income of the CFC of the statutory accounting period;

then the otherwise assessable section 456 amount is reduced by the amount calculated using the formula:

Indirect attribution interests via CFE

×

Foreign accruals-taxed     attributable income

where:

Indirect attribution interests via CFE means the total of the attributable taxpayer's indirect attribution interests in the CFC that are held through the CFE.

Foreign accruals-taxed attributable income means the amount of the foreign accruals-taxed attributable income.

456A(2)   [Indirect attribution interest held through 2 or more CFEs]  

Where:

(a) apart from this subsection, subsection (1) would reduce the otherwise assessable section 456 amount of the attributable taxpayer in relation to the CFC in a case where foreign tax is payable by 2 or more CFEs under accruals tax laws; and

(b) any indirect attribution interest referred to in the formula component Indirect attribution interests via CFE in subsection (1) is held through any 2 or more of the CFEs;

then that indirect attribution interest is only to be taken into account once in applying the subsection.

456A(3)   [Consequential reduction of indirect attribution percentage]  

Where, because of any of subsections 362(2) to (5) , the amount that would otherwise be the attribution percentage of the attributable taxpayer for the CFC is reduced, then the Commissioner may, for the purposes of this section, make such consequential reduction as the Commissioner considers reasonable in the circumstances to any indirect attribution interest in the CFC held by the attributable taxpayer.