Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 820 - Thin capitalisation rules  

Subdivision 820-H - Control of entities  

TC direct control interest, TC indirect control interest and TC control tracing interest

SECTION 820-870   TC indirect control interest in a company, trust or partnership  

What is a TC indirect control interest?

820-870(1)    
An entity holds a thin capitalisation indirect control interest (or a TC indirect control interest ) in a company, trust or partnership at a particular time if, and only if:

(a) there is an interposed entity, or a continuous series of at least 2 interposed entities, between that entity and the company, trust or partnership; and

(b) the interposed entity, or each of the interposed entities, is:

(i) a *foreign controlled Australian entity if this section is used for the purposes of determining whether or not an entity is a foreign controlled Australian entity; or

(ii) an *Australian controlled foreign entity if this section is used for the purposes of determining whether or not an entity is an Australian controlled foreign entity or an *Australian controller of such an entity.

Note:

In the case of a continuous series of interposed entities between an entity and a company, trust or partnership, the entity must hold a TC control tracing interest in the first interposed entity (see subsection (2)). In addition, under subsection (2), each interposed entity in the series must hold a TC control tracing interest in the next interposed entity (except in the case of the last one, which holds a TC control tracing interest in the company, trust or partnership).

What is an interposed entity?

820-870(2)    
For the purposes of this section, an entity (the middle entity ) is interposed between 2 other entities at a particular time if, and only if, at that time:

(a) the first of those 2 entities holds a *TC control tracing interest in the middle entity; and

(b) the middle entity holds a TC control tracing interest in the second of those 2 entities.

Note:

For the rules about a TC control tracing interest, see section 820-875 .

How to calculate a TC indirect control interest

820-870(3)    
The *TC indirect control interest that an entity (the top entity ) holds in a company, trust or partnership at a particular time is calculated in accordance with subsection (4), (5) or (6) (as appropriate).

One interposed entity only

820-870(4)    
The *TC indirect control interest is the result of applying the following method statement if there is only one interposed entity between the top entity and the company, trust or partnership at that time. Method statement

2 interposed entities

820-870(5)    
The *TC indirect control interest is the result of applying the following method statement if there are 2 interposed entities between the top entity and the company, trust or partnership at that time. Method statement

More than 2 interposed entities

820-870(6)    
The *TC indirect control interest is the result of applying the following method statement if there are more than 2 interposed entities between the top entity and the company, trust or partnership at that time. Method statement