Taxation Laws Amendment (Foreign Income Measures) Act 1997 (155 of 1997)
Schedule 1 Foreign source income
Part 1 General amendments
Income Tax Assessment Act 1936
4 After subsection 23AH(10)
Insert:
(10A) For the purposes of this section, the adjusted tainted income of a permanent establishment of a taxpayer is income or other amounts that would be adjusted tainted income of the taxpayer for the purposes of Part X if it were assumed that, for the purposes of that Part:
(a) except in applying paragraphs 447(1)(a), (c) and (e) and 450(6)(c), (7)(d) and (8)(b), the only income or other amounts derived by the taxpayer were the income derived in carrying on business at or through the permanent establishment; and
(b) the taxpayer's statutory accounting periods were the same as the taxpayer's years of income; and
(c) subsections 446(2) and (3) had not been enacted; and
(d) in applying paragraphs 447(1)(a), (c) and (e) and 450(6)(c), (7)(d) and (8)(b):
(i) the part of the taxpayer's operations that consists of the business carried on at or through the permanent establishment were a company (the PE company ); and
(ii) the remaining part of the taxpayer's operations were a separate company (the HQ company ); and
(iii) the HQ company were an associate of the PE company; and
(iv) the PE company and the HQ company had carried out the sale of goods transactions that they would have carried out if the PE company were engaged in the same or similar activities as the permanent establishment under the same or similar conditions as the permanent establishment and were dealing wholly independently with the HQ company; and
(v) any income derived by the HQ company were disregarded; and
(e) paragraphs 447(1)(b), (d) and (f) had not been enacted; and
(f) in a case where the taxpayer is an AFI entity (within the meaning of subsection 326(2)) - the taxpayer were an AFI subsidiary.
(10B) For the purposes of this section, a permanent establishment of a taxpayer passes the active income test in relation to a year of income if the taxpayer would have passed the active income test (within the meaning of Part X) if it were assumed that, for the purposes of that Part:
(a) except in applying paragraphs 447(1)(a), (c) and (e) and 450(6)(c), (7)(d) and (8)(b), the only income or other amounts derived by the taxpayer were the income derived in carrying on business at or through the permanent establishment; and
(b) the taxpayer's statutory accounting periods were the same as the taxpayer's years of income; and
(c) paragraphs 432(1)(b) and (e) and subsections 432(2) and (3) had not been enacted; and
(d) subsections 446(2) and (3) had not been enacted; and
(e) in applying paragraphs 447(1)(a), (c) and (e) and 450(6)(c), (7)(d) and (8)(b):
(i) the part of the taxpayer's operations that consists of the business carried on at or through the permanent establishment were a company (the PE company ); and
(ii) the remaining part of the taxpayer's operations were a separate company (the HQ company ); and
(iii) the HQ company were an associate of the PE company; and
(iv) the PE company and the HQ company had carried out the sale of goods transactions that they would have carried out if the PE company were engaged in the same or similar activities as the permanent establishment under the same or similar conditions as the permanent establishment and were dealing wholly independently with the HQ company; and
(v) any income derived by the HQ company were disregarded; and
(f) paragraphs 447(1)(b), (d) and (f) had not been enacted; and
(g) in a case where the taxpayer is an AFI entity (within the meaning of subsection 326(2)) - the taxpayer were an AFI subsidiary; and
(h) any income or other amounts derived by the taxpayer before 1 July 1997 were disregarded.
(10C) In subsections (10A) and (10B):
goods has the same meaning as in Part X.
sale has the same meaning as in Part X.