Taxation Laws Amendment Act (No. 2) 1999 (93 of 1999)

Schedule 1   Australia as a regional financial centre

Part 3   Controlled foreign companies

Income Tax Assessment Act 1936

47   After subsection 356(4)

Insert:

(4A) Shares in a company that is treated as a real estate investment trust for the purposes of the Internal Revenue Code 1986 of the United States of America are to be ignored for the purposes of the application of subsection (1) to the company (except in so far as that subsection has effect for the purposes of section 459) if the conditions in subsection (4B) or (4C) are satisfied.

(4B) The condition in this subsection is that the taxpayer who holds the shares satisfies the Commissioner that:

(a) the shares that the taxpayer holds at the end of the entity's statutory accounting period are held for the sole purpose of investing directly, or indirectly through one or more interposed entities, in:

(i) a business conducted in the United States of America; or

(ii) real property located in the United States of America; and

(b) the company does not directly, or indirectly through one or more interposed entities:

(i) have an interest in income or gains derived from sources outside the United States of America; or

(ii) hold an interest in a FIF that is not resident in the United States of America; or

(iii) hold real property that is not located in the United States of America.

(4C) The condition in this subsection is that the taxpayer who holds the shares satisfies the Commissioner that:

(a) the shares that the taxpayer holds at the end of the entity's statutory accounting period are held for the sole purpose of investing directly, or indirectly through one or more interposed entities, in:

(i) a business conducted in the United States of America; or

(ii) real property located in the United States of America; and

(b) throughout the entity's statutory accounting period, the total value of:

(i) any interests that the company has in income or gains derived from sources outside the United States of America; and

(ii) any interests that the company has in FIFs that are not resident in the United States of America; and

(iii) any real property held by the company that is not located in the United States of America;

does not exceed 5% of the total value of all interests held by the company in other entities; and

(c) throughout the entity's statutory accounting period, the total value of assets held by the company that:

(i) produce income from sources outside the United States of America; or

(ii) if disposed of would give rise to a gain from a source outside the United States of America;

does not exceed 5% of the total value of all the assets held by the company.

(4D) For the purposes of subsection (4C), the value of interests and the value of assets is to be determined using the accounting records of the company.