Income Tax Assessment Act 1936

PART III - LIABILITY TO TAXATION  

Division 7A - Distributions to entities connected with a private company  

Subdivision EB - Unpaid present entitlements - interposed entities  

SECTION 109XF   PAYMENTS THROUGH INTERPOSED ENTITIES  

109XF(1)   [ What constitutes payment]  

For the purposes of paragraphs 109XA(1)(a) and (1A)(a) , a trustee is taken to have made a payment to a shareholder, or to an associate of a shareholder, (the target entity ) of a private company if:

(a) the trustee makes a payment or loan to another entity (the first interposed entity ) that is interposed between:

(i) the trustee; and

(ii) the target entity; and

(b) a reasonable person would conclude (having regard to all the circumstances) that the trustee made the payment or loan solely or mainly as part of an arrangement involving a payment to the target entity; and

(c) either:

(i) the first interposed entity makes a payment to the target entity; or

(ii) another entity interposed between the trustee and the target entity makes a payment to the target entity.

109XF(2)   [ Timing]  

For the purposes of this section, it does not matter:

(a) whether the interposed entity made the payment to the target entity before, after or at the same time as the first interposed entity received the payment or loan from the trustee; or

(b) whether or not the interposed entity paid the target entity the same amount as the trustee paid or lent the first interposed entity.

109XF(3)   [ Payment in relation to unrealised gain]  

Treat the reference in paragraph 109XA(1)(b) to a payment as being a reference to the payment to the target entity mentioned in paragraph (1)(c) of this section.