Income Tax Assessment Act 1936

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

Division 3 - Control interests, attribution interests, attributable taxpayers and attribution percentages  

Subdivision B - Attribution interests  

SECTION 356   DIRECT ATTRIBUTION INTEREST IN A CFC OR CFT  

356(1)   [Interests held by entity]  

An entity holds a direct attribution interest in a CFC at a particular time equal to the percentage that the entity holds, or is entitled to acquire, at that time of:

(a) the total paid-up share capital of the CFC; or

(b) the total rights of shareholders to vote, or participate in any decision-making, concerning any of the following:

(i) the making of distributions of capital or profits of the CFC to its shareholders;

(ii) the constituent document of the CFC;

(iii) any variation of the share capital of the CFC; or

(c) the total rights to distributions of capital or profits of the CFC to its shareholders on winding-up; or

(d) the total rights to distributions of capital or profits of the CFC to its shareholders, otherwise than on winding-up;

or, if different percentages are applicable under the preceding paragraphs, the greater or greatest of those percentages.

356(2)   [Rights to distribution on winding-up]  

For the purposes of the application of subsection (1) to a company, the percentage that an entity holds, or is entitled to acquire, at a particular time (in this subsection called the test time ) in a statutory accounting period of the company, of the total rights to distributions of capital or profits of the company to its shareholders on winding-up is to be worked out by:

(a) ascertaining whichever of the following is applicable:

(i) the capital of the company as at the end of the statutory accounting period;

(ii) the profits of the company for the statutory accounting period; and

(b) assuming that the rights to such distributions that the entity holds, or is entitled to acquire, at the test time were the same at all other times during the statutory accounting period; and

(c) ascertaining the percentage concerned:

(i) at the end of the statutory accounting period instead of at the test time; and

(ii) on that assumption.

356(3)   [Rights to distribution otherwise than on winding-up]  

For the purposes of the application of subsection (1) to a company, the percentage that an entity holds, or is entitled to acquire, at a particular time (in this subsection called the test time ) in a statutory accounting period of the company, of the total rights to distributions of capital or profits of the company to its shareholders, otherwise than on winding-up, is to be worked out by:

(a) ascertaining whichever of the following is applicable:

(i) the capital of the company as at the end of the statutory accounting period;

(ii) the profits of the company for the statutory accounting period; and

(b) assuming that the rights to such distributions that the entity holds, or is entitled to acquire, at the test time were the same at all other times during the statutory accounting period; and

(c) ascertaining the percentage concerned:

(i) at the end of the statutory accounting period instead of at the test time; and

(ii) on that assumption.

356(4)   [Finance shares to be ignored]  

Eligible finance shares, widely distributed finance shares and transitional finance shares in a company are to be ignored for the purposes of the application of subsection (1) to the company.

356(4A)   [Real estate investment trusts under USA law]  

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 if the conditions in subsection (4B) or (4C) are satisfied.

356(4B)   [Company not to have interests outside USA]  

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 (within the meaning of former Part XI ) 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.

356(4C)   [USA interests not exceeding 5% of company's total interests]  

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 (within the meaning of former Part XI ) 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.

356(4D)   [Determining subsection (4C) amount]  

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.

356(5)   [Eligible transferor deemed to hold 100% interest]  

An entity that is an eligible transferor at a particular time in relation to a CFT holds a direct attribution interest in the CFT at that time equal to 100%.

356(6)   [Application of subsec (5)]  

Subsection (5) does not apply if:

(a) the eligible transferor is a natural person (other than a natural person in the capacity of a trustee); and

(b) the CFT is a non-resident family trust in relation to the natural person.

356(7)   [Entitlement to income or corpus of CFT]  

An entity (in this subsection called the lower entity ) that is a beneficiary in a CFT holds a direct attribution interest in the CFT at a particular time equal to:

(a) the percentage of the income of the CFT represented by the share of the income to which the lower entity is entitled, or that the lower entity is entitled to acquire; or

(b) the percentage of the corpus of the CFT represented by the share of the corpus to which the lower entity is entitled, or that the lower entity is entitled to acquire;

or, if those percentages differ, the greater of those percentages.

356(8)   [Subsec (7) interest deemed not held]  

An entity that holds a direct attribution interest in a CFT at a particular time because of subsection (5) is not to be taken to hold any direct attribution interest in the CFT at that time because of subsection (7).