Income Tax Assessment Act 1936

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

Division 8 - Active income test  

Subdivision C - Treatment of partnership income  

SECTION 437   TREATMENT OF PARTNERSHIP INCOME  

437(1)   [Modified application]  

For each partnership in which a company is a partner at any time during a statutory accounting period, the following modifications apply for the purposes of determining the effect of that partnership on the question whether the company is taken to pass the active income test in relation to the statutory accounting period:

(a) the partnership is to be treated as an entity separate from the company;

(b) in spite of anything in section 432 , the company is not taken to pass the active income test in relation to the statutory accounting period unless:

(i) the partnership has kept accounts for the statutory accounting period and:

(A) the accounts are prepared in accordance with commercially accepted accounting principles; and

(B) the accounts give a true and fair view of the financial position of the partnership; and

(ii) the partnership has complied with the substantiation requirements set out in section 452 in relation to the statutory accounting period;

(c) for the purposes of this Division, the notional gross tainted turnover of the partnership of the statutory accounting period, or the notional gross turnover of the partnership of the statutory accounting period, is the amount that would be the gross tainted turnover, or the gross turnover, as the case requires, of the partnership of the statutory accounting period if:

(i) except for the purposes of determining the associates of the partnership - the partnership were a company; and

(ii) a reference in this Division to the recognised accounts of the partnership were a reference to the accounts referred to in paragraph (b) of this subsection that are prepared by the partnership for the statutory accounting period; and

(iii) the partnership were a resident of the same particular listed country or particular unlisted country, of which the company was a resident;

(d) the gross tainted turnover of the company of the statutory accounting period is to be increased by the amount calculated using the formula:

Notional gross tainted turnover of partnership   ×   Partner's interest

where:

Notional gross tainted turnover of partnership
means the notional gross tainted turnover of the partnership for the statutory accounting period;

Partner's interest
means the company's percentage interest in the profits of the partnership for the statutory accounting period;

(e) the gross turnover of the company of the statutory accounting period is to be increased by the amount calculated using the formula:

Notional gross turnover of partnership   ×   Partner's interest

where:

Notional gross turnover of partnership
means the notional gross turnover of the partnership for the statutory accounting period;

Partner's interest
means the company's percentage interest in the profits of the partnership for the statutory accounting period.

437(2)   [Application of s 432(1)(e)]  

If:

(a) a company is a partner in one or more partnerships at any time during a statutory accounting period; and

(b) apart from this subsection, paragraph 432(1)(e) does not apply in relation to the company in relation to the statutory accounting period; and

(c) at all times during the statutory accounting period when:

(i) a particular one of those partnerships was in existence; and

(ii) the company was in existence and was a resident of a particular listed country, or of a particular unlisted country;

the partnership carried on business in that country at or through a permanent establishment of the partnership in that country;

subsection 432(1) has effect as if paragraph 432(1)(e) had applied in relation to the company in relation to the statutory accounting period.