Taxation Laws Amendment Act (No. 2) 1994 (82 of 1994)

Part 3   AMENDMENT OF THE INCOME TAX ASSESSMENT ACT 1936

Division 5   Amendments relating to foreign investment funds and foreign life insurance policies

Subdivision A   Holding company exemptions involving insurance, real property or mixed activities

75   Insertion of new section

After section 511 of the Principal Act the following section is inserted in Division 7 of Part XI:

Exemption for interest in foreign holding company of foreign real property company

Interest in holding company disregarded

"511A.(1) If:

(a) at the end of the notional accounting period of a foreign company (the 'holding company'), the taxpayer had an interest in the holding company that consisted of shares included in a class of shares that were quoted on the stock market of an approved stock exchange; and

(b) the holding company requirements set out in subsection (2) are satisfied; and

(c) the subsidiary company requirements set out in subsection (3) are satisfied;

the interest is disregarded for the purposes of the application of the operative provision to the taxpayer in relation to the holding company in respect of that notional accounting period.

Holding company requirements

"(2) The holding company requirements are that:

(a) at the end of the notional accounting period, either:

(i) the holding company was included by an approved stock exchange in a class of companies designated by the stock exchange as engaged in carrying on one or more of the activities mentioned in subparagraph 511(b)(ii); or

(ii) the holding company was included by an international sectoral classification system named in regulations made for the purposes of section 499 or, until regulations are so made, by an international sectoral classification system named in Schedule 5, in a class of companies designated by the system as engaged in carrying on one or more of the activities mentioned in subparagraph 511(b)(ii); and

(b) throughout the notional accounting period, or the part of that period in which the taxpayer had the interest in the holding company, as the case may be, shares in the holding company that were included in the class mentioned in paragraph (1)(a) were widely held, and actively traded on a regular basis, on a stock market of an approved stock exchange.

Subsidiary company requirements

"(3) The subsidiary company requirements are that, throughout the notional accounting period, or the part of that period in which the taxpayer had the interest in the holding company, as the case may be:

(a) one or more other foreign companies were wholly-owned subsidiaries of the holding company; and

(b) if there was only one such subsidiary-that subsidiary was principally engaged in the active carrying on of one or more of the activities mentioned in subparagraph 511(b)(ii); and

(c) if there were 2 or more such subsidiaries-the principal activities of all the subsidiaries, considered together, were the active carrying on of one or more of the activities mentioned in subparagraph 511(b)(ii).".