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

76   Insertion of new section

After section 523 of the Principal Act the following section is inserted in Division 13 of Part XI:

Exemption for interest in foreign holding company of foreign mixed activity company

Interest in holding company disregarded

"523A.(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 requirement set out in subsection (2) is 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 requirement

"(2) The holding company requirement is 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, 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 2 or more of the activities mentioned in subparagraph 523(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 2 or more activities mentioned in subparagraph 523(b)(ii).".