Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-95 - VALUE SHIFTING  

Division 727 - Indirect value shifting affecting interests in companies and trusts, and arising from non-arm ' s length dealings  

Guide to Division 727  

SECTION 727-15   When does an indirect value shift have consequences under this Division?  

727-15(1)    
Indirect value shift is defined very broadly, but the application of this Division is limited in various ways.

727-15(2)    
The losing entity must be a company or trust (except a superannuation entity). However, the gaining entity can be any kind of entity, including an individual.

727-15(3)    
This Division does not apply if entities deal with each other at arm ' s length, or provide economic benefits in return for full market value.

727-15(4)    
The losing entity and the gaining entity must be connected by having had the same ultimate controller . In the case of closely held entities, they may instead be connected by having had a high level of common ownership .

727-15(5)    
The only interests affected are those owned by entities involved in the indirect value shift or by their associates.

727-15(6)    
There are a range of exclusions, such as:

(a) exclusions for minor indirect value shifts; and

(b) a series of rules designed to provide safe harbour treatment for common transactions relating to services; and

(c) anti-overlap provisions to prevent double-counting.

727-15(7)    
Rules of thumb are included to make it easier to determine the market value of some kinds of economic benefits.

727-15(8)    
To reduce compliance costs for:

(a) *small business entities; and

(b) entities that meet the CGT small business net asset threshold ($6 million);

interests owned by those entities are not affected by this Division.