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  

Subdivision 727-G - The realisation time method  

95% services indirect value shifts that are not excluded

SECTION 727-715   Service arrangements reduce value of losing entity that is a group service provider by at least $500,000  

727-715(1)    
At some time during the period (the ownership period ) when the owner owned the interest, the sole or dominant activity of the ^* losing entity must consist of providing services directly to one or more entities (the group entities ) each of which is covered by one or more of the following paragraphs:

(a) the ^* gaining entity;

(b) an ^* affected owner;

(c) an entity that has at that time the same ^* ultimate controller as the losing entity or the gaining entity;

(d) if the conditions in section 727-110 (common-ownership nexus test) are satisfied for the ^* indirect value shift - an entity that has with the losing entity or with the gaining entity a ^* common-ownership nexus within that period.

727-715(2)    

It must be reasonable to conclude that the total (the total market value ) of the ^* market values, immediately before the ^* realisation event, of ^* primary interests in the ^* losing entity then owned by ^* affected owners is less than it would have been if none of the following had happened:

(a) the ^* 95% services indirect value shift; and

(b) each ^* predominantly-services indirect value shift for which the same entity is the losing entity as for the 95% services indirect value shift, and that happened:

(i) if the amount of the ^* indirect value shift is $500,000 or more - at any time during the ownership period; or

(ii) otherwise - during the ownership period but within 4 years before the realisation event, or at the same time as the realisation event.

Thresholds for reduction of the total market value

727-715(3)    

It must also be reasonable to conclude that the total ^* market value is less than it would have been by at least $500,000, and by at least the lesser of:

(a) 5% of the total of the ^* adjustable values of ^* primary interests in the ^* losing entity owned by ^* affected owners at:

(i) if subsection (4) applies - the time determined under that subsection; or

(ii) otherwise - the start of the income year in which the ^* realisation event happens; and

(b) the amount worked out under the table.

Alternative threshold for reduction of the total market value
Item	In this case:	The amount is:
1	The ownership period is 4 years or less	worked out using this formula:
		$5,000,000	×	Number of days in that period 365
2	The ownership period is more than 4 years	$25,000,000

727-715(3A)    

If at the time referred to in subsection (3) a ^* primary interest covered by that subsection was ^* trading stock or a ^* revenue asset, its ^* adjustable value taken into account under that subsection is the greater of its adjustable value as a ^* CGT asset and its adjustable value as trading stock or a revenue asset.

727-715(4)    
If the owner of the interest is an ^* affected owner because of item 1, 2, 3 or 4 in the table in subsection 727-530(1) (about who is an affected owner), the time for the purposes of subparagraph (3)(a)(i) of this section is the latest of:

(a) the start of the income year in which the ^* realisation event happens; and

(b) the start of the most recent period (if any):

(i) that ended before or at the time of the ^* realisation event; and

(ii) throughout which at least one of the group entities had the same ^* ultimate controller as the losing entity or the gaining entity; and

(c) the start of the most recent period (if any):

(i) that ended before or at the time of the realisation event; and

(ii) within which at least one of the group entities has with the losing entity or with the gaining entity a ^* common-ownership nexus.