Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 768 - Foreign non-assessable income and gains  

Subdivision 768-G - Reduction in capital gains and losses arising from CGT events in relation to certain voting interests in active foreign companies  

Active foreign business asset percentage

SECTION 768-535   Modified rules for foreign wholly-owned groups  

768-535(1)    
This section applies if:

(a) for the purposes of section 768-505 , it is necessary to work out the *active foreign business asset percentage of a company (the top foreign company ) in relation to the holding company mentioned in that section, at the time of the CGT event mentioned in that section; and

(b) the top foreign company is not :

(i) an AFI subsidiary (within the meaning of Part X of the Income Tax Assessment Act 1936 ); or

(ii) a *foreign life insurance company; or

(iii) a *foreign general insurance company; and

(c) for the purposes of section 768-505 , it is also necessary (apart from this section) to work out the active foreign business asset percentage at that time of 1 or more other companies in relation to the holding company, at that time, where:

(i) the top foreign company and 1 or more of those other companies (the subsidiary foreign companies ) are members of a *wholly-owned group; and

(ii) each of the subsidiary foreign companies is a *100% subsidiary of the top foreign company.

768-535(2)    
The holding company may choose to work out the *active foreign business asset percentage of the top foreign company in accordance with subsections (4) and (6).

768-535(3)    
The way an entity making a choice under subsection (2) prepares its *income tax return is sufficient evidence of the making of the choice.

768-535(4)    
If the holding company has made a choice under subsection (2), the provisions mentioned in subsection (5) operate, for the purposes of section 768-505 , as if each subsidiary foreign company were a part of the top foreign company, rather than a separate entity.

Note 1:

This subsection means that certain assets are not treated as active foreign business assets, or as assets included in the total assets, of any of the subsidiary foreign companies or of the top foreign company. For example:

(a) a share owned by one of those companies in another of those companies; and

(b) a debt owed by one of those companies to another of those companies.

Note 2:

If an asset (other than an asset mentioned in Note 1) is actually an active foreign business asset, or an asset included in the total assets, of a subsidiary foreign company, it is treated under this subsection as an active foreign business asset, or as an asset included in the total assets, of the top foreign company.

768-535(5)    
For the purposes of subsection (4), the provisions are:

(a) section 768-540 (active foreign business assets of a foreign company); and

(b) section 768-545 (assets included in the total assets of a foreign company).

768-535(6)    
If the holding company has made a choice under subsection (2), then for the purposes of sections 768-510 and 768-525 , treat the *recognised consolidated accounts of the top foreign company and all of the subsidiary foreign companies as the *recognised company accounts of the top foreign company.