Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 820 - Thin capitalisation rules  

Subdivision 820-EAA - Debt deduction limitation rules for debt deduction creation (all relevant entities)  

Operative provisions

SECTION 820-423E   Modified meaning of associate pair  

820-423E(1)    
This section applies for the purposes of determining whether, for the purposes of this Subdivision, an entity that is a unit trust is an associate pair of another entity.

Treating certain unit trusts as companies

820-423E(2)    
Subsection (3) applies if any of the following *CGT events are capable of applying to all of the units and interests in the trust:

(a)    *CGT event E4;

(b)    *CGT event E10.

820-423E(3)    
For the purposes of determining, under section 318 of the Income Tax Assessment Act 1936 , whether:

(a)    the trust is an *associate of another entity; or

(b)    another entity is an associate of the trust;

treat the trust as if it were a company.

Application of sufficient influence test

820-423E(4)    
In determining whether the trust is sufficiently influenced by another entity for the purposes of subsection 318(2) of the Income Tax Assessment Act 1936 , as applied by subsection (3) of this section:

(a)    treat the trust as sufficiently influenced by another entity or other entities if the trust is accustomed or under an obligation (whether formal or informal), or might reasonably be expected, to act in accordance with the directions, instructions or wishes of the other entity or other entities (whether those directions, instructions or wishes are, or might reasonably be expected to be, communicated directly or through interposed companies, partnerships or trusts); and

(b)    another entity or other entities are taken to hold a majority voting interest in the trust if either of the following percentages is not less than 50%:

(i) the percentage of the income of the trust represented by the share of the income to which the other entity or other entities are entitled, or that the other entity or other entities are entitled to acquire;

(ii) the percentage of the corpus of the trust represented by the share of the corpus to which the other entity or other entities are entitled, or that the other entity or other entities are entitled to acquire; and

(c)    disregard the operation that paragraphs 318(6)(b) and (c) of that Act would otherwise have by reason only of subsection (3) of this section.

820-423E(5)    
Subsection (6) applies in determining whether the trust:

(a)    is sufficiently influenced by another entity for the purposes of section 318 of the Income Tax Assessment Act 1936 ; or

(b)    sufficiently influences another entity for the purposes of that section.

820-423E(6)    
If:

(a)    there is any breach by any entity of the terms of a *debt interest issued by, or held by, the trust; and

(b)    there are reasonable grounds to believe that the breach occurred only to protect the interests of secured creditors in relation to the debt interest;

sufficient influence is not taken to exist in relation to the trust merely because of the breach.