Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 832 - Hybrid mismatch rules  

Subdivision 832-I - Dual inclusion income  

Operative provisions

SECTION 832-680   Dual inclusion income, and when an entity is eligible to apply it  

832-680(1)    
An amount of income or profits is dual inclusion income if 2 or more of the following outcomes arise for the amount:

(a) it is *subject to Australian income tax in an income year;

(b) it is *subject to foreign income tax in a foreign country in a *foreign tax period;

(c) it is subject to foreign income tax in a foreign country (other than the country mentioned in paragraph (b)) in a foreign tax period.

Note:

In certain circumstances, dual inclusion income can be applied to reduce the neutralising amount for a hybrid payer mismatch (see section 832-330 ) or a deducting hybrid mismatch (see section 832-560 ).

832-680(1A)    

In determining for the purposes of subsection (1) whether an amount of income or profits is *subject to Australian income tax, disregard subsection 832-125(2) (which is about when an amount included in the assessable income of a trust or partnership is subject to Australian income tax), so far as it applies in relation to assessable income from a foreign source.

Effect of Australian foreign income tax offset for underlying taxes

832-680(2)    
For the purposes of subsection (1), if:

(a) an amount of assessable income of a *corporate tax entity (the assessable amount ) would, apart from this subsection and subsection (1A), be *subject to Australian income tax; and

(b) an amount of *foreign income tax (except a tax covered by subsection 832-130(7) ) paid in respect of the assessable amount counts towards a *tax offset for an entity under Division 770 ;

then:

(c) if the amount of the tax offset equals or exceeds the amount of *tax that would, having regard only to the assessable amount and the rate at which tax is imposed on the entity, be payable on the assessable amount - the assessable amount is treated as if it were not subject to Australian income tax; and

(d) if the amount of the tax offset is a proportion of the amount of that tax - then that proportion of the assessable amount is treated as if it were not subject to Australian income tax.

Effect of credits etc. for underlying taxes

832-680(3)    
In determining for the purposes of subsection (1) whether an amount of income or profits is *subject to foreign income tax in a *foreign tax period, disregard subsection 832-130(3) .

Extension for certain on-payments through grouped entities

832-680(4)    
Subsection (5) applies, if:

(a) an entity is a member of a dual inclusion income group in a country (see subsection (6)); and

(b) an amount of income or profits of the entity (the on-payment amount ) is a payment received by the entity from another member of the dual inclusion income group at a time; and

(c) it is reasonable to conclude that the payment was funded by an amount of income or profits of the other member (the funding income or profits ); and

(d) it is reasonable to conclude that the funding income or profits were:

(i) if the country mentioned in paragraph (a) is Australia - *subject to Australian income tax; or

(ii) if the country mentioned in paragraph (a) is a foreign country - *subject to foreign income tax in the foreign country; and

(e) the funding income or profits were not *dual inclusion income under subsection (1) (disregarding subsection (5)) in the country.

832-680(4A)    

In determining whether paragraph (4)(d) is satisfied, have regard to any previous application of subsection (5).

832-680(5)    
For the purposes of subsection (1), the on-payment amount is treated as if it were:

(a) if the country mentioned in paragraph (4)(a) is Australia - *subject to Australian income tax in the income year in which the time mentioned in paragraph (4)(b) occurs; or

(b) if the country mentioned in paragraph (4)(a) is a foreign country - *subject to foreign income tax in the foreign country in the *foreign tax period in which the time mentioned in paragraph (4)(b) occurs.

832-680(6)    

Two or more entities (the member entities ) are members of a group (a dual inclusion income group ) in a country for the purposes of this Division if in that country:

(a) the same entity or entities are *liable entities in respect of the income or profits of each of the member entities; and

(b) no other entity is a liable entity in respect of the income or profits of any of the member entities.

Note:

For example, entities that are members of a consolidated group or MEC group.

When an entity is eligible to apply dual inclusion income

832-680(7)    
An entity is eligible to apply an amount of *dual inclusion income if the amount is income or profits of:

(a) the entity; or

(b) if paragraph (a) does not apply and the entity is a member of a dual inclusion income group in any country - an entity that is a member of the dual inclusion income group.

832-680(8)    
However, an entity is not eligible to apply the amount if it has already been applied by any entity by a previous application of a provision of this Division.

Interaction with other provisions

832-680(9)    

To avoid doubt, if a provision of this section has the effect that an amount is treated for the purposes of subsection (1) as if it were *subject to Australian income tax, or *subject to foreign income tax, then that effect extends to another provision of this Act that refers to an amount that is (as the case requires):

(a) subject to Australian income tax for the purposes of subsection (1) of this section; or

(b) subject to foreign income tax for the purposes of subsection (1) of this section.

Note:

For example, an amount that would not be subject to Australian income tax for the purposes of subsection (1) apart from subsection (1A) satisfies paragraphs 832-330(2)(b) and (3)(b) and subparagraph 832-335(1)(b)(ii) .