Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 842 - Exempt Australian source income and gains of foreign residents  

Subdivision 842-I - Investment manager regime  

IMR concessions

SECTION 842-215   IMR concessions  


Concessions relating to IMR financial arrangements

842-215(1)    
The following consequences apply to an *IMR entity for an income year in relation to an *IMR financial arrangement if the requirements of subsection (3) or (5) are met in relation to the year:


(a) what would otherwise be the entity ' s assessable income for the year is *non-assessable non-exempt income of the entity, to the extent that it is attributable to a return or gain:


(i) from the arrangement (if the arrangement is a *derivative financial arrangement); or

(ii) from the entity disposing of, ceasing to own or otherwise realising the arrangement;


(b) an amount is not deductible by the entity for the year, to the extent that it is attributable to an outgoing or loss:


(i) from the arrangement (if the arrangement is a derivative financial arrangement); or

(ii) from the entity disposing of, ceasing to own or otherwise realising the arrangement;


(c) disregard a *capital gain or *capital loss that is from a *CGT event that happens in the year in relation to the arrangement.

Further concessions relating to permanent establishments

842-215(2)    
Without limiting subsection (1), the following further consequences apply to an *IMR entity for an income year if the requirements of subsection (5) are met in relation to the year:


(a) income that relates to or arises under the *IMR financial arrangement, and that would otherwise be the entity ' s assessable income for the year, is *non-assessable non-exempt income of the entity, to the extent that the income:


(i) if the entity is resident in a country that has entered into an *international tax agreement with Australia containing a *business profits article - is treated as having a source in Australia because it is attributable to a permanent establishment (within the meaning of the relevant international tax agreement) of the entity in Australia; or

(ii) if subparagraph (i) does not apply - is treated as having a source in Australia because of subsection 815-230(1) ;


(b) an amount is not deductible by the entity for the year, to the extent that it is attributable to gaining income that is non-assessable non-exempt income of the entity because of paragraph (a);


(c) disregard a *capital gain or *capital loss that is from a *CGT event that relates to or arises under the IMR financial arrangement, and that happens in the year in relation to a *CGT asset that:


(i) is covered by item 3 of the table in section 855-15 in relation to the entity; or

(ii) is covered by item 4 of the table in section 855-15 in relation to the entity because it is an option or right to *acquire a CGT asset covered by item 3 of that table in relation to the entity.


Direct investment by IMR widely held entity

842-215(3)    
The requirements of this subsection in relation to the year are that:


(a) during the whole of the year, the *IMR entity is an *IMR widely held entity; and


(b) during the whole of the year, the interest of the entity in the issuer of, or counterparty to, the *IMR financial arrangement does not pass the *non-portfolio interest test (see section 960-195 ); and


(c) none of the returns, gains or losses for the year from the arrangement are attributable to:


(i) if the entity is a resident of a country that has entered into an *international tax agreement with Australia containing a *permanent establishment article - a permanent establishment (within the meaning of the relevant international tax agreement) of the entity in Australia; or

(ii) otherwise - a *permanent establishment of the entity in Australia; and


(d) the IMR entity does not, during the year, carry on in Australia a trading business (within the meaning of section 102M of the Income Tax Assessment Act 1936 ) that relates (directly or indirectly) to the arrangement; and


(e) subsection 842-225(2) does not apply to the IMR financial arrangement.

842-215(4)    
For the purposes of paragraph (3)(a), disregard any part of the year during which the entity did not exist.

Indirect investment through independent Australian fund manager

842-215(5)    
The requirements of this subsection in relation to the year are that:


(a) the *IMR financial arrangement was made, on the *IMR entity ' s behalf, by an entity that is an *independent Australian fund manager for the IMR entity for the income year (see section 842-245 ); and


(b) if the issuer of, or counterparty to:


(i) the IMR financial arrangement referred to in paragraph (a), if it is a *financial arrangement; or

(ii) otherwise - the IMR financial arrangement to which that arrangement relates;
is an Australian resident, or a *resident trust for CGT purposes - during the whole of the year, the interest of the entity in the issuer or counterparty does not pass the *non-portfolio interest test (see section 960-195 ); and


(c) the IMR entity does not, during the year, carry on in Australia a trading business (within the meaning of section 102M of the Income Tax Assessment Act 1936 ) that relates (directly or indirectly) to the arrangement.

Withholding taxes etc.

842-215(6)    
If what would otherwise be the *IMR entity ' s assessable income is *non-assessable non-exempt income of the entity because of subsection (1) or (2), for the purposes of determining an entity ' s liability to pay, in relation to that income:


(a) *withholding tax; or


(b) an amount that must be withheld under Division 12 in Schedule 1 to the Taxation Administration Act 1953 (even if the amount is not withheld);

assume that any *independent Australian fund manager for the IMR entity is not a *permanent establishment of the IMR entity.


842-215(7)    
For the purposes of subparagraphs (2)(a)(i) and (3)(c)(i), an entity is taken to be a resident of a country that has entered into an *international tax agreement with Australia if the entity is such a resident within the meaning of that agreement.


 

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