Income Tax (Transitional Provisions) 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  

SECTION 842-220   Treatment of foreign resident partner that is not a trust or partnership  

Objects

842-220(1)    
The objects of this section are to ensure that:

(a) a foreign resident partner of an IMR foreign fund in relation to the 2010-11 income year, or an earlier income year, is not subject to any Australian income tax in respect of pre-2012 IMR income or a pre-2012 IMR capital gain (or in respect of an amount that is referable to pre-2012 IMR income or a pre-2012 IMR capital gain) for the income year; and

(b) the foreign resident partner of the fund is not able to claim a deduction or utilise a tax loss in relation to the income year to the extent that the deduction or tax loss was incurred or made in respect of an amount that is:

(i) pre-2012 IMR income of the fund (or referable to pre-2012 IMR income of the fund); or

(ii) a pre-2012 IMR capital gain (or referable to a pre-2012 IMR capital gain); and

(c) this section does not provide any tax concession to an Australian resident that invests in the fund (whether directly or indirectly through one or more interposed entities).

Application

842-220(2)    
This section applies to a partner in a partnership in relation to the 2010-11 income year, or an earlier income year, if:

(a) the partner is not an Australian resident at any time during the income year; and

(b) the partner is not a trust or a partnership at any time during the income year (other than a foreign superannuation fund); and

(c) neither the partnership nor the partner has lodged an income tax return in relation to the 2010-11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and

(d) the Commissioner did not, before 18 December 2010, make an assessment of the taxable income of the partner for any income year.

Note:

A partnership that is an IMR foreign fund is generally subject to the general tax rules that apply to partnerships, subject to the modifications set out in this Subdivision: see Division 5 of Part III of the Income Tax Assessment Act 1936 .

Adjustments to calculation of taxable income, tax loss or net capital loss

842-220(3)    
In working out the partner ' s taxable income, tax loss or net capital loss for the income year:

(a) for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the net income of the partnership with references to the individual interest of the partner in the pre-2012 non-IMR partnership net income (within the meaning of section 842-245 of the Income Tax (Transitional Provisions) Act 1997 ); and

(b) for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the partnership loss with references to the individual interest of the partner in the pre-2012 non-IMR partnership loss (within the meaning of section 842-245 of the Income Tax (Transitional Provisions) Act 1997 ); and

(c) disregard the partner ' s pre-2012 IMR capital gain or an amount that is referable to a pre-2012 IMR capital gain (within the meaning of subsection 842-270(3) of the Income Tax Assessment Act 1997 ) or pre-2012 IMR capital loss or an amount that is referable to a pre-2012 IMR capital loss (within the meaning of that term in section 842-235 of this Act).

Fraud

842-220(4)    
Subsection (3) does not apply if the Commissioner has reason to believe that there has been fraud by the partnership in relation to any income year.

Audit or compliance review

842-220(5)    
Subsection (3) does not apply if before 18 December 2010 the Commissioner notified the partnership that an audit or compliance review would be undertaken in relation to any income year.