Taxation Laws Amendment Act (No. 2) 1999 (93 of 1999)

Schedule 1   Australia as a regional financial centre

Part 1   OBUs, withholding tax and thin capitalisation

Income Tax Assessment Act 1936

22   After section 121EL

Insert:

121ELA Exemption of income etc. of overseas charitable institutions

Investment with OBU

(1) Income, derived by an overseas charitable institution, is exempt to the extent that it is:

(a) a payment or outgoing from an OBU as part of the OB activities of the OBU; or

(b) a distribution of income that is exempt under subsection 121EL(2).

Capital gains and losses

(2) If:

(a) an OBU is a trustee, or is the central manager and controller, of a unit trust estate; and

(b) the only person who benefits, or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust is an overseas charitable institution; and

(c) the terms of the trust are to the effect that income, profits or capital gains of the trust estate may only come from investment activities covered by subsection 121D(6B); and

(d) the overseas charitable institution disposes of its interest in the trust;

then the overseas charitable institution makes no capital gain or capital loss from a CGT event happening in relation to the disposal.

121ELB Adjustment of capital gains and losses from disposal of units in OBU offshore investment trusts

Trust with subsection 121D(6) investment activities

(1) If:

(a) an OBU is a trustee, or is the central manager and controller, of a unit trust estate; and

(b) the only persons who benefit, or are capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust are non-residents; and

(c) all units in the trust are held by non-residents; and

(d) the terms of the trust are to the effect that income, profits or capital gains of the trust estate may only come from investment activities covered by subsection 121D(6); and

(e) a non-resident disposes of a unit in the trust;

then the non-resident makes no capital gain or capital loss from a CGT event happening in relation to the disposal.

Trust with subsection 121D(6A) investment activities

(2) If:

(a) an OBU is a trustee, or is the central manager and controller, of a unit trust estate; and

(b) the only persons who benefit, or are capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust are non-residents; and

(c) all units in the trust are held by non-residents; and

(d) the terms of the trust are to the effect that income, profits or capital gains of the trust estate may only come from investment activities covered by subsection 121D(6A); and

(e) a non-resident disposes of a unit in the trust; and

(f) the average Australian asset percentage for the portfolio investment concerned was 10% or less;

then if, apart from this section, the non-resident would make a capital gain or capital loss from a CGT event happening in relation to the disposal, the non-resident makes only the average Australian asset percentage of the gain or loss.

(3) In working out the average Australian asset percentage for the purposes of subsection (2), the investment management period is taken to be the period during the 12 months before the disposal during which the non-resident held the unit.