Tax Laws Amendment (2004 Measures No. 2) Act 2004 (83 of 2004)

Schedule 2   Consolidation etc.

Part 9   International tax

Division 3   Foreign tax credits

Income Tax Assessment Act 1997

56   After section 717-20

Insert:

717-22 Excess foreign tax credits from non-membership period ending before head company's income year starts

(1) This section operates for the purposes of section 160AFE of the Income Tax Assessment Act 1936 in relation to an income year (the first use year ) of the *head company of a *consolidated group and later income years of the head company if:

(a) an entity (the joining entity ) becomes a *subsidiary member of the group at a time (the joining time ) that is before or at the start of the head company's first use year but after the start of the same income year of the joining entity (because that income year starts at different times for the head company and the joining entity); and

(b) the joining entity has *excess foreign tax credits (the transfer credits ) from the non-membership period described in section 701-30 that starts at the start of that income year of the joining entity and ends just before the joining time.

Note: Under section 701-30, the non-membership period is treated like an income year.

(2) For those purposes relating to an income year shown in an item of the table, the *head company of the group is taken to have the amount of the transfer credits shown in the item from its earlier income year shown in the item included in its other *excess foreign tax credits (if any) from that earlier income year.

(3) Subsection (2) also has effect for the purposes of a subsequent operation of this section.

(4) This section operates separately in relation to each class of foreign income (within the meaning of the Income Tax Assessment Act 1936) identified in subsection 160AF(7) of that Act, as if:

(a) the *head company's foreign income of that class for an income year were the whole of the head company's foreign income for that year; and

(b) the joining entity's foreign income of that class for the non-membership period were the whole of the joining entity's foreign income for the period.

717-28 Excess foreign tax credits lost on joining consolidated group

(1) For the purposes of section 160AFE of the Income Tax Assessment Act 1936 in relation to an income year ending after the time an entity becomes a *subsidiary member of a *consolidated group, the entity is taken not to have any *excess foreign tax credits from an income year, or non-membership period described in section 701-30, that ended before or at that time.

(2) Subsection (1) does not affect the operation of section 160AFE of the Income Tax Assessment Act 1936 in accordance with section 717-15 or 717-22.