Taxation Laws Amendment Act (No. 1) 2004 (101 of 2004)

Schedule 10   Foreign hybrids

Part 2   Amendment of the Income Tax Assessment Act 1997

15   At the end of Part 4-5 (before the link note)

Add:

Division 830 - Foreign hybrids

Table of Subdivisions

Guide to Division 830

830-A Meaning of "foreign hybrid"

830-B Extension of normal partnership provisions to foreign hybrid companies

830-C Special rules applicable while an entity is a foreign hybrid

830-D Special rules applicable when an entity becomes or ceases to be a foreign hybrid

Guide to Division 830

830-1 What this Division is about

This Division:

(a) provides for certain entities (called foreign hybrids) that are treated as partnerships for the purposes of foreign tax, but as companies for the purposes of tax within the meaning of this Act, to be treated as partnerships for the purposes of this Act; and

(b) applies special rules to the entities in addition to those that normally apply to partnerships.

[This is the end of the Guide.]

Subdivision 830-A - Meaning of "foreign hybrid"

Table of sections

830-5 Foreign hybrid

830-10 Foreign hybrid limited partnership

830-15 Foreign hybrid company

830-5 Foreign hybrid

The expression foreign hybrid means:

(a) a *foreign hybrid limited partnership; or

(b) a *foreign hybrid company.

830-10 Foreign hybrid limited partnership

(1) A *limited partnership is a foreign hybrid limited partnership in relation to an income year if:

(a) it was formed in a foreign country; and

(b) *foreign tax is imposed under the law of the foreign country on the partners, not the limited partnership, in respect of the income or profits of the partnership for the income year; and

(c) at no time during the income year is the limited partnership, for the purposes of a law of any foreign country that imposes foreign tax on entities because they are residents of the foreign country, a resident of that country; and

(d) disregarding subsection 94D(4) of the Income Tax Assessment Act 1936, at no time during the income year is it an Australian resident; and

(e) disregarding that subsection, in relation to the same income year of another taxpayer:

(i) the limited partnership is a *CFC at the end of a *statutory accounting period that ends in the income year; and

(ii) at the end of the statutory accounting period, the taxpayer is an *attributable taxpayer in relation to the CFC with an *attribution percentage greater than nil.

(2) If a partner in a *limited partnership makes an election under subsection 485AA(1) of the Income Tax Assessment Act 1936 in relation to the partner's interest in the partnership, then, for the purpose of applying that Act and this Act in relation to the partner's interest, the limited partnership is a foreign hybrid limited partnership in relation to any income year during which the election is in force.

830-15 Foreign hybrid company

(1) A company is a foreign hybrid company in relation to an income year if:

(a) at all times during the income year when the company is in existence, the partnership treatment requirements for the income year in subsection (2) or (3) are satisfied; and

(b) at no time during the income year is the company, for the purposes of a law of any foreign country that imposes *foreign tax on entities because they are residents of the foreign country, a resident of that country; and

(c) at no time during the income year is the company an Australian resident; and

(d) disregarding this Division, in relation to the same income year of another taxpayer:

(i) the company is a *CFC at the end of a *statutory accounting period that ends in the income year; and

(ii) at the end of the statutory accounting period, the taxpayer is an *attributable taxpayer in relation to the CFC with an *attribution percentage greater than nil.

Partnership treatment requirements specific to USA

(2) For the purposes of paragraph (1)(a), the partnership treatment requirements are satisfied if:

(a) the company was formed in the United States of America; and

(b) for the purposes of the law of that country relating to *foreign tax imposed by that country, the company is a limited liability company that:

(i) is treated as a partnership; or

(ii) is an eligible entity that is disregarded as an entity separate from its owner.

Partnership treatment requirements relating to any foreign country

(3) For the purposes of paragraph (1)(a), the partnership treatment requirements are also satisfied if:

(a) the company was formed in a foreign country (which may be the United States of America); and

(b) for the purposes of the law of that country relating to *foreign tax imposed by that country, the company is treated as a partnership; and

(c) regulations are in force setting out requirements to be satisfied by a company in relation to the income year for the purposes of this paragraph, and the company satisfies those requirements.

(4) Regulations for the purposes of paragraph (3)(c) cannot set out requirements in relation to any income year before the one in which the regulations are made.

(5) If a *shareholder in a company makes an election under subsection 485AA(2) of the Income Tax Assessment Act 1936 in relation to the shareholder's share or shares in the company, then, for the purpose of applying that Act and this Act in relation to the shareholder's share or shares, the company is a foreign hybrid company in relation to any income year during which the election is in force.

Subdivision 830-B - Extension of normal partnership provisions to foreign hybrid companies

Note: The normal partnership provisions will apply of their own force to foreign hybrids that are foreign hybrid limited partnerships.

Table of sections

830-20 Treatment of company as a partnership

830-25 Partners are the shareholders in the company

830-30 Individual interest of a partner in net income etc. equals percentage of notional distribution of company's profits

830-35 Partner's interest in assets

830-40 Control and disposal of share in partnership income

830-20 Treatment of company as a partnership

If a company is a *foreign hybrid company in relation to an income year, the *foreign hybrid tax provisions apply as if the company were a partnership, and for that purpose the following provisions of this Subdivision have effect.

830-25 Partners are the shareholders in the company

The partners in the partnership are the *shareholders in the company.

830-30 Individual interest of a partner in net income etc. equals percentage of notional distribution of company's profits

The individual interest of a partner in the *net income or *partnership loss of the partnership of the income year is equal to the percentage that, if the profits of the company for the income year were distributed at the end of the income year to its *shareholders:

(a) if paragraph (b) does not apply - as dividends; or

(b) if the company's *constitution or other rules provide for the distribution of profits other than as dividends - in accordance with the constitution or those rules;

the partner, as a shareholder, could reasonably be expected to receive of the total distribution.

830-35 Partner's interest in assets

(1) The interest that each partner has in the assets of the partnership, under the partnership agreement, is equal to the percentage in subsection (2).

(2) The percentage is the percentage that, if the capital of the company were distributed to its *shareholders on a winding-up of the company at the end of the income year, the partner, as a shareholder, could reasonably be expected to receive of the total distribution.

830-40 Control and disposal of share in partnership income

(1) This section applies for the purposes of determining under section 94 of the Income Tax Assessment Act 1936 whether the partnership is so constituted or controlled, or its operations are so conducted, that a partner does not have the real and effective control and disposal of the partner's share, or a part of the partner's share, in the *net income of the partnership of an income year.

(2) The reference to the partner's share, or a part of the partner's share, in the *net income is a reference to any rights that the *shareholder has under the *constitution or other rules of the company that were taken into account under section 830-30 in working out the individual interest of the partner in the partnership's net income or *partnership loss of the income year.

Subdivision 830-C - Special rules applicable while an entity is a foreign hybrid

Note: In the case of a foreign hybrid company, references in this Subdivision that relate to partnerships are to be read subject to Subdivision 830-B. For example, a reference to a partner will be a reference to a shareholder in the company who is treated by Subdivision 830-B as a partner.

Table of sections

830-45 Partner's revenue and net capital losses from foreign hybrid not to exceed partner's loss exposure amount

830-50 Deduction etc. where partner's foreign hybrid revenue loss amount and foreign hybrid net capital loss amount are less than partner's loss exposure amount

830-55 Meaning of foreign hybrid net capital loss amount

830-60 Meaning of loss exposure amount

830-65 Meaning of outstanding foreign hybrid revenue loss amount

830-70 Meaning of outstanding foreign hybrid net capital loss amount

830-75 Extended meaning of subject to tax

830-45 Partner's revenue and net capital losses from foreign hybrid not to exceed partner's loss exposure amount

(1) This section applies to a *limited partner in a *foreign hybrid in relation to an income year if the sum of the following amounts:

(a) any amount (a foreign hybrid revenue loss amount ) allowable to the partner as a deduction under subsection 92(2) of the Income Tax Assessment Act 1936 in respect of a *partnership loss of the foreign hybrid for the income year;

(b) any *foreign hybrid net capital loss amount of the partner in respect of the foreign hybrid for the income year;

exceeds the partner's *loss exposure amount for the income year.

Reduction in foreign hybrid revenue loss amount or foreign hybrid net capital loss amount

(2) If this section applies, the amount mentioned in paragraph (1)(a) or (b), or each of the amounts mentioned in those paragraphs, is reduced so that in total they equal the partner's *loss exposure amount. The partner must choose how much of the reduction is applied to each of the amounts.

Effect of reducing foreign hybrid net capital loss amount

(3) If the partner's *foreign hybrid net capital loss amount in respect of the *foreign hybrid for the income year is reduced under subsection (2), the partner's *net capital gain or *net capital loss for the income year is worked out by assuming that the *capital gains and *capital losses taken into account in working out the partner's foreign hybrid net capital loss amount were instead a capital loss equal to the foreign hybrid net capital loss amount after the reduction.

830-50 Deduction etc. where partner's foreign hybrid revenue loss amount and foreign hybrid net capital loss amount are less than partner's loss exposure amount

(1) This section applies if:

(a) the sum of a partner's *foreign hybrid revenue loss amount and *foreign hybrid net capital loss amount for a *foreign hybrid for an income year does not exceed the partner's *loss exposure amount for the foreign hybrid for the income year (the difference being the partner's available loss exposure amount ); and

(b) the partner has one or more *outstanding foreign hybrid revenue loss amounts or one or more *outstanding foreign hybrid net capital loss amounts, or both, in respect of the foreign hybrid for the income year.

Where sum of outstanding foreign hybrid revenue loss amounts and outstanding foreign hybrid net capital loss amounts does not exceed available loss exposure amount

(2) If the sum of the *outstanding foreign hybrid revenue loss amounts and the *outstanding foreign hybrid net capital loss amounts does not exceed the *available loss exposure amount:

(a) a deduction is allowable to the partner for the income year equal to the sum of the outstanding foreign hybrid revenue loss amounts; and

(b) the partner makes a *capital loss for the income year under section 104-270 equal to the sum of the outstanding foreign hybrid net capital loss amounts.

Where sum of outstanding foreign hybrid revenue loss amounts and outstanding foreign hybrid net capital loss amounts exceeds available loss exposure amount

(3) If the sum of the *outstanding foreign hybrid revenue loss amounts and the *outstanding foreign hybrid net capital loss amounts exceeds the *available loss exposure amount, then either or both of the following apply:

(a) a deduction is allowable to the partner for the income year equal to some or all of the outstanding foreign hybrid revenue loss amounts;

(b) the partner makes a *capital loss under section 104-270 equal to some or all of the outstanding foreign hybrid net capital loss amounts;

such that the sum of the deduction and the capital loss equals the available loss exposure amount.

Partner to choose how to apply subsection (3)

(4) The partner must choose:

(a) which of paragraphs (3)(a) and (b) is to apply or whether both are to apply; and

(b) the amount of the deduction or *capital loss, or the amounts of both; and

(c) the particular outstanding foreign hybrid revenue loss amounts or outstanding foreign hybrid net capital loss amounts, or both, to which they relate.

830-55 Meaning of foreign hybrid net capital loss amount

If:

(a) the sum of a partner's *capital losses from *CGT events happening during an income year in relation to a *foreign hybrid or *CGT assets of a foreign hybrid;

exceeds:

(b) the sum of the partner's *capital gains from CGT events happening during the income year in relation to the foreign hybrid or CGT assets of the foreign hybrid;

the partner has a foreign hybrid net capital loss amount in respect of the foreign hybrid for the income year equal to the excess.

830-60 Meaning of loss exposure amount

(1) The loss exposure amount of a partner in a *foreign hybrid for an income year is worked out as follows:

Method statement

Step 1. Work out the sum of the amounts or *market values of the contributions made by the partner to the *foreign hybrid that, as at the end of the income year:

(a) have not been repaid or returned to the partner; and

(b) have been contributed for at least 180 days, or are intended by the partner to remain contributed for at least 180 days.

Step 2. Subtract the sum of the amounts of:

(a) all *limited recourse debts owed by the partner at the end of the income year, to the extent that the *borrowings concerned were for the purpose of enabling the partner to make contributions to the *foreign hybrid and the debts were secured by the partner's interest in the foreign hybrid; and

(b) all the partner's *foreign hybrid revenue loss amounts in respect of the foreign hybrid for previous income years, after any reduction under subsection 830-45(2); and

(c) all the partner's *foreign hybrid net capital loss amounts in relation to the partnership for previous income years, after any reduction under subsection 830-45(2); and

(d) all deductions allowed to the partner under subsection 830-50(2) or (3) in respect of the foreign hybrid for previous income years; and

(e) all *capital losses that, as a result of subsection 830-50(2) or (3), the partner made in respect of *CGT event K12 in respect of the foreign hybrid for previous income years.

Contribution in case of foreign hybrid company

(2) For the purposes of step 1 in the method statement in subsection (1), if:

(a) the *foreign hybrid is a *foreign hybrid company; and

(b) the partner *acquired its *shares in the company from another shareholder; and

(c) the payment or other consideration for the acquisition of the shares did not constitute the making of a contribution by the partner to the foreign hybrid;

the payment or other consideration is taken:

(d) to be a contribution by the partner to the foreign hybrid; and

(e) to be so contributed for as long as the partner holds the shares; and

(f) to have been repaid to the partner to the extent of any payment that:

(i) the foreign hybrid makes to the partner in respect of the share; and

(ii) the foreign hybrid describes as a return of capital; and

(iii) is attributable to the period during which the partner has held the shares.

830-65 Meaning of outstanding foreign hybrid revenue loss amount

(1) This section applies if a *foreign hybrid revenue loss amount of a partner in a *foreign hybrid in relation to an income year (the reduction year ) is reduced under subsection 830-45(2).

(2) The partner has, for each later income year, an outstanding foreign hybrid revenue loss amount equal to the amount of the reduction, less the sum of any deductions allowable to the partner under subsection 830-50(2) or (3) in respect of the outstanding foreign hybrid revenue loss amount for income years between the reduction year and the later income year.

Outstanding foreign hybrid revenue loss amount not to form part of tax loss

(3) To avoid doubt, a partner's *outstanding foreign hybrid revenue loss amount for an income year cannot form part of a *tax loss for the purposes of Division 36.

830-70 Meaning of outstanding foreign hybrid net capital loss amount

(1) This section applies if a *foreign hybrid net capital loss amount of a partner in a *foreign hybrid in relation to an income year (the reduction year ) is reduced under subsection 830-45(2).

(2) The partner has, for each later income year, an outstanding foreign hybrid net capital loss amount equal to the amount of the reduction, less the sum of any *capital losses that, as a result of subsection 830-50(2) or (3), the partner makes in respect of *CGT event K12 in respect of the outstanding foreign hybrid net capital loss amount for income years between the reduction year and the later income year.

830-75 Extended meaning of subject to tax

Where entity becomes a partner

(1) If:

(a) an entity becomes a partner (the first partner ) in a *foreign hybrid in relation to an income year; and

(b) a gain or profit of a capital nature accrues to another partner as a result of the disposal of the whole or part of that other partner's interest in an asset of the foreign hybrid that happens when the first partner becomes a partner; and

(c) apart from this subsection, the gain or profit is not *subject to tax in a *listed country in any *tax accounting period; and

(d) if the foreign hybrid had disposed of the whole or an equivalent part of the asset at the time of the disposal of the whole or the part of the interest, any gain or profit of a capital nature that accrued to the foreign hybrid in respect of the disposal would have been subject to tax in a listed country in a tax accounting period;

then, for the purposes of Part X of the Income Tax Assessment Act 1936, the gain or profit mentioned in paragraph (b) is taken to be subject to tax in the listed country, and in the tax accounting period, mentioned in paragraph (d).

Where partner increases its interest

(2) If:

(a) an entity is a partner (the first partner ) that increases its interest in a *foreign hybrid in relation to an income year; and

(b) a gain or profit of a capital nature accrues to another partner as a result of the disposal of the whole or part of that other partner's interest in an asset of the foreign hybrid that happens when the first partner increases its interest in the foreign hybrid; and

(c) apart from this subsection, the gain or profit is not *subject to tax in a *listed country in any *tax accounting period; and

(d) if the foreign hybrid had disposed of the whole or an equivalent part of the asset at the time of the disposal of the whole or the part of the interest, any gain or profit of a capital nature that accrued to the foreign hybrid in respect of the disposal would have been subject to tax in a listed country in a tax accounting period;

then, for the purposes of Part X of the Income Tax Assessment Act 1936, the gain or profit mentioned in paragraph (b) is taken to be subject to tax in the listed country, and in the tax accounting period, mentioned in paragraph (d).

Where entity ceases to be a partner

(3) If:

(a) an entity ceases to be a partner in a *foreign hybrid in relation to an income year; and

(b) a gain or profit of a capital nature accrues to the entity as a result of the disposal of its interest in an asset of the foreign hybrid that happens when the entity ceases to be a partner; and

(c) apart from this subsection, the gain or profit is not *subject to tax in a *listed country in any *tax accounting period; and

(d) any gain or profit of a capital nature that accrues to the entity as a result of the disposal of its interest in the foreign hybrid that happens when the entity ceases to be a partner is subject to tax in a listed country in a tax accounting period;

then, for the purposes of Part X of the Income Tax Assessment Act 1936, the gain or profit mentioned in paragraph (b) is taken to be subject to tax in the listed country, and in the tax accounting period, mentioned in paragraph (d).

Where partner disposes of part of its interest

(4) If:

(a) an entity is a partner that disposes of part of its interest in a *foreign hybrid in relation to an income year; and

(b) a gain or profit of a capital nature accrues to the entity as a result of the disposal of part of its interest in an asset of the foreign hybrid that happens when the entity disposes of the part of its interest in the foreign hybrid; and

(c) apart from this subsection, the gain or profit is not *subject to tax in a *listed country in any *tax accounting period; and

(d) any gain or profit of a capital nature that accrues to the entity as a result of the disposal of the part of its interest in the foreign hybrid is subject to tax in a listed country in a tax accounting period;

then, for the purposes of Part X of the Income Tax Assessment Act 1936, the gain or profit mentioned in paragraph (b) is taken to be subject to tax in the listed country, and in the tax accounting period, mentioned in paragraph (d).

Subdivision 830-D - Special rules applicable when an entity becomes or ceases to be a foreign hybrid

Note: In the case of a foreign hybrid company, references in this Subdivision that relate to partnerships are to be read subject to Subdivision 830-B. For example, a reference to a partner will be a reference to a shareholder in the company who is treated by Subdivision 830-B as a partner.

Table of sections

830-80 Setting the tax cost of partners' interests in the assets of an entity that becomes a foreign hybrid

830-85 Setting the tax cost of assets of an entity when it ceases to be a foreign hybrid

830-90 What the expression tax cost is set means

830-95 What the expression tax cost setting amount means

830-100 What the expression tax cost means

830-105 What the expression asset-based income tax regime means

830-110 No disposal of assets etc. on entity becoming or ceasing to be a foreign hybrid

830-115 Tax losses cannot be transferred to a foreign hybrid

830-120 End of CFC's last statutory accounting period

830-125 How long interest in asset, or asset, held

830-80 Setting the tax cost of partners' interests in the assets of an entity that becomes a foreign hybrid

(1) This section applies if:

(a) an entity is a *foreign hybrid in relation to an income year (the hybrid year ); and

(b) the entity was in existence at the end of the preceding income year (which may be the income year before this Division first applies to the entity); and

(c) the entity was not a foreign hybrid in relation to that preceding income year.

(2) For the purposes of applying an *asset-based income tax regime for the hybrid year and each later income year in relation to which the entity continues to be a foreign hybrid, the *tax cost is set at the start of the hybrid year, for each asset of the *foreign hybrid in which each partner has an interest at that time.

830-85 Setting the tax cost of assets of an entity when it ceases to be a foreign hybrid

(1) This section applies if:

(a) an entity is a *foreign hybrid in relation to an income year; and

(b) the entity is in existence at the start of the next income year; and

(c) the entity is not a foreign hybrid in relation to that income year (the post-hybrid year ).

(2) For the purposes of applying an *asset-based income tax regime for the post-hybrid year and each later income year in relation to which the entity continues not to be a foreign hybrid, the *tax cost is set at the start of the post-hybrid year, for each asset of the entity at that time.

830-90 What the expression tax cost is set means

The following table explains what the expression tax cost is set at the start of the hybrid year or the post-hybrid year means, in relation to an asset in which a partner has an interest or in relation to an asset of the entity, for the purposes of each *asset-based income tax regime:

830-95 What the expression tax cost setting amount means

(1) A partner's tax cost setting amount for an interest of the partner in an asset at the start of the hybrid year, in relation to an *asset-based income tax regime, is worked out as follows:

Method statement

Step 1. Work out what would have been the entity's *tax cost of the asset for the purposes of applying the *asset-based income tax regime as at the start of the hybrid year if it were not a *foreign hybrid in relation to the hybrid year.

Step 2. Multiply the result of step 1 by:

(a) if the entity is a *foreign hybrid company in relation to the hybrid year - the percentage applicable to the partner under subsection 830-35(2); or

(b) if the entity is a *foreign hybrid limited partnership in relation to the hybrid year - the individual interest of the partner in the asset, expressed as a percentage of the interests of all of the partners in the asset.

Step 3. If the partner paid a premium in respect of the *acquisition of its interest in the asset (see subsection (2)), add the amount of the premium to the result of step 2. If the partner received a discount in respect of the acquisition (see subsection (2)), subtract the amount of the discount from the result of step 2, but not to the extent that this would result in a negative amount.

The result of step 3 is the partner's tax cost setting amount in respect of the asset.

(2) Work out whether the partner paid a premium or received a discount for its interest in the asset using the following method statement:

Method Statement

Step 1. Add up all the amounts paid by the partner before the start of the hybrid year for its *shares in the entity (if the entity was a company), or for its interests in the assets of the entity and in the entity (if the entity was a *limited partnership), that it held at the start of the hybrid year, and subtract all amounts received by the partner in respect of those shares or interests by way of reduction in capital of the entity.

Step 2. Work out the amount that, if the capital of the entity had been distributed to its *shareholders on a winding-up or to its partners on a dissolution, at the end of the income year before the hybrid year, the partner could reasonably be expected to have received of the total distribution.

Step 3. If the result of step 1 exceeds the result of step 2, the partner paid a premium for its interest in the asset. If the result of step 2 exceeds the result of step 1, the partner received a discount for its interest in the asset.

Step 4. Work out the amount of the premium or discount using the formula:

(Result of step 1 in the method statement in subsection (1) / Sum of results of step 1 in the method statement in subsection (1) for the partner for all of the foreign hybrid's assets in relation to the asset-based income tax regime) * Excess mentioned in step 3 in the method statement in this subsection

(3) The entity's tax cost setting amount for an asset at the start of the post-hybrid year in relation to an *asset-based income tax regime is equal to the sum of what the partners' *tax costs for their interests in the asset would be at that time for the purpose of applying the asset-based income tax regime if the entity had continued to be a *foreign hybrid in relation to that income year.

830-100 What the expression tax cost means

The tax cost of a partner's interest in an asset or of an asset of the entity for the purposes of applying an *asset-based income tax regime at the start of the post-hybrid year or the hybrid year is worked out using the following table:

830-105 What the expression asset-based income tax regime means

The provisions listed in the first column in relation to each item in the table in section 830-100 are an asset-based income tax regime .

830-110 No disposal of assets etc. on entity becoming or ceasing to be a foreign hybrid

To avoid doubt, the fact that an entity becomes or ceases to be a *foreign hybrid in relation to an income year does not cause:

(a) a *CGT event to happen to any *CGT asset consisting of:

(i) any *share or interest in the entity; or

(ii) any interest in an asset of the entity; or

(b) a disposal or any other event to happen to any other asset consisting of such a share or interest.

830-115 Tax losses cannot be transferred to a foreign hybrid

(1) If an entity is a *foreign hybrid in relation to an income year, it cannot deduct in that income year a *tax loss for a *loss year in relation to which it was not a foreign hybrid.

Former foreign hybrid can deduct tax losses for income years before it became a foreign hybrid

(2) This section does not prevent an entity that:

(a) is not a *foreign hybrid in relation to an income year (the post-hybrid year ); and

(b) was a foreign hybrid in relation to a previous income year; and

(c) was not a foreign hybrid in relation to an income year (the pre-hybrid year ) before the previous year;

from deducting, in the post-hybrid year, a *tax loss for the pre-hybrid year.

830-120 End of CFC's last statutory accounting period

If:

(a) a taxpayer is a partner in an entity that becomes a *foreign hybrid in relation to an income year; and

(b) the entity was a *CFC at the end of the taxpayer's preceding income year; and

(c) the last *statutory accounting period of the CFC did not end at the end of the taxpayer's preceding income year; and

(d) if it had so ended, the taxpayer would have been an *attributable taxpayer in relation to the CFC;

for the purposes of working out the *attributable income of the CFC for the taxpayer in respect of the last statutory accounting period of the CFC, that statutory accounting period ends at the end of the taxpayer's preceding income year.

830-125 How long interest in asset, or asset, held

Partner's interest in asset when entity becomes a foreign hybrid

(1) If an entity becomes a *foreign hybrid company in relation to an income year, the interest that a partner has in an asset as mentioned in section 830-35 is taken to have been held by the partner (except for the purposes of having the *tax cost of the interest set) from the later of the following times:

(a) when the entity *acquired the asset;

(b) when the partner acquired its *shares in the entity.

Entity's asset when it ceases to be a foreign hybrid company

(2) If:

(a) an entity is not a *foreign hybrid company in relation to an income year (the post-hybrid year ); and

(b) the entity was a *foreign hybrid company in relation to the preceding income year; and

(c) during:

(i) that preceding income year; or

(ii) any earlier income year in relation to which the entity was also a foreign hybrid;

but not at the start of the first income year in relation to which the entity was a foreign hybrid company, the partners in the foreign hybrid company *acquired an interest in an asset that is an asset of the entity at the start of the post-hybrid year;

the asset is taken to have been held by the entity (except for the purposes of having the *tax cost of the asset set) from the time the partners acquired their interests in the asset.