New International Tax Arrangements (Managed Funds and Other Measures) Act 2005 (21 of 2005)

Schedule 2   Treaty source rules

International Tax Agreements Act 1953

1   After section 3

Insert:

3AA Source of income from funds management activities

(1) This section applies to a beneficiary of a widely held unit trust if:

(a) the beneficiary is a resident of a country (other than Australia) for the purposes of an agreement that is given the force of law under this Act; and

(b) the beneficiary is presently entitled, either:

(i) directly; or

(ii) indirectly through fixed entitlements in one or more interposed trust estates (whether widely held unit trusts or not);

to a share of the income of the widely held unit trust derived from the carrying on by the trustee in Australia of funds management activities through a permanent establishment in Australia (the funds management income ).

(2) In working out for the purposes of the Assessment Act whether the funds management income of the beneficiary is attributable to sources in Australia, these provisions (the source of income provisions ) do not apply:

(a) Article 21 of the 2003 United Kingdom convention;

(b) a corresponding provision of another agreement;

(c) subsections 11(3), 11S(2) and 11ZF(2) of this Act, and any provision of this Act of similar effect enacted after the commencement of this section.

(3) However, the source of income provisions do apply to the extent to which the income derived from the carrying on by the trustee of funds management activities is adjusted under:

(a) Article 7(2) or 9(1) of the 2003 United Kingdom convention; or

(b) a corresponding provision of another agreement.

(4) In this section:

closely held has the meaning given by section 272-105 in Schedule 2F to the Income Tax Assessment Act 1936.

funds management activities means activities carried on by:

(a) a managed investment scheme (as defined by section 9 of the Corporations Act 2001) that is a widely held unit trust; or

(b) a managed investment scheme (as so defined) that is a unit trust that is closely held by one or more of these:

(i) a managed investment scheme (as so defined) that is a widely held unit trust;

(ii) a complying superannuation entity;

(iii) a life insurance company.

permanent establishment , in relation to an agreement, has the same meaning as in the agreement.

widely held unit trust has the meaning given by section 272-105 in Schedule 2F to the Income Tax Assessment Act 1936.