Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010 (114 of 2010)

Schedule 1   Repeal of the FIF and deemed present entitlement rules

Part 2   Other amendments

Income Tax Assessment Act 1936

89   Subsection 401(3)

Repeal the subsection, substitute:

(3) For the purposes of paragraph (1)(c):

(a) a reference to the grossed-up amount of an attribution surplus is a reference to the amount of the surplus divided by the eligible taxpayer's attribution account percentage for the eligible CFC; and

(b) where the disposal of the asset, or the CGT event, causes the eligible taxpayer's attribution account percentage for an attribution account entity in relation to which there is an attribution surplus to be reduced by a proportion, then only that proportion of the attribution surplus is, subject to this subsection, to be taken into account under that paragraph; and

(c) where there is only one attribution surplus referred to in that paragraph and (after any application of paragraph (b) of this subsection) its grossed-up amount exceeds the consideration in respect of the disposal or the capital proceeds from the CGT event, then the surplus is only to be taken into account to the extent that its grossed-up amount equals the consideration or those capital proceeds; and

(d) where there are 2 or more attribution surpluses referred to in paragraph (1)(c) and (after any application of paragraph (b) of this subsection) the sum of their grossed-up amounts exceeds the consideration in respect of the disposal or the capital proceeds from the CGT event, then:

(i) if the taxpayer makes an election that for the purposes of this paragraph, a part of each surplus (after any application of paragraph (b)) such that the sum of the grossed-up amounts of the parts to which the election relates equals the consideration or those capital proceeds - only the part to which the election relates of each surplus is to be taken into account under paragraph (1)(c); or

(ii) if subparagraph (i) does not apply - only a proportion of each surplus (after any application of paragraph (b)) is to be taken into account under paragraph (1)(c), being the proportion calculated using the formula:

where:

consideration means the amount of the consideration or the capital proceeds.

total grossed-up surplus means the sum of the grossed-up amounts of the attribution surpluses (after any application of paragraph (b)).