Tax and Superannuation Laws Amendment (2014 Measures No. 4) Act 2014 (110 of 2014)

Schedule 2   Foreign dividends

Part 1   Foreign equity distributions on participation interests

Income Tax Assessment Act 1997

4   Before Subdivision 768-B

Insert:

Subdivision 768-A - Returns on foreign investment

Guide to Subdivision 768-A

768-1 What this Subdivision is about

If:

(a) an Australian corporate tax entity receives a foreign equity distribution from a foreign company, either directly or indirectly through one or more interposed trusts or partnerships; and

(b) the Australian corporate tax entity holds a participation interest of at least 10% in the foreign company;

the distribution is non-assessable non-exempt income for the Australian corporate tax entity.

Table of sections

Foreign equity distributions on participation interests

768-5 Foreign equity distributions on participation interests

768-10 Meaning of foreign equity distribution

768-15 Participation test - minimum 10% participation

Foreign equity distributions on participation interests

768-5 Foreign equity distributions on participation interests

Foreign equity distributions received directly

(1) A *foreign equity distribution is not assessable income, and is not *exempt income, of the entity to which it is made if:

(a) the entity is an Australian resident and a *corporate tax entity; and

(b) at the time the distribution is made, the entity satisfies the participation test in section 768-15 in relation to the company that made the distribution; and

(c) the entity:

(i) does not receive the distribution in the capacity of a trustee; or

(ii) receives the distribution in the capacity of a trustee of a *corporate unit trust or *public trading trust.

Foreign equity distributions received through interposed trusts and partnerships

(2) An amount is not assessable income, and is not *exempt income, of an entity if:

(a) the entity is a beneficiary of a trust or a partner in a partnership, an Australian resident and a *corporate tax entity; and

(b) the amount is all or part of the net income of the trust or partnership that would, apart from this subsection, be included in the entity’s assessable income because of Division 5 or 6 of Part III of the Income Tax Assessment Act 1936; and

(c) the amount can be attributed (either directly or indirectly through one or more interposed trusts or partnerships that are not *corporate tax entities) to a *foreign equity distribution; and

(d) at the time the distribution is made, the entity satisfies the participation test in section 768-15 in relation to the company that made the distribution; and

(e) the entity:

(i) does not receive the distribution in the capacity of a trustee; or

(ii) receives the distribution in the capacity of a trustee of a *corporate unit trust or *public trading trust.

(3) An amount that is *non-assessable non-exempt income under subsection (2) is taken, for the purpose of section 25-90 (about deductions relating to foreign non-assessable non-exempt income) to be derived from the same source as the *foreign equity distribution.

768-10 Meaning of foreign equity distribution

A foreign equity distribution is a *distribution or *non-share dividend made by a company that is a foreign resident in respect of an *equity interest in the company.

768-15 Participation test - minimum 10% participation

An entity satisfies the participation test in this section in relation to another entity at a time if, at that time, the sum of the following is at least 10%:

(a) the *direct participation interest the entity would have in the other entity if rights on winding-up were disregarded;

(b) the *indirect participation interest the entity would have in the other entity if:

(i) rights on winding-up were disregarded; and

(ii) section 960-185 only applied to intermediate entities that are not *corporate tax entities.