INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIA - CAPITAL GAINS AND CAPITAL LOSSES  

Division 17A - Roll-over relief for certain disposals of assets related to small businesses  

Subdivision A - Interpretative provisions  

SECTION 160ZZPN   ENTITY CONNECTED WITH TAXPAYER  

160ZZPN(1)   Connection to be based on control.  

Subject to this section, an entity is connected with a taxpayer for the purposes of this Division if:

(a) the taxpayer controls the entity; or

(b) the taxpayer is controlled by the entity; or

(c) the taxpayer and the entity are each controlled by the same entity.

160ZZPN(2)   Control of entity: 50% or more of rights.  

Subject to subsection (3), an entity (the first entity ) is taken for the purposes of subsection (1) to control another entity if the first entity, or an associate or associates of the first entity, or the first entity and an associate or associates of the first entity:

(a) own beneficially, or have the right to acquire the beneficial ownership of, interests in the other entity that carry between them the right to receive at least 50% of any distribution of income or capital that the other entity may make; or

(b) if the other entity is a company - own beneficially, or have the right to acquire beneficial ownership of, shares in the company that carry between them the right to exercise, or control the exercise of, at least 50% of the voting power in the company; or

(c) if the other entity is a discretionary trust:

(i) are the trustee or trustees of the trust; or

(ii) have the power to determine the manner in which the trustee or trustees of the trust exercise the power to make any payment of income or capital to or for the benefit of beneficiaries of the trust.

160ZZPN(2A)   Where Public Trustee is trustee of discretionary trust.  

Subparagraph (2)(c)(i) does not apply to the first entity if the trustee of the trust referred to in that subparagraph is the Public Trustee of a State or Territory acting in that capacity.

160ZZPN(3)   Exception.  

Paragraph (2)(c) does not apply if:

(a) the trust referred to in that paragraph is the taxpayer referred to in subsection (1); and

(b) a beneficiary of that trust is taken to control the trust because of the operation of a provision of this section; and

(c) that beneficiary is not an associate of that trust or of any person who has the power of determination referred to in subparagraph (2)(c)(ii).

160ZZPN(4)   Control of entity: at least 40% but less than 50% of rights.  

An entity (the first entity ) is also taken for the purposes of subsection (1) to control another entity if the first entity, or an associate or associates of the first entity, or the first entity and an associate or associates of the first entity:

(a) own beneficially, or have the right to acquire the beneficial ownership of, interests in the other entity that carry between them the right to receive at least 40%, but less than 50%, of any distribution of income or capital that the other entity may make; or

(b) if the other entity is a company - own beneficially, or have the right to acquire beneficial ownership of, shares in the company that carry between them the right to exercise, or control the exercise of, at least 40%, but less than 50%, of the voting power in the company;

unless the first entity satisfies the Commissioner that the other entity is controlled by a person other than, or by persons that do not include, the first entity or an associate of the first entity.

160ZZPN(5)   Control of discretionary trust.  

If the trustee or trustees of a discretionary trust have the power to pay to, or apply for the benefit of, an entity any income or capital of the trust, the entity is taken for the purposes of this section to own beneficially interests in any distribution of any income or capital, as the case may be, of the trust that is equal to the maximum percentage of the income or capital that the trustee is empowered to pay to, or apply for the benefit of, the entity.

160ZZPN(5A)   [When subsec (5) does no apply]  

Subsection (5) does not apply if:

(a) the entity is a public entity; and

(b) the trustee or trustees have that power only because another beneficiary of the trust has an interest in the entity.

160ZZPN(6)   Indirect control of entity.  

Subject to subsection (7), an entity that directly controls a second entity is taken for the purposes of this section also to control any other entity that is directly, or indirectly by any other application or applications of this section, controlled by the second entity.

160ZZPN(7)   No tracing through public entity.  

If an entity (the first entity ) controls a public entity, the first entity is not taken merely because of the operation of subsection (6) to control any other entity that is controlled by the public entity.