INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART XII - DROUGHT INVESTMENT ALLOWANCE  

Division 5 - Special provisions about primary producers  

Subdivision B - Group companies  

SECTION 657   ENTITLEMENT TO PRIMARY PRODUCER DEDUCTION NOT LOST FOR DISPOSALS IN FEWER THAN 12 MONTHS WITHIN COMPANY GROUPS  

657(1)   When section applies.  

This section applies if a taxpayer that is a company would, as a result of subsection 633(2) , lose its entitlement to the deduction to which Division 2 applies because the taxpayer has disposed of the item of drought mitigation property concerned before the end of 12 months after first using it or installing it for use.

657(2)   No loss of entitlement.  

If this section applies and the requirements in subsections (3) to (6) are met, the taxpayer does not lose the entitlement.

657(3)   Disposal to group company.  

The disposal must have been to a group company (the transferee ) of the taxpayer.

Note:

Group company is defined in section 682 .

657(4)   Ownership restriction.  

The item must not, at any time (the test time ) during the period of 12 months, have been owned by a person other than:

(a) if the transferee was the holding company of the taxpayer - the transferee or a group company of the transferee at the test time; or

(b) if the transferee was a wholly-owned subsidiary of the taxpayer - the taxpayer or a group company of the taxpayer at the test time; or

(c) if the transferee was a wholly-owned subsidiary of another company of which the taxpayer was also a wholly-owned subsidiary - the other company or a group company of it at the test time; or

(d) if the transferee was a wholly-owned subsidiary of other companies of which the taxpayer was also a wholly-owned subsidiary - a company that, at the test time, was a wholly-owned subsidiary of the other companies.

657(5)   Eligible public company requirement.  

At any time during the 12 months when the item was owned by:

(a) if the transferee was the holding company of the taxpayer - the transferee; or

(b) if the transferee was a wholly-owned subsidiary of the taxpayer - the taxpayer; or

(c) if the transferee was a wholly-owned subsidiary of another company of which the taxpayer was also a wholly-owned subsidiary - that other company;

the transferee, the taxpayer or that other company, as the case may be, must have been an eligible public company in relation to the year of income in which that time occurred.

657(6)   Restriction on leasing etc.  

At no time during the period of 12 months must a person who owned the item have:

(a) leased the item to another person; or

(b) let the item on hire to another person under a hire-purchase agreement; or

(c) otherwise granted a right to another person to use the item; or

(d) used the item outside Australia or for a purpose other than that of producing assessable primary production income.

657(7)   Group company exception to paragraph (6)(a) or (c) requirement.  

The requirement in paragraph (6)(a) or (c) does not apply if:

(a) the other person mentioned in that paragraph is a group company of the person who owned the item and is an eligible public company in relation to the year of income in which the leasing or granting of rights concerned happens; and

(b) in a case where the required time (see subsection (8)) happens in a year of income after the one in which the leasing or granting happens - the group company is also an eligible public company in relation to that later year of income; and

(c) at all times from the grant of the lease or rights until the required time (see subsection (8)), the group company remains a group company of the person who owned the item and uses the item wholly and exclusively both in Australia and for the purpose of producing assessable primary production income other than by leasing it or otherwise granting a right to another person to use it.

657(8)   Meaning of required time.  

The required time is the earlier of:

(a) the end of the term of the lease or period of the grant; and

(b) the end of the period of 12 months mentioned in subsection (1).

657(9)   Effect of dissolution of certain companies by court order.  

If:

(a) a company (the original company ) is any of the following companies:

(i) the transferee referred to in paragraph (4)(a);

(ii) the taxpayer referred to in paragraph (4)(b);

(iii) the other company referred to in paragraph (4)(c);

(iv) any of the other companies referred to in paragraph (4)(d); and

(b) under an order of a court made under the law of a State or Territory relating to companies:

(i) the whole of the undertaking, property and liabilities of the original company is vested in another company (the substituted company ); and

(ii) the persons who beneficially owned shares in the original company become the beneficial owners of all of the shares in the substituted company without a reduction in their respective interests; and

(iii) the original company is dissolved;

subsections (4) and (5) apply, in relation to any time after the order of the court takes effect, as if the substituted company were the transferee, the taxpayer or the other company, as the case may be.