Private ruling: Sale and re-purchase arrangement
Ruling period: Year ending 30 September 2010 | Year ending 30 September 2011 | Year ending 30 September 2012 | Year ending 30 September 2013 | Year ending 30 September 2014 | Year ending 30 September 2015
Date scheme commenced: The income year ending 30 September 2010

Ruling: Q1: Is Sub Co not a subsidiary member of the X Co tax consolidated group immediately prior to the commencement of the transaction? | A1: Yes | Q2: Does Sub Co again become a subsidiary member of the X Co tax consolidated group when the B Prefs are acquired by X Co under transaction? | A2: Yes | Q3: At the time when Sub Co exits the X Co tax consolidated group upon exercise of the Put and Call Option prior to termination, does item 2 of the table in section 701-60 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to determine the tax cost setting amount of the B Prefs for X Co? If item 2 of the table in section 701-60 applies, are the B Prefs included at step 4 under subsection 711-20(1) of the ITAA 1997 on exit? | A3: At the time when Sub Co exits the X Co tax consolidated group, item 2 rather than item 3 of the table in section 701-60 of the ITAA 1997 applies in relation to the B Prefs. The B Prefs are not included at step 4 under subsection 711-20(1) of the ITAA 1997 on exit. | Q4: Are dividends paid by X Co on its ordinary shares (M Ords) frankable distributions pursuant to section 202-40 of the ITAA 1997? | A4: Yes | Q5: Does section 177EA of the Income Tax Assessment Act 1936 (ITAA 1936) apply to X Co in relation to dividends it pays on the X Ords out of profits? | A5: No | Q6: Does section 177D of the ITAA 1936 Act apply to X Co in relation to the scheme or any aspect of the scheme? | A6: No | Q7: Are dividends paid to Parent Co, including dividends credited under dividend reinvestment terms in the X Co constitution, on the X Ords, assessable income of Parent Co under section 44 of the ITAA 1936? | A7: Yes | Q8: Is Parent Co entitled to a franking tax offset under section 207-20 of the ITAA 1997 in respect of franked dividends Parent Co receives on the X Ords? | A8: Yes | Q9: Does section 177EA of the ITAA 1936 Act apply to Parent Co in relation to franked dividends Parent Co receives on the X Ords? | A9: No | Q10: Will accumulated dividends paid by Sub Co to Y Co on the B Prefs be subject to dividend withholding tax under subsection 128B(1) of the ITAA 1936? | A10: No | Q11: Does section 177CA of the ITAA 1936 and the provisions dealing with avoidance of withholding tax apply to Y Co in relation to the transaction? | A11: No

Relevant facts and circumstances: This financing transaction concerns the provision of a loan by Parent Co to its wholly owned non-resident subsidiary, P-Sub, via the use of sale and repurchase agreements (repos). The loan was effected by the sale and repurchase of preference shares. X Co, a subsidiary of Parent Co, purchased the preference shares in an Australian company (outside the Parent Co tax consolidated group) from Y Co, a subsidiary of P-Sub. At the end of the repos, the preference shares were repurchased by Y Co. The repos placed P-Sub in funds to finance its business.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1936 Section 44 | Income Tax Assessment Act 1936 Subparagraph 44(1)(a)(i) | Income Tax Assessment Act 1936 Section 128B | Income Tax Assessment Act 1936 Subsection 128B(1) | Income Tax Assessment Act 1936 Subsection 128B(3) | Income Tax Assessment Act 1936 Paragraph 128B(3)(ga) | Income Tax Assessment Act 1936 Subsection 128B(4) | Income Tax Assessment Act 1936 former Subsection 160APHM(2) | Income Tax Assessment Act 1936 former Subsection 160APHN(2) | Income Tax Assessment Act 1936 former Section 160APHO | Income Tax Assessment Act 1936 former Subsection 160APHO(2) | Income Tax Assessment Act 1936 Section 177CA | Income Tax Assessment Act 1936 Section 177D | Income Tax Assessment Act 1936 Paragraph 177D(b) | Income Tax Assessment Act 1936 Section 177EA | Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 202-40 | Income Tax Assessment Act 1997 Subsection 202-40(1) | Income Tax Assessment Act 1997 Section 202-45 | Income Tax Assessment Act 1997 Section 207-20 | Income Tax Assessment Act 1997 Section 207-75 | Income Tax Assessment Act 1997 Paragraph 207-75(1)(b) | Income Tax Assessment Act 1997 Paragraph 207-145(1)(a) | Income Tax Assessment Act 1997 Section 701-1 | Income Tax Assessment Act 1997 Section 701-15 | Income Tax Assessment Act 1997 Subsection 701-15(2) | Income Tax Assessment Act 1997 Subsection 701-15(3) | Income Tax Assessment Act 1997 Section 701-20 | Income Tax Assessment Act 1997 Subsection 701-20(2) | Income Tax Assessment Act 1997 Section 701-60 | Income Tax Assessment Act 1997 Paragraph 703-15(2)(b) | Income Tax Assessment Act 1997 Section 703-20 | Income Tax Assessment Act 1997 Section 703-30 | Income Tax Assessment Act 1997 Subsection 703-30(1) | Income Tax Assessment Act 1997 Section 705-25 | Income Tax Assessment Act 1997 Section 705-30 | Income Tax Assessment Act 1997 Section 705-35 | Income Tax Assessment Act 1997 Section 705-60 | Income Tax Assessment Act 1997 Section 711-5 | Income Tax Assessment Act 1997 Subsection 711-5(2) | Income Tax Assessment Act 1997 Subsection 711-5(3) | Income Tax Assessment Act 1997 Subsection 711-5(4) | Income Tax Assessment Act 1997 Section 711-20 | Income Tax Assessment Act 1997 Subsection 711-20(1) | Income Tax Assessment Act 1997 Section 711-45 | Income Tax Assessment Act 1997 Subsection 711-45(1) | Income Tax Assessment Act 1997 Subsection 960-130(1) | Income Tax Assessment Act 1997 Section 960-135 | Income Tax Assessment Act 1997 Section 974-20 | Income Tax Assessment Act 1997 Subsection 974-75(1) | Income Tax Assessment Act 1997 Section 974-135 | Income Tax Assessment Act 1997 Section 995-1 | International Tax Agreements Act 1953 Section 4 | International Tax Agreements Act 1953 Schedule Sch1 | International Tax Agreements Act 1953 Section Sch1-Art10 | International Tax Agreements Act 1953 Subsection Sch1-Art10(2) | International Tax Agreements Act 1953 Subsection Sch1-Art10(3) | International Tax Agreements Act 1953 Paragraph Sch1-Art10(3)(b) | International Tax Agreements Act 1953 Subsection Sch1-Art10(8) | International Tax Agreements Act 1953 Subsection Sch1-Art10(7) | International Tax Agreements Act 1953 Paragraph Sch1-Art3(1)(o) | Income Tax Rates Act 1986 Section 3 | Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 Section 7


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