Income Tax Assessment Act 1997

s 832-625 — Meaning of importing payment

(1) A payment an entity (the payer ) makes is an importing payment in relation to an * offshore hybrid mismatch if: (a) either: (i) apart from section 832 ‑ 610, the payment, or a part of the payment, gives rise to a deduction in an income year covered by subsection (2); or (ii) the payment, or a part of the payment, gives rise to a * foreign income tax deduction in a foreign country that has * foreign hybrid mismatch rules, in a * foreign tax period covered by subsection (2); and (b) the payment is made directly, or indirectly through one or more interposed entities, to another entity; and (c) the other entity (the offshore deducting entity ) is: (i) the entity that made the payment that gave rise to the offshore hybrid mismatch; or (ii) if the offshore hybrid mismatch is a * deducting hybrid mismatch—the * deducting hybrid. Period within which mismatch may be imported (2) For the purposes of paragraph (1)(a), a * foreign tax period or income year is covered by this subsection if: (a) it ends at or after the end of the foreign tax period in which a * deduction component of the * offshore hybrid mismatch arose; and (b) it has at least one day in common with that period. Indirect importations (3) For the purposes of determining whether a payment is made indirectly through one or more interposed entities to the offshore deducting entity: (a) it is sufficient if payments exist between each interposed entity, and it is not necessary to demonstrate that each payment in a series of payments funds the next payment, or is made after the previous payment; and (b) each payment made by an interposed entity must: (i) give rise to a * foreign income tax deduction in a country that does not have * foreign hybrid mismatch rules; and (ii) not give rise to a * deduction/non ‑ inclusion mismatch. Loss surrender and grouping relief (4) Subsection (5) applies if: (a) a payment is made to an entity (the first entity ); and (b) another entity (the second entity ) makes a payment (the second payment ) to a third entity; and (c) the first entity and the second entity are in the same * Division 832 control group; and (d) under the law of a foreign country relating to * foreign income tax (except a tax covered by subsection 832 ‑ 130(7)): (i) a * foreign income tax deduction arises in respect of the second payment; and (ii) the foreign income tax deduction may, as a result of a concessional feature of that law, be transferred to, shared with, or otherwise applied by, the first entity. Note: For the meaning of Division 832 control group , see section 832 ‑ 205. (5) For the purposes of this section, treat: (a) a payment as having been made by the first entity to the second entity; and (b) the payment as having given rise to a * foreign income tax deduction (but not a * deduction/non ‑ inclusion mismatch) in the foreign country mentioned in paragraph (4)(d).

Amendment history: Inserted by No 84 of 2018, effective Sch 1 (items 1, 8–13, 15), Sch 2 (items 1–3, 6–10), Sch 3, Sch 4 (items 2–4) and Sch 5: 1 Oct 2018 (s 2(1) item 1) | Amended by No 79 of 2020, effective Sch 1, 3 and 5: 1 Oct 2020 (s 2(1) items 2, 4)

s 832-630 — Working out the amount of the imported hybrid mismatch

(1) The amount of the * imported hybrid mismatch is the lesser of: (a) the importing deduction amount worked out under subsection (2) in relation to the deduction; and (b) the amount worked out using the following formula: where: importing deduction means the amount of the importing deduction amount worked out under subsection (2) in relation to the deduction. remaining offshore hybrid mismatch means: (a) unless paragraph (b) applies—the amount of the * offshore hybrid mismatch; or (b) if an item higher in the table in subsection 832 ‑ 615(2) applies to one or more other * importing payments in relation to the offshore hybrid mismatch—the amount of the offshore hybrid mismatch that is not, or will not be, neutralised by the application of this Subdivision, and equivalent provisions of applicable * foreign hybrid mismatch rules, in relation to those other importing payments. total importing deductions of equal priority means the amount worked out by: (a) identifying each * importing payment in relation to the * offshore hybrid mismatch to which the same item in the table in subsection 832 ‑ 615(2) applies; and (b) working out under subsection (2) the importing deduction amount in relation to the deduction or * foreign income tax deduction to which each such importing payment gives rise; and (c) summing the results from paragraph (b) for each such importing payment. (2) The amount (the importing deduction amount ) worked out under this subsection in relation to a deduction or * foreign income tax deduction is: (a) if the * importing payment is made directly to the offshore deducting entity—the amount of the deduction or foreign income tax deduction; or (b) if the importing payment is made indirectly through one or more interposed entities to the offshore deducting entity—the lesser of: (i) the amount of the deduction or foreign income tax deduction; and (ii) the smallest amount of any foreign income tax deduction to which a payment by an interposed entity gave rise.

Amendment history: Inserted by No 84 of 2018, effective Sch 1 (items 1, 8–13, 15), Sch 2 (items 1–3, 6–10), Sch 3, Sch 4 (items 2–4) and Sch 5: 1 Oct 2018 (s 2(1) item 1)

s 832-635 — Carry forward of residual offshore hybrid mismatches

(1) Subsection (2) applies if: (a) a payment made in a particular * foreign tax period gave rise to an * offshore hybrid mismatch (the original mismatch ); and (b) the original mismatch is only partly neutralised by the application of this Subdivision and equivalent provisions of applicable * foreign hybrid mismatch rules. (2) This Subdivision applies as if: (a) the offshore deducting entity had made a payment in the next * foreign tax period; and (b) the payment gave rise to an * offshore hybrid mismatch (the residual mismatch ); and (c) the amount of the residual mismatch was the amount of the original mismatch that was not neutralised by the application of this Subdivision and equivalent provisions of applicable * foreign hybrid mismatch rules.

Amendment history: Inserted by No 84 of 2018, effective Sch 1 (items 1, 8–13, 15), Sch 2 (items 1–3, 6–10), Sch 3, Sch 4 (items 2–4) and Sch 5: 1 Oct 2018 (s 2(1) item 1)

s 832-675 — What this Subdivision is about

Income that is taxed in 2 countries is dual inclusion income. It can be applied to reduce the neutralising amount for the hybrid payer mismatch and the deducting hybrid mismatch. This Subdivision modifies the concepts of “subject to Australian income tax” and “subject to foreign income tax” for the purposes of calculating dual inclusion income. It also identifies which entities are able to apply dual inclusion income. Table of sections Operative provisions 832 ‑ 680 Dual inclusion income, and when an entity is eligible to apply it

Amendment history: Inserted by No 84 of 2018, effective Sch 1 (items 1, 8–13, 15), Sch 2 (items 1–3, 6–10), Sch 3, Sch 4 (items 2–4) and Sch 5: 1 Oct 2018 (s 2(1) item 1)

s 832-680 — Dual inclusion income, and when an entity is eligible to apply it

(1) An amount of income or profits is dual inclusion income if 2 or more of the following outcomes arise for the amount: (a) it is * subject to Australian income tax in an income year; (b) it is * subject to foreign income tax in a foreign country in a * foreign tax period; (c) it is subject to foreign income tax in a foreign country (other than the country mentioned in paragraph (b)) in a foreign tax period. Note: In certain circumstances, dual inclusion income can be applied to reduce the neutralising amount for a hybrid payer mismatch (see section 832 ‑ 330) or a deducting hybrid mismatch (see section 832 ‑ 560). (1A) In determining for the purposes of subsection (1) whether an amount of income or profits is * subject to Australian income tax, disregard subsection 832 ‑ 125(2) (which is about when an amount included in the assessable income of a trust or partnership is subject to Australian income tax), so far as it applies in relation to assessable income from a foreign source. Effect of Australian foreign income tax offset for underlying taxes (2) For the purposes of subsection (1), if: (a) an amount of assessable income of a * corporate tax entity (the assessable amount ) would, apart from this subsection and subsection (1A), be * subject to Australian income tax; and (b) an amount of * foreign income tax (except a tax covered by subsection 832 ‑ 130(7)) paid in respect of the assessable amount counts towards a * tax offset for an entity under Division 770; then: (c) if the amount of the tax offset equals or exceeds the amount of * tax that would, having regard only to the assessable amount and the rate at which tax is imposed on the entity, be payable on the assessable amount—the assessable amount is treated as if it were not subject to Australian income tax; and (d) if the amount of the tax offset is a proportion of the amount of that tax—then that proportion of the assessable amount is treated as if it were not subject to Australian income tax. Effect of credits etc. for underlying taxes (3) In determining for the purposes of subsection (1) whether an amount of income or profits is * subject to foreign income tax in a * foreign tax period, disregard subsection 832 ‑ 130(3). Extension for certain on ‑ payments through grouped entities (4) Subsection (5) applies, if: (a) an entity is a member of a dual inclusion income group in a country (see subsection (6)); and (b) an amount of income or profits of the entity (the on ‑ payment amount ) is a payment received by the entity from another member of the dual inclusion income group at a time; and (c) it is reasonable to conclude that the payment was funded by an amount of income or profits of the other member (the funding income or profits ); and (d) it is reasonable to conclude that the funding income or profits were: (i) if the country mentioned in paragraph (a) is Australia— * subject to Australian income tax; or (ii) if the country mentioned in paragraph (a) is a foreign country— * subject to foreign income tax in the foreign country; and (e) the funding income or profits were not * dual inclusion income under subsection (1) (disregarding subsection (5)) in the country. (4A) In determining whether paragraph (4)(d) is satisfied, have regard to any previous application of subsection (5). (5) For the purposes of subsection (1), the on ‑ payment amount is treated as if it were: (a) if the country mentioned in paragraph (4)(a) is Australia— * subject to Australian income tax in the income year in which the time mentioned in paragraph (4)(b) occurs; or (b) if the country mentioned in paragraph (4)(a) is a foreign country— * subject to foreign income tax in the foreign country in the * foreign tax period in which the time mentioned in paragraph (4)(b) occurs. (6) Two or more entities (the member entities ) are members of a group (a dual inclusion income group ) in a country for the purposes of this Division if in that country: (a) the same entity or entities are * liable entities in respect of the income or profits of each of the member entities; and (b) no other entity is a liable entity in respect of the income or profits of any of the member entities. Note: For example, entities that are members of a consolidated group or MEC group. When an entity is eligible to apply dual inclusion income (7) An entity is eligible to apply an amount of * dual inclusion income if the amount is income or profits of: (a) the entity; or (b) if paragraph (a) does not apply and the entity is a member of a dual inclusion income group in any country—an entity that is a member of the dual inclusion income group. (8) However, an entity is not eligible to apply the amount if it has already been applied by any entity by a previous application of a provision of this Division. Interaction with other provisions (9) To avoid doubt, if a provision of this section has the effect that an amount is treated for the purposes of subsection (1) as if it were * subject to Australian income tax, or * subject to foreign income tax, then that effect extends to another provision of this Act that refers to an amount that is (as the case requires): (a) subject to Australian income tax for the purposes of subsection (1) of this section; or (b) subject to foreign income tax for the purposes of subsection (1) of this section. Note: For example, an amount that would not be subject to Australian income tax for the purposes of subsection (1) apart from subsection (1A) satisfies paragraphs 832 ‑ 330(2)(b) and (3)(b) and subparagraph 832 ‑ 335(1)(b)(ii).

Amendment history: Inserted by No 84 of 2018, effective Sch 1 (items 1, 8–13, 15), Sch 2 (items 1–3, 6–10), Sch 3, Sch 4 (items 2–4) and Sch 5: 1 Oct 2018 (s 2(1) item 1) | Amended by No 79 of 2020, effective Sch 1, 3 and 5: 1 Oct 2020 (s 2(1) items 2, 4)

s 832-720 — What this Subdivision is about

This Subdivision contains an integrity measure that disallows an Australian deduction for a payment of interest (or a payment of a similar character) made by an entity (the paying entity ) under a scheme to a foreign entity (the interposed foreign entity ). The deduction will be disallowed if certain conditions are satisfied, including that: (a) the paying entity, the interposed foreign entity and another foreign entity (the ultimate parent entity ) are in the same Division 832 control group; and (b) the payment is not subject to Australian income tax; and (c) the highest rate of foreign income tax (the foreign country rate ) on the payment is 10% or less; and (d) it is reasonable to conclude (having regard to certain matters) that the entity, or one of the entities, that entered into or carried out all or part of the scheme did so for a purpose including a purpose of enabling a deduction to be obtained in respect of the payment, and enabling foreign income tax to be imposed on the payment at a rate of 10% or less. However, the deduction will not be disallowed if, assuming that the payment had been made directly to the ultimate parent entity: (a) the rate of foreign income tax on the payment in the country of residence of the ultimate parent entity would be less than or equal to the foreign country rate; and (b) the payment would not give rise to a hybrid mismatch of a particular kind. Table of sections Operative provisions 832 ‑ 725 Payments made to interposed foreign entity (integrity measure)—denial of deduction 832 ‑ 730 Back to back arrangements, etc. 832 ‑ 735 Determination may specify kinds of scheme and circumstances where no denial of deduction

Amendment history: Inserted by No 84 of 2018, effective Sch 1 (items 1, 8–13, 15), Sch 2 (items 1–3, 6–10), Sch 3, Sch 4 (items 2–4) and Sch 5: 1 Oct 2018 (s 2(1) item 1) | Amended by No 79 of 2020, effective Sch 1, 3 and 5: 1 Oct 2020 (s 2(1) items 2, 4)

s 832-725 — Payments made to interposed foreign entity (integrity measure)—denial of deduction

(1) Subsection (3) applies if: (a) an entity (the paying entity ) makes a payment under a * scheme to a * foreign entity (the interposed foreign entity ), either directly, or indirectly through one or more interposed * Australian trusts or Australian partnerships (within the meaning of Part X of the Income Tax Assessment Act 1936 ); and (b) the paying entity, the interposed foreign entity and another foreign entity (the ultimate parent entity ) are in the same * Division 832 control group; and (c) the ultimate parent entity is not controlled by any other entity (other than an entity that is not a member of the Division 832 control group); and (d) the payment is of: (i) an amount of interest (within the meaning of subsection 128A(1AB) of the Income Tax Assessment Act 1936 ); or (ii) an amount under a * derivative financial arrangement; and (e) an entity is entitled to a deduction in an income year in respect of the payment (disregarding this section); and (f) the payment is not * subject to Australian income tax; and (g) either: (i) the payment is * subject to foreign income tax in one or more foreign countries, and the highest rate (the foreign country rate ) at which the payment is subject to foreign income tax is 10% or less; or (ii) the payment is not subject to foreign income tax; and (h) it is reasonable to conclude (having regard to the matters in subsection (2)) that the entity, or one of the entities, who entered into or carried out the scheme or any part of the scheme did so for a principal purpose of, or for more than one principal purpose that includes a purpose of: (i) enabling a deduction to be obtained in respect of the payment; and (ii) enabling foreign income tax to be imposed on the payment at a rate of 10% or less, or enabling foreign income tax not to be imposed on the payment. (1A) For the purposes of subsection (1), disregard paragraphs 832 ‑ 130(7)(d) and (e) (exclusion of municipal and State taxes in working out what is * subject to foreign income tax). (2) For the purposes of paragraph (1)(h), have regard to the following matters: (a) the facts and circumstances that exist in relation to the * scheme; (b) if the payment is an amount of interest as mentioned in subparagraph (1)(d)(i)—the source of the funds used by the interposed foreign entity to provide the paying entity with the loan or other debt interest in respect of which the payment of interest is made; (c) whether the interposed foreign entity engages in substantial commercial activities in carrying on a banking, financial or other similar business. (3) The entity mentioned in paragraph (1)(e) is not entitled to the deduction mentioned in that paragraph. (4) Subsection (3) does not apply if it is reasonable to conclude that: (a) the following requirements are satisfied: (i) the amount of the payment is taken into account under Part X of the Income Tax Assessment Act 1936 ; (ii) the sum of the * attribution percentages of each * attributable taxpayer in relation to the interposed foreign entity, for the purposes of sections 456 and 457 of that Act in respect of the income year in which the payment is made, is at least 100%; or (b) requirements similar to those in paragraph (a), under the law of a foreign country that has substantially the same effect as Part X of that Act in respect of that foreign country, are satisfied in relation to the interposed foreign entity; or (c) assuming that the payment were treated as being divided into 2 separate payments: (i) the requirements in paragraph (a) would be satisfied in relation to one of those separate payments; and (ii) the requirements in paragraph (b) would be satisfied in relation to the other of those separate payments. (5) Subsection (3) does not apply if it is reasonable to conclude that, assuming that the payment had been made directly to the ultimate parent entity: (a) the payment would: (i) be * subject to foreign income tax at a rate that is the same as, or less than, the foreign country rate; or (ii) not be subject to foreign income tax; and (b) the payment would not give rise to a * hybrid financial instrument mismatch, a * hybrid payer mismatch or a * reverse hybrid mismatch. (6) Subsection (3) does not apply if the payment gives rise to a * hybrid financial instrument mismatch, a * hybrid payer mismatch, a * reverse hybrid mismatch, a * branch hybrid mismatch or an * imported hybrid mismatch. (7) Subsection (3) does not apply to the extent that an amount to which the payment relates was not allowable as a deduction under subsection 832 ‑ 530(2).

Amendment history: Inserted by No 84 of 2018, effective Sch 1 (items 1, 8–13, 15), Sch 2 (items 1–3, 6–10), Sch 3, Sch 4 (items 2–4) and Sch 5: 1 Oct 2018 (s 2(1) item 1) | Amended by No 79 of 2020, effective Sch 1, 3 and 5: 1 Oct 2020 (s 2(1) items 2, 4)

s 832-730 — Back to back arrangements, etc.

(1) Subsection (2) applies if: (a) an entity (the original paying entity ) makes a payment of a kind mentioned in subparagraph 832 ‑ 725(1)(d)(i) to another entity; and (b) the other entity, or a further entity, pays an amount of that kind to a foreign entity; and (c) the payments mentioned in paragraphs (a) and (b) are made under an arrangement involving back ‑ to ‑ back loans or an arrangement that is economically equivalent and intended to have a similar effect to back ‑ to ‑ back loans. (2) For the purposes of this Subdivision, treat the original paying entity as having made the payment mentioned in paragraph (1)(a) to the foreign entity mentioned in paragraph (1)(b).

Amendment history: Inserted by No 84 of 2018, effective Sch 1 (items 1, 8–13, 15), Sch 2 (items 1–3, 6–10), Sch 3, Sch 4 (items 2–4) and Sch 5: 1 Oct 2018 (s 2(1) item 1)

s 832-735 — Determination may specify kinds of scheme and circumstances where no denial of deduction

(1) Subsection 832 ‑ 725(3) does not apply if: (a) where a determination made for the purposes of paragraph (2)(a) specifies a kind of * scheme—the scheme mentioned in subsection 832 ‑ 725(1) is of that kind; or (b) where a determination made for the purposes of paragraph (2)(b) specifies a kind of circumstances in relation to a scheme—circumstances of that kind exist in relation to the scheme mentioned in subsection 832 ‑ 725(1). (2) For the purposes of subsection (1), the Minister may, by legislative instrument, make a determination that: (a) specifies kinds of * schemes; and (b) specifies kinds of circumstances in relation to schemes.

Amendment history: Inserted by No 84 of 2018, effective Sch 1 (items 1, 8–13, 15), Sch 2 (items 1–3, 6–10), Sch 3, Sch 4 (items 2–4) and Sch 5: 1 Oct 2018 (s 2(1) item 1)

s 832-775 — What this Subdivision is about

This Subdivision contains modifications applying to gains and losses from financial arrangements. Table of sections Operative provisions 832 ‑ 780 Section 832 ‑ 20 applies to Division 230 losses 832 ‑ 785 Adjusting Division 230 loss 832 ‑ 790 Modifications relating to Division 230 gains and losses

Amendment history: Inserted by No 84 of 2018, effective Sch 1 (items 1, 8–13, 15), Sch 2 (items 1–3, 6–10), Sch 3, Sch 4 (items 2–4) and Sch 5: 1 Oct 2018 (s 2(1) item 1)

s 832-780 — Section 832 ‑ 20 applies to Division 230 losses

To avoid doubt, the reference in paragraph 832 ‑ 20(1)(a) to a loss includes: (a) a loss from a * Division 230 financial arrangement; and (b) an amount treated under section 832 ‑ 790 as a separate loss from a Division 230 financial arrangement.

Amendment history: Inserted by No 84 of 2018, effective Sch 1 (items 1, 8–13, 15), Sch 2 (items 1–3, 6–10), Sch 3, Sch 4 (items 2–4) and Sch 5: 1 Oct 2018 (s 2(1) item 1)

s 832-785 — Adjusting Division 230 loss

(1) This section applies if a provision of this Division (a disallowing provision ) would, apart from this section, apply to make not allowable all or a part of a deduction for: (a) a loss from a * Division 230 financial arrangement; or (b) an amount treated under section 832 ‑ 790 as a separate loss from a Division 230 financial arrangement. (2) The disallowing provision does not apply. Note: See instead section 230 ‑ 522. (3) However, the following provisions (about adjustments) apply as if the disallowing provision had applied to make the deduction, or the part of the deduction, not allowable: (a) 832 ‑ 240(1)(a); (b) 832 ‑ 335(1)(a); (c) 832 ‑ 565(1)(a).

Amendment history: Inserted by No 84 of 2018, effective Sch 1 (items 1, 8–13, 15), Sch 2 (items 1–3, 6–10), Sch 3, Sch 4 (items 2–4) and Sch 5: 1 Oct 2018 (s 2(1) item 1)

s 832-790 — Modifications relating to Division 230 gains and losses

(1) This section applies to the following: (a) a gain that, apart from this Division, would be included in an entity’s assessable income for an income year under Division 230; (b) a loss that, apart from this Division, would be allowable as a deduction to an entity for an income year under Division 230; (c) a gain or a loss that, apart from this Division, would be dealt with in accordance with subsection 230 ‑ 310(4) in relation to an income year. Separation of currency effects for Division 230 gains and losses (2) For the purposes of this Division, split a gain into 2 separate gains, or a gain and a loss, as follows: (a) to the extent to which the gain represents a * currency exchange rate effect, treat it as a separate gain or loss; (b) to the extent that it does not represent that effect, treat it as a separate gain or loss from the * financial arrangement to which this Division applies. (3) For the purposes of this Division, split a loss into 2 separate losses, or a gain and a loss, as follows: (a) to the extent to which the loss represents a * currency exchange rate effect, treat it as a separate gain or loss; (b) to the extent that it does not represent that effect, treat it as a separate gain or loss from the * financial arrangement to which this Division applies. (4) For the purposes of this Division, assume an amount treated under paragraph (2)(b) or (3)(b) as a separate loss would, apart from this Division, be allowable as a deduction to the entity for the income year. This Division applies to a non ‑ currency component that is a gain (5) If there is an amount treated under paragraph (2)(b) or (3)(b) as a separate gain from a * financial arrangement, the gain is treated as consisting of any actual payments made under the financial arrangement and taken into account in working out the amount of the gain or loss the entity made under the arrangement. (6) For the purposes of this Division, assume the gain is an amount that, subject to Division 6 (about effect of foreign residence), is included in the entity’s assessable income.

Amendment history: Inserted by No 84 of 2018, effective Sch 1 (items 1, 8–13, 15), Sch 2 (items 1–3, 6–10), Sch 3, Sch 4 (items 2–4) and Sch 5: 1 Oct 2018 (s 2(1) item 1)

s 840-1 — What this Division is about

This Division provides the rules to determine if you are liable to pay income tax in respect of certain Australian sourced income paid to you, or which you are entitled to receive. The rules are relevant for foreign residents and certain other entities. The income tax payable is a withholding tax. The associated withholding obligations are in the Taxation Administration Act 1953 . Amounts on which there is a liability to pay withholding tax are non ‑ assessable non ‑ exempt income.

Amendment history: Inserted by No 32 of 2008, effective 23 June 2008

s 840-800 — What this Subdivision is about

If you are a foreign resident you may be liable to pay income tax on certain amounts of Australian sourced net income (other than dividends, interest and royalties) of a withholding MIT that are either paid to you or to which you become entitled. A beneficiary (other than a foreign pension fund) of a trust in the capacity of a trustee of another trust will not be liable to income tax on these amounts. Amounts on which there is a liability to pay withholding tax are non ‑ assessable non ‑ exempt income. Table of sections Operative provisions 840 ‑ 805 Liability for managed investment trust withholding tax 840 ‑ 810 When managed investment trust withholding tax is payable 840 ‑ 815 Certain income is non ‑ assessable non ‑ exempt income 840 ‑ 820 Agency rules

Amendment history: Inserted by No 32 of 2008, effective 23 June 2008 | Amended by No 133 of 2014, effective s 4, Sch 1 (items 1, 4–29, 37–40) and Sch 2 (items 1–3, 5): 12 Dec 2014 (s 2(1) items 1, 2) | Amended by No 53 of 2016, effective Sch 1 (item 1), Sch 2, Sch 3 (items 2–4), Sch 4 (items 1–5), Sch 5 (items 2, 29–67, 75), Sch 6 (items 21–34), Sch 8 (item 1) and Sch 9: 5 May 2016 (s 2(1) items 2, 4)

s 840-805 — Liability for managed investment trust withholding tax

Liability (1) You are liable to pay income tax at the rate declared by the Parliament on the amount identified in subsection (2), (3) or (4) as the fund payment part if that subsection applies to you. Note 1: The tax, which is called managed investment trust withholding tax, is imposed by the Income Tax (Managed Investment Trust Withholding Tax) Act 2008 and the rate of the tax is set out in that Act. Note 2: See Subdivision 12 ‑ H in Schedule 1 to the Taxation Administration Act 1953 for provisions dealing with withholding from fund payments, and Subdivision 12A ‑ C in that Schedule for provisions dealing with obligations to pay the Commissioner amounts analogous to such withholding in relation to AMITs. Note 3: This subsection does not apply to residents of information exchange countries for the first income year starting on or after the first 1 July after the day on which the Tax Laws Amendment (Election Commitments No. 1) Act 2008 receives the Royal Assent. Subdivision 840 ‑ M of the Income Tax (Transitional Provisions) Act 1997 applies instead. Payments from withholding MITs (2) This subsection applies to you if: (a) you are paid an amount from a trust that is a * withholding MIT in relation to an income year, or an amount is applied or dealt with as you direct by such a trust; and (b) all or part of that amount (the fund payment part ) is represented by a * fund payment in relation to that year; and (c) you are, in respect of the fund payment part, a beneficiary (but not a beneficiary in the capacity of a trustee of another trust); and (d) you are a foreign resident when you are paid the amount or when the amount is applied or dealt with as you direct. Note 1: Because a fund payment can be adjusted to account for earlier fund payments and the expected amounts of later fund payments (see subsection 12A ‑ 110(5) in Schedule 1 to the Taxation Administration Act 1953 ), the amount of a particular fund payment may not reflect the actual amount you are paid for the purposes of this subsection. Note 2: If the withholding MIT is an AMIT, under subsection 12A ‑ 205(2) in Schedule 1 to the Taxation Administration Act 1953 , amounts may be treated, for the purposes of this Subdivision, as having been paid to you from the trustee of the AMIT. Payments from custodians (3) This subsection applies to you if: (a) you are paid an amount from a * custodian, or an amount is applied or dealt with as you direct by a custodian; and (b) all or part of that amount (the fund payment part ) is reasonably attributable to a * fund payment in relation to an income year by a trust that is a * withholding MIT in relation to that year; and (c) you are, in respect of the fund payment part, a beneficiary (but not a beneficiary in the capacity of a trustee of another trust); and (d) you are a foreign resident when you are paid the amount or when the amount is applied or dealt with as you direct; and (e) either: (i) the custodian is not a company; or (ii) if it is a company, it would be acting in the capacity as your * agent apart from section 840 ‑ 820. Note: If the withholding MIT is an AMIT, under subsection 12A ‑ 205(5) in Schedule 1 to the Taxation Administration Act 1953 , amounts may be treated, for the purposes of this Subdivision, as having been paid to you from the custodian. Entitlements to amounts from other entities (4) This subsection applies to you if: (a) you are a beneficiary of a trust (that is not a * withholding MIT or a * custodian) and are presently entitled to a share of the income or capital of the trust; and (b) all or part of that share (also the fund payment part ) is reasonably attributable to a payment that is a * fund payment in relation to an income year made by a trust that is a withholding MIT in relation to that year; and (c) you are not, in respect of that share, a beneficiary in the capacity of a trustee of another trust; and (d) you are a foreign resident at the time (the entitlement time ) when you became presently entitled. Modification—foreign pension funds (4A) For the purposes of subsections (2), (3) and (4), if: (a) the beneficiary, in respect of a fund payment part, is a beneficiary in the capacity of a trustee of another trust; and (b) the beneficiary is a * foreign pension fund; the foreign pension fund is taken, in respect of that fund payment part, to be a beneficiary in its own right, and not a beneficiary in the capacity of the trustee of another trust. (4B) Foreign pension fund means: (a) an entity, the principal purpose of which is to fund pensions (including disability and similar benefits) for the citizens or other contributors of a foreign country, if: (i) the entity is a fund established by an * exempt foreign government agency; or (ii) the entity is established under a * foreign law for an exempt foreign government agency; or (b) a * foreign superannuation fund that has at least 50 * members. (4C) If: (a) a * foreign pension fund is liable to pay income tax on a fund payment part (a taxed part ) because of the operation of subsection (4A); and (b) you are a beneficiary of the foreign pension fund and are presently entitled to a share of the income or capital of the foreign pension fund; then, in working out for the purposes of paragraph (4)(b) whether all or part of that share is reasonably attributable to a payment that is a * fund payment, disregard the taxed part. Modification—AMITs (4D) If the * managed investment trust mentioned in paragraph (2)(a), (3)(b) or (4)(b) is an * AMIT for the income year mentioned in that paragraph: (a) if paragraph (2)(a) applies—disregard the phrase “(but not a beneficiary in the capacity of a trustee of another trust)” in paragraph (2)(c); or (b) if paragraph (3)(b) applies—disregard the phrase “(but not a beneficiary in the capacity of a trustee of another trust)” in paragraph (3)(c); or (c) if paragraph (4)(b) applies—disregard paragraph (4)(c). (4E) If: (a) a trustee of a trust is liable to pay income tax on a fund payment part (a taxed part ) because of the operation of subsection (4D); and (b) you are a beneficiary of the trust and are presently entitled to a share of the income or capital of the trust; then, in working out for the purposes of paragraph (4)(b) whether all or part of that share is reasonably attributable to a payment that is a * fund payment, disregard the taxed part. Entitlement to capital of a trust (5) For the purposes of this section, section 95A of the Income Tax Assessment Act 1936 applies in relation to capital of a trust in the same way as it applies to income of the trust. Exception—Australian permanent establishments (6) This section does not apply to you if: (a) you are paid the fund payment part, or it is applied or dealt with as you direct; or (b) you become presently entitled to it; in the course of a * business you carry on at or through an * Australian permanent establishment. Exception—distributions on carried interests (7) Subsections (2) and (3) do not apply to you to the extent that the fund payment part: (a) is included in your assessable income under subsection 275 ‑ 200(2) (Gains etc. from carried interests) for the income year because you hold or held a * CGT asset that carries an entitlement to a distribution mentioned in subsection 275 ‑ 200(2); or (b) would be so included if subsection 275 ‑ 200(3) were disregarded. (8) Subsection (4) does not apply to you to the extent that the fund payment part: (a) is attributable to an amount included in the net income of the trust mentioned in that subsection because of subsection 275 ‑ 200(2) (Gains etc. from carried interests) for the income year because the trust holds or held a * CGT asset that carries an entitlement to a distribution mentioned in subsection 275 ‑ 200(2); or (b) would be so included if subsection 275 ‑ 200(3) were disregarded. (9) Subsections (2), (3) and (4) do not apply to you to the extent that the fund payment part relates to an amount that is * non ‑ assessable non ‑ exempt income of yours because of: (a) Division 880; or (b) Division 880 of the Income Tax (Transitional Provisions) Act 1997 .

Amendment history: Inserted by No 32 of 2008, effective 23 June 2008 | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B) | Amended by No 133 of 2014, effective s 4, Sch 1 (items 1, 4–29, 37–40) and Sch 2 (items 1–3, 5): 12 Dec 2014 (s 2(1) items 1, 2) | Amended by No 53 of 2016, effective Sch 1 (item 1), Sch 2, Sch 3 (items 2–4), Sch 4 (items 1–5), Sch 5 (items 2, 29–67, 75), Sch 6 (items 21–34), Sch 8 (item 1) and Sch 9: 5 May 2016 (s 2(1) items 2, 4) | Amended by No 15 of 2019, effective Sch 1 (items 2–17, 46): 1 Apr 2019 (s 2(1) item 2) | Amended by No 34 of 2019, effective Sch 1 (items 1–5, 12, 13, 16), Sch 2, Sch 4 (items 3–6, 8, 9) and Sch 5 (items 1, 2, 5): 1 July 2019 (s 2(1) items 2, 3)

s 840-810 — When managed investment trust withholding tax is payable

(1) * Managed investment trust withholding tax is due and payable by you at the end of 21 days after: (a) if subsection 840 ‑ 805(2) or (3) applies to you—the end of the month in which the fund payment part is paid, applied or dealt with; or (b) if subsection 840 ‑ 805(4) applies to you—the end of the month in which the entitlement time occurs. (2) If any of the * managed investment trust withholding tax that you are liable to pay remains unpaid after the time by which it is due to be paid, you are liable to pay the * general interest charge on the unpaid amount for each day in the period that: (a) starts at the beginning of the day by which the withholding tax was due to be paid; and (b) ends at the end of the last day on which, at the end of the day, any of the following remains unpaid: (i) the withholding tax; (ii) general interest charge on any of the withholding tax. Note: The general interest charge is worked out under Part IIA of the Taxation Administration Act 1953 . (3) The Commissioner may give you a notice specifying: (a) the amount of any * managed investment trust withholding tax that the Commissioner has ascertained is payable by you; and (b) the day on which that tax became due and payable. (4) The ascertainment of an amount of * managed investment trust withholding tax is not an assessment for the purposes of this Act. (5) The production of a notice given under subsection (3), or of a copy of it certified by or on behalf of the Commissioner, is conclusive evidence that the notice was given and of the particulars in it.

Amendment history: Inserted by No 32 of 2008, effective 23 June 2008

s 840-815 — Certain income is non ‑ assessable non ‑ exempt income

(1) An amount on which * managed investment trust withholding tax is payable is not assessable income and is not * exempt income of an entity. (2) Subsection (1) does not apply to an Australian resident to the extent that: (a) * managed investment trust withholding tax is payable on the amount because of subsection 840 ‑ 805(4D); and (b) the Australian resident is entitled, directly or indirectly, to the amount.

Amendment history: Inserted by No 32 of 2008, effective 23 June 2008 | Amended by No 53 of 2016, effective Sch 1 (item 1), Sch 2, Sch 3 (items 2–4), Sch 4 (items 1–5), Sch 5 (items 2, 29–67, 75), Sch 6 (items 21–34), Sch 8 (item 1) and Sch 9: 5 May 2016 (s 2(1) items 2, 4)

s 840-820 — Agency rules

(1) This section applies to: (a) a payment (the first payment ) made to a * custodian in the capacity as * agent for another entity; and (b) another payment made by the custodian to the extent that it is reasonably attributable to the first payment. (2) This Subdivision has effect as if the * custodian were not an * agent in relation to the payments.

Amendment history: Inserted by No 32 of 2008, effective 23 June 2008

s 840-900 — What this Subdivision is about

If you are a foreign resident who is employed under a labour mobility program, you may be liable to pay income tax on the salary, wages etc. paid to you under that program. Amounts on which there is a liability to pay the tax are non ‑ assessable non ‑ exempt income. Table of sections Operative provisions 840 ‑ 905 Liability for labour mobility program withholding tax 840 ‑ 906 Covered labour mobility programs 840 ‑ 910 When labour mobility program withholding tax is payable 840 ‑ 915 Certain income is non ‑ assessable non ‑ exempt income 840 ‑ 920 Overpayment of labour mobility program withholding tax

Amendment history: Inserted by No 58 of 2012, effective Schedule 1 (items 2–6): 21 June 2012 ( see s. 2(1)) Schedule 4: Royal Assent Schedule 5: 1 July 2012 | Amended by No 75 of 2022, effective sch 4 (items 2-21, 38): 1 July 2022 (s 2(1) item 4)

s 840-905 — Liability for labour mobility program withholding tax

You are liable to pay income tax at the rate declared by the Parliament on income: (a) that is salary, wages, commission, bonuses or allowances paid to you as an employee of an Approved Employer under a program covered by section 840 ‑ 906; and (b) that you * derive at a time when you are a foreign resident and: (i) you hold a Temporary Work (International Relations) Visa (subclass 403); or (ii) you hold a Temporary Activity Visa (subclass 408) having previously held a Temporary Work (International Relations) Visa (subclass 403); or (iii) you hold a visa of a kind prescribed by the regulations for the purposes of this subparagraph. Note 1: The tax, which is called labour mobility program withholding tax, is imposed by the Income Tax (Labour Mobility Program Withholding Tax) Act 2012 and the rate of the tax is set out in that Act. Note 2: See Subdivision 12 ‑ FC in Schedule 1 to the Taxation Administration Act 1953 for provisions dealing with withholding from the salary, wages etc. You are entitled to a credit under section 18 ‑ 33 in that Schedule for amounts withheld from your salary, wages etc. under that Subdivision.

Amendment history: Inserted by No 58 of 2012, effective Schedule 1 (items 2–6): 21 June 2012 ( see s. 2(1)) Schedule 4: Royal Assent Schedule 5: 1 July 2012 | Amended by No 8 of 2019, effective Sch 3 (items 1, 10), Sch 8 (items 8, 10, 11, 13, 35–46), Sch 9 and 10: 1 Apr 2019 (s 2(1) items 3, 11, 13) Sch 11: 1 July 2019 (s 2(1) item 14) | Amended by No 8 of 2022, effective sch 5 (items 1-4, 8-14): 1 July 2022 (s 2(1) item 4) sch 5 (items 15-19): repealed before commencing (s 2(1) item 5) sch 6 (items 1-22, 24), sch 7, sch 8 (items 33, 34), sch 10: 1 Apr 2022 (s 2(1) items 6-8, 10, 14) | Amended by No 75 of 2022, effective sch 4 (items 2-21, 38): 1 July 2022 (s 2(1) item 4)

s 840-906 — C overed labour mobility programs

This section covers the following programs: (a) the Seasonal Labour Mobility Program; (b) the Pacific Australia Labour Mobility scheme; (c) each program prescribed by the regulations for the purposes of this paragraph.

Amendment history: Inserted by No 75 of 2022, effective sch 4 (items 2-21, 38): 1 July 2022 (s 2(1) item 4)

s 840-910 — When labour mobility program withholding tax is payable

(1) * Labour mobility program withholding tax is due and payable by you at the end of 21 days after the end of the income year in which you * derived the income to which the tax relates. (2) If any of the * labour mobility program withholding tax that you are liable to pay remains unpaid after the time by which it is due to be paid, you are liable to pay the * general interest charge on the unpaid amount for each day in the period that: (a) starts at the beginning of the day by which the withholding tax was due to be paid; and (b) ends at the end of the last day on which, at the end of the day, any of the following remains unpaid: (i) the withholding tax; (ii) general interest charge on any of the withholding tax. Note: The general interest charge is worked out under Part IIA of the Taxation Administration Act 1953 . (3) The Commissioner may give you a notice specifying: (a) the amount of any * labour mobility program withholding tax that the Commissioner has ascertained is payable by you; and (b) the day on which that tax became due and payable. (4) The ascertainment of an amount of * labour mobility program withholding tax is not an assessment for the purposes of this Act. (5) The production of a notice given under subsection (3), or of a copy of it certified by or on behalf of the Commissioner, is, except in proceedings under Part IVC of this Act on a review or appeal relating to the notice, conclusive evidence that the notice was given and of the particulars in it. (6) You may object, in the manner set out in Part IVC of the Taxation Administration Act 1953, against a notice given to you under subsection (3) of this section, if you are dissatisfied with the notice.

Amendment history: Inserted by No 58 of 2012, effective Schedule 1 (items 2–6): 21 June 2012 ( see s. 2(1)) Schedule 4: Royal Assent Schedule 5: 1 July 2012 | Amended by No 75 of 2022, effective sch 4 (items 2-21, 38): 1 July 2022 (s 2(1) item 4)

s 840-915 — Certain income is non ‑ assessable non ‑ exempt income

An amount on which * labour mobility program withholding tax is payable is not assessable income and is not * exempt income.

Amendment history: Inserted by No 58 of 2012, effective Schedule 1 (items 2–6): 21 June 2012 ( see s. 2(1)) Schedule 4: Royal Assent Schedule 5: 1 July 2012 | Amended by No 75 of 2022, effective sch 4 (items 2-21, 38): 1 July 2022 (s 2(1) item 4)

s 840-920 — Overpayment of labour mobility program withholding tax

If * labour mobility program withholding tax has been overpaid: (a) the Commissioner must refund the amount overpaid; and (b) the employee is not entitled to a credit under section 18 ‑ 33 in Schedule 1 to the Taxation Administration Act 1953 in respect of the amount overpaid.

Amendment history: Inserted by No 58 of 2012, effective Schedule 1 (items 2–6): 21 June 2012 ( see s. 2(1)) Schedule 4: Royal Assent Schedule 5: 1 July 2012 | Amended by No 75 of 2022, effective sch 4 (items 2-21, 38): 1 July 2022 (s 2(1) item 4)

s 842-100 — What this Subdivision is about

If you are a foreign resident, some of the income you derive while in Australia, or from Australian sources, may be exempt income. Table of sections 842 ‑ 105 Amounts of Australian source ordinary income and statutory income that are exempt

Amendment history: Inserted by No 101 of 2006, effective Schedules 3 and 4: 1 Jan 2008 Remainder: Royal Assent

s 842-105 — Amounts of Australian source ordinary income and statutory income that are exempt

The amounts of * ordinary income and * statutory income covered by the table are exempt from income tax. In some cases, the exemption is subject to exceptions or special conditions, or both. Note 1: Ordinary and statutory income that is exempt from income tax is called exempt income: see section 6 ‑ 20. The note to subsection 6 ‑ 15(2) describes some of the other consequences of it being exempt income. Note 2: Even if an exempt payment is made to you, the Commissioner can still require you to lodge an income tax return or information under section 161 of the Income Tax Assessment Act 1936 . Exempt amounts Item If you are: the following amounts are exempt from income tax: subject to these exceptions and special conditions: 1 a foreign resident your remuneration paid by an * Australian government agency the remuneration is paid to you: (a) for expert advice to that agency; or (b) as a member of a Royal Commission 2 a foreign resident who is: (a) the representative of the government of a foreign country, visiting Australia on behalf of that government; or (b) a member of the entourage of such a representative your * ordinary income, and your * statutory income, in your official capacity as such a representative or member none 3 a foreign resident visiting Australia: (a) in the capacity of representative of any society or association established for educational, scientific, religious or philanthropic purposes; and (b) for the purpose of attending an international conference, or for the purpose of carrying on investigation or research for the society or association your * ordinary income, and your * statutory income, in that capacity none 4 a foreign resident visiting Australia: (a) in the capacity of representative of the media outside Australia; and (b) for the purpose of reporting the proceedings relating to any of the matters referred to in items 2 and 3 your * ordinary income, and your * statutory income, in that capacity none 5 a member of the naval, military or air forces of the government of a foreign country pay and allowances you earn in Australia as a member of those forces the pay and allowances are not paid or provided by the Commonwealth 6 a foreign resident visiting Australia your * ordinary income, and your * statutory income, that: (a) is from an occupation you carry on while in Australia; and (b) is not exempt from income tax in the country where you are ordinarily resident in the opinion of the Minister, the visit and occupation are principally directed to assisting in the defence of Australia 7 (a) a foreign resident pursuing in Australia a course of study or training; and (b) in Australia for the sole purpose of pursuing that course your * ordinary income, and your * statutory income, by way of a scholarship, bursary, or other educational allowance, provided by the Commonwealth none

Amendment history: Inserted by No 101 of 2006, effective Schedules 3 and 4: 1 Jan 2008 Remainder: Royal Assent | Amended by No 110 of 2014, effective Sch 1 and Sch 2 (items 2–5, 13–23): 17 Oct 2014 (s 2(1) item 2) Sch 3, Sch 4 (items 1, 3) and Sch 5 (items 16–67, 74–76, 84–91, 98–121): 16 Oct 2014 (s 2(1) items 3–5, 7)

s 842-200 — What this Subdivision is about

This Subdivision sets out rules about the taxation of some foreign residents (known as IMR entities) that invest into or through Australia. Income and capital gains from IMR financial arrangements are not subject to Australian income tax. Deductions and capital losses from IMR financial arrangements are disregarded for the purposes of this Act. Table of sections Object of this Subdivision 842 ‑ 205 Object of this Subdivision IMR concessions 842 ‑ 210 IMR concessions apply only to foreign residents etc. 842 ‑ 215 IMR concessions 842 ‑ 220 Meaning of IMR entity 842 ‑ 225 Meaning of IMR financial arrangement IMR widely held entities 842 ‑ 230 Meaning of IMR widely held entity 842 ‑ 235 Rules for determining total participation interests for the purposes of the widely held test 842 ‑ 240 Extended meaning of IMR widely held entity —temporary circumstances outside entity’s control Independent Australian fund managers 842 ‑ 245 Meaning of independent Australian fund manager 842 ‑ 250 Reductions in IMR concessions if independent Australian fund manager entitled to substantial share of IMR entity’s income

Amendment history: Inserted by No 126 of 2012, effective Sch 1 (items 1, 2, 4–15, 17): 13 Sept 2012 (s 2(1) items 2, 3, 5, 7) Sch 1 (item 3): never commenced (s 2(1) item 4) | Repealed and substituted by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015

s 842-205 — Object of this Subdivision

The object of this Subdivision is to encourage particular kinds of investment made into or through Australia by some foreign residents that have wide membership, or that use Australian fund managers.

Amendment history: Inserted by No 126 of 2012, effective Sch 1 (items 1, 2, 4–15, 17): 13 Sept 2012 (s 2(1) items 2, 3, 5, 7) Sch 1 (item 3): never commenced (s 2(1) item 4) | Repealed and substituted by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015

s 842-210 — IMR concessions apply only to foreign residents etc.

(1) This Subdivision applies only for the purposes of working out the assessable income of an entity (the foreign entity ) that: (a) is a foreign resident; and (b) is not a trust or partnership. (2) Despite subsection (1), this Subdivision applies in relation to a partnership or trust, to the extent necessary to work out an amount included in the assessable income of the foreign entity. Note 1: This Subdivision applies, for example, in working out the net income of a partnership or trust, to the extent necessary to work out the assessable income, attributable to that partnership or trust, of a partner or beneficiary who is a foreign resident. Note 2: This Subdivision could operate in relation to an entity (if it is a partnership or trust) and/or one or more partnerships or trusts interposed between the entity and the foreign resident.

Amendment history: Inserted by No 126 of 2012, effective Sch 1 (items 1, 2, 4–15, 17): 13 Sept 2012 (s 2(1) items 2, 3, 5, 7) Sch 1 (item 3): never commenced (s 2(1) item 4) | Repealed and substituted by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015

s 842-215 — IMR concessions

Concessions relating to IMR financial arrangements (1) The following consequences apply to an * IMR entity for an income year in relation to an * IMR financial arrangement if the requirements of subsection (3) or (5) are met in relation to the year: (a) what would otherwise be the entity’s assessable income for the year is * non ‑ assessable non ‑ exempt income of the entity, to the extent that it is attributable to a return or gain: (i) from the arrangement (if the arrangement is a * derivative financial arrangement); or (ii) from the entity disposing of, ceasing to own or otherwise realising the arrangement; (b) an amount is not deductible by the entity for the year, to the extent that it is attributable to an outgoing or loss: (i) from the arrangement (if the arrangement is a derivative financial arrangement); or (ii) from the entity disposing of, ceasing to own or otherwise realising the arrangement; (c) disregard a * capital gain or * capital loss that is from a * CGT event that happens in the year in relation to the arrangement. Further concessions relating to permanent establishments (2) Without limiting subsection (1), the following further consequences apply to an * IMR entity for an income year if the requirements of subsection (5) are met in relation to the year: (a) income that relates to or arises under the * IMR financial arrangement, and that would otherwise be the entity’s assessable income for the year, is * non ‑ assessable non ‑ exempt income of the entity, to the extent that the income: (i) if the entity is resident in a country that has entered into an * international tax agreement with Australia containing a * business profits article—is treated as having a source in Australia because it is attributable to a permanent establishment (within the meaning of the relevant international tax agreement) of the entity in Australia; or (ii) if subparagraph (i) does not apply—is treated as having a source in Australia because of subsection 815 ‑ 230(1); (b) an amount is not deductible by the entity for the year, to the extent that it is attributable to gaining income that is non ‑ assessable non ‑ exempt income of the entity because of paragraph (a); (c) disregard a * capital gain or * capital loss that is from a * CGT event that relates to or arises under the IMR financial arrangement, and that happens in the year in relation to a * CGT asset that: (i) is covered by item 3 of the table in section 855 ‑ 15 in relation to the entity; or (ii) is covered by item 4 of the table in section 855 ‑ 15 in relation to the entity because it is an option or right to * acquire a CGT asset covered by item 3 of that table in relation to the entity. Direct investment by IMR widely held entity (3) The requirements of this subsection in relation to the year are that: (a) during the whole of the year, the * IMR entity is an * IMR widely held entity; and (b) during the whole of the year, the interest of the entity in the issuer of, or counterparty to, the * IMR financial arrangement does not pass the * non ‑ portfolio interest test (see section 960 ‑ 195); and (c) none of the returns, gains or losses for the year from the arrangement are attributable to: (i) if the entity is a resident of a country that has entered into an * international tax agreement with Australia containing a * permanent establishment article—a permanent establishment (within the meaning of the relevant international tax agreement) of the entity in Australia; or (ii) otherwise—a * permanent establishment of the entity in Australia; and (d) the IMR entity does not, during the year, carry on in Australia a trading business (within the meaning of section 102M of the Income Tax Assessment Act 1936 ) that relates (directly or indirectly) to the arrangement; and (e) subsection 842 ‑ 225(2) does not apply to the IMR financial arrangement. (4) For the purposes of paragraph (3)(a), disregard any part of the year during which the entity did not exist. Indirect investment through independent Australian fund manager (5) The requirements of this subsection in relation to the year are that: (a) the * IMR financial arrangement was made, on the * IMR entity’s behalf, by an entity that is an * independent Australian fund manager for the IMR entity for the income year (see section 842 ‑ 245); and (b) if the issuer of, or counterparty to: (i) the IMR financial arrangement referred to in paragraph (a), if it is a * financial arrangement; or (ii) otherwise—the IMR financial arrangement to which that arrangement relates; is an Australian resident, or a * resident trust for CGT purposes—during the whole of the year, the interest of the entity in the issuer or counterparty does not pass the * non ‑ portfolio interest test (see section 960 ‑ 195); and (c) the IMR entity does not, during the year, carry on in Australia a trading business (within the meaning of section 102M of the Income Tax Assessment Act 1936 ) that relates (directly or indirectly) to the arrangement. Withholding taxes etc. (6) If what would otherwise be the * IMR entity’s assessable income is * non ‑ assessable non ‑ exempt income of the entity because of subsection (1) or (2), for the purposes of determining an entity’s liability to pay, in relation to that income: (a) * withholding tax; or (b) an amount that must be withheld under Division 12 in Schedule 1 to the Taxation Administration Act 1953 (even if the amount is not withheld); assume that any * independent Australian fund manager for the IMR entity is not a * permanent establishment of the IMR entity. (7) For the purposes of subparagraphs (2)(a)(i) and (3)(c)(i), an entity is taken to be a resident of a country that has entered into an * international tax agreement with Australia if the entity is such a resident within the meaning of that agreement.

Amendment history: Inserted by No 126 of 2012, effective Sch 1 (items 1, 2, 4–15, 17): 13 Sept 2012 (s 2(1) items 2, 3, 5, 7) Sch 1 (item 3): never commenced (s 2(1) item 4) | Repealed and substituted by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015

s 842-220 — Meaning of IMR entity

An entity is an IMR entity for an income year if the entity: (a) is not an Australian resident at all times during the income year; and (b) is not a * resident trust for CGT purposes for the income year.

Amendment history: Inserted by No 126 of 2012, effective Sch 1 (items 1, 2, 4–15, 17): 13 Sept 2012 (s 2(1) items 2, 3, 5, 7) Sch 1 (item 3): never commenced (s 2(1) item 4) | Repealed and substituted by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015

s 842-225 — Meaning of IMR financial arrangement

(1) A * financial arrangement is an IMR financial arrangement unless it is or relates to a * CGT asset that is: (a) * taxable Australian real property (see section 855 ‑ 20); or (b) an * indirect Australian real property interest (see section 855 ‑ 25). (2) Without limiting subsection (1), a sub ‑ underwriting arrangement that is not a * financial arrangement is an IMR financial arrangement if it was entered into by an * IMR entity for the purpose of providing for the entity to invest or trade in a financial arrangement that is an IMR financial arrangement under subsection (1).

Amendment history: Inserted by No 126 of 2012, effective Sch 1 (items 1, 2, 4–15, 17): 13 Sept 2012 (s 2(1) items 2, 3, 5, 7) Sch 1 (item 3): never commenced (s 2(1) item 4) | Repealed and substituted by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015

s 842-230 — Meaning of IMR widely held entity

(1) An IMR widely held entity is any of the following: (aa) a * widely held entity; (a) an entity that is covered by paragraph 275 ‑ 20(4)(a), (b), (c), (d), (e), (g), (h), (i) or (ia); (c) an entity of a kind specified in regulations made for the purposes of this paragraph. (2) An entity is a widely held entity if: (a) either: (i) no other entity has a * total participation interest in the entity of 20% or more (see section 842 ‑ 235); or (ii) there are not 5 or fewer other entities the sum of whose total participation interests in the entity is 50% or more (see section 842 ‑ 235); or (b) the entity has never satisfied the requirements of paragraph (a), but investment in the entity is being actively marketed with the intention that the entity satisfies the requirements of that paragraph; or (c) the reason for failing to satisfy the requirements of paragraph (a) relates to the entity’s activities and investments being wound down.

Amendment history: Inserted by No 126 of 2012, effective Sch 1 (items 1, 2, 4–15, 17): 13 Sept 2012 (s 2(1) items 2, 3, 5, 7) Sch 1 (item 3): never commenced (s 2(1) item 4) | Repealed and substituted by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015 | Amended by No 53 of 2016, effective Sch 1 (item 1), Sch 2, Sch 3 (items 2–4), Sch 4 (items 1–5), Sch 5 (items 2, 29–67, 75), Sch 6 (items 21–34), Sch 8 (item 1) and Sch 9: 5 May 2016 (s 2(1) items 2, 4) | Amended by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7) | Amended by No 15 of 2019, effective Sch 1 (items 2–17, 46): 1 Apr 2019 (s 2(1) item 2)

s 842-235 — Rules for determining total participation interests for the purposes of the widely held test

(1) For the purposes of subsection 842 ‑ 230(2), apply the rules in this section in determining an entity’s * total participation interest in another entity (the test entity ). (2) If an entity has, through one or more interposed entities, an * indirect participation interest in the test entity, treat each of those interposed entities as having a * total participation interest in the test entity of nil. (3) If the test entity is a trust, do not treat an object of the trust as having a * direct participation interest or * indirect participation interest in the test entity. (4) Treat the following (the affiliated entities ): (a) an entity; (b) each of the entity’s * affiliates; as together being one entity, that has all of the interests and rights of the affiliated entities. Note: Such interests and rights may give rise to a participation interest in the test entity. (5) If an entity (the nominee ) has interests and rights in the capacity of nominee of another entity: (a) treat the nominee as not having those interests and rights; and (b) instead, treat the other entity as having those interests and rights (in addition to the other entity’s interests and rights apart from this subsection). (6) If an entity that has a * direct participation interest or * indirect participation interest in the test entity is an entity covered by: (a) paragraph 842 ‑ 230(1)(a), (b) or (c); or (b) paragraph 275 ‑ 20(4)(f) (foreign collective investment vehicles with a wide membership); treat the entity’s * total participation interest in the test entity as nil. (7) The application of subsection (6) to an entity that has a * direct participation interest or * indirect participation interest in the test entity does not affect the * total participation interest in the test entity of any other entity that has a direct participation interest or indirect participation interest in the test entity. (8) In determining a * direct participation interest of one entity in another entity, disregard paragraph 350(1)(b) of the Income Tax Assessment Act 1936 (rights of shareholders to vote or participate in certain decision ‑ making). (9) If the test entity is an * IMR entity and another entity is an independent fund manager for the test entity, in determining the * total participation interest of the other entity, or any entity * connected with the other entity, in the test entity, disregard any direct or indirect entitlements (including contingent entitlements) of the other entity, or connected entity, to remuneration from the test entity: (a) to the extent that the remuneration is subject to income tax in relation to the income year for which the consequences (if any) under subsection 842 ‑ 215(1) or (2) are being determined in relation to the test entity; and (b) to the extent that the remuneration is subject to taxation in relation to that income year under a * foreign law. Example: Assume that 4 entities have interests in an IMR entity, as follows: (a) a life insurance company has a 55% interest; (b) an endowment fund has a 5% interest; (c) company A has a 25% interest. It has 2 shareholders (who are not affiliated): shareholder Y holds 60% of the shares and shareholder Z holds 40%; (d) company B has a 15% interest. It has several shareholders. The IMR entity is an IMR widely held entity because: (e) under subsection 842 ‑ 235(6), the life insurance company has a total participation interest of nil, as it is covered by paragraph 275 ‑ 20(4)(a); and (f) the endowment fund has a total participation interest below the 20% threshold in subparagraph 842 ‑ 230(2)(a)(i); and (g) under subsection 842 ‑ 235(2), company A’s 25% interest is divided between shareholder Y (15%) and shareholder Z (10%), and company A is treated as having a total participation interest in the IMR entity of nil; and (h) company B’s 15% interest is below the 20% threshold, so none of its shareholders can have a total participation interest above that threshold. (In these circumstances, it is not necessary to determine the total participation interests for each of those shareholders.) (Treating the life insurance company’s 55% interest as a total participation interest of nil ensures that no summing of the other total participation interest can exceed the 50% threshold in subparagraph 842 ‑ 230(2)(a)(ii).)

Amendment history: Inserted by No 126 of 2012, effective Sch 1 (items 1, 2, 4–15, 17): 13 Sept 2012 (s 2(1) items 2, 3, 5, 7) Sch 1 (item 3): never commenced (s 2(1) item 4) | Repealed and substituted by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015 | Amended by No 53 of 2016, effective Sch 1 (item 1), Sch 2, Sch 3 (items 2–4), Sch 4 (items 1–5), Sch 5 (items 2, 29–67, 75), Sch 6 (items 21–34), Sch 8 (item 1) and Sch 9: 5 May 2016 (s 2(1) items 2, 4) | Amended by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7)

s 842-240 — Extended meaning of IMR widely held entity —temporary circumstances outside entity’s control

Without limiting section 842 ‑ 230, an entity is an IMR widely held entity if: (a) apart from a particular circumstance, the entity would be an * IMR widely held entity because of section 842 ‑ 230; and (b) the circumstance is temporary; and (c) the circumstance arose outside the entity’s control; and (d) it is fair and reasonable to treat the entity as an IMR widely held entity, having regard to the following matters: (i) the matters in paragraphs (b) and (c); (ii) the nature of the circumstance; (iii) the actions (if any) taken by the entity to address or remove the circumstance, and the speed with which such actions are taken; (iv) any other relevant matter.

Amendment history: Inserted by No 126 of 2012, effective Sch 1 (items 1, 2, 4–15, 17): 13 Sept 2012 (s 2(1) items 2, 3, 5, 7) Sch 1 (item 3): never commenced (s 2(1) item 4) | Repealed and substituted by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015

s 842-245 — Meaning of independent Australian fund manager

(1) An entity (the managing entity ) is an independent Australian fund manager for an * IMR entity for an income year if: (a) the managing entity is an Australian resident; and (b) the managing entity carries out investment management activities for the IMR entity in the ordinary course of * business; and (c) the managing entity’s remuneration for carrying out those activities is what the remuneration would be between parties dealing at * arm’s length; and (d) one or more of the following applies: (i) the IMR entity is an * IMR widely held entity; (ii) 70% or less of the managing entity’s income, for the income year, is income received from the IMR entity or entities * connected with the IMR entity; (iii) if the managing entity has been carrying out investment management activities for 18 months or less—it takes all reasonable steps to ensure that the proportion of its income received from the IMR entity or entities connected with the IMR entity, for the income year in which that 18 month period ends, will be reduced to 70% or less. (2) In applying paragraph (1)(c), have regard to the documents covered by section 815 ‑ 135.

Amendment history: Inserted by No 126 of 2012, effective Sch 1 (items 1, 2, 4–15, 17): 13 Sept 2012 (s 2(1) items 2, 3, 5, 7) Sch 1 (item 3): never commenced (s 2(1) item 4) | Repealed and substituted by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015

s 842-250 — Reductions in IMR concessions if independent Australian fund manager entitled to substantial share of IMR entity’s income

(1) The application of section 842 ‑ 215 to an * IMR entity for an income year is modified, as provided by subsection (4) of this section, if: (a) an entity is an * independent Australian fund manager for the IMR entity; and (b) that entity, or another entity * connected with the entity, has a direct or indirect right to receive part of the profits of the IMR entity for the year; and (c) the sum of the amounts that the entity, and any other entity connected with the entity, receive for the year in connection with the entity being that independent Australian fund manager exceeds 20% of the amount (the unadjusted concessional amount ) worked out under subsection (3); and (d) the requirements of subsection 842 ‑ 215(3) in relation to the year are not met. (2) However, this section does not apply if: (a) the circumstances giving rise to the requirements of paragraph (1)(c) being met arose outside the control of: (i) the * IMR entity; or (ii) the * independent Australian fund manager or any entity * connected with the independent Australian fund manager; and (b) the independent Australian fund manager, or an entity connected with the independent Australian fund manager, is taking steps to address those circumstances. (3) Work out the unadjusted concessional amount as follows: where: amount not assessable or exempt is the sum of: (a) the amount (the 842 ‑ 215(1)(a) amount ) of the * IMR entity’s income for the income year that is, or would (apart from this section) be, * non ‑ assessable non ‑ exempt income of the IMR entity because of paragraph 842 ‑ 215(1)(a); and (b) the amount (the 842 ‑ 215(2)(a) amount ) of the IMR entity’s income for the income year that is, or would (apart from this section) be, non ‑ assessable non ‑ exempt income of the IMR entity because of paragraph 842 ‑ 215(2)(a), and not because of paragraph 842 ‑ 215(1)(a). amounts not deductible is the amount obtained by adding together: (a) the sum of the amounts that are not deductible by the * IMR entity for the income year because of paragraph 842 ‑ 215(1)(b); and (b) the sum of the amounts that are not deductible by the IMR entity for the income year because of paragraph 842 ‑ 215(2)(b), and not because of paragraph 842 ‑ 215(1)(b); and (c) the sum of the amounts that would otherwise be deductible by the IMR entity for the income year under section 8 ‑ 1 if the income in relation to which they were incurred were not income that is * non ‑ assessable non ‑ exempt income of the IMR entity because of paragraph 842 ‑ 215(1)(a); and (d) the sum of the amounts that would otherwise be deductible by the IMR entity for the income year under section 8 ‑ 1 if the income in relation to which they were incurred were not income that is non ‑ assessable non ‑ exempt income of the IMR entity because of paragraph 842 ‑ 215(2)(a), and not because of paragraph 842 ‑ 215(1)(a). disregarded capital gains is the amount obtained by adding together: (a) the sum (the 842 ‑ 215(1)(c) amount ) of the amounts of the * capital gains that: (i) are from * CGT events that happen in the income year; and (ii) are, or would (apart from this section) be, disregarded in relation to the * IMR entity, because of paragraph 842 ‑ 215(1)(c); and (b) the sum (the 842 ‑ 215(2)(c) amount ) of the amounts of the capital gains that: (i) are from CGT events that happen in the income year; and (ii) are, or would (apart from this section) be, disregarded in relation to the IMR entity because of paragraph 842 ‑ 215(2)(c), and not because of paragraph 842 ‑ 215(1)(c). disregarded capital losses is the amount obtained by adding together: (a) the sum of the amounts of the * capital losses that: (i) are from * CGT events that happen in the income year; and (ii) are disregarded in relation to the * IMR entity because of paragraph 842 ‑ 215(1)(c); and (b) the sum of the amounts of the capital losses that: (i) are from CGT events that happen in the income year; and (ii) are disregarded in relation to the IMR entity because of paragraph 842 ‑ 215(2)(c), and not because of paragraph 842 ‑ 215(1)(c). (4) Apply the sum referred to in paragraph (1)(c) to reduce (including reduce to zero) the following amounts: (a) the 842 ‑ 215(1)(a) amount; (b) the 842 ‑ 215(2)(a) amount; (c) the 842 ‑ 215(1)(c) amount; (d) the 842 ‑ 215(2)(c) amount. Do not apply the sum to reduce an amount referred to in a paragraph (other than paragraph (a)) unless the sum has been applied to reduce to zero the amount referred to in each paragraph preceding that paragraph. (5) If the 842 ‑ 215(1)(c) amount or the 842 ‑ 215(2)(c) amount relates to more than one * capital gain, a reduction of the amount under subsection (4) is taken to reduce each of the capital gains by the following amount: (6) Without limiting the circumstances in which the requirements of paragraph (1)(c) are not met, those requirements are taken not to be met in relation to the * IMR entity for an income year if they are not met in relation to the IMR entity for a period (a qualifying period ) of up to 5 consecutive income years including the income year (but not including any future income years). (7) In ascertaining for the purposes of subsection (6) whether the requirements of paragraph (1)(c) are not met in relation to the * IMR entity for a qualifying period, assume that the qualifying period is the income year referred to in subsection (1). (8) For the purposes of paragraphs (1)(b) and (c) (including paragraph (1)(c) as affected by subsections (6) and (7)), disregard any direct or indirect entitlements (including contingent entitlements) of the * independent Australian fund manager, or any entity * connected with the independent Australian fund manager, to remuneration from the * IMR entity: (a) to the extent that the remuneration is subject to income tax in relation to the income year referred to in subsection (1); and (b) to the extent that the remuneration is subject to taxation in relation to that income year under a * foreign law.

Amendment history: Inserted by No 126 of 2012, effective Sch 1 (items 1, 2, 4–15, 17): 13 Sept 2012 (s 2(1) items 2, 3, 5, 7) Sch 1 (item 3): never commenced (s 2(1) item 4) | Amended by No 126 of 2012, effective Sch 1 (items 1, 2, 4–15, 17): 13 Sept 2012 (s 2(1) items 2, 3, 5, 7) Sch 1 (item 3): never commenced (s 2(1) item 4) | Amended by No 101 of 2013, effective Sch 2 (items 2, 20–43, 50): 29 June 2013 (s 2(1) item 3) Sch 2 (items 55–57): 8 Sept 2012 (s 2(1) item 4) | Repealed and substituted by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015

s 855-1 — What this Division is about

A foreign resident can disregard a capital gain or loss unless the relevant CGT asset is a direct or indirect interest in Australian real property, or relates to a business carried on by the foreign resident through a permanent establishment in Australia. Special rules apply for individuals who were Australian residents but have become foreign residents (see also Subdivision 104 ‑ I) and for foreign resident beneficiaries of fixed trusts. There are also rules dealing with what happens when a foreign resident becomes an Australian resident.

Amendment history: Inserted by No 168 of 2006, effective Schedule 3 (items 3–5): 13 Dec 2005 Remainder: Royal Assent

s 855-5 — Objects of this Subdivision

(1) The objects of this Subdivision are to improve: (a) Australia’s status as an attractive place for business and investment; and (b) the integrity of Australia’s capital gains tax base. (2) This is achieved by: (a) aligning Australia’s tax laws with international practice; and (b) ensuring interests in an entity remain subject to Australia’s capital gains tax laws if the entity’s underlying value is principally derived from Australian real property.

Amendment history: Inserted by No 168 of 2006, effective Schedule 3 (items 3–5): 13 Dec 2005 Remainder: Royal Assent

s 855-10 — Disregarding a capital gain or loss from CGT events

(1) Disregard a * capital gain or * capital loss from a * CGT event if: (a) you are a foreign resident, or the trustee of a * foreign trust for CGT purposes, just before the CGT event happens; and (b) the CGT event happens in relation to a * CGT asset that is not * taxable Australian property. Note: A capital gain or capital loss from a CGT asset you have used at any time in carrying on a business through a permanent establishment in Australia may be reduced under section 855 ‑ 35. (2) The * CGT asset in relation to which a * CGT event happens includes the following: (a) for CGT event D1 (about creating contractual or other rights)—the CGT asset that is the subject of the creation of the contractual or other rights; Example: You grant an easement over land in Australia. The land is the subject of the creation of the rights in the easement. Therefore, the CGT event happens in relation to the land. (b) for CGT event D2 (about granting an option)—the CGT asset that is the subject of the option; (c) for CGT event F1 (about granting a lease)—the CGT asset that is the subject of the lease; (d) for CGT event J1 (about a company ceasing to be a member of wholly ‑ owned group after roll ‑ over)—the roll ‑ over asset.

Amendment history: Inserted by No 168 of 2006, effective Schedule 3 (items 3–5): 13 Dec 2005 Remainder: Royal Assent

s 855-15 — When an asset is taxable Australian property

There are 5 categories of * CGT assets that are taxable Australian property . They are set out in this table. CGT assets that are taxable Australian property Item Description 1 * Taxable Australian real property (see section 855 ‑ 20) 2 A * CGT asset that: (a) is an * indirect Australian real property interest (see section 855 ‑ 25); and (b) is not covered by item 5 of this table 3 A * CGT asset that: (a) you have used at any time in carrying on a * business through: (i) if you are a resident in a country that has entered into an * international tax agreement with Australia containing a * permanent establishment article—a permanent establishment (within the meaning of the relevant international tax agreement) in Australia; or (ii) otherwise—a * permanent establishment in Australia; and (b) is not covered by item 1, 2 or 5 of this table 4 An option or right to * acquire a * CGT asset covered by item 1, 2 or 3 of this table 5 A * CGT asset that is covered by subsection 104 ‑ 165(3) (choosing to disregard a gain or loss on ceasing to be an Australian resident) Note 1: An asset is also taxable Australian property if it was acquired by a company after 28 January 1988 and before 26 May 1988 from a foreign resident as a result of a disposal for which there was a roll ‑ over under section 160ZZN or 160ZZO of the Income Tax Assessment Act 1936 : see section 136 ‑ 25 of the Income Tax (Transitional Provisions) Act 1997 . Note 2: Payments may need to be made to the Commissioner for acquisitions of some kinds of taxable Australian property if foreign residents are involved (see Subdivision 14 ‑ D in Schedule 1 to the Taxation Administration Act 1953 ).

Amendment history: Inserted by No 168 of 2006, effective Schedule 3 (items 3–5): 13 Dec 2005 Remainder: Royal Assent | Amended by No 110 of 2014, effective Sch 1 and Sch 2 (items 2–5, 13–23): 17 Oct 2014 (s 2(1) item 2) Sch 3, Sch 4 (items 1, 3) and Sch 5 (items 16–67, 74–76, 84–91, 98–121): 16 Oct 2014 (s 2(1) items 3–5, 7) | Amended by No 10 of 2016, effective Sch 1 (items 1–32, 38, 39) and Sch 2 (items 3–9, 30): 26 Feb 2016 (s 2(1) items 2, 4)

s 855-16 — Meaning of permanent establishment article

A permanent establishment article is: (a) Article 5 of the United Kingdom convention (within the meaning of the International Tax Agreements Act 1953 ); or (b) a corresponding provision of another * international tax agreement.

Amendment history: Inserted by No 110 of 2014, effective Sch 1 and Sch 2 (items 2–5, 13–23): 17 Oct 2014 (s 2(1) item 2) Sch 3, Sch 4 (items 1, 3) and Sch 5 (items 16–67, 74–76, 84–91, 98–121): 16 Oct 2014 (s 2(1) items 3–5, 7)

s 855-20 — Taxable Australian real property

A * CGT asset is taxable Australian real property if it is: (a) real property situated in Australia (including a lease of land, if the land is situated in Australia); or (b) a * mining, quarrying or prospecting right (to the extent that the right is not real property), if the * minerals, * petroleum or quarry materials are situated in Australia.

Amendment history: Inserted by No 168 of 2006, effective Schedule 3 (items 3–5): 13 Dec 2005 Remainder: Royal Assent | Amended by No 88 of 2009, effective s. 4, Schedule 3 (items 1, 5–23), Schedule 4 (items 2–5) and Schedule 5 (items 113–204, 237, 238, 258, 282, 319–341, 344): 18 Sept 2009 Schedule 2 (items 4–15, 25–27, 30, 31): 1 Oct 2009 Schedule 2 (item 23): 1 Jan 2010 | Amended by No 12 of 2012, effective s 4, Sch 2 (items 1–23), Sch 5 and Sch 6 (items 3–6, 11–20, 25, 26, 35–67, 74–83, 94–96, 117–142, 157–178, 183, 200–203, 214–217, 235–240, 248): 21 Mar 2012 (s 2(1) items 1, 3, 5, 6, 10, 14, 18, 19, 27, 31) Sch 6 (item 7): 1 July 2007 (s 2(1) item 7) Sch 6 (item 10): 1 July 2010 (s 2(1) item 9) Sch 6 (items 106–116): 22 Mar 2012 (s 2(1) items 16, 17) Sch 6 (item 143): 22 Jan 2013 (s 2(1) item 20) Sch 6 (items 146–148): never commenced (s 2(1) item 23) Sch 6 (items 179, 181): 3 Oct 2008 (s 2(1) items 28, 30) Sch 6 (item 180): 3 June 2010 (s 2(1) item 29)

s 855-25 — Indirect Australian real property interests

(1) A * membership interest held by an entity (the holding entity ) in another entity (the test entity ) at a time is an indirect Australian real property interest at that time if: (a) the interest passes the * non ‑ portfolio interest test (see section 960 ‑ 195): (i) at that time; or (ii) throughout a 12 month period that began no earlier than 24 months before that time and ended no later than that time; and (b) the interest passes the principal asset test in section 855 ‑ 30 at that time. (2) For the purposes of subsection (1), in working out whether the interest passes the * non ‑ portfolio interest test and the principal asset test in section 855 ‑ 30: (a) apply section 350 of the Income Tax Assessment Act 1936 as if the words “, or is entitled to acquire,” (wherever occurring) were omitted; and (b) apply section 351 of that Act as if: (i) the words “, or that the beneficiary is entitled to acquire” (wherever occurring) were omitted; and (ii) the words “, or that the entity is entitled to acquire” in paragraph 351(2)(d) were omitted. (3) The first element of the * cost base and * reduced cost base of a * CGT asset on 10 May 2005 is the * market value of the asset on that day if, on that day: (a) the CGT asset was a * membership interest you held in another entity; and (b) you were a foreign resident, or the trustee of a trust that was not a * resident trust for CGT purposes; and (c) the CGT asset was a * post ‑ CGT asset; and (d) the CGT asset did not have the necessary connection with Australia (within the meaning of this Act as in force on that day) disregarding the operation of paragraph (b) of item 5 and paragraph (b) of item 6 of the table in section 136 ‑ 25 (as in force on that day). (4) Also, Parts 3 ‑ 1 and 3 ‑ 3 apply to the asset as if you had * acquired it on that day.

Amendment history: Inserted by No 168 of 2006, effective Schedule 3 (items 3–5): 13 Dec 2005 Remainder: Royal Assent

s 855-30 — Principal asset test

(1) The purpose of this section is to define when an entity’s underlying value is principally derived from Australian real property (see paragraph 855 ‑ 5(2)(b)). (2) A * membership interest held by an entity (the holding entity ) in another entity (the test entity ) passes the principal asset test if the sum of the * market values of the test entity’s assets that are * taxable Australian real property exceeds the sum of the * market values of its assets that are not taxable Australian real property. Note: The market value of any of the latter kind of assets that are duplicated within the test entity’s corporate group could be disregarded (see section 855 ‑ 32). (3) For the purposes of subsection (2), treat an asset of an entity (the first entity ) that is a * membership interest in another entity (the other entity ) as if it were instead the following 2 assets: (a) an asset that is * taxable Australian real property (the TARP asset ); (b) an asset that is not taxable Australian real property (the non ‑ TARP asset ). (4) For the purposes of subsection (2), treat the * market value of the TARP asset and the non ‑ TARP asset according to the following table. Market value of the TARP asset and the non ‑ TARP asset Item If: the market value of the TARP asset is: the market value of the non ‑ TARP asset is: 1 the sum of the * total participation interests held by the holding entity and its * associates in the other entity is less than 10% zero the * market value of the * membership interest mentioned in subsection (3) 2 item 1 does not apply the product of: (a) the sum of the * market values of all the assets of the other entity that are * taxable Australian real property; and (b) the first entity’s * direct participation interest in the other entity the product of: (a) the sum of the market values of all the assets of the other entity that are not taxable Australian real property; and (b) the first entity’s direct participation interest in the other entity Note 1: For the purposes of item 2 of the table, it is necessary to work out the market value of any TARP assets and non ‑ TARP assets in relation to any membership interests held by the other entity before working out the value of the TARP asset and non ‑ TARP asset held by the first entity. Note 2: The market value of an asset of the other entity that is not taxable Australian real property, and is duplicated within the other entity’s corporate group, could be disregarded (see section 855 ‑ 32). (4A) For the purposes of working out the * total participation interests held by the holding entity and its * associates under item 1 of the table in subsection (4), take into account: (a) a particular * direct participation interest; or (b) a particular * indirect participation interest; held in the other entity only once if it would otherwise be counted more than once because the entity holding it is an associate of the holding entity. (5) For the purposes of this section, disregard the * market value of any asset acquired by the test entity, or by any other entity, if the * acquisition was done for a purpose (other than an incidental purpose) that included ensuring that a * membership interest in any entity would not pass the principal asset test in this section.

Amendment history: Inserted by No 168 of 2006, effective Schedule 3 (items 3–5): 13 Dec 2005 Remainder: Royal Assent | Amended by No 110 of 2014, effective Sch 1 and Sch 2 (items 2–5, 13–23): 17 Oct 2014 (s 2(1) item 2) Sch 3, Sch 4 (items 1, 3) and Sch 5 (items 16–67, 74–76, 84–91, 98–121): 16 Oct 2014 (s 2(1) items 3–5, 7) | Amended by No 129 of 2019, effective Sch 1 (items 1–31, 33–36) and Sch 2: 1 Jan 2020 (s 2(1) item 2)

s 855-32 — Disregard market value of duplicated non ‑ TARP assets

(1) The purpose of this section is to prevent double counting of the * market value of the assets of a corporate group that: (a) are not * taxable Australian real property; and (b) are created under * arrangements under which corresponding liabilities are created in other members of the group. (2) For the purposes of subsections 855 ‑ 30(2) and (4), subsection (4) of this section applies to an asset that is not * taxable Australian real property if: (a) the parties to an * arrangement included the 2 entities referred to in subsection (3); and (b) an effect of the arrangement was to create, before the * CGT event happened: (i) the asset as an asset of one of those 2 parties; and (ii) a corresponding liability of the other (the other party ). (3) The 2 entities are either: (a) the first entity and the other entity (see subsection 855 ‑ 30(3)), if table item 2 in subsection 855 ‑ 30(4) applies to those entities; or (b) both: (i) that first entity or that other entity; and (ii) an entity that is a first entity or other entity for the purposes of a related application of subsection 855 ‑ 30(3) and table item 2 in subsection 855 ‑ 30(4). (4) Disregard: (a) if the other party is the test entity (see subsection 855 ‑ 30(2))—the asset’s * market value; or (b) otherwise—the percentage of the asset’s market value equal to the percentage that is the test entity’s * total participation interest in the other party. Example: The test entity loans money to its wholly ‑ owned subsidiary. The market value of the loan asset created as an asset of the test entity is disregarded for the purposes of subsection 855 ‑ 30(2).

Amendment history: Inserted by No 110 of 2014, effective Sch 1 and Sch 2 (items 2–5, 13–23): 17 Oct 2014 (s 2(1) item 2) Sch 3, Sch 4 (items 1, 3) and Sch 5 (items 16–67, 74–76, 84–91, 98–121): 16 Oct 2014 (s 2(1) items 3–5, 7)

s 855-35 — Reducing a capital gain or loss from a business asset—Australian permanent establishments

(1) This section applies to a * CGT asset that is * taxable Australian property under item 3 of the table in section 855 ‑ 15 because you have used it at any time in carrying on a * business through a permanent establishment (as mentioned in that item) in Australia. (2) The * capital gain or * capital loss you make from a * CGT event in relation to the asset is reduced if you used it in this way for only part of the period from when you * acquired it to when the CGT event happened. (3) The gain or loss is reduced by this fraction:

Amendment history: Inserted by No 168 of 2006, effective Schedule 3 (items 3–5): 13 Dec 2005 Remainder: Royal Assent | Amended by No 110 of 2014, effective Sch 1 and Sch 2 (items 2–5, 13–23): 17 Oct 2014 (s 2(1) item 2) Sch 3, Sch 4 (items 1, 3) and Sch 5 (items 16–67, 74–76, 84–91, 98–121): 16 Oct 2014 (s 2(1) items 3–5, 7)

s 855-40 — Capital gains and losses of foreign residents through fixed trusts

(1) The purpose of this section is to provide comparable taxation treatment as between direct ownership, and indirect ownership through a * fixed trust, by foreign residents of * CGT assets that are not * taxable Australian property. (2) A * capital gain you make in respect of your interest in a * fixed trust is disregarded if: (a) you are a foreign resident when you make the gain; and (b) the gain is attributable to a * CGT event happening to a * CGT asset of a trust (the CGT event trust ) that is: (i) the * fixed trust; or (ii) another fixed trust in which that trust has an interest (directly, or indirectly through a * chain of trusts, each trust in which is a fixed trust); and (c) either: (i) the asset is not * taxable Australian property for the CGT event trust at the time of the CGT event; or (ii) the asset is an interest in a fixed trust and the conditions in subsections (5), (6), (7) and (8) are satisfied. Note: Section 115 ‑ 215 treats a portion of a trust’s capital gain as a capital gain made by a beneficiary, and applies the CGT discount to that portion as if the gain were made directly by the beneficiary. (3) You are not liable to pay tax as a trustee of a * fixed trust in respect of an amount to the extent that the amount gives rise to a * capital gain that is disregarded for a beneficiary under subsection (2). (4) To avoid doubt, subsection (3) does not affect the operation of subsection 98A(1) or (3) of the Income Tax Assessment Act 1936 (about taxing beneficiaries who are foreign residents at the end of an income year). Conditions (5) The conditions in subsections (6), (7) and (8) must be satisfied if the relevant * CGT event happens to an interest in a * fixed trust (the first trust ) and the interest is * taxable Australian property at the time of the CGT event. (6) At least 90% (by * market value) of the * CGT assets of: (a) the first trust; or (b) a * fixed trust in which the first trust has an interest (directly, or indirectly through a * chain of trusts, each trust in which is a fixed trust); must not be * taxable Australian property at the time of the relevant * CGT event. (7) If the condition in subsection (6) is not satisfied for the first trust (but is satisfied for a trust covered by paragraph (6)(b)), the condition in subsection (8) must be satisfied for the first trust, and for each other trust in the * chain of trusts between the first trust and the trust that satisfied the condition in subsection (6). (8) The condition is that, assuming any interest in a * fixed trust in that * chain not to be * taxable Australian property, at least 90% (by * market value) of the * CGT assets of the trust must not be taxable Australian property.

Amendment history: Inserted by No 168 of 2006, effective Schedule 3 (items 3–5): 13 Dec 2005 Remainder: Royal Assent | Amended by No 79 of 2007, effective Schedule 1 (items 28, 29, 39–42, 43(1), (6)), Schedules 3, 4, Schedule 6 (items 3–8), Schedule 9 (items 14–26, 30, 34) and Schedule 10 (items 10–13, 32): Royal Assent Schedule 8 (items 2, 12–25, 26(1)–(3)): 1 July 2007 | Amended by No 41 of 2011, effective Schedule 1 (items 1–3): 1 Jan 2011 Schedule 1 (items 4–6) and Schedule 5 (items 25–29, 33, 36–50, 74–78, 80–145, 148–167, 173–175, 383–396, 400, 414–418): Royal Assent Schedule 5 (items 9, 18–20): 28 June 2011 Schedule 5 (items 51–54): 1 July 2011

s 855-45 — Individual or company becomes an Australian resident

(1) If you become an Australian resident, there are rules relevant to each * CGT asset that you owned just before you became an Australian resident, except an asset: (a) that is * taxable Australian property; or (b) that you * acquired before 20 September 1985. Note: This section has effect subject to section 768 ‑ 950 (individuals who become Australian residents and are temporary residents immediately after they become Australian residents). (2) The first element of the * cost base and * reduced cost base of the asset (at the time you become an Australian resident) is its * market value at that time. (3) Also, Parts 3 ‑ 1 and 3 ‑ 3 apply to the asset as if you had * acquired it at the time you became an Australian resident. (4) This section does not apply to an * ESS interest if: (a) Subdivision 83A ‑ C (about employee share schemes) applies to the interest, and the * ESS deferred taxing point for the interest has not yet occurred; or (b) the provisions referred to in paragraphs 83A ‑ 33(1)(a) to (c) (about start ups) apply to the ESS interest.

Amendment history: Inserted by No 168 of 2006, effective Schedule 3 (items 3–5): 13 Dec 2005 Remainder: Royal Assent | Amended by No 133 of 2009, effective Schedule 1 (items 1, 21–76, 86, 87): 14 Dec 2009 Schedule 2 (items 1–13, 15) and Schedule 3 (items 28–40, 44, 45): Royal Assent | Amended by No 105 of 2015, effective Sch 1 (items 2–41, 44–51): 1 July 2015 (s 2)

s 855-50 — Trust becomes a resident trust

(1) If a trust becomes a * resident trust for CGT purposes, there are rules relevant to each * CGT asset that the trustee owned just before the trust became a resident trust for CGT purposes, except one: (a) that is * taxable Australian property; or (b) that the trustee * acquired before 20 September 1985. (2) The first element of the * cost base and * reduced cost base of the asset (at the time the trust becomes a * resident trust for CGT purposes) is its * market value at that time. (3) Also, Parts 3 ‑ 1 and 3 ‑ 3 apply to the asset as if the trustee had * acquired it at the time the trust became a * resident trust for CGT purposes. Exception (4) This section does not apply to a trust if, just before it became a * resident trust for CGT purposes, it was a * CFT because of paragraph 342(a) of the Income Tax Assessment Act 1936 . Note: This section is disregarded in calculating the attributable income of a trust: see section 102AAZB of the Income Tax Assessment Act 1936 .

Amendment history: Inserted by No 168 of 2006, effective Schedule 3 (items 3–5): 13 Dec 2005 Remainder: Royal Assent

s 855-55 — CFC becomes an Australian resident

(1) This section applies to a * CFC that stops at a time (the residence change time ) being a resident of a * listed country or an * unlisted country and becomes an Australian resident. (2) Section 855 ‑ 45 does not apply to the * CFC. (3) The modifications of Parts 3 ‑ 1 and 3 ‑ 3 of this Act in sections 411 to 414 of the Income Tax Assessment Act 1936 have the effect they would have, in relation to each * commencing day asset owned by the * CFC at the residence change time, if those modifications were used to work out the taxable income of the CFC rather than its * attributable income. (4) However, if a * capital gain on a * commencing day asset of the * CFC (for a period before the residence change time) was * subject to foreign tax in a * listed country, the modifications of Parts 3 ‑ 1 and 3 ‑ 3 of this Act in sections 411 to 414 of the Income Tax Assessment Act 1936 have the effect they would have in relation to the asset if: (a) those modifications were used to work out the taxable income of the CFC rather than its * attributable income; and (b) the * commencing day of the CFC were the residence change time. Note: This section is disregarded in calculating the attributable income of a CFC: see section 410 of the Income Tax Assessment Act 1936 .

Amendment history: Inserted by No 168 of 2006, effective Schedule 3 (items 3–5): 13 Dec 2005 Remainder: Royal Assent | Amended by No 79 of 2010, effective Sch 1 (items 3–5, 27–32), Sch 2 (items 2–8, 17–45), Sch 3 (items 2–59), Sch 4 (items 2–6, 38–46, 51) and Sch 5 (items 2, 6–13): 1 July 2010 (s 2(1) items 2–4)

s 880-10 — What this Subdivision is about

This Subdivision defines several terms that are fundamental to the operation of this Division, such as sovereign entity and sovereign entity group . Table of sections Operative provisions 880 ‑ 15 Meaning of sovereign entity 880 ‑ 20 Meaning of sovereign entity group

Amendment history: Inserted by No 34 of 2019, effective Sch 1 (items 1–5, 12, 13, 16), Sch 2, Sch 4 (items 3–6, 8, 9) and Sch 5 (items 1, 2, 5): 1 July 2019 (s 2(1) items 2, 3)

s 880-15 — Meaning of sovereign entity

A sovereign entity is any of the following: (a) a body politic of a foreign country, or a part of a foreign country; (b) a * foreign government agency; (c) an entity: (i) in which an entity covered by paragraph (a) or (b) holds a * total participation interest of 100%; and (ii) that is not an Australian resident; and (iii) that is not a resident trust estate for the purposes of Division 6 of Part III of the Income Tax Assessment Act 1936 .

Amendment history: Inserted by No 34 of 2019, effective Sch 1 (items 1–5, 12, 13, 16), Sch 2, Sch 4 (items 3–6, 8, 9) and Sch 5 (items 1, 2, 5): 1 July 2019 (s 2(1) items 2, 3)

s 880-20 — Meaning of sovereign entity group

(1) Each of the following is part of a sovereign entity group : (a) a body politic of a foreign country (other than a body politic of a part of that foreign country); (b) a * foreign government agency in relation to that foreign country (other than a foreign government agency in relation to a part of that foreign country); (c) an entity: (i) in which an entity covered by paragraph (a) or (b) holds a * total participation interest of 100%; and (ii) that is not an Australian resident; and (iii) that is not a resident trust estate for the purposes of Division 6 of Part III of the Income Tax Assessment Act 1936 . (2) Each of the following is part of a sovereign entity group : (a) a body politic of a part of a foreign country; (b) a * foreign government agency in relation to that part of that foreign country; (c) an entity: (i) in which an entity covered by paragraph (a) or (b) holds a * total participation interest of 100%; and (ii) that is not an Australian resident; and (iii) that is not a resident trust estate for the purposes of Division 6 of Part III of the Income Tax Assessment Act 1936 . (3) Each entity that is part of a * sovereign entity group is a member of the group.

Amendment history: Inserted by No 34 of 2019, effective Sch 1 (items 1–5, 12, 13, 16), Sch 2, Sch 4 (items 3–6, 8, 9) and Sch 5 (items 1, 2, 5): 1 July 2019 (s 2(1) items 2, 3)

s 880-50 — What this Subdivision is about

This Subdivision provides that a sovereign entity is liable to pay tax. It also provides that a body politic (or a foreign government agency) of a foreign country, or part of a foreign country, is treated as being a person that is not a resident of Australia, but is a resident of the foreign country. Table of sections Operative provisions 880 ‑ 55 Sovereign entity liable to pay tax 880 ‑ 60 Bodies politic of foreign countries and foreign government agencies treated as foreign residents

Amendment history: Inserted by No 34 of 2019, effective Sch 1 (items 1–5, 12, 13, 16), Sch 2, Sch 4 (items 3–6, 8, 9) and Sch 5 (items 1, 2, 5): 1 July 2019 (s 2(1) items 2, 3)

s 880-55 — Sovereign entity liable to pay tax

A * sovereign entity is liable to pay * tax. Note: The actual amount of tax payable may be nil.

Amendment history: Inserted by No 34 of 2019, effective Sch 1 (items 1–5, 12, 13, 16), Sch 2, Sch 4 (items 3–6, 8, 9) and Sch 5 (items 1, 2, 5): 1 July 2019 (s 2(1) items 2, 3)

s 880-60 — Bodies politic of foreign countries and foreign government agencies treated as foreign residents

(1) For the purposes of this Act, treat a body politic of a foreign country, or a part of a foreign country: (a) as being a person that is not a resident of Australia; and (b) as being a resident of the foreign country. (2) For the purposes of this Act, treat a * foreign government agency in relation to a foreign country (including a foreign government agency in relation to a part of a foreign country): (a) as being a person that is not a resident of Australia; and (b) as being a resident of the foreign country.

Amendment history: Inserted by No 34 of 2019, effective Sch 1 (items 1–5, 12, 13, 16), Sch 2, Sch 4 (items 3–6, 8, 9) and Sch 5 (items 1, 2, 5): 1 July 2019 (s 2(1) items 2, 3)

s 880-100 — What this Subdivision is about

This Subdivision provides a tax exemption for certain sovereign entities in respect of certain returns on membership interests (etc.) in entities that are Australian resident companies or managed investment trusts. To obtain this exemption, the relevant sovereign entity group can hold only a portfolio interest in the entity, and cannot have relevant influence over the entity. Table of sections Operative provisions 880 ‑ 105 Sovereign entity’s income from membership interest etc. in trust or company—non ‑ assessable non ‑ exempt income 880 ‑ 110 Sovereign entity’s deduction from membership interest etc.—loss not deductible 880 ‑ 115 Sovereign entity’s capital gain from membership interest etc.—gain disregarded 880 ‑ 120 Sovereign entity’s capital loss from membership interest etc. in trust or company—loss disregarded 880 ‑ 125 Covered sovereign entities 880 ‑ 130 Meaning of public non ‑ financial entity and public financial entity

Amendment history: Inserted by No 34 of 2019, effective Sch 1 (items 1–5, 12, 13, 16), Sch 2, Sch 4 (items 3–6, 8, 9) and Sch 5 (items 1, 2, 5): 1 July 2019 (s 2(1) items 2, 3)

s 880-105 — Sovereign entity’s income from membership interest etc. in trust or company—non ‑ assessable non ‑ exempt income

(1) An amount of * ordinary income or * statutory income of a * sovereign entity is not assessable income and is not * exempt income if: (a) the sovereign entity is covered by section 880 ‑ 125; and (b) the amount is a return on any of the following kinds of interest that the sovereign entity holds in another entity (the test entity ): (i) a * membership interest; (ii) a * debt interest; (iii) a * non ‑ share equity interest; and (c) the test entity is: (i) a company that is an Australian resident at the time (the income time ) when the amount becomes ordinary or statutory income of the sovereign entity; or (ii) a * managed investment trust in relation to the income year in which the income time occurs; and (d) the * sovereign entity group of which the sovereign entity is a member satisfies the portfolio interest test in subsection (4) in relation to the test entity: (i) at the income time; and (ii) throughout any 12 month period that began no earlier than 24 months before that time and ended no later than that time; and (e) the sovereign entity group of which the sovereign entity is a member does not have influence of a kind described in subsection (6) in relation to the test entity at the income time. (2) For the purposes of paragraph (1)(b), treat an interest that a * sovereign entity holds in another entity as a partner in a * partnership as not being an interest that the sovereign entity holds in the other entity. (3) If the amount is a * fund payment, subsection (1) does not apply to the extent that the amount is attributable to: (a) * non ‑ concessional MIT income (see section 12 ‑ 435 in Schedule 1 to the Taxation Administration Act 1953 ); or (b) an amount that would be non ‑ concessional MIT income if the following provisions were disregarded: (i) subsection 12 ‑ 437(5) in that Schedule; (ii) sections 12 ‑ 440, 12 ‑ 447, 12 ‑ 449 and 12 ‑ 451 in that Schedule. Portfolio interest test (4) A * sovereign entity group satisfies the portfolio interest test in this subsection in relation to the test entity at a time if, at that time, the sum of the * total participation interests that each * member of the group holds in the test entity: (a) is less than 10%; and (b) would be less than 10% if, in working out the * direct participation interest that any entity holds in a company: (i) an * equity holder were treated as a shareholder; and (ii) the total amount contributed to the company in respect of * non ‑ share equity interests were included in the total paid ‑ up share capital of the company. (5) For the purposes of subsection (4), in working out the sum of the * total participation interests held by each * member of the group in the test entity, take into account: (a) a particular * direct participation interest; or (b) a particular * indirect participation interest; held in the entity only once if it would otherwise be counted more than once. Influence test (6) A * sovereign entity group has influence of a kind described in this subsection in relation to the test entity at a time if any of the following requirements are satisfied at that time: (a) a * member of the group: (i) is directly or indirectly able to determine; or (ii) in acting in concert with others, is directly or indirectly able to determine; the identity of at least one of the persons who, individually or together with others, make (or might reasonably be expected to make) the decisions that comprise the control and direction of the test entity’s operations; (b) at least one of those persons is accustomed or obliged to act, or might reasonably be expected to act, in accordance with the directions, instructions or wishes of a member of the group (whether those directions, instructions or wishes are expressed directly or indirectly, or through the member acting in concert with others). (7) However, a * sovereign entity group does not have influence of a kind described in subsection (6) if, disregarding any breach of terms of a * debt interest by any entity, the sovereign entity group would not have influence of that kind. (8) For the purposes of subsection (6), in working out whether an entity is a * member of a * sovereign entity group, treat the references in paragraphs 880 ‑ 20(1)(c) and (2)(c) to 100% as instead being references to more than 50%.

Amendment history: Inserted by No 34 of 2019, effective Sch 1 (items 1–5, 12, 13, 16), Sch 2, Sch 4 (items 3–6, 8, 9) and Sch 5 (items 1, 2, 5): 1 July 2019 (s 2(1) items 2, 3)

s 880-110 — Sovereign entity’s deduction from membership interest etc.—loss not deductible

A * sovereign entity cannot deduct an amount if: (a) the sovereign entity is covered by section 880 ‑ 125; and (b) the amount is a loss in respect of any of the following kinds of interest that the sovereign entity holds in another entity: (i) a * membership interest; (ii) a * debt interest; (iii) a * non ‑ share equity interest; and (c) the requirements in paragraphs 880 ‑ 105(1)(c), (d) and (e) would be satisfied, on the assumptions that: (i) the amount were * ordinary income or * statutory income; and (ii) the amount became ordinary income or statutory income of the sovereign entity at the time it arose; and (iii) references in those paragraphs to the test entity were references to the other entity mentioned in paragraph (b) of this section.

Amendment history: Inserted by No 34 of 2019, effective Sch 1 (items 1–5, 12, 13, 16), Sch 2, Sch 4 (items 3–6, 8, 9) and Sch 5 (items 1, 2, 5): 1 July 2019 (s 2(1) items 2, 3)

s 880-115 — Sovereign entity’s capital gain from membership interest etc.—gain disregarded

Disregard a * capital gain of a * sovereign entity from a * CGT event that happens in relation to a * CGT asset if: (a) the sovereign entity is covered by section 880 ‑ 125; and (b) the CGT asset is a * membership interest, * non ‑ share equity interest or * debt interest in another entity; and (c) the requirements in paragraphs 880 ‑ 105(1)(c), (d) and (e) would be satisfied, on the assumptions that: (i) the capital gain were an amount of * ordinary income or * statutory income; and (ii) the amount mentioned in subparagraph (i) became ordinary income or statutory income of the sovereign entity immediately before the time the CGT event happened; and (iii) references in those paragraphs to the test entity were references to the other entity mentioned in paragraph (b) of this section.

Amendment history: Inserted by No 34 of 2019, effective Sch 1 (items 1–5, 12, 13, 16), Sch 2, Sch 4 (items 3–6, 8, 9) and Sch 5 (items 1, 2, 5): 1 July 2019 (s 2(1) items 2, 3)

s 880-120 — Sovereign entity’s capital loss from membership interest etc. in trust or company—loss disregarded

Disregard a * capital loss of a * sovereign entity from a * CGT event that happens at a time if, on the assumption that the loss were a * capital gain that happened at that time, the capital gain would be disregarded because of section 880 ‑ 115.

Amendment history: Inserted by No 34 of 2019, effective Sch 1 (items 1–5, 12, 13, 16), Sch 2, Sch 4 (items 3–6, 8, 9) and Sch 5 (items 1, 2, 5): 1 July 2019 (s 2(1) items 2, 3)

s 880-125 — Covered sovereign entities

A * sovereign entity is covered by this section if it satisfies all of the following requirements: (a) the entity is funded solely by public monies; (b) all returns on the entity’s investments are public monies; (c) the entity is not a partnership; (d) the entity is not any of the following: (i) a * public non ‑ financial entity; (ii) a * public financial entity (other than a public financial entity that only carries on central banking activities).

Amendment history: Inserted by No 34 of 2019, effective Sch 1 (items 1–5, 12, 13, 16), Sch 2, Sch 4 (items 3–6, 8, 9) and Sch 5 (items 1, 2, 5): 1 July 2019 (s 2(1) items 2, 3)

s 880-130 — Meaning of public non ‑ financial entity and public financial entity

(1) An entity is a public non ‑ financial entity if its principal activity is either or both of the following: (a) producing or trading non ‑ financial goods; (b) providing services that are not financial services. (2) An entity is a public financial entity if any of the following requirements are satisfied: (a) it trades in financial assets and liabilities; (b) it operates commercially in the financial markets; (c) its principal activities include providing any of the following financial services: (i) financial intermediary services, including deposit ‑ taking and insurance services; (ii) financial auxiliary services, including brokerage, foreign exchange and investment management services; (iii) capital financial institution services, including financial services in relation to assets or liabilities that are not available on open financial markets.

Amendment history: Inserted by No 34 of 2019, effective Sch 1 (items 1–5, 12, 13, 16), Sch 2, Sch 4 (items 3–6, 8, 9) and Sch 5 (items 1, 2, 5): 1 July 2019 (s 2(1) items 2, 3)

s 880-200 — What this Subdivision is about

This Subdivision provides a tax exemption for income of an entity that arises from its consular functions. Table of sections Operative provisions 880 ‑ 205 Income from consular functions—non ‑ assessable non ‑ exempt income

Amendment history: Inserted by No 34 of 2019, effective Sch 1 (items 1–5, 12, 13, 16), Sch 2, Sch 4 (items 3–6, 8, 9) and Sch 5 (items 1, 2, 5): 1 July 2019 (s 2(1) items 2, 3)

s 880-205 — Income from consular functions—non ‑ assessable non ‑ exempt income

An amount of * ordinary income or * statutory income of an entity is not assessable income and is not * exempt income if the income arises from the entity’s consular functions. Income Tax Assessment Act 1997 No. 38, 1997 Compilation No. 266 Compilation date: 1 July 2026 Includes amendments: Act No. 17, 2025, Act No. 57, 2025, Act No. 49, 2026 and Act No. 58, 2026 This compilation is in 12 volumes Volume 1: Chapter 1, Part 1 ‑ 1 to Chapter 2, Part 2 ‑ 5 sections 1 ‑ 1 to 36 ‑ 55 Volume 2: Chapter 2, Part 2 ‑ 10 to Chapter 2, Part 2 ‑ 20 sections 40 ‑ 1 to 67 ‑ 30 Volume 3: Chapter 2, Part 2 ‑ 25 to Chapter 3, Part 3 ‑ 1 sections 70 ‑ 1 to 121 ‑ 35 Volume 4: Chapter 3, Part 3 ‑ 3 to Chapter 3, Part 3 ‑ 5 sections 122 ‑ 1 to 197 ‑ 85 Volume 5: Chapter 3, Part 3 ‑ 6 to Chapter 3, Part 3 ‑ 10 sections 200 ‑ 1 to 253 ‑ 15 Volume 6: Chapter 3, Part 3 ‑ 25 to Chapter 3, Part 3 ‑ 30 sections 275 ‑ 1 to 313 ‑ 85 Volume 7: Chapter 3, Part 3 ‑ 32 to Chapter 3, Part 3 ‑ 50 sections 315 ‑ 1 to 421 ‑ 85 Volume 8: Chapter 3, Part 3 ‑ 80 to Chapter 3, Part 3 ‑ 90 sections 615 ‑ 1 to 721 ‑ 40 Volume 9: Chapter 3, Part 3 ‑ 95 to Chapter 4, Part 4 ‑ 5 sections 723 ‑ 1 to 880 ‑ 205 Volume 10: Chapter 5, Part 5 ‑ 30 to Chapter 6, Part 6 ‑ 5 sections 900 ‑ 1 to 995 ‑ 1 Volume 11: Endnotes 1 to 3 Volume 12: Endnote 4 Each volume has its own contents About this compilation This compilation This is a compilation of the Income Tax Assessment Act 1997 that shows the text of the law as amended and in force on 1 July 2026 (the compilation date ). The notes at the end of this compilation (the endnotes ) include information about amending laws and the amendment history of provisions of the compiled law. Uncommenced amendments The effect of uncommenced amendments is not shown in the text of the compiled law. The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. Any uncommenced amendments affecting the law are accessible on the Register (www.legislation.gov.au). Application, saving and transitional provisions If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes. Editorial changes For more information about any editorial changes made in this compilation, see the endnotes. Presentational changes The Legislation Act 2003 provides for First Parliamentary Counsel to make presentational changes to a compilation. Presentational changes are applied to give a more consistent look and feel to legislation published on the Register, and enable the user to more easily navigate those documents. Modifications If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. Any modifications affecting the law are accessible on the Register. Self ‑ repealing provisions If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes. Contents

Amendment history: Inserted by No 34 of 2019, effective Sch 1 (items 1–5, 12, 13, 16), Sch 2, Sch 4 (items 3–6, 8, 9) and Sch 5 (items 1, 2, 5): 1 July 2019 (s 2(1) items 2, 3)

s 900-1 — What this Division is about

This Division sets out the substantiation rules that apply to certain types of losses or outgoings.

s 900-5 — Application of the requirements of Division 900

(1) The requirements of this Division apply to an individual. (2) They also apply to a partnership that includes at least one individual, as if the partnership were an individual. (3) They do not apply to any other entity.

s 900-10 — Substantiation requirement

To deduct certain types of losses or outgoings, you need to substantiate them under this Division. Item For this type of loss or outgoing: see: 1. Work expenses Subdivision 900 ‑ B 2. Car expenses Subdivision 900 ‑ C 3. Business travel expenses Subdivision 900 ‑ D Note: There are exceptions to these requirements: • Subdivision 900 ‑ B has some specific exceptions about work expenses. • Subdivision 900 ‑ H provides for relief from the effects of failing to substantiate.

Amendment history: Amended by No 49 of 2026, effective sch 1 (items 1-51, 54-59, 64-79A, 82-84), sch 3, sch 4 (items 1-17): 1 July 2026 (s 2(1) items 2-4, 6) sch 2 (items 1-5): 27 June 2026 (s 2(1) item 5)

s 900-12 — Application to recipients and payers of certain withholding payments

Application to recipients (1) If an individual receives, or is entitled to receive, * withholding payments covered by subsection (3), this Division applies to him or her: (a) in the same way as it applies to an employee; and (b) as if an entity that makes (or is liable to make) such payments to him or her were his or her employer; and (c) as if the withholding payments covered by subsection (3) that he or she receives (or is entitled to receive) were salary or wages. Application to payers (2) This Division applies to an entity that makes, or is liable to make, * withholding payments covered by subsection (3): (a) in the same way as it applies to an employer; and (b) as if an individual to whom the entity makes (or is liable to make) such payments were the entity’s employee. Withholding payments covered (3) This subsection covers a * withholding payment covered by any of the provisions in Schedule 1 to the Taxation Administration Act 1953 listed in the table. Withholding payments covered Item Provision Subject matter 1 Section 12 ‑ 35 Payment to employee 2 Section 12 ‑ 40 Payment to company director 3 Section 12 ‑ 45 Payment to office holder 3A Section 12 ‑ 47 Payment to * religious practitioner 4 Section 12 ‑ 50 Return to work payment 5 Subdivision 12 ‑ C Payments for retirement or because of termination of employment 6 Subdivision 12 ‑ D Benefit and compensation payments

Amendment history: Repealed and substituted by No 178 of 1999, effective Schedule 1 (items 6, 8, 70–78): 1 July 2000 Remainder: Royal Assent | Amended by No 168 of 2001, effective Schedule 2: 1 July 2000 Remainder: Royal Assent | Amended by No 15 of 2007, effective s 4, Sch 1 (items 150–236, 240, 242–260, 406(1)–(3)), Sch 3 (items 8–44, 66) and Sch 4 (items 1–8): 15 Mar 2007 (s 2(1) items 1, 2, 6, 8, 9) Sch 2: 12 Apr 2007 (s 2(1) item 3) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B)

s 900-15 — Getting written evidence

(1) To deduct a * work expense: (a) it must qualify as a deduction under some provision of this Act outside this Division; and (b) you need to substantiate it by getting written evidence. Subdivision 900 ‑ E tells you about the evidence you need. To find out whether an expense qualifies as a deduction under this Act, see Division 8 (Deductions). (2) If your expense is for fuel or oil, you have a choice of either: (a) getting written evidence of it under Subdivision 900 ‑ E; or (b) keeping odometer records for the period when you owned or leased the * car in the income year. Subdivision 28 ‑ H tells you about odometer records. Note: In certain circumstances (for example, under a hire purchase agreement) the notional buyer of property is taken to be its owner (see subsection 240 ‑ 20(2)).

Amendment history: Amended by No 174 of 1997, effective Sch 6 (items 1–16, 23(1)) and Sch 9 (items 1–23, 30(1)): 21 Nov 1997 (s 2(1), (3)) | Amended by No 72 of 2001, effective 30 June 2001

s 900-20 — Keeping travel records

You need to keep travel records if your expense is for travel that involves you being away from your ordinary residence for 6 or more nights in a row. The travel may be within or outside Australia. Subdivision 900 ‑ F tells you about travel records. Note: Members of international flight crews may be exempt from keeping travel records for losses or outgoings covered by travel allowances: see section 900 ‑ 65.

s 900-25 — Retaining the written evidence and travel records

(1) Once you have the material required by section 900 ‑ 15 or 900 ‑ 20, you must retain it for 5 years. There is no need to lodge it with your * income tax return. The Commissioner may require you to produce it: see Subdivision 900 ‑ G. The period for which you must retain it is called the retention period . (2) The 5 years start on the due day for lodging your * income tax return for the income year. If you lodge your return later, the 5 years start on the day you lodge it. (3) However, the * retention period is extended if, when the 5 years end, you are involved in a dispute with the Commissioner that relates to the expense. See section 900 ‑ 170. (4) If you do not retain the material for the * retention period, you cannot deduct the expense. If you have already deducted it, your assessment may be amended to disallow the deduction. (5) If you lose any of the material, there are rules that might help you in section 900 ‑ 205.

s 900-30 — Meaning of work expense

General (1) A work expense is a loss or outgoing you incur in producing your salary or wages. Note: This Division also applies to withholding payments that are not salary or wages: see subsection 900 ‑ 12(3). Travel allowance expenses included (2) Travel allowance expenses count as * work expenses. A travel allowance expense is a loss or outgoing you incur for travel that is covered by a * travel allowance. The loss or outgoing must: (a) be for accommodation or for food or drink; or (b) be incidental to the travel. (3) A travel allowance is an allowance your employer pays or is to pay to you to cover losses or outgoings: (a) that you incur for travel away from your ordinary residence that you undertake in the course of your duties as an employee; and (b) that are losses or outgoings for accommodation or for food or drink, or are incidental to the travel. The travel may be within or outside Australia. Note: This Division also applies to individuals who are not employees: see section 900 ‑ 12. Meal allowance expenses included (4) Meal allowance expenses count as * work expenses. A meal allowance expense is a loss or outgoing that you incur for food or drink that is covered by a * meal allowance. (5) A meal allowance is an allowance that your employer pays or is to pay to you as an employee to enable you to buy food or drink. However, an allowance is not a meal allowance if it is a * travel allowance or part of one. Note: This Division also applies to individuals who are not employees: see section 900 ‑ 12. Motor vehicle expenses excluded (6) A loss or outgoing to do with a * motor vehicle is not treated as a * work expense unless it is: (a) a loss or outgoing incurred, or a payment made, in respect of travel outside Australia; or (b) a taxi fare or similar loss or outgoing. However, most losses or outgoings to do with a * motor vehicle are covered by the rules about * car expenses. See Division 28 and Subdivision 900 ‑ C. Other types of losses or outgoings included (7) In addition to losses or outgoings within the general scope of subsection (1), any of the following is a * work expense: (a) the decline in value of property you own and that is used, or is * installed ready for use, by you in order to produce your salary or wages; (b) expenditure you incur that qualifies as a deduction under section 25 ‑ 60 (Parliament election expenses) or section 25 ‑ 65 (about local government election expenses); (c) expenditure you incur that entitles you to a deduction under section 25 ‑ 100 (transport expenses incurred in your travel between workplaces), other than * car expenses; (d) a loss or outgoing you incur in relation to producing your salary or wages that entitles you to a deduction under section 25 ‑ 125 (COVID ‑ 19 tests). Note 1: This Division also applies to payments that are not salary or wages, but are PAYE earnings: see section 900 ‑ 12. Note 2: In certain circumstances (for example, under a hire purchase agreement) the notional buyer of property is taken to be its owner (see subsection 240 ‑ 20(2)). Note 3: See Subdivision 900 ‑ C for car expenses that are also transport expenses incurred in your travel between workplaces.

Amendment history: Amended by No 121 of 1997, effective s 4: 8 July 1997 (s 2(1)) Sch 1, Sch 2 (items 3–17), Sch 3 (items 3–30), Sch 4 (items 5–62, Sch 5 (items 3–42), Sch 6 (items 3–67), Sch7 (items 2–4), Sch 8 (items 2–31), Sch 9 (items 3–15), Sch 10 (items 2–11), Sch 11 (items 2–36) and Sch 12 (items 1–14): 1 July 1997 (s 2(2), (3), (4) (5)) | Amended by No 179 of 1999, effective Sch 7, Sch 8, Sch 16 (items 18, 19, 37) and Sch 18: 22 Dec 1999 (s 2(1), (7)(d), (e)) Sch 11 (items 80–105) and Sch 18 (items 4, 5, 17, 21, 32): 1 July 2000 (s 2(9)(b), (14)) | Amended by No 72 of 2001, effective 30 June 2001 | Amended by No 77 of 2001, effective Sch 2 (items 149–476, 488): 30 June 2001 (s 2(1)) | Amended by No 95 of 2004, effective s. 4, Schedules 2, 3, 5 and 11: Royal Assent Schedule 7 (items 1–10, 13): 1 July 2004 Schedule 10 (items 28–39, 44, 45): 1 July 2005 | Amended by No 58 of 2006, effective s. 4, Schedules 1, 2, Schedule 3 (items 1–3, 7), Schedule 4, Schedule 5 (items 1–3) and Schedule 7 (items 51–113, 213–216, 257–263): Royal Assent Sch 7 (items 179–188): 1 July 2004 (s 2(1) item 15) Sch 7 (item 189): 5 July 1999 (s 2(1) item 16) Sch 7 (item 190): 30 June 2000 (s 2(1) item 17) Sch 7 (item 191): 24 Oct 2002 (s 2(1) item 18) Sch 7 (item 192): 30 June 2004 (s 2(1) item 19) Sch 7 (item 193): 22 Dec 1999 (s 2(1) item 20) | Amended by No 101 of 2006, effective Schedules 3 and 4: 1 Jan 2008 Remainder: Royal Assent | Amended by No 14 of 2022, effective sch 2, 3, 6, sch 8 (items 1-9): 1 Apr 2022 (s 2(1) items 3, 7, 9)

s 900-50 — Exception for domestic travel allowance expenses

(1) You can deduct a * travel allowance expense for travel within Australia without getting written evidence or keeping travel records if the Commissioner considers reasonable the total of the losses or outgoings you claim for travel covered by the allowance. (2) In deciding whether the total of the losses or outgoings you claim is reasonable, the Commissioner must take into account the total of the losses or outgoings of the following kinds that it would be reasonable for you to incur for the travel: (a) accommodation; (b) food or drink; (c) losses or outgoings incidental to the travel.

s 900-55 — Exception for overseas travel allowance expenses

(1) You can deduct a * travel allowance expense for travel outside Australia without getting written evidence under the same conditions as for domestic * travel allowances, except that you still have to get written evidence for losses or outgoings for accommodation. (2) Consequently, in deciding whether the total of the losses or outgoings you claim is reasonable, the Commissioner must disregard losses or outgoings for accommodation. (3) However, for overseas travel covered by a * travel allowance you must still keep travel records if the travel involves you being away from your ordinary residence for 6 or more nights in a row: Subdivision 900 ‑ F tells you about travel records.

s 900-60 — Exception for reasonable overtime meal allowance

You can deduct a * meal allowance expense without getting written evidence if: (a) the allowance is to enable you to buy food or drink in connection with overtime that you work; and (b) the allowance is paid or payable to you under an * industrial instrument; and (c) the Commissioner considers reasonable the total of the losses or outgoings you claim that are covered by the allowance.

s 900-65 — Crew members on international flights need not keep travel records

You can deduct a * travel allowance expense without keeping travel records if: (a) the allowance covers travel by you as a crew member of an aircraft; and (b) the travel is principally outside Australia; and (c) the total of the losses or outgoings you claim for the travel that are covered by the allowance does not exceed the allowance.

s 900-70 — Getting written evidence

(1) For the “log book” method of deducting a * car expense, you need to substantiate the expense by getting written evidence. Subdivision 900 ‑ E tells you about the evidence you need. Subdivision 28 ‑ F tells you about the “log book” method. (3) If you are using the “log book” method and your expense is for fuel or oil, you do not need to get written evidence of it, because section 28 ‑ 100 already requires you to keep odometer records for the period when you * held the * car in the income year.

Amendment history: Amended by No 174 of 1997, effective Sch 6 (items 1–16, 23(1)) and Sch 9 (items 1–23, 30(1)): 21 Nov 1997 (s 2(1), (3)) | Amended by No 72 of 2001, effective 30 June 2001 | Amended by No 162 of 2015, effective Sch 1 (items 1–3, 21–46) and Sch 4 (items 2, 27): 30 Nov 2015 (s 2(1) items 2, 3, 6)

s 900-75 — Retaining the written evidence and odometer records

(1) Once you have the material required by this Subdivision, you must retain it for 5 years. There is no need to lodge it with your * income tax return. The Commissioner may require you to produce it: see Subdivision 900 ‑ G. The period for which you must retain it is called the retention period . (2) The 5 years start on the due day for lodging your * income tax return for the income year. If you lodge your return later, the 5 years start on the day you lodge it. (3) However, the * retention period is extended if, when the 5 years end, you are involved in a dispute with the Commissioner that relates to the expense. See section 900 ‑ 170. (4) If you do not retain the material for the * retention period, you cannot deduct the expense. If you have already deducted it, your assessment may be amended to disallow the deduction. (5) If you lose any of the material, there are rules that might help you in section 900 ‑ 205.

s 900-80 — Getting written evidence

(1) To deduct a * business travel expense: (a) it must qualify as a deduction under some provision of this Act outside this Division; and (b) you need to substantiate it by getting written evidence. Subdivision 900 ‑ E tells you about the evidence you need. To find out whether an expense qualifies as a deduction under this Act, see Division 8 (Deductions). (2) If your expense is for fuel or oil, you have a choice of either: (a) getting written evidence of it under Subdivision 900 ‑ E; or (b) keeping odometer records for the period when you owned or leased the * car in the income year. Subdivision 28 ‑ H tells you about odometer records. Note: In certain circumstances (for example, under a hire purchase agreement) the notional buyer of property is taken to be its owner (see subsection 240 ‑ 20(2)).

Amendment history: Amended by No 174 of 1997, effective Sch 6 (items 1–16, 23(1)) and Sch 9 (items 1–23, 30(1)): 21 Nov 1997 (s 2(1), (3)) | Amended by No 72 of 2001, effective 30 June 2001

s 900-85 — Keeping travel records

You need to keep travel records if your expense is for travel that involves you being away from your ordinary residence for 6 or more nights in a row. Subdivision 900 ‑ F tells you about travel records.

s 900-90 — Retaining the written evidence and travel records

(1) Once you have the material required by section 900 ‑ 80 or 900 ‑ 85, you must retain it for 5 years. There is no need to lodge it with your * income tax return. The Commissioner may require you to produce it: see Subdivision 900 ‑ G. The period for which you must retain it is called the retention period . (2) The 5 years start on the due day for lodging your * income tax return for the income year. If you lodge your return later, the 5 years start on the day you lodge it. (3) However, the * retention period is extended if, when the 5 years end, you are involved in a dispute with the Commissioner that relates to the expense. See section 900 ‑ 170. (4) If you do not retain the material for the * retention period, you cannot deduct the expense. If you have already deducted it, your assessment may be amended to disallow the deduction. (5) If you lose any of the material, there are rules that might help you in section 900 ‑ 205.

s 900-95 — Meaning of business travel expense

General (1) A business travel expense is a * travel expense, in so far as you incur it in producing your assessable income other than salary or wages. Travel expense (2) A loss or outgoing is a travel expense if you incur it for travel by you that involves you being away from your ordinary residence for at least one night. The travel may be within or outside Australia. Salary and wages travel expenses excluded (3) In so far as you incur * travel expenses in producing your salary or wages, the expenses are not treated as * business travel expenses. Instead, they are dealt with as * work expenses in Subdivision 900 ‑ B. Note: This Division also applies to withholding payments that are not salary or wages: see subsection 900 ‑ 12(3). Travel allowance expenses excluded (4) * Travel allowance expenses are not treated as * business travel expenses. They too are dealt with as * work expenses in Subdivision 900 ‑ B. Motor vehicle expenses excluded (5) A loss or outgoing to do with a * motor vehicle is not treated as a * business travel expense unless it is: (a) a loss or outgoing incurred, or a payment made, in respect of travel outside Australia; or (b) a taxi fare or similar loss or outgoing. However, most * motor vehicle expenses are covered by the rules about * car expenses. See Division 28 and Subdivision 900 ‑ C.

Amendment history: Amended by No 179 of 1999, effective Sch 7, Sch 8, Sch 16 (items 18, 19, 37) and Sch 18: 22 Dec 1999 (s 2(1), (7)(d), (e)) Sch 11 (items 80–105) and Sch 18 (items 4, 5, 17, 21, 32): 1 July 2000 (s 2(9)(b), (14))

s 900-100 — What this Subdivision is about

This Subdivision tells you how you must get written evidence to support a claim for a deduction. Table of sections Operative provisions 900 ‑ 105 Ways of getting written evidence 900 ‑ 110 Time limits 900 ‑ 115 Written evidence from supplier 900 ‑ 120 Written evidence of depreciating asset expense 900 ‑ 125 Evidence of small expenses 900 ‑ 130 Evidence of expenses considered otherwise too hard to substantiate 900 ‑ 135 Evidence on a payment summary

s 900-105 — Ways of getting written evidence

Each of the following sections has a set of rules for a particular way of getting written evidence to substantiate a deduction. Which ones you can use depends on the type of expense. You only need to use one set of rules to support an expense.

s 900-110 — Time limits

(1) There is no time limit for getting written evidence of an expense (unless you want to record the expense yourself under section 900 ‑ 125 or 900 ‑ 130). But until you get written evidence of it, you are not entitled to a deduction for the expense. (2) If when you lodge your * income tax return for the income year you have good reason to expect to get written evidence of the expense within a reasonable time, you can deduct the expense without actually getting the evidence. But if you don’t get the evidence within a reasonable time, your entitlement to the deduction ceases. If you have already deducted the expense, your assessment may be amended to disallow the deduction. (3) Even if you only get written evidence of the expense after the end of the income year, you deduct the expense for that income year, not the income year in which you get the evidence.

s 900-115 — Written evidence from supplier

(1) You may use this set of rules for any type of expense except the decline in value of a * depreciating asset. (2) You must get a document from the supplier of the goods or services the expense is for. The document must set out: (a) the name or business name of the supplier; and (b) the amount of the expense, expressed in the currency in which it was incurred; and (c) the nature of the goods or services; and (d) the day the expense was incurred; and (e) the day it is made out. (3) There are 2 exceptions to these requirements: (a) if the document does not show the day the expense was incurred, you may use a bank statement or other reasonable, independent evidence that shows when it was paid; (b) if the document the supplier gave you does not specify the nature of the goods or services, you may write in the missing details yourself before you lodge your * income tax return for the income year. (4) The document must be in English. However, if the expense was incurred in a country outside Australia, the document can instead be in a language of that country.

Amendment history: Amended by No 77 of 2001, effective Sch 2 (items 149–476, 488): 30 June 2001 (s 2(1))

s 900-120 — Written evidence of depreciating asset expense

(1) You may use this set of rules only for a * depreciating asset expense. (2) You must get evidence of the original acquisition of the * depreciating asset. It must be a document that you get from the supplier of the asset and that specifies: (a) the name or business name of the supplier; and (b) the cost of the asset to you; and (c) the nature of the asset; and (d) the day you acquired the asset; and (e) the day it is made out. (3) However, if the document the supplier gave you does not specify the nature of the asset, you may write in the missing details yourself before you lodge your * income tax return for the income year in which you first claim a deduction for the decline in value of the asset. (4) If you don’t get the document in time, for example because you only decided to use the asset for income ‑ producing purposes several years after you acquired it, there are rules that might help you in Subdivision 900 ‑ H (Relief from effects of failing to substantiate). (5) The document must be in English. However, if you * imported the asset into Australia, the document can instead be in a language of the country from which the asset was originally exported.

Amendment history: Amended by No 176 of 1999, effective Sch 3: 1 July 2000 (s 2(9)) | Repealed and substituted by No 77 of 2001, effective Sch 2 (items 149–476, 488): 30 June 2001 (s 2(1))

s 900-125 — Evidence of small expenses

(1) If your expense is small, and you have a small total of small expenses, you can make a record of the expenses instead of getting a document from the supplier. (2) Each expense must be $10 or less, and the total of all your expenses that: (a) are each $10 or less; and (b) you incurred in the income year and wish to deduct; and (c) you must get written evidence for under this Division; must be $200 or less. These limits can be increased from time to time by regulations made under section 909 ‑ 1. (3) If the expense is not the decline in value of a * depreciating asset, you must get a document with the same information as required by section 900 ‑ 115, except that you may create the document and record all the details yourself. You must do so as soon as possible after incurring the expense. (4) If the expense is the decline in value of a * depreciating asset, you must, as soon as possible after the last day of the income year, record in a document the following: (a) the nature of the property; (b) the amount of the decline in value; (c) who made the record; (d) the day the record is made. (5) A record must be in English.

Amendment history: Amended by No 77 of 2001, effective Sch 2 (items 149–476, 488): 30 June 2001 (s 2(1))

s 900-130 — Evidence of expenses considered otherwise too hard to substantiate

(1) If the Commissioner considers it unreasonable to expect you to have got written evidence of an expense in any other way permitted by this Subdivision, you can use the method in section 900 ‑ 125 to get written evidence of your claim. (2) The expense may be more than $10 and does not count towards the $200 limit in section 900 ‑ 125.

s 900-135 — Evidence on a payment summary

(1) If the nature and amount of a * work expense are shown on your copy of a * payment summary given to you by your employer, you can use the copy as written evidence of the expense. Note: This Division also applies to entities that are not employers, but pay (or are liable to pay) withholding payments covered by subsection 900 ‑ 12(3). (2) Expenses of the same nature need not be separately itemised; it is acceptable if they are totalled together on the * payment summary.

Amendment history: Amended by No 179 of 1999, effective Sch 7, Sch 8, Sch 16 (items 18, 19, 37) and Sch 18: 22 Dec 1999 (s 2(1), (7)(d), (e)) Sch 11 (items 80–105) and Sch 18 (items 4, 5, 17, 21, 32): 1 July 2000 (s 2(9)(b), (14))

s 900-140 — What this Subdivision is about

This Subdivision tells you how to keep travel records. A travel record is a record of activities you undertake during your travel. Table of sections 900 ‑ 145 Purpose of a travel record Operative provisions 900 ‑ 150 Recording activities in travel records 900 ‑ 155 Showing which of your activities were income ‑ producing activities

s 900-145 — Purpose of a travel record

The purpose of a travel record is to show which of your activities were undertaken in the course of producing your assessable income, so that your losses or outgoings, or portions of them, can be attributed to income ‑ producing purposes.

s 900-150 — Recording activities in travel records

(1) You record an activity by specifying in a diary or similar document: (a) the nature of the activity; (b) the day and approximate time when it began; (c) how long it lasted; (d) where you engaged in it. (2) An activity must be recorded before it ends, or as soon as possible afterwards. Each entry must be in English.

s 900-155 — Showing which of your activities were income ‑ producing activities

(1) You need not record an income ‑ producing activity. But if you don’t, the activity cannot be taken into account in working out the extent to which you can deduct an expense you incur for the travel. Example: If you fly to Los Angeles for the sole purpose of attending a 7 day conference, but you don’t record the conference in your travel record, you cannot deduct the cost of the air fare. This is so even if you have written evidence that you paid the fare (eg a receipt), as required by Subdivision 900 ‑ E. (2) You don’t need to record any other kind of activity, although you may do so.

s 900-160 — What this Subdivision is about

This Subdivision tells you how long you need to retain records of an expense and when you have to produce those records. Table of sections 900 ‑ 165 The retention period Operative provisions 900 ‑ 170 Extending the retention period if an expense is disputed 900 ‑ 175 Commissioner may tell you to produce your records 900 ‑ 180 How to comply with a notice 900 ‑ 185 What happens if you don’t comply

s 900-165 — The retention period

Whenever you are required to retain records of an expense under this Division or Division 28, you need to retain the records for 5 years.

s 900-170 — Extending the retention period if an expense is disputed

The * retention period is automatically extended if one of the following types of dispute relating to the expense is unresolved when the 5 years end: (a) an objection; (b) a review or appeal arising from an objection; (c) a request for amendment of an assessment. The extension lasts until the dispute is resolved.

s 900-175 — Commissioner may tell you to produce your records

(1) The Commissioner may give you a written notice telling you to produce records of expenses specified in the notice. The records must be ones that you have to retain for the * retention period: you do not have to produce records if the retention period for those records is over. (2) The notice must give you 28 days or more to comply, starting on the day after the notice is given. The Commissioner may allow you more time to comply with the notice.

s 900-180 — How to comply with a notice

(1) To comply with the notice, you must produce to the Commissioner, for each of the expenses, the material that this Division or Division 28 requires you to retain during the * retention period. (2) You must also produce a summary that, for each expense for which you produce written evidence (see Subdivision 900 ‑ E): (a) notes the expense; and (b) has a cross ‑ reference to the written evidence of the expense; and (c) summarises the particulars set out in the written evidence; and (d) if the expense was in a foreign currency—shows the amount of the expense in Australian currency. The summary must be in English in a form approved by the Commissioner.

s 900-185 — What happens if you don’t comply

(1) If you do not comply with a notice for a particular expense, you cannot deduct the expense. If you have already deducted it, your assessment may be amended to disallow the deduction. (2) You do not commit an offence merely by not complying with the notice, despite section 8C of the Taxation Administration Act 1953 .

s 900-195 — Commissioner’s discretion to review failure to substantiate

Not doing something necessary to follow the rules in this Division does not affect your right to a deduction if the nature and quality of the evidence you have to substantiate your claim satisfies the Commissioner: (a) that you incurred the expense; and (b) that you are entitled to deduct the amount you claim.

s 900-200 — Reasonable expectation that substantiation would not be required

Not doing something necessary to follow the rules in this Division does not affect your right to deduct an amount if the only reason was that you had a reasonable expectation that you would not need to do it in order to be able to deduct that amount.

s 900-205 — What if your documents are lost or destroyed?

(1) If you have a complete copy of a document that is lost or destroyed during the * retention period, it is treated as the original from the time of the loss or destruction. (2) If you don’t have such a copy, but the Commissioner is satisfied that you took reasonable precautions to prevent the loss or destruction, the rest of this section explains what to do. (3) If the lost or destroyed document was a travel record, log book or other document that is not written evidence of an expense under Subdivision 900 ‑ E, you do not need to replace it; your deduction is not affected by your failing to retain or produce the document. (4) If the lost or destroyed document was written evidence, you must try to get a substitute document that meets all the original requirements (except the time limit for getting the original). (5) If you succeed, your deduction is not affected by your failing to retain or produce the original document. The substitute document is treated as the original from the time of the loss or destruction. (6) If it is not reasonably possible to succeed, your deduction is not affected by your failing to retain or produce the original document. (7) If it is reasonably possible for you to get a substitute document, but you don’t get one, this section does not protect you from the consequences of failing to retain or produce the original.

s 905-5 — Application of the Criminal Code

Chapter 2 of the Criminal Code applies to all offences against this Act. Note: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

Amendment history: Inserted by No 146 of 2001, effective Sch 4 (items 92–101): 15 Dec 2001 (s 2(1))

s 909-1 — Regulations

(1) The Governor ‑ General may make regulations prescribing matters that: (a) this Act requires or permits to be prescribed; or (b) are necessary or convenient to prescribe for carrying out or giving effect to this Act. (2) The regulations may prescribe penalties for offences against the regulations. A penalty may not exceed a fine of 5 penalty units. Note: Section 4AA of the Crimes Act 1914 deals with penalty units.

s 950-100 — What forms part of this Act

(1) These all form part of this Act: • the headings of the Chapters, Parts, Divisions and Subdivisions of this Act; • * Guides; • the headings of the sections and subsections of this Act; • the headings for groups of sections of this Act (group headings); • the notes and examples (however described) that follow provisions of this Act. (2) The asterisks used to identify defined terms form part of this Act. However, if a term is not identified by an asterisk, disregard that fact in deciding whether or not to apply to that term a definition or other interpretation provision.

s 950-105 — What does not form part of this Act

These do not form part of this Act:  footnotes and endnotes;  Tables of Subdivisions;  Tables of sections.

s 950-150 — Guides, and their role in interpreting this Act

(1) A Guide consists of: (a) sections under a heading indicating that what follows is a Guide to a particular Subdivision, Division etc.; or (b) a Subdivision, Division or Part that is identified as a Guide by a provision in the Subdivision, Division or Part. (2) Guides form part of this Act, but they are kept separate from the operative provisions. In interpreting an operative provision, a Guide may only be considered: (a) in determining the purpose or object underlying the provision; or (b) to confirm that the provision’s meaning is the ordinary meaning conveyed by its text, taking into account its context in the Act and the purpose or object underlying the provision; or (c) in determining the provision’s meaning if the provision is ambiguous or obscure; or (d) in determining the provision’s meaning if the ordinary meaning conveyed by its text, taking into account its context in the Act and the purpose or object underlying the provision, leads to a result that is manifestly absurd or is unreasonable.

Amendment history: Amended by No 16 of 1998, effective s 4, Sch 3–5, Sch 10 (items 1–19) and Sch 11: 16 Apr 1998 (s 2(1))

s 960-20 — Utilisation

(1) None of the following can be * utilised, to the extent it has already been utilised: (a) a * tax loss; (b) a * net capital loss; (c) * net exempt income. Utilisation of losses (2) A * tax loss is utilised to the extent that: (a) it is deducted from an amount of assessable income or * net exempt income; or (b) it is reduced by applying a * total net forgiven amount; or (c) it is * carried back. (3) A * net capital loss is utilised to the extent that: (a) it is applied to reduce an amount of * capital gains; or (b) it is reduced by applying a * total net forgiven amount. Utilisation of net exempt income (4) * Net exempt income for an income year is utilised to the extent that: (a) it is subtracted: (i) from deductions; or (ii) under subsection 268 ‑ 60(4) in Schedule 2F to the Income Tax Assessment Act 1936 or subsection 165 ‑ 70(4) or 175 ‑ 35(4) of this Act; in determining a * tax loss for the income year; or (b) because of it, the extent to which a tax loss can be deducted in that income year is reduced; or (c) because of it, an amount is reduced under subsection 35 ‑ 15(2) (about deferral of deductions from non ‑ commercial business activities); or (d) because of it, a quarantined amount is reduced under subsection 26 ‑ 47(8); or (e) it is reduced under subsection 65 ‑ 35(3) because of a * tax offset carried forward; or (f) because of it, an amount is reduced under step 2 of the method statement in subsection 160 ‑ 10(2) (which is a step in calculating a loss carry back tax offset component).

Amendment history: Inserted by No 88 of 2013, effective s 4, Sch 1 (items 1–18), Sch 3 and Sch 7 (items 200–210, 236–242): 28 June 2013 (s 2(1) items 1, 2, 5, 21, 26) Sch 1 (items 33, 34): 1 July 2013 (s 2(1) item 3) Sch 5 (items 1–5, 7–9) and Sch 6 (items 3–41, 50–65): 29 June 2013 (s 2(1) items 8, 9, 14) Sch 7 (items 1–4): 1 July 2012 (s 2(1) item 15) | Amended by No 96 of 2014, effective Sch 1 (items 14–45, 122–124), Sch 2 (items 1, 14–40, 42, 43) and Sch 3–5: 30 Sept 2014 (s 2(1) item 2) Sch 8 (items 15–22, 26) and Sch 9 (items 21, 22, 24): 31 Dec 2016 (s 2(1) items 7, 9) | Amended by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 960-49 — Objects of this Subdivision

The objects of this Subdivision are as follows: (a) to set out a basic rule requiring an amount in a * foreign currency to be translated into an Australian dollar amount (the basic rule is subject to the functional currency rules in Subdivision 960 ‑ D and to certain specific exclusions); (b) to ensure that the rules for identifying the exchange rate for the translation of a foreign currency amount into Australian dollars: (i) reflect an appropriate prevailing exchange rate; and (ii) take into account, as appropriate, commercial practices for the translation of foreign currency amounts into Australian dollars.

Amendment history: Inserted by No 133 of 2003, effective 17 Dec 2003

s 960-50 — Translation of amounts into Australian currency

(1) For the purposes of this Act, an amount in a * foreign currency is to be translated into Australian currency. Examples of an amount (2) The following are examples of an amount: (a) an amount of * ordinary income; (b) an amount of an expense; (c) an amount of an obligation; (d) an amount of a liability; (e) an amount of a receipt; (f) an amount of a payment; (g) an amount of consideration; (h) a value. (3) The amounts set out in paragraphs (2)(b) to (h) may be amounts on revenue account, capital account or otherwise. Amounts that are elements in the calculation of other amounts (4) In applying this section: (a) first, translate any amounts that are elements in the calculation of other amounts (except * special accrual amounts); and (b) then, calculate the other amounts. Special accrual amounts (5) In applying this section: (a) calculate a * special accrual amount without translation; and (b) then, translate the special accrual amount. Special translation rules (6) The table has effect: Special translation rules Item In this case... this is the result... 1 forex realisation event 4 happens when you cease to have an obligation, or a part of an obligation, to pay * foreign currency, and neither of subparagraphs 775 ‑ 55(1)(b)(ii) and (iii) applies for the purposes of section 775 ‑ 55, the amount of the obligation, or the part of the obligation, at the tax recognition time (see subsection 775 ‑ 55(7)) is to be translated to Australian currency at the exchange rate applicable at that time. 2 cost of a * depreciating asset (a) if you incur an obligation in return for your starting to hold the asset, and the obligation is not satisfied before you begin to hold the asset (worked out under Division 40)—the cost of the asset is to be translated to Australian currency at the exchange rate applicable when you begin to hold the asset; or (b) if you incur an obligation in return for your starting to hold the asset, and the obligation is satisfied before you begin to hold the asset (worked out under Division 40)—the cost of the asset is to be translated to Australian currency at the exchange rate applicable when the obligation is satisfied. 3 value of an item of * trading stock on hand at the end of an income year, where you have elected to use its * cost the value is to be translated to Australian currency at the exchange rate applicable at the time when the item became on hand. 4 value of an item of * trading stock on hand at the end of an income year, where you have elected to use: (a) its market selling value; or (b) its replacement value the value is to be translated to Australian currency at the exchange rate applicable at the end of the income year. 5 a transaction or event that: (a) involves an amount of money or the * market value of other property; and (b) is relevant for the purposes of Part 3 ‑ 1 or 3 ‑ 3; to the extent to which the amount or value is relevant for the purposes of Part 3 ‑ 1 or 3 ‑ 3 the amount or value is to be translated, for the purposes of Part 3 ‑ 1 or 3 ‑ 3, to Australian currency at the exchange rate applicable at the time of the transaction or event. 6 an amount of * ordinary income (a) if the amount is received at or before the time when it is * derived—the amount is to be translated to Australian currency at the exchange rate applicable at the time of receipt; or (b) in any other case—the amount is to be translated to Australian currency at the exchange rate applicable when it is derived. 7 an amount of * statutory income (other than an amount included in assessable income under Division 102) (a) if the amount is received at or before the time when the requirement first arose to include it in your assessable income—the amount is to be translated to Australian currency at the exchange rate applicable at the time of receipt; or (b) in any other case—the amount is to be translated to Australian currency at the exchange rate applicable at the time when the requirement first arose to include it in your assessable income. 8 an amount that you deduct (other than under Division 40) (a) if the amount is paid at or before the time when it became deductible—the amount is to be translated to Australian currency at the exchange rate applicable at the time of payment; or (b) in any other case—the amount is to be translated to Australian currency at the exchange rate applicable at the time when it became deductible. 9 an amount that is relevant for the purposes of quantifying: (a) the total of all of a company’s * production expenditure on a * film; or (b) the total of the company’s * qualifying Australian production expenditure on a film; or (c) the company’s * total film expenditure on a film; to the extent to which the amount is relevant for the purposes of issuing a certificate under section 376 ‑ 20 or 376 ‑ 65 the amount is to be translated to Australian currency at the exchange rate applicable at the time when principal photography commences or production of the animated image commences. 9A an amount that is relevant for the purposes of quantifying: (a) the total of all of a company’s * production expenditure on a * film; or (b) the total of the company’s * qualifying Australian production expenditure on a film; to the extent to which the amount is relevant for the purposes of issuing a certificate under section 376 ‑ 45 the amount is to be translated to Australian currency at the exchange rate applicable when * post, digital and visual effects production for the film commences. 9B subject to item 9C, an amount that is relevant for the purposes of quantifying: (a) the total of all of a company’s * production expenditure on a * film; or (b) the total of the company’s * qualifying Australian production expenditure on a film; or (c) the company’s * total film expenditure on a film; to the extent to which the amount is relevant for the purposes of calculating an amount of a * tax offset under section 376 ‑ 15, 376 ‑ 40 or 376 ‑ 60 the amount is to be translated to Australian currency at the average of the exchange rates applicable from time to time during the period that qualifying Australian production expenditure is incurred on the film. 9C an amount that is relevant for the purposes of quantifying: (a) the total of all of a company’s * production expenditure on a * film; or (b) the total of the company’s * qualifying Australian production expenditure on a film; or (c) the company’s * total film expenditure on a film; to the extent to which the total of the company’s qualifying Australian production expenditure on a film is less than $15 million and the amount is relevant for the purposes of calculating an amount of a * tax offset under section 376 ‑ 60 the amount is to be translated to Australian currency at the exchange rate applicable at the time when expenditure is incurred on the film 9D an amount that is relevant for the purposes of quantifying a company’s * qualifying Australian development expenditure on a * digital game incurred in * completing the game to the extent to which the amount is relevant for the purposes of: (a) a certificate under subsection 378 ‑ 25(1) (completion certificate) in relation to the game; or (b) a determination under section 378 ‑ 30 in relation to such a certificate the amount is to be translated to Australian currency at the average of the exchange rates applicable from time to time during the period: (a) starting at the earliest time that the company incurred * development expenditure on the game in * completing the game; and (b) ending at the earlier of: (i) the last time the company incurred development expenditure on the game in completing the game; and (ii) the time the company applies for the issue of a certificate under section 378 ‑ 25(1) (completion certificate) in relation to the game. 9E an amount that is relevant for the purposes of quantifying a company’s * qualifying Australian development expenditure on a * digital game incurred in * porting the game to the extent to which the amount is relevant for the purposes of: (a) a certificate under section 378 ‑ 25(3) (porting certificate) in relation to the game; or (b) a determination under section 378 ‑ 30 in relation to such a certificate the amount is to be translated to Australian currency at the average of the exchange rates applicable from time to time during the period: (a) starting at the earliest time that the company incurred * development expenditure on the game in * porting the game; and (b) ending at the earlier of: (i) the last time the company incurred development expenditure on the game in porting the game; and (ii) the time the company applies for the issue of a certificate under subsection 378 ‑ 25(3) (porting certificate) in relation to the game. 9F an amount that is relevant for the purposes of quantifying a company’s * qualifying Australian development expenditure on a * digital game or games incurred in an income year on the * ongoing development of the games in the income year to the extent to which the amount is relevant for the purposes of: (a) a certificate under subsection 378 ‑ 20(5) (ongoing development certificate) in relation to the games for the income year; or (b) a determination under section 378 ‑ 30 in relation to such a certificate the amount is to be translated to Australian currency at the average of the exchange rates applicable from time to time during the period: (a) starting at the earliest time that the company incurred * development expenditure on the games in the income year on the * ongoing development of the games in the income year; and (b) ending at the earlier of: (i) the last time the company incurred development expenditure on the games in the income year on the ongoing development of the games in the income year; and (ii) the time the company applies for the issue of certificate under subsection 378 ‑ 25(5) (ongoing development certificate) in relation to the games for the income year. 10 an amount that Division 12 of Part 2.5 in Schedule 1 to the Taxation Administration Act 1953 requires to be withheld from a payment the amount is to be translated to Australian currency at the exchange rate applicable at the time when the amount is required to be withheld under that Division. 11 an amount of a receipt or a payment, where none of the above items apply the amount is to be translated to Australian currency at the exchange rate applicable at the time of the receipt or payment. (7) Subsection (6) has effect subject to any modifications made by the regulations. (7A) Despite subsections (6) and (7), an amount that is relevant for the purposes of quantifying, for the purposes of section 960 ‑ 565, the * annual global income of an entity as shown in * global financial statements for the entity is to be translated into Australian currency at the average exchange rate applicable for the period for which the statements are prepared. (7B) For the purposes of subsection (7A): (a) the entity must obtain: (i) all of the exchange rates that it will use to work out the average exchange rate; or (ii) an average exchange rate that has been worked out for the period referred to in that subsection; from one or more sources that are not * associates of the entity, and not the entity itself, or from one or more sources specified by the Commissioner in a notice to the entity; and (b) the entity must use the average exchange rate so worked out in translating into Australian currency any amount referred to in that subsection that is relevant to that period. (7C) A notice under paragraph (7B)(a) is not a legislative instrument. Regulations about translation (8) An entity must comply with the regulations (if any) in translating an amount into Australian currency. Note: For example, the regulations could require the use of a particular translation method and require consistency in the use of the translation method. (9) Regulations made for the purposes of subsection (8) may make provision in relation to a matter by applying, adopting or incorporating (with or without modifications) matter contained in any of the * accounting standards: (a) as in force or existing at a particular time; or (b) as in force or existing from time to time. (9A) Regulations made for the purposes of subsection (8) do not apply to translating an amount into Australian currency under subsection (7A), unless they provide otherwise. Operation of certain provisions unaffected (10) This section does not affect the operation of the following provisions: (aa) section 220 ‑ 110 ( * maximum franking credit); (a) section 775 ‑ 210 (notional loans under * facility agreements); (b) Subdivision 960 ‑ D (functional currency); (c) subsection 974 ‑ 35(6) (valuation of financial benefits for the purposes of the debt/equity provisions).

Amendment history: Amended by No 67 of 2003, effective Schedule 10 (items 13–16): 14 Oct 2003 ( see s. 2(1)) | Inserted by No 133 of 2003, effective 17 Dec 2003 | Amended by No 58 of 2006, effective s. 4, Schedules 1, 2, Schedule 3 (items 1–3, 7), Schedule 4, Schedule 5 (items 1–3) and Schedule 7 (items 51–113, 213–216, 257–263): Royal Assent Sch 7 (items 179–188): 1 July 2004 (s 2(1) item 15) Sch 7 (item 189): 5 July 1999 (s 2(1) item 16) Sch 7 (item 190): 30 June 2000 (s 2(1) item 17) Sch 7 (item 191): 24 Oct 2002 (s 2(1) item 18) Sch 7 (item 192): 30 June 2004 (s 2(1) item 19) Sch 7 (item 193): 22 Dec 1999 (s 2(1) item 20) | Amended by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 114 of 2010, effective Schedule 1 (items 40–86, 93(1), 95): Royal Assent | Amended by No 46 of 2011, effective Schedule 2 (items 693–697) and Schedule 3 (items 10, 11): 27 Dec 2011 | Amended by No 147 of 2011, effective s. 4, Schedule 1, Schedule 5 (items 1–9, 16–20), Schedule 6 (items 1, 6) and Schedule 9: Royal Assent Schedule 8 (items 2–9, 37, 38, 41): 1 Jan 2012 | Amended by No 170 of 2015, effective Sch 1 (items 1–4) and Sch 4: 11 Dec 2015 (s 2(1) item 1) | Amended by No 49 of 2020, effective Sch 1 (items 1–17, 21) and Sch 2 (items 1, 7): 1 July 2020 (s 2(1) item 1) | Amended by No 29 of 2023, effective sch 1, sch 2 (items 12, 13, 15): 1 July 2023 (s 2(1) item 2) sch 9 (items 5-7): 24 June 2023 (s 2(1) item 5)

s 960-55 — Application of translation rules

(1) Section 960 ‑ 50 applies to: (a) a transaction, event or thing that: (i) involves an amount in a * foreign currency; and (ii) occurs on or after the applicable commencement date (within the meaning of Division 775); or (b) a transaction, event or thing that: (i) involves an amount in a foreign currency; and (ii) occurs before the applicable commencement date (within the meaning of Division 775); to the extent to which the transaction, event or thing is relevant for the purposes of Division 775; or (c) an amount that Division 12 of Part 2 ‑ 5 in Schedule 1 to the Taxation Administration Act 1953 requires to be withheld from a payment, if the time when the amount is required to be withheld occurs on or after 1 July 2003; or (d) a payment that Part 5 ‑ 30 in Schedule 1 to the Taxation Administration Act 1953 requires to be reported, if the amount is paid on or after 1 July 2003. Note: For applicable commencement date , see section 775 ‑ 155. Exceptions (2) Despite subsection (1), section 960 ‑ 50 does not apply to a transaction, event or thing that involves: (a) an amount covered by subsection 775 ‑ 165(1); or (b) a right, or a part of a right, covered by subsection 775 ‑ 165(2); or (c) an obligation, or a part of an obligation, covered by subsection 775 ‑ 165(4). Note: Subsections 775 ‑ 165(1), (2) and (4) are transitional provisions relating to forex realisation events.

Amendment history: Inserted by No 133 of 2003, effective 17 Dec 2003 | Amended by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 960-56 — What this Subdivision is about

The net income of any of the following entities (or parts of entities) that keeps its accounts solely or predominantly in a particular foreign currency can be worked out in that currency, with the net amount being translated into Australian currency: (a) an Australian resident who is required to prepare financial reports under section 292 of the Corporations Act 2001 ; (b) a permanent establishment; (c) an offshore banking unit; (d) a controlled foreign company (CFC); (e) a transferor trust. Table of sections Operative provisions 960 ‑ 59 Object of this Subdivision 960 ‑ 60 You may choose a functional currency 960 ‑ 61 Functional currency for calculating capital gains and losses on indirect Australian real property interests 960 ‑ 65 Backdated startup choice 960 ‑ 70 What is the applicable functional currency ? 960 ‑ 75 What is a transferor trust ? 960 ‑ 80 Translation rules 960 ‑ 85 Special rule about translation—events that happened before the current choice took effect 960 ‑ 90 Withdrawal of choice

Amendment history: Inserted by No 133 of 2003, effective 17 Dec 2003

s 960-59 — Object of this Subdivision

The object of this Subdivision is, for the purposes of reducing compliance costs and reflecting commercial practice, to allow certain entities (or parts of entities) whose accounts are kept solely or predominantly in a particular * foreign currency (the functional currency ) to calculate their net incomes by reference to the functional currency.

Amendment history: Inserted by No 133 of 2003, effective 17 Dec 2003

s 960-60 — You may choose a functional currency

(1) The table has effect: Choosing to use a functional currency Item If you are: you may choose to use the * applicable functional currency to... with effect from the start of... 1 an Australian resident who is required to prepare financial reports under section 292 of the Corporations Act 2001 work out so much of your taxable income or tax loss as is not subject to a choice made by you under any of the other items of this table (a) if the choice you make under this item is a backdated startup choice (see section 960 ‑ 65)—the income year in which you make the choice; or (b) in any other case—the income year following the one in which you make the choice. 2 (a) an Australian resident carrying on an activity or business at or through an * overseas permanent establishment; or (b) a foreign resident carrying on an activity or business at or through an * Australian permanent establishment work out the taxable income or tax loss derived from the activity or business carried on at or through the permanent establishment (a) if the choice you make under this item is a backdated startup choice (see section 960 ‑ 65)—the income year in which you make the choice; or (b) in any other case—the income year following the one in which you make the choice. 3 an * offshore banking unit work out your total assessable OB income (within the meaning of Division 9A of Part III of the Income Act Assessment Act 1936 ) and your total allowable OB deductions (within the meaning of that Division) (a) if the choice you make under this item is a backdated startup choice (see section 960 ‑ 65)—the income year in which you make the choice; or (b) in any other case—the income year following the one in which you make the choice. 4 an attributable taxpayer (within the meaning of Part X of the Income Tax Assessment Act 1936 ) of a * controlled foreign company (CFC) work out the * attributable income of the CFC (a) if the choice you make under this item is a backdated startup choice (see section 960 ‑ 65)—the CFC’s * statutory accounting period in which you make the choice; or (b) in any other case—the CFC’s statutory accounting period following the one in which you make the choice. 5 a * transferor trust work out your attributable income (within the meaning of Division 6AAA of Part III of the Income Tax Assessment Act 1936 ) (a) if the choice you make under this item is a backdated startup choice (see section 960 ‑ 65)—the income year in which you make the choice; or (b) in any other case—the income year following the one in which you make the choice. Note: The attributable income of a controlled foreign company is calculated separately for each attributable taxpayer—see section 381 of the Income Tax Assessment Act 1936 . (2) A choice must be in writing. (3) A choice under item 1 of the table in subsection (1) continues in effect until: (a) a withdrawal of the choice takes effect (see section 960 ‑ 90); or (b) immediately after the end of the income year in which you cease to be subject to a requirement to prepare financial reports under section 292 of the Corporations Act 2001 ; whichever happens first. (4) A choice under item 2, 3, 4 or 5 of the table in subsection (1) continues in effect until a withdrawal of the choice takes effect (see section 960 ‑ 90).

Amendment history: Inserted by No 133 of 2003, effective 17 Dec 2003 | Amended by No 96 of 2004, effective 29 June 2004 | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Amended by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 960-61 — Functional currency for calculating capital gains and losses on indirect Australian real property interests

(1) Subsection (2) applies if: (a) you are a foreign resident; and (b) a * CGT event happens in relation to a * CGT asset that is an * indirect Australian real property interest for you; and (c) the sole or predominant currency in which you keep your accounts at the time of the CGT event is a currency other than Australian currency. (2) You must use the * applicable functional currency to work out the amount of your * capital gain or * capital loss (if any).

Amendment history: Inserted by No 168 of 2006, effective Schedule 3 (items 3–5): 13 Dec 2005 Remainder: Royal Assent

s 960-65 — Backdated startup choice

The table has effect: Backdated startup choice Item In this case: the choice is a backdated startup choice if... 1 you make a choice under item 1 of the table in subsection 960 ‑ 60(1) (a) both: (i) you were in existence at the start of the income year in which you made the choice; and (ii) you make the choice within 90 days after the beginning of that income year or within 30 days after the commencement of this section; or (b) both: (i) you came into existence during the income year in which you made the choice; and (ii) you make the choice within 90 days after you came into existence or within 30 days after the commencement of this section. 2 you make a choice under item 2 of the table in subsection 960 ‑ 60(1) (a) both: (i) the permanent establishment was in existence at the start of the income year in which you made the choice; and (ii) you make the choice within 90 days after the beginning of that income year or within 30 days after the commencement of this section; or (b) both: (i) the permanent establishment came into existence during the income year in which you made the choice; and (ii) you make the choice within 90 days after the permanent establishment came into existence or within 30 days after the commencement of this section. 3 you make a choice under item 3 of the table in subsection 960 ‑ 60(1) (a) both: (i) the * offshore banking unit was in existence at the start of the income year in which you made the choice; and (ii) you make the choice within 90 days after the beginning of that income year or within 30 days after the commencement of this section; or (b) both: (i) the offshore banking unit came into existence during the income year in which you made the choice; and (ii) you make the choice within 90 days after the offshore banking unit came into existence or within 30 days after the commencement of this section. 4 you make a choice under item 4 of the table in subsection 960 ‑ 60(1) (a) both: (i) you are an attributable taxpayer of the CFC at the beginning of the CFC’s * statutory accounting period in which you made the choice; and (ii) you make the choice within 90 days after the beginning of the CFC’s statutory accounting period or within 30 days after the commencement of this section; or (b) both: (i) you became an attributable taxpayer in relation to the CFC during the CFC’s statutory accounting period during which you made the choice; and (ii) you make the choice within 90 days after the beginning of the CFC’s statutory accounting period or within 30 days after the commencement of this section. 5 you make a choice under item 5 of the table in subsection 960 ‑ 60(1) you make the choice within 90 days after the beginning of an income year or within 30 days after the commencement of this section.

Amendment history: Inserted by No 133 of 2003, effective 17 Dec 2003 | Amended by No 96 of 2004, effective 29 June 2004

s 960-70 — What is the applicable functional currency ?

Australian resident required to prepare financial reports under section 292 of the Corporations Act 2001 (1) If you make a choice under item 1 of the table in subsection 960 ‑ 60(1) with effect from the start of a particular income year, your applicable functional currency for: (a) that income year; and (b) each later income year for which the choice is in effect; is the sole or predominant * foreign currency in which you kept your accounts at the time when you made the choice. Permanent establishment, offshore banking unit or transferor trust (2) If you make a choice under item 2, 3 or 5 of the table in subsection 960 ‑ 60(1) in relation to a * permanent establishment, an * offshore banking unit or a * transferor trust with effect from the start of a particular income year, the applicable functional currency of the establishment, unit or trust for: (a) that income year; and (b) each later income year for which the choice is in effect; is the sole or predominant * foreign currency in which the establishment, unit or trust kept its accounts at the time when you made the choice. Controlled foreign company (3) If you make a choice under item 4 of the table in subsection 960 ‑ 60(1) in relation to a * controlled foreign company (CFC) with effect from the start of a particular * statutory accounting period, the applicable functional currency of the CFC for: (a) that statutory accounting period; and (b) each later statutory accounting period for which the choice is in effect; is the sole or predominant * foreign currency in which the CFC kept its accounts at the time when you made the choice. Note: The attributable income of a controlled foreign company is calculated separately for each attributable taxpayer—see section 381 of the Income Tax Assessment Act 1936 . Calculating capital gains and losses on indirect Australian real property interests (3A) If subsection 960 ‑ 61(2) applies, your applicable functional currency for the purposes of that subsection is the sole or predominant currency in which you keep your accounts at the time of the * CGT event. Accounts (4) For the purposes of this section, accounts means: (a) ledgers; and (b) journals; and (c) statements of financial performance; and (d) profit and loss accounts; and (e) balance ‑ sheets; and (f) statements of financial position; and includes statements, reports and notes attached to, or intended to be read with, any of the foregoing.

Amendment history: Inserted by No 133 of 2003, effective 17 Dec 2003 | Amended by No 96 of 2004, effective 29 June 2004 | Amended by No 168 of 2006, effective Schedule 3 (items 3–5): 13 Dec 2005 Remainder: Royal Assent

s 960-75 — What is a transferor trust ?

A transferor trust is a trust where, having regard to all relevant circumstances, it would be reasonable to conclude that another entity is, or is likely to be, an attributable taxpayer in relation to the trust for the purposes of Division 6AAA of Part III of the Income Tax Assessment Act 1936 .

Amendment history: Inserted by No 133 of 2003, effective 17 Dec 2003

s 960-80 — Translation rules

(1) The table has effect: Translation rules Item In this case... these rules apply... 1 (a) you are an Australian resident required to prepare financial reports under section 292 of the Corporations Act 2001 ; and (b) you have made a choice under item 1 of the table in subsection 960 ‑ 60(1), and that choice is in effect for an income year (a) first, for the purpose of working out, for the income year, so much of your taxable income or tax loss as is not the subject of a choice made by you under any other item of that table: (i) an amount that is not in the * applicable functional currency is to be translated into the applicable functional currency; and (ii) the definition of foreign currency in subsection 995 ‑ 1(1) does not apply; and (iii) the applicable functional currency is taken not to be a foreign currency; and (iv) Australian currency and any other currency (except the applicable functional currency) are taken to be foreign currencies; and (b) second, so much of your taxable income as is not the subject of a choice made by you under any other item of that table is to be translated into Australian currency. 2 (a) you are: (i) an Australian resident carrying on an activity or business at or through an * overseas permanent establishment; or (ii) a foreign resident carrying on an activity or business at or through an * Australian permanent establishment; and (b) you have made a choice under item 2 of the table in subsection 960 ‑ 60(1) in relation to the permanent establishment, and that choice is in effect for an income year (a) first, for the purpose of working out, for the income year, the taxable income or tax loss derived from the activity or business carried on at or through the permanent establishment: (i) an amount that is not in the * applicable functional currency is to be translated into the applicable functional currency; and (ii) the definition of foreign currency in subsection 995 ‑ 1(1) does not apply; and (iii) the applicable functional currency is taken not to be a foreign currency; and (iv) Australian currency and any other currency (except the applicable functional currency) are taken to be foreign currencies; and (b) second, the taxable income derived from the activity or business carried on at or through the permanent establishment is to be translated into Australian currency. 3 (a) you are an * offshore banking unit (OBU); and (b) you have made a choice under item 3 of the table in subsection 960 ‑ 60(1) in relation to the OBU, and that choice is in effect for an income year (a) first, for the purpose of working out, for the income year, your total assessable OB income (within the meaning of Division 9A of Part III of the Income Tax Assessment Act 1936 ) and your total OB deductions (within the meaning of that Division): (i) an amount that is not in the * applicable functional currency is to be translated into the applicable functional currency; and (ii) the definition of foreign currency in subsection 995 ‑ 1(1) does not apply; and (iii) the applicable functional currency is taken not to be a foreign currency; and (iv) Australian currency and any other currency (except the applicable functional currency) are taken to be foreign currencies; and (b) second, the total assessable OB income and the total allowable OB deductions are to be translated into Australian currency. 4 (a) you are an attributable taxpayer (within the meaning of Part X of the Income Tax Assessment Act 1936 ) of a * controlled foreign company (CFC); and (b) you have made a choice under item 4 of the table in subsection 960 ‑ 60(1) in relation to the CFC, and that choice is in effect for a * statutory accounting period of the CFC (a) first, for the purpose of working out, for the statutory accounting period, the * attributable income of the CFC: (i) an amount that is not in the * applicable functional currency is to be translated into the applicable functional currency; and (ii) the definition of foreign currency in subsection 995 ‑ 1(1) does not apply; and (iii) the applicable functional currency is taken not to be a foreign currency; and (iv) Australian currency and any other currency (except the applicable functional currency) are taken to be foreign currencies; and (b) second, the attributable income is to be translated into Australian currency. 5 (a) you are a * transferor trust; and (b) you have made a choice under item 5 of the table in subsection 960 ‑ 60(1) in relation to the trust, and that choice is in effect for an income year (a) first, for the purpose of working out, for the income year, your attributable income (within the meaning of Division 6AAA of Part III of the Income Tax Assessment Act 1936 ): (i) an amount that is not in the * applicable functional currency is to be translated into the applicable functional currency; and (ii) the definition of foreign currency in subsection 995 ‑ 1(1) does not apply; and (iii) the applicable functional currency is taken not to be a foreign currency; and (iv) Australian currency and any other currency (except the applicable functional currency) are taken to be foreign currencies; and (b) second, the attributable income is to be translated into Australian currency. 6 (a) you are a * foreign resident who makes a * capital gain or * capital loss from a * CGT event in relation to an asset that is an * indirect Australian real property interest; and (b) you are required by subsection 960 ‑ 61(2) to work out the amount of your capital gain or capital loss in the * applicable functional currency (a) first, for the purpose of working out, for the income year, the amount of your capital gain or capital loss from the CGT event, an amount that is not in the applicable functional currency is to be translated into the applicable functional currency; and (b) second, the amount of the capital gain or capital loss is to be translated into Australian currency. Note: The attributable income of a controlled foreign company is calculated separately for each attributable taxpayer—see section 381 of the Income Tax Assessment Act 1936 . Examples of an amount (2) The following are examples of an amount: (a) an amount of * ordinary income; (b) an amount of an expense; (c) an amount of an obligation; (d) an amount of a liability; (e) an amount of a receipt; (f) an amount of a payment; (g) an amount of consideration; (h) a value; (i) a monetary limit or other amount set out in this Act or any other law of the Commonwealth. (3) The amounts set out in paragraphs (2)(b) to (i) may be amounts on revenue account, capital account or otherwise. Amounts that are elements in the calculation of other amounts (4) In applying this section: (a) first, translate any amounts that are elements in the calculation of other amounts (except * special accrual amounts); and (b) then, calculate the other amounts. Special accrual amounts (5) In applying this section: (a) calculate a * special accrual amount without translation and without applying the first rule set out in the relevant item of the table in subsection (1); and (b) then, translate the special accrual amount to Australian currency for the purposes of applying the second rule set out in the relevant item of the table in subsection (1). Special translation rules (6) Subsection 960 ‑ 50(6) has effect, in relation to the translation of an amount into the * applicable functional currency, as if each reference in that subsection to Australian currency were a reference to the applicable functional currency. Regulations about translation (7) An entity must comply with the regulations (if any) in translating an amount into: (a) the * applicable functional currency; or (b) Australian currency. Note: For example, the regulations could require the use of a particular translation method and require consistency in the use of the translation method. (8) Regulations made for the purposes of subsection (7) may make provision in relation to a matter by applying, adopting or incorporating (with or without modifications) matter contained in any of the * accounting standards: (a) as in force or existing at a particular time; or (b) as in force or existing from time to time.

Amendment history: Inserted by No 133 of 2003, effective 17 Dec 2003 | Amended by No 96 of 2004, effective 29 June 2004 | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Amended by No 168 of 2006, effective Schedule 3 (items 3–5): 13 Dec 2005 Remainder: Royal Assent