Income Tax Assessment Act 1936

s 362 — Attribution percentage of an attributable taxpayer

(1) Subject to this section, the attribution percentage of an attributable taxpayer in relation to a CFC or CFT at a particular time is the sum of: (a) the direct attribution interest in the CFC or CFT held by the taxpayer at that time; and (b) the aggregate of the indirect attribution interests in the CFC or CFT held by the taxpayer at that time. (2) If, apart from this subsection, both of the following things would be counted in calculating the attribution percentage of an attributable taxpayer in relation to a CFC or CFT at a particular time: (a) the holding of a direct attribution interest in an entity by any other entity; (b) an entitlement to acquire that direct attribution interest; only one of those things is to be taken into account. (3) If: (a) in calculating the percentage that would be the attribution percentage of an attributable taxpayer (apart from this subsection and subsection (5)) in relation to a CFC at a particular time (in this subsection called the test time ) regard was had to an attribution tracing interest of an eligible transferor in relation to a CFT, being an attribution tracing interest determined under subsection 360(1); and (b) the attribution percentage referred to in paragraph (a) is greater than it would have been apart from subsection 360(1); and (c) there are other eligible transferors in relation to the CFT at the test time; and (d) the attributable taxpayer gives to the Commissioner, in accordance with a form approved, in writing, by the Commissioner, such information as is required by the form to be given; the Commissioner may reduce the attribution percentage referred to in paragraph (a) by such amount as the Commissioner considers reasonable in the circumstances. (4) If: (a) in calculating the percentage that would be the attribution percentage of an attributable taxpayer (apart from this subsection and subsection (5)) in relation to a CFT (in this subsection called the attributing CFT ) at a particular time (in this subsection called the test time ) regard was had to: (i) a direct attribution interest of the attributable taxpayer in relation to the attributing CFT, being direct attribution interest determined under subsection 356(2); or (ii) an attribution tracing interest of an eligible transferor in relation to another CFT (in this subsection called the interposed CFT ); and (b) the attribution percentage referred to in paragraph (a) is greater than it would have been apart from subsection 356(2) or 360(1), as the case may be; and (c) at the test time, there are other eligible transferors in relation to the attributing CFT or the interposed CFT, as the case may be; and (d) the attributable taxpayer gives to the Commissioner such information, and produces to the Commissioner such documents, as the Commissioner requires in connection with the operation of this subsection; the Commissioner may reduce the attribution percentage referred to in paragraph (a) by such amount as the Commissioner considers reasonable in the circumstances. (5) If, apart from this subsection, the aggregate of the attribution percentages of all the attributable taxpayers in relation to a CFC or CFT at a particular time would exceed 100%, the attribution percentage of each of those attributable taxpayers is the percentage calculated using the formula: where: Individual percentage means the percentage that would, apart from this subsection, be the attribution percentage of the attributable taxpayer concerned. Total percentage means the aggregate of the percentages that would, apart from this subsection, be the attribution percentages of all the attributable taxpayers.

Amendment history: Inserted by No 5 of 1991, item 51 | item 100, effective s 4–61: 8 Jan 1991 (s 2)

s 363 — Attribution account entity

(1) Each of the following is an attribution account entity: (a) a company that is not a Part X Australian resident; (b) a partnership; (c) a trust. (2) If: (a) a company ceases to be resident in an unlisted country and becomes a Part X Australian resident; and (b) a taxpayer is an attributable taxpayer in relation to the company immediately before the time of the change of residence; in determining whether an attribution debit arises for the company in relation to the taxpayer in respect of an attribution account payment made to the taxpayer or another attribution account entity, the company is taken to be an attribution account entity.

Amendment history: Inserted by No 5 of 1991, item 51, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 216 of 1991, Sch 4 item 84, effective s 10, 12–39, 41, 43, 44, 67–81, 83–86, 89(1), (3)–(19), 91, 92, 102, 103 and Sch 1–4: 24 Dec 1991 (s 2(1)) s 11 and 89(2): 22 Jan 1991 (s 2(2)) s 40 and 42: 6 Jan 1992 (s 2(3)) s 45, 46, 48–51, 54–58, 60–66, 90(1), (3)–(14), 93–96 and 98–101: 21 Aug 1991 (s 2(4)) s 47, 52, 53, 59, 90(2) and 97: 3 pm (A.C.T) 20 Aug 1991 (s 2(5)) s 82(2): 25 Dec 1991 (s 2(6))

s 364 — Attribution account percentage

The attribution account percentage of a taxpayer in relation to an entity is the sum of the taxpayer’s direct attribution account interest and indirect attribution account interest or interests in the entity.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2)

s 365 — Attribution account payment

(1) Each of the following is an attribution account payment: (a) a dividend paid by a company to a shareholder; (b) the individual interest of a partner in the net income (within the meaning of section 90) of a partnership of a year of income; (c) where a beneficiary of a trust is presently entitled to a share of the income of the trust—that share of the net income (within the meaning of section 95) of the trust of a year of income; (ca) where a beneficiary of a trust is specifically entitled to an amount of a capital gain or a franked distribution of the trust for a year of income: (i) in the case of a capital gain—the amount mentioned in subsection 115 ‑ 225(1) in respect of the beneficiary; or (ii) in the case of a franked distribution—the amount mentioned in subsection 207 ‑ 37(1) in respect of the beneficiary; to the extent that it is not covered under paragraph (c); (d) the whole or part of the net income of a trust of a year of income that is assessable to the trustee under section 99 or 99A; (e) an amount of trust property that would be included in the assessable income of a beneficiary of a year of income under section 99B if: (i) the beneficiary were a resident, within the meaning of section 6, at a time during the year of income; and (ii) paragraph 99B(2)(c) were replaced by a paragraph referring to any attribution account payment under paragraph (c) or (d) of this subsection. (2) The attribution account payment is taken to be made: (a) in a paragraph (1)(b) case—by the partnership to the partner; and (b) in a paragraph (1)(c) or (e) case—by the trust to the beneficiary; and (c) in a paragraph (1)(d) case—by the trust to the trustee; and, in any such case, to be made at the end of the year of income. (3) Where: (a) an attribution credit arises for a company in relation to a taxpayer under paragraph 371(1)(b) as a result of a change of residence whereby the company becomes a Part X Australian resident; and (b) the company makes an attribution account payment consisting of a frankable distribution that has been franked in accordance with section 202 ‑ 5 of the Income Tax Assessment Act 1997 , or that has been franked with an exempting credit in accordance with section 208 ‑ 60 of that Act; and (c) immediately before the attribution account payment is made, there is an attribution surplus for the company in relation to the taxpayer that is attributable to the attribution credit; then, for the purposes of applying section 23AI and Divisions 4 and 5 of this Part in relation to the taxpayer, the attribution account payment is taken to be reduced to the extent that it is franked.

Amendment history: Inserted by No 5 of 1991, item 100 | item 9 | item 51 | item 52, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 93 of 1999, Sch 5 item 76, effective s 4, Sch 1 (items 1–35, 39–48), Sch 2, Sch 3 (items 26–33), Sch 4 (items 1–23, 25), Sch 5 and 7: 16 July 1999 (s 2(1)) Sch 4 (item 24): 16 Apr 1998 (s 2(2)) | Amended by No 23 of 2005, Sch 3 item 55, effective s 4 and Sch 3 (items 14–74, 111(3)–(5), 112–114): 21 Mar 2005 (s 2(1) items 1, 6) | Amended by No 62 of 2011, Sch 2 item 43, effective Sch 1 (items 4, 5, 14), Sch 2 (items 1–7, 28–44, 51) and Sch 4 (items 1–32, 34): 29 June 2011 (s 2(1) items 2, 6)

s 366 — Direct attribution account interest in a company

(1) An entity holds a direct attribution account interest in a company at a particular time equal to the percentage that the entity holds, or is entitled to acquire, at that time of: (a) the total paid ‑ up share capital of the company; or (b) the total rights of shareholders to vote, or participate in any decision ‑ making, concerning any of the following: (i) the making of distributions of capital or profits of the company to its shareholders; (ii) the constituent document of the company; (iii) any variation of the share capital of the company; or (c) the total rights to distributions of capital or profits of the company to its shareholders on winding ‑ up; or (d) the total rights to distributions of capital or profits of the company to its shareholders, otherwise than on winding ‑ up; or, if different percentages are applicable under the preceding paragraphs, the greater or greatest of those percentages. (2) If the percentage of total rights to vote or participate in decision ‑ making differs as between differing types of decision ‑ making, the highest of those percentages applies for the purposes of paragraph (1)(b). (3) For the purposes of the application of subsection (1) to a company, the percentage that an entity holds, or is entitled to acquire, at a particular time (in this subsection called the test time ) in a statutory accounting period of the company, of the total rights to distributions of capital or profits of the company to its shareholders on winding ‑ up is to be worked out by: (a) ascertaining whichever of the following is applicable: (i) the capital of the company as at the end of the statutory accounting period; (ii) the profits of the company for the statutory accounting period; and (b) assuming that the rights to such distributions that the entity holds, or is entitled to acquire, at the test time were the same at all other times during the statutory accounting period; and (c) ascertaining the percentage concerned: (i) at the end of the statutory accounting period instead of at the test time; and (ii) on that assumption. (4) For the purposes of the application of subsection (1) to a company, the percentage that an entity holds, or is entitled to acquire, at a particular time (in this subsection called the test time ) in a statutory accounting period of the company, of the total rights to distributions of capital or profits of the company to its shareholders, otherwise than on winding ‑ up, is to be worked out by: (a) ascertaining whichever of the following is applicable: (i) the capital of the company as at the end of the statutory accounting period; (ii) the profits of the company for the statutory accounting period; and (b) assuming that the rights to such distributions that the entity holds, or is entitled to acquire, at the test time were the same at all other times during the statutory accounting period; and (c) ascertaining the percentage concerned: (i) at the end of the statutory accounting period instead of at the test time; and (ii) on that assumption. (5) Eligible finance shares, widely distributed finance shares and transitional finance shares in a company are to be ignored for the purposes of the application of subsection (1) to the company.

Amendment history: Inserted by No 5 of 1991, item 341, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 35 of 1992, item 60, effective s 7–75: 25 May 1992 (s 2) | Amended by No 80 of 1992, item 58, effective s 52(2) and 53(2): 1 July 1992 (s 2(3)) Remainder: 30 June 1992 (s 2(1))

s 367 — Direct attribution account interest in a partnership

(1) An entity that is a partner in a partnership holds a direct attribution account interest in the partnership at a particular time equal to the percentage that the partner holds, or is entitled to acquire, of: (a) the total interests in the profits of the partnership; or (b) the total interests in the property of the partnership; or, if those percentages differ, the greater of those percentages. (2) For the purposes of the application of subsection (1) to a partnership: (a) the percentage that the partner holds, or is entitled to acquire, of the total interests in the profits of the partnership; or (b) the percentage that the partner holds, or is entitled to acquire, of the total interests in the property of the partnership; at a particular time (in this subsection called the test time ) in an accounting period of the partnership is to be worked out by: (c) ascertaining whichever of the following is applicable: (i) the profits of the partnership for the accounting period; (ii) the property of the partnership as at the end of the accounting period; and (d) assuming that the percentage that the partner holds, or that the partner is entitled to acquire, at the test time was the same at all other times during the accounting period; and (e) ascertaining the percentage concerned: (i) at the end of the accounting period instead of at the test time; and (ii) on that assumption.

s 368 — Direct attribution account interest in a trust

(1) A beneficiary in a trust holds a direct attribution account interest in the trust at a particular time equal to: (a) the percentage of the income of the trust represented by the share of the income to which the beneficiary is entitled, or that the beneficiary is entitled to acquire; or (b) the percentage of the corpus of the trust represented by the share of the corpus to which the beneficiary is entitled, or that the beneficiary is entitled to acquire; or, if those percentages differ, the greater of those percentages. (2) For the purposes of the application of subsection (1) to a trust: (a) the percentage of the income of the trust represented by the share of the income to which the beneficiary is entitled, or that the beneficiary is entitled to acquire; or (b) the percentage of the corpus of the trust represented by the share of the corpus to which the beneficiary is entitled, or that the beneficiary is entitled to acquire; at a particular time (in this subsection called the test time ) in an accounting period of the trust, is to be worked out by: (c) ascertaining whichever of the following is applicable: (i) the income of the trust for the accounting period; (ii) the corpus of the trust as at the end of the accounting period; and (d) assuming that the share to which the entity is entitled, or that the entity is entitled to acquire, at the test time was the same at all other times during the accounting period; and (e) ascertaining the percentage concerned: (i) at the end of the accounting period instead of at the test time; and (ii) on that assumption. (3) Each entity that is an eligible transferor in relation to a trust at a particular time holds a direct attribution account interest in the trust at that time equal to: (a) if paragraph (b) does not apply—100%; or (b) if, because there are 2 or more eligible transferors in relation to the trust, the Commissioner reduces an attribution percentage under subsection 362(3) or (4) or subsection 362(5) applies—such lower percentage as the Commissioner considers reasonable in the circumstances. (4) An entity that holds a direct attribution account interest in a trust at a particular time because of subsection (3) is not taken to hold any direct attribution account interest in the trust at that particular time because of subsection (1).

s 369 — Indirect attribution account interest in an entity

(1) The indirect attribution account interest that an entity (in this section called the bottom entity ) holds in another entity (in this section called the top entity ) is calculated in accordance with this section. (2) An interposed entity is not to be taken into account in calculating the indirect attribution account interest unless the entity is an attribution account entity. (3) If there is only one entity interposed between the bottom entity and the top entity, the indirect attribution account interest is calculated by multiplying the direct attribution account interest that the bottom entity holds in the interposed entity by the direct attribution account interest that the interposed entity holds in the top entity. (4) If there are 2 entities interposed between the bottom entity and the top entity, the indirect attribution account interest is calculated: (a) by multiplying the direct attribution account interest that the bottom entity holds in the first interposed entity by the direct attribution account interest that the first interposed entity holds in the second interposed entity; and (b) by multiplying the result of the calculation in paragraph (a) by the direct attribution account interest that the second interposed entity holds in the top entity. (5) If there are 3 or more entities interposed between the bottom entity and the top entity, the indirect attribution account interest is calculated: (a) by multiplying the direct attribution account interest that the bottom entity holds in the first interposed entity by the direct attribution account interest that the first interposed entity holds in the second interposed entity; and (b) by multiplying the result of the multiplication referred to in paragraph (a) by the direct attribution account interest that the second interposed entity holds in the third interposed entity; and so on, ending with a multiplication by the direct attribution account interest that the last interposed entity holds in the top entity. (6) For the purposes of this section, an entity (in this subsection called the second entity ) is interposed between 2 other entities (in this subsection called the first entity and the third entity respectively) if, and only if: (a) the first entity has a direct attribution account interest in the second entity; and (b) the second entity has a direct attribution account interest in the third entity.

s 370 — Attribution surplus

An attribution surplus for an attribution account entity in relation to a taxpayer exists at a particular time if the entity’s total attribution credits arising before that time in relation to the taxpayer exceed its total attribution debits arising before that time in relation to the taxpayer.

s 371 — Attribution credit

(1) An attribution credit arises for an attribution account entity (in this section called the eligible entity ) in relation to a taxpayer if: (a) an amount is included in the taxpayer’s assessable income under section 456 in respect of the attributable income of the eligible entity for a statutory accounting period; or (b) an amount is included in the taxpayer’s assessable income under section 457 as a result of a change of residence by the eligible entity; or (d) an attribution account payment that requires an attribution debit for another entity in relation to the taxpayer is made to the eligible entity. (2) Subject to subsection (4), the amount of the attribution credit is equal to the amount included in assessable income or to the amount of the attribution debit, as the case may be. (4) Where: (a) the attribution credit arises under paragraph (1)(d) in relation to an attribution account payment consisting of a non ‑ portfolio dividend paid to the eligible entity, where the eligible entity is a company; and (b) the eligible entity is or will be liable to pay an amount of foreign tax on the attribution account payment or on amounts that include the attribution account payment; then the amount of the attribution credit is reduced by the amount calculated using the formula: where: Attribution account percentage means the taxpayer’s attribution account percentage for the attribution account entity. Foreign tax means the amount of foreign tax, to the extent that it is attributable to the attribution account payment. (5) The attribution credit arises: (a) in a paragraph (1)(a) case where subsection 319(6) does not apply to the statutory accounting period referred to in that paragraph—at the end of the statutory accounting period; or (aaa) in a paragraph (1)(a) case where subsection 319(6) applies to the statutory accounting period referred to in that paragraph—at the beginning of the statutory accounting period; or (b) in a paragraph (1)(b) case—subject to subsection (8), at the time of the change of residence referred to in that paragraph; or (d) in a paragraph (1)(d) case—when the attribution account payment referred to in that paragraph is made. (6) Where, apart from this subsection, an attribution credit would arise in relation to an attribution account entity for an Australian partnership or an Australian trust in respect of an amount included in the assessable income of the partnership or trust of a year of income under section 456 or 457, then, subject to subsection (7): (a) the attribution credit does not arise for the partnership or trust; and (b) an attribution credit arises in relation to the attribution account entity for: (i) any taxpayer for whom, as a result of the amount being so included, a tax detriment would arise in circumstances referred to in paragraphs 460(2)(a) and (b) or paragraphs 460(3)(a) and (b); and (ii) any taxpayer where, as a result of the amount being so included, a tax detriment would arise for the trustee of a trust in which the taxpayer is a beneficiary, in respect of an amount assessable to the trustee under section 98 in respect of the taxpayer’s share of the net income of the trust, in circumstances referred to in paragraph 460(4)(a); and (iii) any taxpayer in the capacity of trustee of a trust, where, as a result of the amount being so included, a tax detriment would arise for the taxpayer in respect of an amount assessable to the taxpayer under section 99 or 99A, in circumstances referred to in paragraph 460(4)(a); and (c) the amount of the attribution credit referred to in paragraph (b) equals the amount of the tax detriment, as reduced by any application of section 460; and (d) the attribution credit referred to in paragraph (b) arises at the time when the attribution credit referred to in paragraph (a) would, but for this subsection, have arisen. (7) Subsection (6) does not apply to an Australian trust that is, in relation to the year of income referred to in that subsection: (b) a public trading trust within the meaning of Division 6C of that Part; or (c) a complying superannuation fund, a non ‑ complying superannuation fund, a complying approved deposit fund, a non ‑ complying approved deposit fund or a pooled superannuation trust. (8) If: (a) a company ceases to be resident in an unlisted country and becomes a resident of a listed country; and (b) an amount (in this subsection called the section 457 amount ) is included in a taxpayer’s assessable income under section 457 as a result of the change of residence; and (c) a particular part (in this subsection called the eligible part ) of the section 457 amount is attributable to a hypothetical disposal of a particular asset of the company at the residence change time; and (d) it might reasonably be expected that, if and when the company actually disposes of the asset, so much of the gain derived by the company on the actual disposal of the asset that accrued before the residence change time will be subject to tax in the listed country; the taxpayer may elect to defer the timing of so much of the paragraph (1)(b) attribution credit as is attributable to the eligible part from the time of the change of residence referred to in that paragraph until immediately before the payment by the company of a dividend out of the gain derived by the company on the actual disposal of the asset. (9) An election for the purposes of subsection (8): (b) is irrevocable; and (c) has no effect unless it is made: (i) within 6 months after the end of the later of the following years of income: (A) the year of income in which the residence change time took place; (B) the year of income in which this subsection commenced; or (ii) within such further period as the Commissioner allows.

Amendment history: Inserted by No 5 of 1991, item 51 | item 100 | item 371 | item 55 | item 456 | item 58 | item 1990, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 216 of 1991, Sch 4 item 14 | Sch 4 item 83 | Sch 4 item 85, effective s 10, 12–39, 41, 43, 44, 67–81, 83–86, 89(1), (3)–(19), 91, 92, 102, 103 and Sch 1–4: 24 Dec 1991 (s 2(1)) s 11 and 89(2): 22 Jan 1991 (s 2(2)) s 40 and 42: 6 Jan 1992 (s 2(3)) s 45, 46, 48–51, 54–58, 60–66, 90(1), (3)–(14), 93–96 and 98–101: 21 Aug 1991 (s 2(4)) s 47, 52, 53, 59, 90(2) and 97: 3 pm (A.C.T) 20 Aug 1991 (s 2(5)) s 82(2): 25 Dec 1991 (s 2(6)) | Amended by No 190 of 1992, item 15 | item 17, effective 1 Jan 1993 (s 2) | Amended by No 170 of 1995, Sch 1 item 14, effective Sch 1 and Sch 2 (items 1–53), Sch 3 (items 15, 16): 16 Dec 1995 (s 2(1)) | Amended by No 41 of 1998, Sch 1 item 22 | Sch 1 item 23, effective s 4, Sch 1 (items 4–16, 18–26), Sch 2 (items 1–4), Sch 3 (items 1–3, 7(1)), Sch 4 (items 4, 5), Sch 5 (items 16, 18) and Sch 6 (items 1, 2, 4, 5, 7–13, 15–18, 27): 4 June 1998 (s 2(1)) Sch 1 (item 17): 9 Apr 1999 (s 2(2)) Sch 5 (items 17, 19): 12 Dec 1995 (s 2(5)) Sch 6 (item 3): 16 Dec 1985 (s 2(6)) Sch 6 (item 6): 1 Jan 1993 (s 2(7)) Sch 6 (item 14): never commenced (s 2(9)) Sch 6 (item 16): 1 July 1998 (s 2(10)) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 15 of 2007, Sch 1 item 125, effective Sch 1 (items 1–8, 22–149, 406(1)–(3)) and Sch 3 (items 6, 7): 15 Mar 2007 (s 2(1) items 2, 6) | Amended by No 114 of 2010, Sch 1 item 21 | Sch 1 item 74, effective Sch 1 (items 1–39, 93–96): 14 July 2010 (s 2(1) items 2, 4) Sch 1 (items 88–92): 14 Sept 2006 (s 2(1) item 3) | Amended by No 53 of 2016, Sch 5 item 25, effective Sch 3 (item 1), Sch 5 (items 1, 3, 6–28, 75), Sch 6 (items 1–20) and Sch 8 (item 1): 5 May 2016 (s 2(1) items 2, 4)

s 372 — Attribution debit

(1) An attribution debit arises for an attribution account entity (in this section called the eligible entity ) in relation to a taxpayer if: (a) the eligible entity makes an attribution account payment to the taxpayer or to another attribution account entity; and (b) immediately before the eligible entity makes the attribution account payment, there is an attribution surplus for the eligible entity in relation to the taxpayer. (2) Subject to subsection (4), the amount of the debit is the lesser of: (a) the attribution surplus; and (b) whichever of the following is applicable: (i) if the attribution account payment is made to the taxpayer—the attribution account payment; (ii) in any other case—the taxpayer’s attribution account percentage (for the attribution account entity to which the payment is made) of the attribution account payment. (4) Where: (a) the attribution account payment is made to an attribution account entity that is a trust; and (b) the attribution surplus, for the eligible entity, is in relation to the taxpayer in the capacity of trustee of the trust (because it is a surplus that resulted from an attribution credit or credits that arose under subparagraph 371(6)(b)(iii)); then the amount of the attribution debit is the lesser of: (c) the attribution surplus; and (d) any amount assessable to the taxpayer under section 99 or 99A in relation to the net income of the trust of the year of income in which the attribution account payment is made. (5) The attribution debit arises when the attribution account payment is made.

Amendment history: Inserted by No 5 of 1991, item 51 | item 371 | item 456, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 58 of 2006, Sch 7 item 49, effective s 4 and Sch 7 (items 35–50, 241–256): 22 June 2006 (s 2(1) items 1, 6, 24) Sch 7 (items 173, 175): 30 June 2000 (s 2(1) items 9, 11) Sch 7 (item 174): 24 Oct 2002 (s 2(1) item 10) Sch 7 (items 176, 178): 30 June 2004 (s 2(1) items 12, 14) Sch 7 (item 177): 24 Dec 1992 (s 2(1) item 13)

s 373 — Grossed ‑ up amount of an attribution debit

The grossed ‑ up amount in relation to an attribution debit is: (a) where subparagraph 372(2)(b)(i) applied in relation to the debit—the amount of the debit; or (b) where subparagraph 372(2)(b)(ii) applied in relation to the debit—the amount of the debit, divided by the attribution account percentage referred to in that subparagraph.

Amendment history: Inserted by No 5 of 1991, item 341 | item 371 | item 456, effective s 4–61: 8 Jan 1991 (s 2)

s 381 — Separate attributable income for each attributable taxpayer

Where, at the end of a statutory accounting period (in this Division called the eligible period ) of a company: (a) the company is a CFC; and (b) there are one or more attributable taxpayers in relation to the company; the attributable income of the company (in this Division called the eligible CFC ) for the eligible period is calculated separately for each such attributable taxpayer (in this Division called the eligible taxpayer ) in accordance with this Division.

s 382 — Attributable income is taxable income calculated on certain assumptions

(1) The attributable income is the amount that would be the eligible CFC’s taxable income for the eligible period if certain assumptions were made. (2) For the purposes of describing those assumptions, amounts of assessable income, allowable deductions and exempt income that are to be taken into account in calculating the taxable income are referred to respectively as notional assessable income, notional allowable deductions and notional exempt income.

s 383 — Basic assumptions

The assumptions are: (a) that the eligible CFC is a taxpayer and a resident, within the meaning of section 6, during the whole of the eligible period; and (b) that the eligible period is a year of income, being the year of income of the eligible taxpayer in which the eligible period ends; and (c) that this Act is modified in accordance with Subdivisions B to E; and (d) whichever of the assumptions in section 384 or 385 applies.

Amendment history: Inserted by No 5 of 1991, item 334, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 190 of 1992, item 20, effective 1 Jan 1993 (s 2)

s 384 — Additional assumption for unlisted country CFC

(1) Where the eligible CFC is a resident of an unlisted country at the end of the eligible period, it is to be assumed: (a) that the only amounts of notional assessable income are those to which subsection (2) applies; and (b) that all other income is notional exempt income. (2) The amounts of notional assessable income are: (a) where the eligible CFC does not pass the active income test for the eligible period in relation to the eligible taxpayer—amounts that would be included in its notional assessable income for the eligible period under this Act as modified in accordance with Subdivisions B to E if the only income or other amounts derived by it during the eligible period, and any earlier statutory accounting period, were adjusted tainted income (within the meaning of section 386); and (b) amounts included in the notional assessable income of the eligible CFC for the eligible period under section 102AAZD of this Act as modified in accordance with Subdivisions B to E; and (c) amounts included in the notional assessable income of the eligible CFC for the eligible period under Division 6 of Part III of this Act as so modified; and (d) amounts that would be included in the notional assessable income of the eligible CFC for the eligible period under Division 5 of Part III of this Act, as modified in accordance with Subdivisions B to E of this Division, in relation to any partnership if its net income included only: (i) where the eligible CFC does not pass the active income test for the eligible period in relation to the eligible taxpayer—amounts that would be included if the partnership derived only adjusted tainted income (within the meaning of section 386); and (ii) amounts included under section 102AAZD of this Act as modified in accordance with Subdivisions B to E of this Division; and (iii) amounts included under Division 6 of Part III of this Act as so modified.

Amendment history: Inserted by No 5 of 1991, item 371, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 190 of 1992, item 21 | item 25, effective 1 Jan 1993 (s 2) | Amended by No 155 of 1997, Sch 1 item 34 | Sch 1 item 37 | Sch 1 item 117 | Sch 1 item 119, effective 24 Oct 1997 (s 2) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 64 of 2005, Sch 2 item 2, effective Sch 1 (items 1–6), Sch 3 (items 1–4) and Sch 4 (items 2–27, 38, 39): 26 June 2005 (s 2(1) items 2, 4) Sch 2 (items 1–9): 27 June 2005 (s 2(1) item 3) | Amended by No 114 of 2010, Sch 1 item 24, effective Sch 1 (items 1–39, 93–96): 14 July 2010 (s 2(1) items 2, 4) Sch 1 (items 88–92): 14 Sept 2006 (s 2(1) item 3)

s 385 — Additional assumption for listed country CFC

(1) Where the eligible CFC is a resident of a listed country at the end of the eligible period, it is to be assumed: (a) that the only amounts of notional assessable income are those to which subsection (2) applies; and (b) that all other income is notional exempt income. (2) Subject to subsection (4), the amounts of notional assessable income are: (a) amounts that would be included in the notional assessable income of the eligible CFC for the eligible period under this Act as modified in accordance with Subdivisions B to D if the only income or other amounts derived during the eligible period, and any earlier statutory accounting period, by the eligible CFC were: (i) where the eligible CFC does not pass the active income test for the eligible period in relation to the eligible taxpayer—adjusted tainted income (within the meaning of section 386) that is eligible designated concession income in relation to the listed country or any other listed country; and (ii) income or other amounts, of a kind specified in the regulations, that: (A) are not eligible designated concession income of the eligible CFC in relation to the listed country or any other listed country; and (B) are not treated as derived from sources in the listed country for the purposes of the tax law of the listed country; and (C) pass the test set out in subsection (2A); and (b) amounts included in the notional assessable income of the eligible CFC for the eligible period under section 102AAZD of this Act as modified in accordance with Subdivisions B to D; and (c) amounts included in the notional assessable income of the eligible CFC for the eligible period under Division 6 of Part III of this Act as so modified, where either of the following conditions (but not necessarily the same condition) is satisfied in relation to the listed country and each other listed country: (i) the amounts are not subject to tax in that listed country in a tax accounting period ending before the end of the eligible period or commencing during the eligible period; (ii) the amounts are subject to tax in that listed country in such a tax accounting period and are designated concession income in relation to the listed country; and (d) amounts that would be included in the notional assessable income of the eligible CFC for the eligible period under Division 5 of Part III of this Act, as modified in accordance with Subdivisions B to D of this Division, in relation to any partnership if its net income included only: (i) where the eligible CFC does not pass the active income test for the eligible period in relation to the eligible taxpayer—amounts that would be included if the partnership derived only adjusted tainted income (within the meaning of section 386) that is eligible designated concession income in relation to the listed country or any other listed country; and (ii) amounts that would be included if the partnership derived only income or other amounts, of a kind specified in the regulations, that: (A) are not eligible designated concession income of the partnership in relation to the listed country or any other listed country; and (B) are not treated as derived from sources in the listed country for the purposes of the tax law of the listed country; and (C) pass the test set out in subsection (2A); and (iii) amounts included under section 102AAZD of this Act as modified in accordance with Subdivisions B to D of this Division; and (iv) amounts included under Division 6 of Part III of this Act as so modified, where either of the following conditions (but not necessarily the same condition) is satisfied in relation to the listed country and each other listed country: (A) the amounts are not subject to tax in that listed country in a tax accounting period ending before the end of the eligible period or commencing during the eligible period; (B) the amounts are subject to tax in that listed country in such a tax accounting period and are designated concession income in relation to the listed country. (2A) For the purposes of sub ‑ subparagraphs (2)(a)(ii)(C) and (2)(d)(ii)(C), income or other amounts pass the test set out in this subsection if both: (a) the income or other amounts are adjusted tainted income (within the meaning of section 386); and (b) the income or other amounts are not subject to tax in the listed country or in any other listed country in a tax accounting period ending before the end of the eligible period or commencing during the eligible period. (3) For the purposes of paragraph (2)(c) or (d), a reference in that paragraph to an amount being not subject to tax or subject to tax, as the case may be, includes a reference to another amount included in the net income of a partnership or trust, to which the first ‑ mentioned amount is attributable, being not subject to tax or subject to tax. (4) Where the sum of the amounts to which paragraph (2)(a) would otherwise apply does not exceed the lesser of: (a) $50,000; and (b) 5% of the gross turnover of the eligible CFC for the eligible period; then that paragraph does not apply to those amounts. (5) In determining for the purposes of paragraph (4)(b) the gross turnover of the eligible CFC for the eligible period, section 434 has effect as if: (a) subparagraph 434(1)(a)(i) were omitted; and (b) the words “, but not including amounts that are shown in those recognised accounts as amounts covered by section 436” were omitted from paragraphs 434(1)(b), (c) and (d); and (c) the words “(other than an exclusion of amounts shown in those recognised accounts as amounts covered by section 436)” were omitted from subsection 434(2).

Amendment history: Inserted by No 5 of 1991, item 1990, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 190 of 1992, item 22, effective 1 Jan 1993 (s 2) | Amended by No 122 of 1997, Sch 1 item 20, effective s 4, Sch 1 (items 1–15, 20), Sch 3 (items 1, 2, 6–21) and Sch 5: 8 July 1997 (s 2(1)) Sch 1 (items 17–19): 3 June 1990 (s 2(2)) Sch 1 (items 22, 23): 1 Sept 1994 (s 2(4)) Sch 1 (item 24): 1 Jan 1993 (s 2(3)) Sch 3 (items 3, 4): 24 June 1986 (s 2(6)) Sch 3 (item 5): 30 June 1992 (s 2(7)) Sch 4: 20 Jan 1997 (s 2(8)) Sch 6: 27 June 1996 (s 2(9)) Sch 8: 19 Dec 1996 (s 2(11)) | Amended by No 155 of 1997, Sch 1 item 38 | Sch 1 item 41 | Sch 1 item 42 | Sch 1 item 85 | Sch 1 item 89, effective 24 Oct 1997 (s 2) | Amended by No 73 of 2004, effective 23 June 2004 (s 2) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 64 of 2005, Sch 2 item 4, effective Sch 1 (items 1–6), Sch 3 (items 1–4) and Sch 4 (items 2–27, 38, 39): 26 June 2005 (s 2(1) items 2, 4) Sch 2 (items 1–9): 27 June 2005 (s 2(1) item 3) | Amended by No 114 of 2010, Sch 1 item 28 | Sch 1 item 29 | Sch 1 item 32, effective Sch 1 (items 1–39, 93–96): 14 July 2010 (s 2(1) items 2, 4) Sch 1 (items 88–92): 14 Sept 2006 (s 2(1) item 3)

s 386 — Adjusted tainted income

(1) The references in sections 384, 385 and 457 to adjusted tainted income are references to amounts that would be passive income, tainted sales income or tainted services income if certain modifications were made to the provisions of Division 8. (2) The modifications are: (a) that paragraphs 446(1)(k), (m) and (n) are replaced with the following: “(k) amounts derived from the disposal of tainted assets; (m) amounts derived from the disposal of tainted commodity investments; (n) amounts derived that are attributable to currency exchange rate fluctuations, except where under section 439 the amounts would, if they were currency exchange gains, relate to an active income transaction;”; and (b) that paragraph 446(1)(k) as so replaced does not apply to an amount derived from the disposal of a tainted asset in the circumstances referred to in paragraphs 450(2)(a) to (c) or (5)(a) to (c); and (c) that paragraph 446(1)(n) as so replaced does not apply to an amount derived where, if it were a currency exchange gain, paragraphs 450(3)(a) and (b) would apply to it; and (d) that the reference in subsection 450(7) to net gains that accrued to the company in respect of the disposal of tainted assets is replaced with a reference to amounts derived by the company from the disposal of tainted assets.

s 387 — Reduction of attributable income because of interim dividends

(1) Where: (a) during the eligible period, the eligible CFC pays a dividend to the eligible taxpayer or to another entity; and (b) if the dividend is paid to the eligible taxpayer—the whole or part of the dividend is included in the assessable income of the eligible taxpayer of a year of income; and (d) the whole or part of the grossed ‑ up assessable component of the dividend may reasonably be regarded as having been paid out of the attributable income of the eligible CFC for the eligible period; then, for the purposes of this Part, the attributable income of the eligible CFC for the eligible period in relation to the eligible taxpayer is reduced by an amount equal to the whole or the part of the grossed ‑ up assessable component of the dividend. (2) In this section: grossed ‑ up assessable component , in relation to a dividend the whole or part of which is included in the assessable income of the eligible taxpayer, means the amount of the whole or the part divided by the eligible taxpayer’s attribution percentage for the eligible CFC at the time of payment of the dividend.

s 388 — Double tax agreements to be disregarded

In calculating the attributable income of the eligible CFC, the International Tax Agreements Act 1953 is to be disregarded, except for the purpose of references in this Act to that Act.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 22 of 1995, item 34, effective Sch (items 16–35): 29 Mar 1995 (s 2)

s 389 — Certain provisions to be disregarded in calculating attributable income

For the purpose of applying this Act in calculating the attributable income of the eligible CFC, the following provisions are to be disregarded: (a) except for the purposes of a reference in any other provision of this Part—sections 23AH, 23AI, 23AK and 128D, Division 15 of Part III (other than subsection 148(1)) and sections 456, 457, 459A and 461; (b) except for the purposes of a reference in Division 6AAA of Part III or in any other provision of this Part—Part 3 ‑ 6 of the Income Tax Assessment Act 1997 ; (ba) Division 230 of the Income Tax Assessment Act 1997 ; (c) Division 820 of the Income Tax Assessment Act 1997 ; (d) Division 832 of the Income Tax Assessment Act 1997 (about hybrid mismatch rules).

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 48 of 1991, item 73, effective s 9, 15, 33, 70 and 81–83: 8 Jan 1991 (s 2(2)) s 10–14, 16–31, 34(a), 35, 37–39, 41–51(1), 52–59(1), 60, 61,67, 68(1), 69, 71–80, 84(1)–(8), (10), (11), (13)–(17), 85, 86 and 88–90: 24 Apr 1991 (s 2(1)) s 32 and 84(9): 1 July 1991 (s 2(4)) s 34(b), 36, 40 and 87: 21 Aug 1990 (s 2(3)) s 51(2), 59(2), 62–66, 68(2) and 84(12): 25 Apr 1991 (s 2(5)) | Amended by No 190 of 1992, item 23, effective 1 Jan 1993 (s 2) | Amended by No 224 of 1992, item 79, effective s 4–13, 14(1), 15(1), 16(1), 17(1) and 18–87: 24 Dec 1992 (s 2(1)) s 14(2), 15(2), 16(2) and 17(2): 1 July 1993 (s 2(1)) | Amended by No 138 of 1994, item 9, effective s 4, 5, 8–10, 14–16, 21–24, 27–33, 44–92, 99–116 and Sch: 28 Nov 1994 (s 2(1)) s 11–13, 17–20, 25, 26 and 34–43: 1 Jan 1993 (s 2(2)) s 93–98: 28 Nov 1994 (s 2(3)) | Amended by No 155 of 1997, Sch 1 item 43, effective 24 Oct 1997 (s 2) | Amended by No 162 of 2001, Sch 1 item 12 | Sch 1 item 13 | Sch 1 item 820, effective Sch 1 (items 2–13, 23–26): 1 July 2001 (s 2(1)) | Amended by No 133 of 2003, Sch 4 item 29 | Sch 4 item 78, effective Sch 1 (items 1–3, 17(1)) and Sch 4 (items 21–37, 77, 78): 17 Dec 2003 (s 2) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 23 of 2005, Sch 3 item 56, effective s 4 and Sch 3 (items 14–74, 111(3)–(5), 112–114): 21 Mar 2005 (s 2(1) items 1, 6) | Amended by No 101 of 2006, Sch 2 item 457, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3) | Amended by No 143 of 2007, Sch 1 item 90, effective Sch 1 (items 2, 3, 18–127, 222, 223, 224(1), (2), 225, 226), Sch 4 (items 1–46, 51, 52), Sch 7 (items 9–17, 104(2)) and Sch 8: 24 Sept 2007 (s 2(1) items 2, 4, 11, 12) | Amended by No 15 of 2009, Sch 1 item 49, effective Sch 1 (items 31–51, 102–105): 26 Mar 2009 (s 2(1) item 2) | Amended by No 114 of 2010, Sch 1 item 33, effective Sch 1 (items 1–39, 93–96): 14 July 2010 (s 2(1) items 2, 4) Sch 1 (items 88–92): 14 Sept 2006 (s 2(1) item 3) | Amended by No 101 of 2013, Sch 2 item 17, effective Sch 1 (items 1–8, 10) and Sch 2 (items 1, 8–19, 50): 29 June 2013 (s 2(1) items 2, 3) | Amended by No 84 of 2018, Sch 1 item 7, effective Sch 1 (items 2–7, 15), Sch 2 (items 4, 5, 9, 10) and Sch 4 (item 1): 1 Oct 2018 (s 2(1) item 1)

s 389A — Other provisions to be disregarded in calculating attributable income

For the purpose of applying this Act in calculating the attributable income of the eligible CFC, the following provisions are to be disregarded: (a) Division 974 of the Income Tax Assessment Act 1997 ; and (b) any provision of this Act to the extent to which the operation of the provision depends on an expression whose meaning is given by Division 974 of the Income Tax Assessment Act 1997 .

Amendment history: Inserted by No 163 of 2001, effective Sch 1 (items 35–116, 118(1), (2), (6)–(13)): 1 July 2001 (s 2)

s 390 — Elections to be made by eligible taxpayer

(1) For the purpose of applying this Act in calculating the attributable income of the eligible CFC, any declaration, election, choice or selection that may be made, any notice that may be given or any option that may be exercised, under this Act by the eligible CFC apart from this section is not to be made, given or exercised by the eligible CFC but instead may be made, given or exercised by the eligible taxpayer. (2) The eligible taxpayer may make the declaration, election or selection, give the notice or exercise the option in the eligible taxpayer’s return of income of the year of income in which the eligible period ends or within such further period after the lodgment of the return as the Commissioner allows. (3) Subsection (1) does not apply to an election under the CGT roll ‑ over provisions.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 16 of 1998, Sch 6 item 11 | Sch 6 item 12, effective s 4, Sch 1 (items 1–58), Sch 6 (items 1–17) and Sch 10 (items 20–57): 16 Apr 1998 (s 2(1), (2))

s 392 — Notional assessable amounts are to be pre ‑ tax

(1) An amount included in the notional assessable income of the eligible CFC is an amount before the payment of any foreign tax or Australian tax in respect of the amount.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6)

s 393 — Notional allowable deduction for taxes paid

(1) Foreign tax or Australian tax paid by the eligible CFC in respect of amounts included in the notional assessable income of the eligible CFC for the eligible period, whether paid before, during or after that period, is a notional allowable deduction from the notional assessable income of the eligible CFC for the eligible period. (2) For the purposes of subsection (1), foreign tax mentioned in that subsection does not include any of the following: (a) foreign IIR tax (within the meaning of the Income Tax Assessment Act 1997 ); (b) foreign UTPR tax (within the meaning of that Act); (c) a tax specified in regulations made for the purposes of this paragraph. (4) Where a person pays an amount of tax that the person is liable to pay under subsection 148(3) of this Act, in its application apart from this Part, in respect of premiums paid or credited to the eligible CFC, then, for the purposes of subsection (1), the amount is taken to be Australian tax paid by the eligible CFC in respect of the premiums.

Amendment history: Inserted by No 5 of 1991, item 33 | item 371, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 48 of 1991, item 74, effective s 9, 15, 33, 70 and 81–83: 8 Jan 1991 (s 2(2)) s 10–14, 16–31, 34(a), 35, 37–39, 41–51(1), 52–59(1), 60, 61,67, 68(1), 69, 71–80, 84(1)–(8), (10), (11), (13)–(17), 85, 86 and 88–90: 24 Apr 1991 (s 2(1)) s 32 and 84(9): 1 July 1991 (s 2(4)) s 34(b), 36, 40 and 87: 21 Aug 1990 (s 2(3)) s 51(2), 59(2), 62–66, 68(2) and 84(12): 25 Apr 1991 (s 2(5)) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 134 of 2024, Sch 1 item 5 | Sch 1 item 19 | Sch 1 item 830 | Sch 1 item 26, effective Sch 1 (items 3–5, 65): 11 Dec 2024 (s 2(1) item 1)

s 394 — Notional allowable deduction for eligible finance share dividends, widely distributed finance share dividends and transitional finance share dividends

Where: (a) the eligible CFC pays an eligible finance share dividend, a widely distributed finance share dividend or a transitional finance share dividend during or after the eligible period; and (b) if, on the assumption that the dividend were instead a payment of the interest, referred to in paragraph 327(d) or 327A(3)(b) or subsection 327B(2), as the case requires, to which it may reasonably be regarded as equivalent, an amount (in this section called the interest equivalent ) of that interest accruing during the eligible period would be a notional allowable deduction for the eligible period; then the interest equivalent is a notional allowable deduction for the eligible period.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 35 of 1992, item 61, effective s 7–75: 25 May 1992 (s 2) | Amended by No 80 of 1992, item 59, effective s 52(2) and 53(2): 1 July 1992 (s 2(3)) Remainder: 30 June 1992 (s 2(1))

s 395 — Expenditure incurred to produce income or profits in later statutory accounting periods

In determining whether expenditure incurred by the eligible CFC during the eligible period for the purpose of gaining or producing income or profits in a later statutory accounting period is a notional allowable deduction under a particular provision, it is to be assumed that: (a) there will be a requirement under this Division to calculate the attributable income of the eligible CFC for that later statutory accounting period; and (b) for that purpose, the eligible CFC will always be a resident of the listed country or unlisted country, as the case may be.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2)

s 396 — Modified application of sections 25A and 52

(1) For the purpose of applying this Act and the Income Tax Assessment Act 1997 in calculating the attributable income of an eligible CFC, sections 25A and 52 of this Act and sections 15 ‑ 15 and 25 ‑ 40 of the Income Tax Assessment Act 1997 do not apply in respect of the disposal of a non ‑ taxable Australian asset of the eligible CFC. (2) A reference in subsection (1) to a non ‑ taxable Australian asset is a reference to a CGT asset other than one that has the necessary connection with Australia (within the meaning of the Income Tax Assessment Act 1997 ). (3) The residency assumption is to be ignored in determining whether an asset is a taxable Australian asset for the purposes of this section.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 121 of 1997, Sch 2 item 36 | Sch 2 item 37 | Sch 4 item 133, effective s 4: 8 July 1997 (s 2(1)) Sch 2 (items 18–37), Sch 3 (items 31–61), Sch 4 (items 63–138), Sch 5 (items 43–93), Sch 6 (items 68–132), Sch 7 (items 5–7), Sch 8 (items 32–51), Sch 9 (items 16–40), Sch 10 (items 12–15), Sch 11 (items 37–57) and Sch 12 (items 15–23): 1 July 1997 (s 2(3), (5)) | Amended by No 46 of 1998, Sch 10 item 427 | Sch 10 item 428, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 89 of 2000, Sch 5 item 32, effective s 4, Sch 1 (item 66), Sch 2 (items 1–24, 35, 36, 48, 53–62), Sch 3 (items 1–29, 98–100), Sch 5 (items 32–34(1)) and Sch 8 (items 1–8, 11): 30 June 2000 (s 2(1)) Sch 1 (item 67): 1 pm (A.C.T.) 11 Nov 1999 (s 2(2)) Sch 2 (items 25, 26) and Sch 3 (items 30–97): 1 July 2000 (s 2(3), (8), (9)) | Amended by No 101 of 2006, Sch 2 item 458, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3) | Amended by No 168 of 2006, Sch 4 item 18 | Sch 4 item 19, effective s 4 and Sch 4 (items 14–28, 112): 12 Dec 2006 (s 2(1) items 1, 5) Sch 3 (items 3–5): 13 Dec 2005 (s 2(1) item 4)

s 397 — Modified application of trading stock provisions

When applying this Act and the Income Tax Assessment Act 1997 in calculating the attributable income of the eligible CFC: (a) Subdivision B of Division 2 of Part III of this Act has effect as if the value of any article of trading stock to be taken into account at the beginning or end of a year of income were its cost price; and (b) Division 70 of the Income Tax Assessment Act 1997 has effect as if the value of any item of trading stock to be taken into account at the beginning or end of an income year were its cost.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Repealed and substituted by No 121 of 1997, Sch 1 item 70 | Sch 5 item 91, effective s 4: 8 July 1997 (s 2(1)) Sch 2 (items 18–37), Sch 3 (items 31–61), Sch 4 (items 63–138), Sch 5 (items 43–93), Sch 6 (items 68–132), Sch 7 (items 5–7), Sch 8 (items 32–51), Sch 9 (items 16–40), Sch 10 (items 12–15), Sch 11 (items 37–57) and Sch 12 (items 15–23): 1 July 1997 (s 2(3), (5))

s 398 — Modified application of depreciation provisions

(1) Where property has been held by the eligible CFC in a non ‑ attributable income period in relation to the application of a depreciation provision to the property (in relation to the eligible CFC and the eligible taxpayer) prior to the eligible period, subsection (2) applies. (2) Such amount as the Commissioner considers appropriate to take account of the holding of the property as mentioned in subsection (1) is, under the depreciation provision: (a) a notional allowable deduction to the eligible CFC; or (b) included in the notional assessable income of the eligible CFC; as the case requires, for the eligible period in relation to the eligible taxpayer, in substitution for any amount that would otherwise be so included or allowable. (3) For the purpose of exercising his or her power under subsection (2) to determine a notional allowable deduction in relation to: (a) former sections 54 to 62 of this Act; or (b) the former Division 42 (Depreciation) of the Income Tax Assessment Act 1997 (other than Subdivisions 42 ‑ L and 42 ‑ M); or (c) Division 40 of that Act (other than Subdivision 40 ‑ E); the Commissioner must assume that the property was used by the eligible CFC during any non ‑ attributable income period wholly and exclusively for the purpose of producing notional assessable income.

Amendment history: Inserted by No 5 of 1991, item 80G, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 121 of 1997, Sch 6 item 125, effective s 4: 8 July 1997 (s 2(1)) Sch 2 (items 18–37), Sch 3 (items 31–61), Sch 4 (items 63–138), Sch 5 (items 43–93), Sch 6 (items 68–132), Sch 7 (items 5–7), Sch 8 (items 32–51), Sch 9 (items 16–40), Sch 10 (items 12–15), Sch 11 (items 37–57) and Sch 12 (items 15–23): 1 July 1997 (s 2(3), (5)) | Amended by No 79 of 2000, Sch 6 item 14, effective s 4: 30 June 2000 (s 2(1)) Sch 1 (items 1, 2, 4), Sch 2 (items 6A–6J, 7), Sch 3, Sch 4 (items 1–5) and Sch 6 (items 12–15): 1 July 2000 (s 2(2)) Sch 4 (items 6–10): 1 July 2001 (s 2(3)) Sch 5: 10 Dec 1999 (s 2(4)) | Amended by No 77 of 2001, Sch 2 item 98, effective Sch 2 (items 20–148, 488(1)): 30 June 2001 (s 2(1)) | Amended by No 101 of 2006, Sch 2 item 459, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3)

s 398A — Application of Division 3A of Part III

(1) Subject to subsection (2), Division 3A of Part III applies in calculating the attributable income of the eligible CFC. (2) Section 82R does not apply, subject to subsection (3), to outgoings during the eligible period under a convertible note if: (a) the note was issued by the eligible CFC (whether or not the company concerned was a CFC at the time): (i) before 1 July 1990; or (ii) on or after 1 July 1990 and before 1 July 1992, where: (A) the terms of the issue of the note were publicly announced by the eligible CFC before 1 July 1990; or (B) the eligible CFC was, under a contract entered into before 1 July 1990, obliged to issue the note; and (b) at the end of each statutory accounting period of the eligible CFC preceding the eligible period and ending after 30 June 1990, the eligible taxpayer was an attributable taxpayer in relation to the eligible CFC; and (c) the eligible period begins before 1 July 2000. (3) If: (a) the terms of a note to which subsection (2) would, apart from this subsection, apply are varied (otherwise than because of a compromise or arrangement approved by a court); and (b) the Commissioner considers that the variation is substantial enough to represent a new loan; subsection (2) does not apply to outgoings under the note after the time at which the variation takes place.

Amendment history: Inserted by No 48 of 1991, effective s 9, 15, 33, 70 and 81–83: 8 Jan 1991 (s 2(2)) s 10–14, 16–31, 34(a), 35, 37–39, 41–51(1), 52–59(1), 60, 61,67, 68(1), 69, 71–80, 84(1)–(8), (10), (11), (13)–(17), 85, 86 and 88–90: 24 Apr 1991 (s 2(1)) s 32 and 84(9): 1 July 1991 (s 2(4)) s 34(b), 36, 40 and 87: 21 Aug 1990 (s 2(3)) s 51(2), 59(2), 62–66, 68(2) and 84(12): 25 Apr 1991 (s 2(5)) | Repealed and substituted by No 163 of 2001, Sch 1 item 112, effective Sch 1 (items 35–116, 118(1), (2), (6)–(13)): 1 July 2001 (s 2)

s 399 — Modifications of net income of partnerships and trusts

(1) If, in calculating the attributable income of the eligible CFC, it is necessary to determine the net income of a partnership or trust under section 90 or 95, it is to be assumed that: (a) the modifications of this Act in this Division (other than excluded modifications) apply to the partnership or the trust in the same way as they apply to the eligible CFC (except where a provision modified only applies to companies); and (b) for the purpose of applying those modifications, the partnership or trust is taken to be a resident of the same listed or unlisted country as the eligible CFC; and (c) the Income Tax Assessment Act 1997 is further modified by disregarding section 855 ‑ 50; and (d) for the purposes of applying Parts 3 ‑ 1 and 3 ‑ 3 of the Income Tax Assessment Act 1997 in accordance with the preceding paragraphs, the trust is a resident trust for CGT purposes. (2) In this section: excluded modifications means modifications made by sections 411 to 418 (inclusive).

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 190 of 1992, item 24, effective 1 Jan 1993 (s 2) | Amended by No 46 of 1998, Sch 10 item 429 | Sch 10 item 430 | Sch 10 item 431, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 101 of 2006, Sch 2 item 460 | Sch 2 item 461, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3) | Amended by No 168 of 2006, Sch 4 item 20, effective s 4 and Sch 4 (items 14–28, 112): 12 Dec 2006 (s 2(1) items 1, 5) Sch 3 (items 3–5): 13 Dec 2005 (s 2(1) item 4) | Amended by No 110 of 2014, Sch 2 item 12, effective Sch 2 (items 1, 6–12, 23): 17 Oct 2014 (s 2(1) item 2) Sch 5 (items 7–15, 95–97): 16 Oct 2014 (s 2(1) items 4, 7)

s 399A — Modified application of bad debt etc. provisions

(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC for the eligible period: (b) section 63D of this Act is to be disregarded; and (c) subsection (2) of this section has effect. (2) Where: (a) apart from this subsection, an amount would be a notional allowable deduction to the eligible CFC under section 8 ‑ 1 or 25 ‑ 35 of the Income Tax Assessment Act 1997 in respect of the writing off of a debt as bad; and (b) the debt was created or acquired in the ordinary course of a money ‑ lending business of the eligible CFC that carries on that business; and (c) assuming that income: (i) that has been derived by the eligible CFC in respect of the debt; or (ii) that would have been reasonably likely to have been derived by the eligible CFC in respect of the debt if it had not become bad; were instead derived by the eligible CFC during periods to which it may reasonably be attributed, there would be a part or parts (which part or the total of which parts is in this subsection called the notional exempt income period ) of the period (in this subsection called the eligible debt holding period ) beginning when the debt was so created or acquired, and ending when it was written off, in respect of which some or all of that income would not be included in the notional assessable income of the eligible CFC for any statutory accounting period; then only a proportion of the amount referred to in paragraph (a) is a notional allowable deduction, being the proportion calculated using the following formula: where: Eligible debt holding period means the number of days in the eligible debt holding period. Notional exempt income period means the number of days in the notional exempt income period. Eligible debt term means: (d) where the debt was acquired from a person other than an associate—the number of days in the eligible debt holding period; or (e) in any other case—the number of days in the period beginning on the day on which the debt was created (whether by the eligible CFC or another person) and ending at the end of the day on which it was written off. (3) For the purposes of subsection (2): (a) where a debt that is written off was acquired from another person, the creation and any previous acquisition of the debt is to be disregarded, other than for the purposes of paragraph (2)(e); and (b) if, on the assumption in paragraph (2)(c), income would be derived by the eligible CFC during a period before the first statutory accounting period of the eligible CFC beginning on or after 1 July 1990, then, in spite of anything in that paragraph, that income is taken not to be included in the notional assessable income of the eligible CFC for any statutory accounting period; and (c) it is to be assumed that, for any statutory accounting period for which there is no requirement to calculate the attributable income of the eligible CFC in relation to the eligible taxpayer, there is such a requirement. (4) Where a part of a debt is written off as bad, the preceding provisions of this section apply as if the part were an entire debt that is written off as bad. (5) This section has the same effect in relation to an allowable deduction under section 63E in respect of the whole or part of a debt that is extinguished as it has in relation to an allowable deduction under section 8 ‑ 1 or 25 ‑ 35 of the Income Tax Assessment Act 1997 in respect of the whole or part of a debt that is written off as bad.

Amendment history: Inserted by No 100 of 1991, effective s 15–28, 30–32, 33(b), (e), (f), 34–76 and 79–84): 27 June 1991 (s 2(1)) s 29 and 77: 24 Apr 1991 (s 2(3), (6)) s 33(a): 16 June 1990 (s 2(4)) s 33(c) and (d): 30 June 1989 (s 2(5)) s 78: 8 Jan 1991 (s 2(7)) | Amended by No 98 of 1992, item 30, effective s 4–31 and 37–81: 30 June 1992 (s 2(1)) s 32–36: 1 July 1992 (s 2(2)) | Amended by No 39 of 1997, Sch 4 item 261 | Sch 4 item 262, effective Sch 1: 1 July 1997 (s 2) | Amended by No 46 of 1998, Sch 10 item 432, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 54 of 1999, Sch 3 item 8 | Sch 3 item 9, effective s 4, Sch 1 (items 2–13, 36), Sch 3, Sch 5 (items 11–15), Sch 6 and Sch 7 (items 1, 3): 5 July 1999 (s 2(1)) | Amended by No 101 of 2006, Sch 1 item 171, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3)

s 400 — Modified cross ‑ border requirement for transfer pricing

(1) This section applies in calculating the attributable income of the eligible CFC. (2) Conditions that operate between the eligible CFC and another entity do not satisfy the cross ‑ border test in subsection 815 ‑ 120(3) of the Income Tax Assessment Act 1997 if: (a) the other entity is a CFC; and (b) the eligible CFC and the other entity are residents of the same listed country (disregarding section 383 of this Act).

Amendment history: Inserted by No 5 of 1991, item 27, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 155 of 1997, Sch 1 item 44, effective 24 Oct 1997 (s 2) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Repealed and substituted by No 101 of 2013, Sch 2 item 18, effective Sch 1 (items 1–8, 10) and Sch 2 (items 1, 8–19, 50): 29 June 2013 (s 2(1) items 2, 3)

s 401 — Reduction of disposal consideration or capital proceeds if attributed income not distributed

(1) If: (a) it is necessary, for the purposes of applying a provision of this Act in calculating the attributable income of the eligible CFC in relation to the eligible taxpayer, to take into account: (i) the amount of consideration received, entitled to be received or taken to have been received, by the eligible CFC in respect of the disposal of an asset; or (ii) the capital proceeds from a CGT event happening in relation to a CGT asset; being an asset that is an interest in an attribution account entity (the disposal entity ); and (b) immediately before the disposal or CGT event takes place, either or both of the following conditions are satisfied: (i) there is an attribution surplus for the disposal entity in relation to the eligible taxpayer; (ii) there is an attribution surplus for one or more other attribution account entities in relation to the eligible taxpayer, where each such entity is one in which the eligible taxpayer has an indirect attribution account interest held through the disposal entity; then: (c) for the purpose of calculating the attributable income, the consideration or capital proceeds that, apart from this section, would be taken into account under the provision referred to in paragraph (a) in respect of the disposal or CGT event is, subject to subsection (3), taken to be reduced by the grossed ‑ up amount of the attribution surplus, or the sum of the grossed ‑ up amounts of the attribution surpluses, as the case requires; and (d) for the purposes of this Act, attribution debits and credits arise in accordance with subsection (5). (3) For the purposes of paragraph (1)(c): (a) a reference to the grossed ‑ up amount of an attribution surplus is a reference to the amount of the surplus divided by the eligible taxpayer’s attribution account percentage for the eligible CFC; and (b) where the disposal of the asset, or the CGT event, causes the eligible taxpayer’s attribution account percentage for an attribution account entity in relation to which there is an attribution surplus to be reduced by a proportion, then only that proportion of the attribution surplus is, subject to this subsection, to be taken into account under that paragraph; and (c) where there is only one attribution surplus referred to in that paragraph and (after any application of paragraph (b) of this subsection) its grossed ‑ up amount exceeds the consideration in respect of the disposal or the capital proceeds from the CGT event, then the surplus is only to be taken into account to the extent that its grossed ‑ up amount equals the consideration or those capital proceeds; and (d) where there are 2 or more attribution surpluses referred to in paragraph (1)(c) and (after any application of paragraph (b) of this subsection) the sum of their grossed ‑ up amounts exceeds the consideration in respect of the disposal or the capital proceeds from the CGT event, then: (i) if the taxpayer makes an election that for the purposes of this paragraph, a part of each surplus (after any application of paragraph (b)) such that the sum of the grossed ‑ up amounts of the parts to which the election relates equals the consideration or those capital proceeds—only the part to which the election relates of each surplus is to be taken into account under paragraph (1)(c); or (ii) if subparagraph (i) does not apply—only a proportion of each surplus (after any application of paragraph (b)) is to be taken into account under paragraph (1)(c), being the proportion calculated using the formula: where: consideration means the amount of the consideration or the capital proceeds. total grossed ‑ up surplus means the sum of the grossed ‑ up amounts of the attribution surpluses (after any application of paragraph (b)). (4) An election for the purposes of paragraph (3)(d) must be made on or before the date of lodgment of the eligible taxpayer’s return of income for the year of income in which the eligible period ends or within such further period after the lodgment of the return as the Commissioner allows. (5) For the purposes of this Act: (a) an attribution debit is taken to arise at the time of the disposal under section 372, in relation to the eligible taxpayer, for each attribution account entity (in this section called a surplus entity ) in relation to which there is an attribution surplus to which paragraph (1)(c) applies; and (b) the amount of the attribution debit is equal to so much of the surplus as is taken into account under paragraph (1)(c); and (c) there is no grossed ‑ up amount in relation to the attribution debit under section 373; and (d) an attribution credit equal to the debit is taken to arise, at the time of the disposal or of the CGT event, under section 371 for the eligible CFC in relation to the eligible taxpayer. (6A) In determining, for the purposes of this section, whether there was an attribution surplus immediately before a CGT event, and the amount of such a surplus, also take into account any attribution credit that later arises because the CGT event caused section 104 ‑ 175 of the Income Tax Assessment Act 1997 (as it notionally applies to the CGT event entity under this Division) to operate. (7) In this section: interest , in relation to an attribution account entity, means: (a) if the entity is a company—an interest in shares in the company, or an entitlement to acquire such an interest; or (b) if the entity is a partnership—an interest of a partner in the profits or property of the partnership, or an entitlement of a partner to acquire such an interest; or (c) if the entity is a trust—an entitlement of a beneficiary to a share of the income or corpus of the trust, or an entitlement of a beneficiary to acquire such an entitlement.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 101 of 1992, effective s 16–32, 34 and Sch 1–4: 30 June 1992 (s 2) | Amended by No 46 of 1998, Sch 10 item 433 | Sch 10 item 434 | Sch 10 item 435 | Sch 10 item 436 | Sch 10 item 437 | Sch 10 item 438 | Sch 10 item 439 | Sch 10 item 440 | Sch 10 item 443, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 58 of 2000, Sch 1 item 5 | Sch 1 item 19 | Sch 1 item 20, effective s 4, Sch 1, Sch 2 (items 1, 4(1)), Sch 3 (item 3), Sch 6 (item 34), Sch 10 (items 1–11, 17(1), (2), 18–30, 38(1), (2)) and Sch 11 (items 1, 11): 31 May 2000 (s 2(1), (2)) Sch 3 (items 1, 2, 4–7) and Sch 6 (item 33): 16 July 1999 (s 2(3)–(6), (12)) Sch 8 (items 1–17, 21): 1 July 1998 (s 2(13)) Sch 8 (item 18): 1 July 1999 (s 2(13)) | Amended by No 101 of 2006, Sch 1 item 172 | Sch 2 item 462 | Sch 2 item 463 | Sch 2 item 464 | Sch 2 item 465 | Sch 2 item 466 | Sch 2 item 467 | Sch 2 item 468 | Sch 2 item 469, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3) | Amended by No 143 of 2007, Sch 1 item 91 | Sch 1 item 92 | Sch 1 item 93, effective Sch 1 (items 2, 3, 18–127, 222, 223, 224(1), (2), 225, 226), Sch 4 (items 1–46, 51, 52), Sch 7 (items 9–17, 104(2)) and Sch 8: 24 Sept 2007 (s 2(1) items 2, 4, 11, 12) | Amended by No 114 of 2010, Sch 1 item 88 | Sch 1 item 89, effective Sch 1 (items 1–39, 93–96): 14 July 2010 (s 2(1) items 2, 4) Sch 1 (items 88–92): 14 Sept 2006 (s 2(1) item 3)

s 402 — Additional notional exempt income—unlisted or listed country CFC

(1) This section applies where the eligible CFC is a resident of either a listed country or an unlisted country at the end of the eligible period. (2) Each of the following is notional exempt income of the eligible CFC in relation to the eligible period: (a) income or other amounts derived by the eligible CFC in the eligible period that are included in the assessable income of the eligible CFC of any year of income for the purposes of this Act apart from this Part, other than amounts that are so included under section 143 (where the proviso to that section does not apply); (b) so much of a frankable distribution, paid to the eligible CFC in the eligible period, as is either the franked part of the distribution, or the part of the distribution that has been franked with an exempting credit; (e) a premium paid or credited to the eligible CFC in the eligible period, where, because of the application of subsection 148 (1) for the purposes of this Act apart from this Part, the premium is not, for those purposes, allowable as a deduction to the person referred to in subparagraph 148(1)(a)(i) and is not included in the assessable income of the eligible CFC. (3) If: (a) an attribution account entity makes an attribution account payment to the eligible CFC in the eligible period; and (b) apart from this subsection, the whole or part of the attribution account payment would be included in the notional assessable income of the eligible CFC in relation to the eligible taxpayer for the eligible period; and (c) on the making of the attribution account payment, an attribution debit arises for the attribution account entity in relation to the eligible taxpayer; then so much (if any) of the whole or the part of the attribution account payment as does not exceed the grossed ‑ up amount of the attribution debit is notional exempt income of the eligible CFC for the eligible period. (4) If: (a) a FIF attribution account entity (within the meaning of former Part XI) makes a FIF attribution account payment (within the meaning of former Part XI) to the eligible CFC in the eligible period; and (b) apart from this subsection, the whole or part of the FIF attribution account payment would be included in the notional assessable income of the eligible CFC in relation to the eligible taxpayer for the eligible period; and (c) on the making of the FIF attribution account payment, a post FIF abolition debit arises under section 23AK for the FIF attribution account entity in relation to the eligible taxpayer; so much (if any) of the whole or the part of the FIF attribution account payment as does not exceed the grossed ‑ up amount of the post FIF abolition debit is notional exempt income of the eligible CFC for the eligible period. (5) For the purposes of subsection (4), the grossed ‑ up amount of the post FIF abolition debit is: (a) where subparagraph 23AK(3)(b)(i) applied in relation to the debit—the amount of the debit; or (b) where subparagraph 23AK(3)(b)(ii) applied in relation to the debit—the amount of the debit, divided by the FIF attribution account percentage referred to in that subparagraph.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 48 of 1991, item 76, effective s 9, 15, 33, 70 and 81–83: 8 Jan 1991 (s 2(2)) s 10–14, 16–31, 34(a), 35, 37–39, 41–51(1), 52–59(1), 60, 61,67, 68(1), 69, 71–80, 84(1)–(8), (10), (11), (13)–(17), 85, 86 and 88–90: 24 Apr 1991 (s 2(1)) s 32 and 84(9): 1 July 1991 (s 2(4)) s 34(b), 36, 40 and 87: 21 Aug 1990 (s 2(3)) s 51(2), 59(2), 62–66, 68(2) and 84(12): 25 Apr 1991 (s 2(5)) | Amended by No 35 of 1992, item 62 | item 1992, effective s 7–75: 25 May 1992 (s 2) | Amended by No 80 of 1992, item 60 | item 68, effective s 52(2) and 53(2): 1 July 1992 (s 2(3)) Remainder: 30 June 1992 (s 2(1)) | Amended by No 190 of 1992, item 25, effective 1 Jan 1993 (s 2) | Amended by No 18 of 1993, item 33 | item 40, effective s 8–29, 54–57, 59 and Sch: 9 June 1993 (s 2(1)) s 30–53: 1 Jan 1993 (s 2(2)) | Amended by No 5 of 1995, item 18, effective s 3(2), (3) and Sch (items 14–35): 1 July 1995 (s 2) | Amended by No 174 of 1997, Sch 2 item 4 | Sch 2 item 5, effective s 4, Sch 1–5, Sch 6 (items 17–23(2), (3)), Sch 7 (items 1–16, 32(1)) and Sch 9 (items 24–30(2), (3)): 21 Nov 1997 (s 2(1)–(3)) | Amended by No 93 of 1999, Sch 5 item 78, effective s 4, Sch 1 (items 1–35, 39–48), Sch 2, Sch 3 (items 26–33), Sch 4 (items 1–23, 25), Sch 5 and 7: 16 July 1999 (s 2(1)) Sch 4 (item 24): 16 Apr 1998 (s 2(2)) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 23 of 2005, Sch 3 item 57, effective s 4 and Sch 3 (items 14–74, 111(3)–(5), 112–114): 21 Mar 2005 (s 2(1) items 1, 6) | Amended by No 114 of 2010, Sch 1 item 35, effective Sch 1 (items 1–39, 93–96): 14 July 2010 (s 2(1) items 2, 4) Sch 1 (items 88–92): 14 Sept 2006 (s 2(1) item 3)

s 403 — Additional notional exempt income—unlisted country CFC

If the eligible CFC is a resident of an unlisted country at the end of the eligible period, the notional exempt income of the eligible CFC in relation to the eligible period includes income or profits derived by the eligible CFC in the eligible period in or in connection with carrying on business in a listed country at or through a permanent establishment of the eligible CFC in that listed country, where the income or profits are not eligible designated concession income in relation to any listed country in relation to the eligible period.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 155 of 1997, Sch 1 item 94, effective 24 Oct 1997 (s 2) | Repealed and substituted by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6)

s 404 — Application of Subdivision 768 ‑ A of the Income Tax Assessment Act 1997

(1) For the purpose of applying Subdivision 768 ‑ A of the Income Tax Assessment Act 1997 (about returns on foreign investment) in calculating the attributable income of the eligible CFC, disregard section 389A of this Act (which is about disregarding Division 974 of the Income Tax Assessment Act 1997 and certain other provisions). (2) For the purpose of applying this Act in calculating the attributable income of the eligible CFC, disregard paragraph 768 ‑ 5(1)(d) of the Income Tax Assessment Act 1997 if: (a) the eligible CFC receives, either directly or indirectly through one or more interposed trusts or partnerships, a foreign equity distribution (within the meaning of the Income Tax Assessment Act 1997 ) from a company; and (b) at the time the distribution is made, both the eligible CFC and the company are residents of the same listed country or unlisted country.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Repealed and substituted by No 110 of 2014, Sch 2 item 6 | Sch 2 item 10, effective Sch 2 (items 1, 6–12, 23): 17 Oct 2014 (s 2(1) item 2) Sch 5 (items 7–15, 95–97): 16 Oct 2014 (s 2(1) items 4, 7) | Amended by No 84 of 2018, Sch 2 item 4 | Sch 2 item 5, effective Sch 1 (items 2–7, 15), Sch 2 (items 4, 5, 9, 10) and Sch 4 (item 1): 1 Oct 2018 (s 2(1) item 1)

s 405 — Interpretation

(1) In this Subdivision: commencing day has the meaning given by section 406. commencing day asset has the meaning given by section 406. (3) Some provisions of this Subdivision say that a payment can include giving property. To the extent that one does, use the market value of the property in working out the amount of the payment.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 170 of 1995, Sch 1 item 3 | Sch 1 item 4, effective Sch 1 and Sch 2 (items 1–53), Sch 3 (items 15, 16): 16 Dec 1995 (s 2(1)) | Amended by No 46 of 1998, Sch 10 item 405 | Sch 10 item 444 | Sch 10 item 445 | Sch 10 item 455 | Sch 10 item 414 | Sch 10 item 3 | Sch 10 item 4 | Sch 10 item 10 | Sch 10 item 11 | Sch 10 item 17 | Sch 10 item 20 | Sch 10 item 114 | Sch 10 item 115 | Sch 10 item 116 | Sch 10 item 117 | Sch 10 item 118 | Sch 10 item 137 | Sch 10 item 138 | Sch 10 item 139 | Sch 10 item 146, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 101 of 2006, Sch 1 item 173 | Sch 1 item 242 | Sch 1 item 243 | Sch 2 item 396 | Sch 2 item 720, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3)

s 406 — Meaning of c ommencing day and commencing day asset

(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, the eligible CFC’s commencing day is the later of: (a) the last day of the most recent period during which there was not an attributable taxpayer with an attribution percentage (greater than nil) in relation to the eligible CFC; and (b) 30 June 1990. Example: If a taxpayer became an attributable taxpayer with an attribution percentage (greater than nil) in relation to the eligible CFC at 3 pm on 20 October 2004 and there were no other such attributable taxpayers at that time, the commencing day is 20 October 2004. (2) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, a commencing day asset of the eligible CFC is a CGT asset (other than one that is taxable Australian property) owned by the eligible CFC at the end of its commencing day. (3) In determining whether a CGT asset is taxable Australian property, disregard the residency assumption.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Repealed and substituted by No 170 of 1995, Sch 1 item 4 | Sch 1 item 5, effective Sch 1 and Sch 2 (items 1–53), Sch 3 (items 15, 16): 16 Dec 1995 (s 2(1)) | Amended by No 46 of 1998, Sch 10 item 444 | Sch 10 item 446 | Sch 10 item 42 | Sch 10 item 43, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 89 of 2000, Sch 5 item 33, effective s 4, Sch 1 (item 66), Sch 2 (items 1–24, 35, 36, 48, 53–62), Sch 3 (items 1–29, 98–100), Sch 5 (items 32–34(1)) and Sch 8 (items 1–8, 11): 30 June 2000 (s 2(1)) Sch 1 (item 67): 1 pm (A.C.T.) 11 Nov 1999 (s 2(2)) Sch 2 (items 25, 26) and Sch 3 (items 30–97): 1 July 2000 (s 2(3), (8), (9)) | Amended by No 64 of 2005, Sch 2 item 5, effective Sch 1 (items 1–6), Sch 3 (items 1–4) and Sch 4 (items 2–27, 38, 39): 26 June 2005 (s 2(1) items 2, 4) Sch 2 (items 1–9): 27 June 2005 (s 2(1) item 3) | Amended by No 168 of 2006, Sch 4 item 21 | Sch 4 item 22, effective s 4 and Sch 4 (items 14–28, 112): 12 Dec 2006 (s 2(1) items 1, 5) Sch 3 (items 3–5): 13 Dec 2005 (s 2(1) item 4)

s 408 — Certain capital gains and losses disregarded

If a CFC makes a capital gain or capital loss from a CGT event that is not disregarded under Subdivision 855 ‑ A of the Income Tax Assessment Act 1997 , or would have made a capital gain from the event apart from indexation, disregard the CGT event in calculating the attributable income of the eligible CFC.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Repealed and substituted by No 46 of 1998, Sch 10 item 118 | Sch 10 item 447, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 168 of 2006, Sch 4 item 23, effective s 4 and Sch 4 (items 14–28, 112): 12 Dec 2006 (s 2(1) items 1, 5) Sch 3 (items 3–5): 13 Dec 2005 (s 2(1) item 4)

s 408A — Certain events before commencing day ignored

For the purposes of applying this Act in calculating the attributable income of an eligible CFC, if the eligible CFC’s commencing day is after 30 June 1995, Parts 3 ‑ 1 and 3 ‑ 3 of the Income Tax Assessment Act 1997 do not apply to CGT events involving the eligible CFC before the end of the commencing day.

Amendment history: Inserted by No 170 of 1995, effective Sch 1 and Sch 2 (items 1–53), Sch 3 (items 15, 16): 16 Dec 1995 (s 2(1)) | Repealed and substituted by No 46 of 1998, Sch 10 item 448, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Repealed and substituted by No 101 of 2006, Sch 2 item 472, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3)

s 409 — Losses before 30 June 1990 to be disregarded

For the purposes of applying this Act in calculating the attributable income of the eligible CFC, capital losses incurred before the end of 30 June 1990 are disregarded.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Repealed and substituted by No 46 of 1998, Sch 10 item 102 | Sch 10 item 449, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4))

s 410 — General modifications—CGT

For the purposes of applying this Act in calculating the attributable income of the eligible CFC, Parts 3 ‑ 1 and 3 ‑ 3 of the Income Tax Assessment Act 1997 apply as if these provisions were disregarded: (a) section 116 ‑ 85 (about section 47A of this Act applying to a rolled ‑ over asset); (b) section 116 ‑ 95 (about a company changing residence from an unlisted country); (c) section 118 ‑ 12 (about assets used to produce exempt income etc.); (d) section 855 ‑ 45 (about an individual or company becoming an Australian resident); (e) section 855 ‑ 55 (about a CFC becoming an Australian resident); (f) Subdivision 170 ‑ B (about transfer of net capital losses within company groups).

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 48 of 1991, item 77, effective s 9, 15, 33, 70 and 81–83: 8 Jan 1991 (s 2(2)) s 10–14, 16–31, 34(a), 35, 37–39, 41–51(1), 52–59(1), 60, 61,67, 68(1), 69, 71–80, 84(1)–(8), (10), (11), (13)–(17), 85, 86 and 88–90: 24 Apr 1991 (s 2(1)) s 32 and 84(9): 1 July 1991 (s 2(4)) s 34(b), 36, 40 and 87: 21 Aug 1990 (s 2(3)) s 51(2), 59(2), 62–66, 68(2) and 84(12): 25 Apr 1991 (s 2(5)) | Repealed and substituted by No 46 of 1998, Sch 10 item 116 | Sch 10 item 118 | Sch 10 item 136 | Sch 10 item 170 | Sch 10 item 450, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 41 of 2005, Sch 10 item 33, effective s 4, Sch 3 (items 1–16, 22), Sch 6 (items 1, 6–11), Sch 8, Sch 9 (items 3–13), Sch 10 (items 19–35, 270) and Sch 11 (items 1–3, 5): 1 Apr 2005 (s 2(1) items 1, 2, 4, 5, 23, 24) Sch 9 (items 1, 2): 29 June 2004 (s 2(1) item 3) | Amended by No 168 of 2006, Sch 4 item 855 | Sch 4 item 24 | Sch 4 item 25, effective s 4 and Sch 4 (items 14–28, 112): 12 Dec 2006 (s 2(1) items 1, 5) Sch 3 (items 3–5): 13 Dec 2005 (s 2(1) item 4)

s 411 — Commencing day assets taken to have been acquired on commencing day

(1) Subject to this section, for the purposes of applying this Act in calculating the attributable income of the eligible CFC, a commencing day asset of the eligible CFC is taken to have been acquired, for the purposes of Parts 3 ‑ 1 and 3 ‑ 3 of the Income Tax Assessment Act 1997 (about CGT), by it on its commencing day. (3) Subsection (1) does not apply for the purposes of determining the cost base to the eligible CFC of an asset.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 170 of 1995, Sch 1 item 7, effective Sch 1 and Sch 2 (items 1–53), Sch 3 (items 15, 16): 16 Dec 1995 (s 2(1)) | Amended by No 46 of 1998, Sch 10 item 30 | Sch 10 item 451, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4))

s 412 — Cost base of commencing day asset

(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, the following provisions have effect. (2) The first element of the cost base of each commencing day asset of the eligible CFC is the greater of the asset’s market value (at the end of the eligible CFC’s commencing day) and the asset’s cost base (on that day). (3) The first element of the reduced cost base of each commencing day asset of the eligible CFC is the lesser of the asset’s market value (at the end of the eligible CFC’s commencing day) and the asset’s cost base (on that day).

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 170 of 1995, Sch 1 item 8 | Sch 1 item 412, effective Sch 1 and Sch 2 (items 1–53), Sch 3 (items 15, 16): 16 Dec 1995 (s 2(1)) | Amended by No 46 of 1998, Sch 10 item 112 | Sch 10 item 452 | Sch 10 item 462, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4))

s 413 — Adjustment of cost base as at commencing day—return of capital

(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, the following provisions have effect. (2) Where: (a) commencing day assets of the eligible CFC consist of shares in a company; and (b) at any time during the period commencing at the time when the eligible CFC acquired the shares and ending at the end of the eligible CFC’s commencing day, the company paid an amount that was not a dividend to the eligible CFC in respect of the shares; the cost base to the eligible CFC of the shares as at the eligible CFC’s commencing day is to be reduced by that amount. (3) Where: (a) a commencing day asset of the eligible CFC consists of an interest or unit in a trust; and (b) at any time during the period commencing at the time when the eligible CFC acquired the interest or unit and ending at the end of the eligible CFC’s commencing day, the trustee of the trust paid an amount to the eligible CFC in respect of the interest or unit, being an amount that would not have been notional assessable income of the eligible CFC; the cost base to the eligible CFC of the interest or unit as at the eligible CFC’s commencing day is to be reduced by so much of the amount as is not attributable to a deduction allowed under Division 43 of the Income Tax Assessment Act 1997 or former Division 10C or 10D of Part III of this Act. (4) The payment referred to in subsection (2) or (3) can include giving property: see subsection 405(3).

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 170 of 1995, Sch 1 item 10, effective Sch 1 and Sch 2 (items 1–53), Sch 3 (items 15, 16): 16 Dec 1995 (s 2(1)) | Amended by No 46 of 1998, Sch 10 item 112 | Sch 10 item 453 | Sch 10 item 454 | Sch 10 item 455, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 54 of 1999, Sch 3 item 10, effective s 4, Sch 1 (items 2–13, 36), Sch 3, Sch 5 (items 11–15), Sch 6 and Sch 7 (items 1, 3): 5 July 1999 (s 2(1)) | Amended by No 101 of 2006, Sch 2 item 473, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3)

s 414 — Exercise of rights

(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, the following provisions have effect. (2) Despite section 130 ‑ 40 of the Income Tax Assessment Act 1997 , the modifications in subsections (3) and (4) of this section apply if the eligible CFC exercises rights or options as mentioned in that section to acquire: (a) shares in a company, or options to acquire shares in a company; or (b) units in a unit trust, or options to acquire units in a unit trust; and those rights or options are commencing day assets of the eligible CFC. (3) The first element of the cost base of the shares, units or options is the sum of: (a) the amount paid to exercise the rights or options; and (b) the greater of the market value of the rights or options (at the end of the eligible CFC’s commencing day) and the cost base of the rights or options (on that day). (4) The first element of the reduced cost base of the shares, units or options is the sum of: (a) the amount paid to exercise the rights or options; and (b) the lesser of the market value of the rights or options (at the end of the eligible CFC’s commencing day) and the cost base of the rights or options (on that day). (5) The payment referred to in subsection (3) or (4) can include giving property: see subsection 405(3). (6) For indexation purposes, the amount referred to in paragraph (3)(b) is taken to have been incurred on the eligible CFC’s commencing day.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 170 of 1995, Sch 1 item 414, effective Sch 1 and Sch 2 (items 1–53), Sch 3 (items 15, 16): 16 Dec 1995 (s 2(1)) | Repealed and substituted by No 46 of 1998, Sch 10 item 112 | Sch 10 item 462, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4))

s 418 — Options

(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, the following provisions have effect. (2) Subsection 104 ‑ 30(5) of the Income Tax Assessment Act 1997 applies to an option granted by the eligible CFC as if the reference in that subsection to 20 September 1985 were a reference to the day after the eligible CFC’s commencing day. (3) Section 134 ‑ 1 of the Income Tax (Transitional Provisions) Act 1997 does not apply to an option granted to the eligible CFC.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 170 of 1995, Sch 1 item 3, effective Sch 1 and Sch 2 (items 1–53), Sch 3 (items 15, 16): 16 Dec 1995 (s 2(1)) | Amended by No 46 of 1998, Sch 10 item 104 | Sch 10 item 458, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4))

s 418A — Effect of change of residence from Australia to listed or unlisted country

(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, where: (a) disregarding the residency assumption, at any time (in this section called the residence ‑ change time ) during the eligible period or an earlier statutory accounting period beginning on or after the day following the eligible CFC’s commencing day, the eligible CFC ceased to be a resident within the meaning of section 6 and became a resident of a listed country or an unlisted country; and (b) the eligible CFC owned a CGT asset at the residence ‑ change time; and (c) a CGT event happens in relation to the asset during the eligible period; then sections 411 to 414 (inclusive) apply, in addition to any application apart from this section but subject to subsection (2) of this section, to the asset as if: (d) any reference in those sections to a commencing day asset were a reference to the asset; and (e) any reference in those sections relating to the eligible CFC’s commencing day or the day following the eligible CFC’s commencing day were a reference relating respectively to the residence ‑ change time or a time immediately after the residence ‑ change time; and (f) if section 104 ‑ 160 of the Income Tax Assessment Act 1997 (CGT event I1) applied to the change of residence for the purposes of the application of this Act apart from this Part: (i) section 412 applies as if subsections 412(2) and (3) referred only to the market value of the asset concerned; and (ii) section 414 applies as if paragraphs 414(3)(b) and (4)(b) referred only to the market value of the asset concerned. (2) Where the asset is a commencing day asset, sections 411 to 414 (inclusive) do not apply, in spite of anything contained in those sections, to the asset except in accordance with subsection (1) of this section.

Amendment history: Inserted by No 48 of 1991, effective s 9, 15, 33, 70 and 81–83: 8 Jan 1991 (s 2(2)) s 10–14, 16–31, 34(a), 35, 37–39, 41–51(1), 52–59(1), 60, 61,67, 68(1), 69, 71–80, 84(1)–(8), (10), (11), (13)–(17), 85, 86 and 88–90: 24 Apr 1991 (s 2(1)) s 32 and 84(9): 1 July 1991 (s 2(4)) s 34(b), 36, 40 and 87: 21 Aug 1990 (s 2(3)) s 51(2), 59(2), 62–66, 68(2) and 84(12): 25 Apr 1991 (s 2(5)) | Amended by No 170 of 1995, Sch 1 item 417, effective Sch 1 and Sch 2 (items 1–53), Sch 3 (items 15, 16): 16 Dec 1995 (s 2(1)) | Amended by No 155 of 1997, Sch 1 item 95 | Sch 1 item 104 | Sch 1 item 118 | Sch 1 item 119, effective 24 Oct 1997 (s 2) | Amended by No 46 of 1998, Sch 10 item 460 | Sch 10 item 461 | Sch 10 item 462 | Sch 10 item 463 | Sch 10 item 464, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 101 of 2006, Sch 2 item 474, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3)

s 419 — Modified application of Subdivision 126 ‑ B of the Income Tax Assessment Act 1997

(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, Subdivision 126 ‑ B of the Income Tax Assessment Act 1997 has effect as if the table in subsection 126 ‑ 50(5) of that Act were omitted and the following table were substituted: Additional requirements Item The originating CFC’s residency status The recipient company’s residency status This requirement must be satisfied 1 A resident of a listed country at the time of the trigger event Either: (a) a resident of that listed country at that time; or (b) an Australian resident at that time It does not matter what the roll ‑ over asset is 2 A resident of a listed country at the time of the trigger event A resident of a particular unlisted country at that time The asset must have been used (just before that time) in connection with a permanent establishment of the originating CFC in any unlisted country at or through which the originating CFC carried on business just before that time 3 A resident of an unlisted country at the time of the trigger event Either: (a) a resident of an unlisted country at that time; or (b) an Australian resident at that time It does not matter what the roll ‑ over asset is (2) The residency assumption is ignored for the purpose of applying the table in subsection (1).

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 76 of 1996, Sch 1 item 40 | Sch 1 item 41 | Sch 1 item 42, effective s 4 and Sch 1 (items 1–43, 47): 18 Dec 1996 (s 2(1)) Sch 1 (items 44–46): 1 Jan 1993 (s 2(2)) Sch 2: 27 June 1996 (s 2(3)) Sch 4 (items 19–24): 16 Feb 1997 (s 2(4)) | Amended by No 155 of 1997, Sch 1 item 45 | Sch 1 item 96 | Sch 1 item 119, effective 24 Oct 1997 (s 2) | Repealed and substituted by No 46 of 1998, Sch 10 item 126 | Sch 10 item 465, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6)

s 421 — Elections under CGT roll ‑ over provisions

(1) Subject to this section, for the purpose of applying this Act in calculating the attributable income of the eligible CFC for the eligible period, any election or choice that may be made, by the eligible CFC, or by the eligible CFC and another entity, apart from this section, under any of the CGT roll ‑ over provisions: (a) on or before the date of lodgment of a particular return of income; or (b) within such further period as the Commissioner allows; is to be made instead: (c) if there is only one attributable taxpayer in relation to the eligible CFC at the end of the eligible period—on or before the date of lodgment of the taxpayer’s return of income of the year of income in which the end of the eligible period occurs; or (d) if there are 2 or more attributable taxpayers in relation to the eligible CFC at the end of the eligible period: (i) if the taxpayers’ returns of income of the year of income in which the end of the eligible period occurs are lodged on different dates—on or before the later or latest of those dates; or (ii) if the taxpayers’ returns of income of the year of income in which the end of the eligible period occurs are lodged on the same date—on or before that date; or (e) in any case—within such further period as the Commissioner allows. (1A) For the purposes of applying subsection (1) to an eligible CFC in relation to an eligible period, if: (a) an entity (the designated entity ) is the only attributable taxpayer in relation to the eligible CFC at the end of the eligible period; and (b) the designated entity’s attribution percentage in relation to the company is 100% at the end of the eligible period; then, instead of the election or choice being given by the eligible CFC, or by the eligible CFC and another entity (which other entity may be the designated entity), the election or choice may be given by: (c) the designated entity; or (d) if the designated entity is not the same as the other entity—the designated entity and the other entity; as the case requires. (2) Except in accordance with subsection (3), subsection (1) does not apply to an election or choice in respect of the disposal of an asset if the disposal is, or apart from an election or choice in accordance with subsection 438(3A) would be, taken into account in determining under Division 8 whether the eligible CFC passes the active income test in relation to the eligible period. (3) If an election or choice is made under a CGT roll ‑ over provision in accordance with subsection 438(3A), that election or choice also has effect as if it were made under the CGT roll ‑ over provision in accordance with subsection (1) of this section.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 80 of 1992, item 61, effective s 52(2) and 53(2): 1 July 1992 (s 2(3)) Remainder: 30 June 1992 (s 2(1)) | Amended by No 155 of 1997, Sch 1 item 47, effective 24 Oct 1997 (s 2) | Amended by No 41 of 1998, Sch 1 item 24, effective s 4, Sch 1 (items 4–16, 18–26), Sch 2 (items 1–4), Sch 3 (items 1–3, 7(1)), Sch 4 (items 4, 5), Sch 5 (items 16, 18) and Sch 6 (items 1, 2, 4, 5, 7–13, 15–18, 27): 4 June 1998 (s 2(1)) Sch 1 (item 17): 9 Apr 1999 (s 2(2)) Sch 5 (items 17, 19): 12 Dec 1995 (s 2(5)) Sch 6 (item 3): 16 Dec 1985 (s 2(6)) Sch 6 (item 6): 1 Jan 1993 (s 2(7)) Sch 6 (item 14): never commenced (s 2(9)) Sch 6 (item 16): 1 July 1998 (s 2(10)) | Amended by No 46 of 1998, Sch 10 item 103 | Sch 10 item 467 | Sch 10 item 468 | Sch 10 item 469 | Sch 10 item 470, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4))

s 422 — Adjustment of capital proceeds where change of residence by eligible CFC from unlisted to listed country

(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, in relation to the eligible period in relation to the eligible taxpayer, the following provisions have effect. (2) This section sets out what happens if: (a) the eligible CFC ceases at a time (the residency change time ), during the eligible period or an earlier statutory accounting period, to be a resident of an unlisted country and becomes a resident of a listed country; and (b) subsection 457(3) does not apply to the change of residence; and (c) because of the change in its residency status, an amount is included in the eligible taxpayer’s assessable income under section 457 (including because of paragraph 58(1)(d) of the Taxation Laws Amendment (Foreign Income) Act 1990 ); and (d) a CGT event happens during the eligible period in relation to a CGT asset (the CFC asset ) that the eligible CFC owned since the residency change time. (3) If the conditions in subsection (4) are satisfied, the capital proceeds from the CGT event are reduced by the amount worked out under subsection (5). If the conditions in subsection (6) are satisfied, those capital proceeds are increased by the amount worked out under subsection (7). Reduction of capital proceeds (4) If all the eligible CFC’s assets were disposed of at the residency change time for their market values in the circumstances mentioned in subparagraph 457(2)(a)(ii): (a) distributable profits of the eligible CFC of a particular amount (the distributable profit amount ) would be created, or its distributable profits would be increased by an amount (also the distributable profit amount ); and (b) the eligible CFC would have made a profit (the CFC asset profit ) on the disposal of the CFC asset. (5) The capital proceeds are reduced by: where: total asset profits is the sum of the profits that the eligible CFC would have made if all its assets were disposed of at the residency change time for their market values (ignoring disposals that would not result in a profit). Increase in capital proceeds (6) If all the eligible CFC’s assets were disposed of at the residency change time for their market values in the circumstances mentioned in subparagraph 457(2)(a)(ii): (a) the distributable profits of the eligible CFC would be reduced by an amount (the distributable profit reduction amount ); and (b) the eligible CFC would have made a loss (the CFC asset loss ) on the disposal of the CFC asset. (7) The capital proceeds are increased by: where: total asset losses is the sum of the losses that the eligible CFC would have made if all its assets were disposed of at the residency change time for their market values (ignoring disposals that would not result in a loss).

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 155 of 1997, Sch 1 item 48, effective 24 Oct 1997 (s 2) | Amended by No 46 of 1998, Sch 10 item 471, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 64 of 2005, effective Sch 1 (items 1–6), Sch 3 (items 1–4) and Sch 4 (items 2–27, 38, 39): 26 June 2005 (s 2(1) items 2, 4) Sch 2 (items 1–9): 27 June 2005 (s 2(1) item 3)

s 423 — Adjustment of capital proceeds where section 47A applies to rolled ‑ over assets

(1) For the purposes of applying this Act in calculating the attributable income of the eligible CFC, in relation to the eligible period in relation to the eligible taxpayer, the following provision has effect. (2) The capital proceeds from a CGT event that happens in relation to a CGT asset of the eligible CFC during the eligible period are reduced if: (a) either: (i) because of Division 17 of former Part IIIA of this Act, that Part did not apply to the disposal of the asset to the eligible CFC by another CFC during the eligible period or an earlier statutory accounting period; or (ii) there was a roll ‑ over under Division 122, 124 or 126 of the Income Tax Assessment Act 1997 (except under Subdivision 124 ‑ J, 124 ‑ K or 124 ‑ L of that Act) for a CGT event (the earlier CGT event ) that happened during that period in relation to the asset and involving the eligible CFC and another CFC; and (b) the eligible taxpayer was an attributable taxpayer in relation to both CFC’s at the time of the disposal or the earlier CGT event; and (c) the other CFC is taken, under section 47A of this Act, to have paid the eligible CFC a dividend in relation to the disposal or the earlier CGT event; and (d) an amount is included in the attributable taxpayer’s assessable income in respect of the dividend under section 456 of this Act. (3) The reduction is the lesser of: (a) the amount of the dividend; and (b) the amount of any capital gain that: (i) apart from Division 17 of former Part IIIA of this Act, would have accrued to the other CFC in respect of the disposal if the consideration in respect of the disposal had been the market value of the asset at the time of the disposal; or (ii) the other CFC would have made from the earlier CGT event apart from the roll ‑ over if the capital proceeds from that event had been the market value of the asset at the time of that event.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 46 of 1998, Sch 10 item 472, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 101 of 2006, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3)

s 425 — Sometimes ‑ exempt income etc.

(1) Where an amount is not included in the eligible CFC’s notional assessable income for a statutory accounting period (being the eligible period or an earlier period) in relation to the eligible taxpayer because: (a) the eligible CFC passes the active income test for the period in relation to the eligible taxpayer; or (b) subsection 385 (4) applies; then the amount is sometimes ‑ exempt income of the eligible CFC for the period in relation to the eligible taxpayer. (2) Where an amount would, disregarding section 431, only be a notional allowable deduction of the eligible CFC for a statutory accounting period (being the eligible period or an earlier period) in relation to the eligible taxpayer if the eligible CFC’s sometimes ‑ exempt income for the period in relation to the eligible taxpayer were instead notional assessable income, then the amount is a sometimes ‑ exempt deduction of the eligible CFC for the period in relation to the eligible taxpayer. (3) Where the eligible CFC’s sometimes ‑ exempt deductions for a statutory accounting period (being the eligible period or an earlier period) in relation to the eligible taxpayer exceed its sometimes ‑ exempt income for the period in relation to the taxpayer, the excess is a (sometimes ‑ exempt income) loss of the eligible CFC for the period in relation to the eligible taxpayer. (4) Where an eligible CFC’s sometimes ‑ exempt income for a statutory accounting period (being the eligible period or an earlier period) in relation to the eligible taxpayer exceeds its sometimes ‑ exempt deductions for the period in relation to the taxpayer, the excess is a (sometimes ‑ exempt income) gain of the eligible CFC for the period in relation to the eligible taxpayer.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 143 of 2007, Sch 1 item 95 | Sch 1 item 96 | Sch 1 item 97 | Sch 1 item 98 | Sch 1 item 99 | Sch 1 item 100 | Sch 1 item 101 | Sch 1 item 102 | Sch 1 item 103, effective Sch 1 (items 2, 3, 18–127, 222, 223, 224(1), (2), 225, 226), Sch 4 (items 1–46, 51, 52), Sch 7 (items 9–17, 104(2)) and Sch 8: 24 Sept 2007 (s 2(1) items 2, 4, 11, 12)

s 426 — Creation of loss

For the purposes of this Subdivision, if: (a) the amount of the eligible CFC’s notional allowable deductions (other than under section 431) for a statutory accounting period (being the eligible period or an earlier period) are applied as follows: (i) they are applied first against any notional assessable income of the eligible CFC class for the period; (ii) any excess is then applied against any (sometimes ‑ exempt income) gain for the period; and (b) there is any amount remaining; then the amount remaining is a loss of the eligible CFC for the period.

Amendment history: Inserted by No 5 of 1991, item 80G, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 143 of 2007, Sch 1 item 770 | Sch 1 item 104 | Sch 1 item 105 | Sch 1 item 108, effective Sch 1 (items 2, 3, 18–127, 222, 223, 224(1), (2), 225, 226), Sch 4 (items 1–46, 51, 52), Sch 7 (items 9–17, 104(2)) and Sch 8: 24 Sept 2007 (s 2(1) items 2, 4, 11, 12)

s 427 — Certain provisions to be disregarded

For the purposes of applying this Act and the Income Tax Assessment Act 1997 in calculating the attributable income of an eligible CFC, disregard the following: (b) Division 36, section 165 ‑ 120 and Subdivisions 170 ‑ A, 709 ‑ D and 719 ‑ I of the Income Tax Assessment Act 1997 (except for the purpose of a reference to any of those provisions in any other provision of this Act, as applied in accordance with this Division); (ba) Subdivisions 165 ‑ CC and 165 ‑ CD of the Income Tax Assessment Act 1997 .

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Repealed and substituted by No 39 of 1997, Sch 4 item 263, effective Sch 1: 1 July 1997 (s 2) | Amended by No 46 of 1998, Sch 10 item 19 | Sch 10 item 20, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 89 of 2000, Sch 1 item 67, effective s 4, Sch 1 (item 66), Sch 2 (items 1–24, 35, 36, 48, 53–62), Sch 3 (items 1–29, 98–100), Sch 5 (items 32–34(1)) and Sch 8 (items 1–8, 11): 30 June 2000 (s 2(1)) Sch 1 (item 67): 1 pm (A.C.T.) 11 Nov 1999 (s 2(2)) Sch 2 (items 25, 26) and Sch 3 (items 30–97): 1 July 2000 (s 2(3), (8), (9)) | Amended by No 162 of 2005, Sch 3 item 8, effective Sch 1, Sch 3 (items 8–15, 33) and Sch 5: 19 Dec 2005 (s 2(1) item 2) Sch 6 (items 14, 15): 1 July 2001 (s 2(1) item 6) | Amended by No 101 of 2006, Sch 1 item 175, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3) | Amended by No 143 of 2007, Sch 1 item 109 | Sch 1 item 110 | Sch 1 item 111 | Sch 1 item 112 | Sch 1 item 113, effective Sch 1 (items 2, 3, 18–127, 222, 223, 224(1), (2), 225, 226), Sch 4 (items 1–46, 51, 52), Sch 7 (items 9–17, 104(2)) and Sch 8: 24 Sept 2007 (s 2(1) items 2, 4, 11, 12)

s 428 — Subdivision to apply as if there were always a requirement to calculate attributable income

For the purposes of applying this Subdivision in calculating the attributable income of the eligible CFC for the eligible period, it is to be assumed that, for any earlier statutory accounting period (when the eligible CFC existed) for which there was no requirement to calculate its attributable income in relation to the eligible taxpayer, there were such a requirement (except for the purpose of applying section 398).

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2)

s 429 — Notional allowable deduction for (sometimes ‑ exempt income) loss

The amount of any (sometimes ‑ exempt income) loss of the eligible CFC for the eligible period class is a notional allowable deduction for the period from the notional assessable income of the eligible CFC.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 143 of 2007, Sch 1 item 114 | Sch 1 item 115, effective Sch 1 (items 2, 3, 18–127, 222, 223, 224(1), (2), 225, 226), Sch 4 (items 1–46, 51, 52), Sch 7 (items 9–17, 104(2)) and Sch 8: 24 Sept 2007 (s 2(1) items 2, 4, 11, 12)

s 431 — Deduction etc. for previous period loss

(1) Where there are one or more losses of the eligible CFC of any statutory accounting period before the eligible period, the losses, to the extent they have not been previously taken into account under this section in respect of any such period, are to be taken into account in accordance with this section. (2) The losses are to be taken into account as follows: (a) they are to be applied first against any (sometimes ‑ exempt income) gain for the eligible period, to the extent that the gain has not already been applied under section 426 in determining whether there is a loss for the eligible period; (b) any excess is then a notional allowable deduction for the eligible period, but only to the extent that the deduction does not exceed the amount of the notional assessable income for the period as reduced by notional allowable deductions other than under this section; (c) where there are 2 or more losses, they are to be taken into account in the order in which they arose. (3) A loss for a statutory accounting period is only to be taken into account under subsection (2) if the eligible CFC was a CFC at the end of that statutory accounting period and each following statutory accounting period before the eligible period. (4) A loss for a statutory accounting period is to be taken into account under subsection (2) only if: (a) where the eligible CFC is a resident of a listed country at the end of the eligible period: (i) the eligible CFC is a resident of a listed country at the end of that statutory accounting period; and (ii) if there are any statutory accounting periods (the intervening periods ) occurring between that statutory accounting period and the eligible period—the eligible CFC was a resident of a listed country at the end of each of the intervening periods; or (b) where the eligible CFC is a resident of an unlisted country at the end of the eligible period: (i) the eligible CFC is a resident of an unlisted country at the end of that statutory accounting period; and (ii) if there are any statutory accounting periods (also the intervening periods ) occurring between that statutory accounting period and the eligible period—the eligible CFC was a resident of an unlisted country at the end of each of the intervening periods. (4A) If: (a) at the end of both the eligible period and of a prior statutory accounting period, the eligible CFC was a resident of the same country; and (b) the country was either: (i) a listed country at the end of the eligible period and an unlisted country at the end of that statutory accounting period; or (ii) an unlisted country at the end of the eligible period and a listed country at the end of that statutory accounting period; subsection (4) does not prevent a loss for that statutory accounting period, or an earlier statutory accounting period, from being taken into account under subsection (2). (4B) If: (a) the eligible CFC is a resident of an unlisted country at the end of the eligible period; and (b) that country emerged from the dissolution of another country; and (c) the other country was in existence at the end of a prior statutory accounting period; and (d) at the end of that statutory accounting period, the CFC was a resident of the other country; and (e) the other country was a listed country at the end of that statutory accounting period; subsection (4) does not prevent a loss for that statutory accounting period, or an earlier statutory accounting period, from being taken into account under subsection (2). (4D) If: (a) as a result of the operation of subsection (4), a loss of a CFC for a statutory accounting period was not taken into account under subsection (2) in calculating the attributable income of the CFC for a later statutory accounting period (the second statutory accounting period ); and (b) the eligible period is later than the second statutory accounting period; then, despite anything in subsection (4), (4A) or (4B), the loss is not to be taken into account under subsection (2) in calculating the attributable income of the CFC for the eligible period. (5) A loss for a statutory accounting period is not to be taken into account under subsection (2) if, assuming that it were a tax loss (within the meaning of the Income Tax Assessment Act 1997 ) of the eligible CFC, it would not be taken into account or allowed as a deduction in relation to the eligible period.

Amendment history: Inserted by No 5 of 1991, item 1990 | item 80G, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 155 of 1997, Sch 1 item 49, effective 24 Oct 1997 (s 2) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 101 of 2006, Sch 2 item 478, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3) | Amended by No 143 of 2007, Sch 1 item 770 | Sch 1 item 117 | Sch 1 item 118 | Sch 1 item 119 | Sch 1 item 122, effective Sch 1 (items 2, 3, 18–127, 222, 223, 224(1), (2), 225, 226), Sch 4 (items 1–46, 51, 52), Sch 7 (items 9–17, 104(2)) and Sch 8: 24 Sept 2007 (s 2(1) items 2, 4, 11, 12)

s 432 — Active income test

(1) Subject to sections 437 and 453, for the purposes of this Part, a company is taken to pass the active income test in relation to a statutory accounting period if, and only if: (a) the company was in existence at the end of the statutory accounting period; and (b) there was no time during the statutory accounting period when the company was in existence when the company was neither a resident of a particular listed country nor of a particular unlisted country; and (c) the company has kept accounts for the statutory accounting period and: (i) the accounts are prepared in accordance with commercially accepted accounting principles; and (ii) the accounts give a true and fair view of the financial position of the company; and (d) the company has complied with the substantiation requirements set out in section 451 in relation to the statutory accounting period; and (e) at all times during the statutory accounting period when the company was in existence and was a resident of a particular listed country, or of a particular unlisted country, the company carried on business in that country at or through a permanent establishment of the company in that country; and (f) the tainted income ratio of the company for the statutory accounting period is less than 0.05. (3) For the purposes of this section, if a company was dormant, within the meaning of Part VI of the Companies Act 1981 , throughout a particular period (in this subsection called the dormant period ) commencing on the day on which the company was incorporated, the company is to be taken not to have been in existence during the dormant period.

Amendment history: Inserted by No 5 of 1991, item 49 | item 80G, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 155 of 1997, Sch 1 item 97 | Sch 1 item 98 | Sch 1 item 109 | Sch 1 item 110, effective 24 Oct 1997 (s 2) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 41 of 2005, Sch 10 item 20 | Sch 10 item 34 | Sch 10 item 35, effective s 4, Sch 3 (items 1–16, 22), Sch 6 (items 1, 6–11), Sch 8, Sch 9 (items 3–13), Sch 10 (items 19–35, 270) and Sch 11 (items 1–3, 5): 1 Apr 2005 (s 2(1) items 1, 2, 4, 5, 23, 24) Sch 9 (items 1, 2): 29 June 2004 (s 2(1) item 3)

s 433 — Tainted income ratio

(1) For the purposes of this Part, if a company is a resident of a particular listed country or a particular unlisted country at the end of a statutory accounting period, the tainted income ratio of the company for the statutory accounting period is calculated using the formula: where: Gross tainted turnover means the gross tainted turnover of the company of the statutory accounting period. Gross turnover means the gross turnover of the company of the statutory accounting period. (3) For the purposes of this Part, the tainted income ratio of a company for a statutory accounting period is taken to be less than 0.05 if both the numerator and the denominator in the applicable fraction are 0. (4) For the purposes of this Part, the tainted income ratio of a company for a statutory accounting period is to be calculated in the currency in which the profit and loss accounts and the balance ‑ sheet of the company for the statutory accounting period are prepared.

Amendment history: Inserted by No 5 of 1991, item 334, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 155 of 1997, Sch 1 item 50 | Sch 1 item 51, effective 24 Oct 1997 (s 2)

s 434 — Gross turnover

(1) Subject to section 437, for the purposes of this Part, the gross turnover of a company of a statutory accounting period is the sum of: (a) the amount that is shown in the recognised accounts of the company for the statutory accounting period as the gross revenue derived by the company, but not including: (i) amounts that are shown in those recognised accounts as amounts covered by section 436; or (ii) amounts that are shown in those recognised accounts as revenue in respect of the disposal of assets (other than trading stock or commodity futures contracts, commodity forward contracts or rights or options in respect of such contracts); or (iii) amounts that are shown in those recognised accounts as revenue from disposing of commodity futures contracts, commodity forward contracts or rights or options in respect of such contracts; or (iv) amounts that are shown in those recognised accounts as revenue from currency exchange rate fluctuations; and (b) the amount that is shown in the recognised accounts of the company for the statutory accounting period as the amount (if any) by which the sum of the gains derived by the company in the statutory accounting period in respect of the disposal of assets (other than trading stock or commodity futures contracts, commodity forward contracts or rights or options in respect of such contracts) exceeds the losses incurred by the company in the statutory accounting period in respect of the disposal of such assets, but not including amounts that are shown in those recognised accounts as amounts covered by section 436; and (c) the amount that is shown in the recognised accounts of the company for the statutory accounting period as the amount (if any) by which the gains derived by the company in the statutory accounting period from disposing of commodity futures contracts, commodity forward contracts or rights or options in respect of such contracts exceeds the losses incurred by the company in the statutory accounting period from disposing of commodity futures contracts, commodity forward contracts or rights or options in respect of such contracts, but not including amounts that are shown in those recognised accounts as amounts covered by section 436; and (d) the amount that is shown in the recognised accounts of the company for the statutory accounting period as the amount (if any) by which the sum of the gains derived by the company in the statutory accounting period from currency exchange rate fluctuations exceeds the losses incurred by the company in the statutory accounting period from currency exchange rate fluctuations, but not including amounts that are shown in those recognised accounts as amounts covered by section 436. (1A) In working out the gross turnover of a company of a statutory accounting period, assume that the amounts shown in the company’s recognised accounts, as mentioned in paragraphs (1)(b) and (c), for that period had been worked out by also including: (a) as gains derived by the company in that period—capital gains the company would have made; and (b) as losses incurred by the company in that period—capital losses the company would have made; in that period because of CGT event J1, if the assumptions in paragraphs 383(a) to (c) had applied. Note 1: CGT event J1 is about companies ceasing to be related after a roll ‑ over. Note 2: Basically, the effect of the assumptions in paragraphs 383(a) to (c) is that the company concerned is taken to be a taxpayer and a resident and CGT event J1 may therefore be taken to have happened. (2) Subject only to sections 437, 438 and 440, for the purposes of this section, where a company has prepared recognised accounts for a statutory accounting period in accordance with commercially accepted accounting principles, then, in determining whether a particular amount shown in those accounts is covered by an expression used in subsection (1) (other than an exclusion of amounts shown in those recognised accounts as amounts covered by section 436), the expression concerned is taken to have the same meaning that it has under those accounting principles. (3) If: (a) arm’s length conditions are taken by Subdivision 815 ‑ B of the Income Tax Assessment Act 1997 to operate for purposes relating to the company; and (b) had those conditions operated, an amount described in any of the paragraphs of subsection (1) as being an amount shown in the recognised accounts of the company for the statutory account period would have been different; then the different amount is substituted for the amount shown in the recognised accounts.

Amendment history: Inserted by No 5 of 1991, item 341, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 170 of 1995, Sch 1 item 19, effective Sch 1 and Sch 2 (items 1–53), Sch 3 (items 15, 16): 16 Dec 1995 (s 2(1)) | Amended by No 58 of 2000, Sch 1 item 6 | Sch 1 item 21, effective s 4, Sch 1, Sch 2 (items 1, 4(1)), Sch 3 (item 3), Sch 6 (item 34), Sch 10 (items 1–11, 17(1), (2), 18–30, 38(1), (2)) and Sch 11 (items 1, 11): 31 May 2000 (s 2(1), (2)) Sch 3 (items 1, 2, 4–7) and Sch 6 (item 33): 16 July 1999 (s 2(3)–(6), (12)) Sch 8 (items 1–17, 21): 1 July 1998 (s 2(13)) Sch 8 (item 18): 1 July 1999 (s 2(13)) | Amended by No 101 of 2013, Sch 2 item 19, effective Sch 1 (items 1–8, 10) and Sch 2 (items 1, 8–19, 50): 29 June 2013 (s 2(1) items 2, 3)

s 435 — Gross tainted turnover

For the purposes of this Part, the gross tainted turnover of a company of a statutory accounting period is so much of the gross turnover of the company of the statutory accounting period as consists of: (a) passive income of the company of the statutory accounting period; or (b) tainted sales income of the company of the statutory accounting period; or (c) tainted services income of the company of the statutory accounting period.

Amendment history: Inserted by No 5 of 1991, item 341, effective s 4–61: 8 Jan 1991 (s 2)

s 436 — Amounts excluded from active income test

(1) For the purposes of the application of this Part to a company, the following amounts are, in accordance with subparagraph 434(1)(a)(i) and paragraphs 434(1)(b), (c) and (d), excluded from the active income test: (a) income or profits derived by the company that are included in the assessable income of the company of any year of income other than under section 143 (where the proviso to that section does not apply); (b) income or profits derived by the company during a statutory accounting period where all of the following conditions are satisfied: (i) the income or profits are derived by the company in carrying on a business at or through a permanent establishment of the company in a listed country (other than a listed country of which the company is a resident); (ii) the income or profits are not eligible designated concession income in relation to any listed country in relation to the statutory accounting period; (iii) the income or profits are subject to tax in a listed country in a tax accounting period: (A) ending before the end of the statutory accounting period; or (B) commencing during the statutory accounting period; (c) an amount that, if the company were a resident within the meaning of section 6, would, or would apart from paragraphs 99B(2)(d) and (e), have been included in the assessable income of the company under Division 6 of Part III; (d) so much of a frankable distribution as is either the franked part of the distribution, or the part of the distribution that has been franked with an exempting credit; (e) a non ‑ portfolio dividend paid to the company by a company that is a resident of a listed country or unlisted country; (g) a premium paid or credited to the company where, because of the application of subsection 148(1), the premium is not allowable as a deduction to the person referred to in subparagraph 148(1)(a)(i) and is not included in the assessable income of the company. (2) Where: (a) the company receives an attribution account payment, being a dividend, from another entity; and (b) the whole or part (in this subsection called the eligible amount ) of the attribution account payment is not excluded from the active income test, in relation to the company in relation to the statutory accounting period, under subsection (1); and (c) on the making of the attribution account payment by the other entity, an attribution debit arises for that entity in relation to a taxpayer; then, for the purposes of this Part, so much of the eligible amount as does not exceed the grossed ‑ up amount of the attribution debit is, in accordance with subparagraph 434(1)(a)(i), excluded (in addition to any other amount that is excluded under subsection (1)) from the active income test in relation to the company in relation to the taxpayer.

Amendment history: Inserted by No 5 of 1991, item 80G, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 48 of 1991, item 80, effective s 9, 15, 33, 70 and 81–83: 8 Jan 1991 (s 2(2)) s 10–14, 16–31, 34(a), 35, 37–39, 41–51(1), 52–59(1), 60, 61,67, 68(1), 69, 71–80, 84(1)–(8), (10), (11), (13)–(17), 85, 86 and 88–90: 24 Apr 1991 (s 2(1)) s 32 and 84(9): 1 July 1991 (s 2(4)) s 34(b), 36, 40 and 87: 21 Aug 1990 (s 2(3)) s 51(2), 59(2), 62–66, 68(2) and 84(12): 25 Apr 1991 (s 2(5)) | Amended by No 155 of 1997, effective 24 Oct 1997 (s 2) | Amended by No 93 of 1999, Sch 5 item 79, effective s 4, Sch 1 (items 1–35, 39–48), Sch 2, Sch 3 (items 26–33), Sch 4 (items 1–23, 25), Sch 5 and 7: 16 July 1999 (s 2(1)) Sch 4 (item 24): 16 Apr 1998 (s 2(2)) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 23 of 2005, Sch 3 item 58, effective s 4 and Sch 3 (items 14–74, 111(3)–(5), 112–114): 21 Mar 2005 (s 2(1) items 1, 6)

s 437 — Treatment of partnership income

(1) For each partnership in which a company is a partner at any time during a statutory accounting period, the following modifications apply for the purposes of determining the effect of that partnership on the question whether the company is taken to pass the active income test in relation to the statutory accounting period: (a) the partnership is to be treated as an entity separate from the company; (b) in spite of anything in section 432, the company is not taken to pass the active income test in relation to the statutory accounting period unless: (i) the partnership has kept accounts for the statutory accounting period and: (A) the accounts are prepared in accordance with commercially accepted accounting principles; and (B) the accounts give a true and fair view of the financial position of the partnership; and (ii) the partnership has complied with the substantiation requirements set out in section 452 in relation to the statutory accounting period; (c) for the purposes of this Division, the notional gross tainted turnover of the partnership of the statutory accounting period, or the notional gross turnover of the partnership of the statutory accounting period, is the amount that would be the gross tainted turnover, or the gross turnover, as the case requires, of the partnership of the statutory accounting period if: (i) except for the purposes of determining the associates of the partnership—the partnership were a company; and (ii) a reference in this Division to the recognised accounts of the partnership were a reference to the accounts referred to in paragraph (b) of this subsection that are prepared by the partnership for the statutory accounting period; and (iii) the partnership were a resident of the same particular listed country or particular unlisted country, of which the company was a resident; (d) the gross tainted turnover of the company of the statutory accounting period is to be increased by the amount calculated using the formula: where: Notional gross tainted turnover of partnership means the notional gross tainted turnover of the partnership for the statutory accounting period. Partner’s interest means the company’s percentage interest in the profits of the partnership for the statutory accounting period. (e) the gross turnover of the company of the statutory accounting period is to be increased by the amount calculated using the formula: where: Notional gross turnover of partnership means the notional gross turnover of the partnership for the statutory accounting period. Partner’s interest means the company’s percentage interest in the profits of the partnership for the statutory accounting period. (2) If: (a) a company is a partner in one or more partnerships at any time during a statutory accounting period; and (b) apart from this subsection, paragraph 432(1)(e) does not apply in relation to the company in relation to the statutory accounting period; and (c) at all times during the statutory accounting period when: (i) a particular one of those partnerships was in existence; and (ii) the company was in existence and was a resident of a particular listed country, or of a particular unlisted country; the partnership carried on business in that country at or through a permanent establishment of the partnership in that country; subsection 432(1) has effect as if paragraph 432(1)(e) had applied in relation to the company in relation to the statutory accounting period.

Amendment history: Inserted by No 5 of 1991, item 334 | item 80G, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 155 of 1997, effective 24 Oct 1997 (s 2) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 41 of 2005, effective s 4, Sch 3 (items 1–16, 22), Sch 6 (items 1, 6–11), Sch 8, Sch 9 (items 3–13), Sch 10 (items 19–35, 270) and Sch 11 (items 1–3, 5): 1 Apr 2005 (s 2(1) items 1, 2, 4, 5, 23, 24) Sch 9 (items 1, 2): 29 June 2004 (s 2(1) item 3)

s 438 — Roll ‑ overs—asset disposals

(1) This section applies in determining the application of paragraph 434(1)(b) and section 445 in relation to a non ‑ taxable Australian asset of a company. (2) If a CGT roll ‑ over provision applies to: (a) the disposal of the asset by an entity (in this section called the transferor ) to the company (in this section called the transferee ); or (b) the disposal of the asset by the company (in this section also called the transferor ) to another entity (in this section also called the transferee ); the following provisions have effect: (c) the transferee is taken to have paid, as consideration to acquire the asset, the sum of: (i) the consideration (if any) paid or payable by the transferor to acquire the asset; and (ii) the expenditure (if any) incurred by the transferor in making capital improvements to the asset; and (d) the transferor is not taken to have: (i) derived any gains; or (ii) incurred any loss; in respect of the disposal of the asset. (2A) If: (a) a CGT roll ‑ over provision applies to the disposal of the asset (in this subsection called the original asset ) by the company; and (b) the disposal is not to another entity; and (c) the company acquires another asset (in this subsection called the replacement asset ) that is referred to in the CGT roll ‑ over provision as being by way of replacement of, substitution for, or consideration for the disposal of, the original asset (whether or not exactly those expressions are used); the following provisions have effect: (d) the company is not taken to have: (i) derived any gains; or (ii) incurred any loss; in respect of the disposal of the original asset; and (e) the company is taken to have paid, as consideration to acquire the replacement asset, the sum of: (i) the consideration (if any) paid or payable by the company to acquire the original asset; and (ii) the expenditure (if any) incurred by the company in making improvements to the original asset. (2B) For the purposes of subsections (2) and (2A), if an asset is disposed of by being cancelled, redeemed or consolidated into another asset, the disposal is taken not to be to another entity. (3) For the purposes of this section, in determining whether a CGT roll ‑ over provision applies to the disposal of an asset, Parts 3 ‑ 1 and 3 ‑ 3 of the Income Tax Assessment Act 1997 have the effect they would have if: (a) the company had failed the active income test in relation to the statutory accounting period concerned; and (b) those Parts were being applied to calculate the attributable income of the company for the statutory accounting period in relation to any taxpayer. (3A) For the purposes of applying Parts 3 ‑ 1 and 3 ‑ 3 of the Income Tax Assessment Act 1997 in relation to a statutory accounting period as mentioned in paragraph (3)(b), any election or choice that may be made by the company, or by the company and another entity, apart from this section under any of the CGT roll ‑ over provisions: (a) on or before the date of lodgment of a particular return of income; or (b) within such period as the Commissioner allows; is to be made instead: (c) if there is only one attributable taxpayer in relation to the company at the end of the statutory accounting period—on or before the date of lodgment of the taxpayer’s return of income of the year of income in which the end of the statutory accounting period occurs; or (d) if there are 2 or more attributable taxpayers in relation to the company at the end of the statutory accounting period: (i) if the taxpayers’ returns of income of the year of income in which the end of the statutory accounting period occurs are lodged on different dates—on or before the later or latest of those dates; or (ii) if the taxpayers’ returns of income of the year of income in which the end of the statutory accounting period occurs are lodged on the same date—on or before that date; or (e) in any case—within such further period as the Commissioner allows. (3B) For the purposes of applying subsection (3A) to a company in relation to a statutory accounting period, if: (a) the company is a CFC at the end of the statutory accounting period; and (b) an entity (the designated entity ) is the only attributable taxpayer in relation to the company at the end of the statutory accounting period; and (c) the designated entity’s attribution percentage in relation to the company is 100% at the end of the statutory accounting period; then, instead of the election being given or the choice being made by the company, or by the company and another entity (which other entity may be the designated entity), the election may be given or the choice may be made by: (d) the designated entity; or (e) if the designated entity is not the same as the other entity—the designated entity and the other entity; as the case requires. (4) A reference in this section to a non ‑ taxable Australian asset of a company is a reference to an asset of the company that is a CGT asset that is not taxable Australian property.

Amendment history: Inserted by No 5 of 1991, item 434, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 80 of 1992, item 61 | item 62, effective s 52(2) and 53(2): 1 July 1992 (s 2(3)) Remainder: 30 June 1992 (s 2(1)) | Amended by No 155 of 1997, Sch 1 item 54, effective 24 Oct 1997 (s 2) | Amended by No 41 of 1998, Sch 1 item 25, effective s 4, Sch 1 (items 4–16, 18–26), Sch 2 (items 1–4), Sch 3 (items 1–3, 7(1)), Sch 4 (items 4, 5), Sch 5 (items 16, 18) and Sch 6 (items 1, 2, 4, 5, 7–13, 15–18, 27): 4 June 1998 (s 2(1)) Sch 1 (item 17): 9 Apr 1999 (s 2(2)) Sch 5 (items 17, 19): 12 Dec 1995 (s 2(5)) Sch 6 (item 3): 16 Dec 1985 (s 2(6)) Sch 6 (item 6): 1 Jan 1993 (s 2(7)) Sch 6 (item 14): never commenced (s 2(9)) Sch 6 (item 16): 1 July 1998 (s 2(10)) | Amended by No 46 of 1998, Sch 10 item 474 | Sch 10 item 475 | Sch 10 item 476 | Sch 10 item 477 | Sch 10 item 478 | Sch 10 item 479 | Sch 10 item 480, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 101 of 2006, Sch 2 item 479 | Sch 2 item 480 | Sch 2 item 481, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3) | Amended by No 168 of 2006, Sch 4 item 26, effective s 4 and Sch 4 (items 14–28, 112): 12 Dec 2006 (s 2(1) items 1, 5) Sch 3 (items 3–5): 13 Dec 2005 (s 2(1) item 4)

s 439 — When currency exchange gains or losses relate to active income transactions

(1) For the purposes of this Part, a currency exchange gain, or a currency exchange loss, of a company for a statutory accounting period is to be taken to relate to an active income transaction if, and only if: (a) the gain or loss was realised under any of the following transactions: (i) a transaction that: (A) gives rise to income, gains or a loss of the company; and (B) is not taken into account in determining the passive income, tainted sales income or tainted services income of the company; (ii) a transaction for the purchase of goods from an entity that, at the time the gain or loss was realised, was not an associate of the company; (iii) a transaction for the purchase of a unit of property where: (A) if the company were a resident within the meaning of section 6, depreciation would be allowable to the company under the former section 54 of this Act or the former Division 42 of the Income Tax Assessment Act 1997 , or the company could deduct an amount for the decline in value of a depreciating asset under Division 40 of that Act, in respect of any year of income; and (B) the unit of property is for use by the company exclusively or principally for the purpose of producing income other than passive income, tainted sales income or tainted services income; (iv) if the company is an AFI subsidiary that carried on financial intermediary business at the time the gain or loss was realised—a transaction under which money was lent to the company; (v) a transaction that was entered into by the company for the sole purpose of eliminating or reducing the risk of adverse financial consequences that might result for the company, under a transaction covered by any of the preceding subparagraphs, from currency exchange rate fluctuations; or (b) both of the following subparagraphs apply: (i) the gain or loss was realised in the course of carrying on a business of currency dealing; (ii) the gain or loss was realised under a transaction and, at the time the gain or loss was realised, no other party to the transaction was: (A) an associate of the company; or (B) a Part X Australian resident. (2) In determining whether an amount is passive income for the purposes of this section, paragraph 446(1)(n) is to be disregarded.

Amendment history: Inserted by No 5 of 1991, item 334 | item 371, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 121 of 1997, effective s 4: 8 July 1997 (s 2(1)) Sch 2 (items 18–37), Sch 3 (items 31–61), Sch 4 (items 63–138), Sch 5 (items 43–93), Sch 6 (items 68–132), Sch 7 (items 5–7), Sch 8 (items 32–51), Sch 9 (items 16–40), Sch 10 (items 12–15), Sch 11 (items 37–57) and Sch 12 (items 15–23): 1 July 1997 (s 2(3), (5)) | Amended by No 77 of 2001, effective Sch 2 (items 20–148, 488(1)): 30 June 2001 (s 2(1)) | Amended by No 101 of 2006, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3)

s 440 — Asset disposals—revaluations and arm’s length amounts

In determining, for the purposes of this Part, whether a company passes the active income test, the following provisions apply in relation to an asset of the company (other than trading stock): (a) the effect of an asset revaluation is to be disregarded; (b) subject to section 438, if: (i) any consideration paid or payable by the company in respect of the acquisition of the asset; or (ii) any consideration paid or payable to the company in respect of the disposal of the asset; or (iii) any expenditure incurred by the company in making capital improvements to the asset; or (iv) any other amount payable to or by the company that is relevant to determining the revenue, gains or losses concerned; is not equal to the amount (in this paragraph called the arm’s length amount ) that the parties to the transaction concerned could have been reasonably expected to have paid if the parties had been acting at arm’s length in relation to the transaction—the amount of the consideration or expenditure is to be taken to be equal to the arm’s length amount.

s 441 — Hire ‑ purchase and other property financing transactions

(1) For the purposes of this Part, in determining whether a company passes the active income test: (a) a hire ‑ purchase transaction or any other transaction for the financing of the acquisition of property is to be treated as a loan of money; and (b) income derived under the transaction is to be treated as interest. (2) Nothing in subsection (1) limits the generality of the expressions “interest”, “loan” or “payment in the nature of interest”.

s 442 — Assumption of rights of lender under a loan

In determining whether a company passes the active income test, if the company assumes the rights of a lender under a loan, this Part has effect, after that assumption, as if: (a) the company had provided the loan to the borrower; and (b) in a case where that assumption was made in the course of carrying on a particular business—interest, or a payment in the nature of interest, derived by the company from the loan had been derived from a loan made in the course of carrying on that business.

s 443 — Net tainted commodity gains

For the purposes of this Part: (a) net tainted commodity gains are to be taken to have accrued to a company in a statutory accounting period if, and only if, the sum of the tainted commodity gains of the company for the statutory accounting period exceeds the sum of the tainted commodity losses of the company for the statutory accounting period; and (b) the amount of the net tainted commodity gains is equal to the amount of the excess.

s 444 — Net tainted currency exchange gains

For the purposes of this Part: (a) net tainted currency exchange gains are to be taken to have accrued to a company in a statutory accounting period if, and only if, the sum of the tainted currency exchange gains of the company for the statutory accounting period exceeds the sum of any tainted currency exchange losses of the company for the statutory accounting period; and (b) the amount of the net tainted currency exchange gains is equal to the amount of the excess.

s 445 — Net gains—disposal of tainted assets

(1) For the purposes of this Part: (a) net gains are to be taken to have accrued to a company in a statutory accounting period in relation to the disposal of tainted assets owned by the company if, and only if, the sum of the gains of the company in relation to the disposal of tainted assets during the statutory accounting period exceeds the sum of the losses (if any) of the company in relation to the disposal of tainted assets during the statutory accounting period; and (b) the amount of the net gains is equal to the amount of the excess. (2) In paragraph (1)(a): gains includes capital gains the company would have made in the statutory accounting period because of CGT event J1, if the assumptions in paragraphs 383(a) to (c) applied. losses includes capital losses the company would have made in the statutory accounting period because of CGT event J1, if the assumptions in paragraphs 383(a) to (c) applied. Note 1: CGT event J1 is about companies ceasing to be related after a roll ‑ over. Note 2: Basically, the effect of the assumptions in paragraphs 383(a) to (c) is that the company concerned is taken to be a taxpayer and a resident and CGT event J1 may therefore be taken to have happened.

Amendment history: Inserted by No 5 of 1991, item 434, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 58 of 2000, Sch 1 item 7 | Sch 1 item 22, effective s 4, Sch 1, Sch 2 (items 1, 4(1)), Sch 3 (item 3), Sch 6 (item 34), Sch 10 (items 1–11, 17(1), (2), 18–30, 38(1), (2)) and Sch 11 (items 1, 11): 31 May 2000 (s 2(1), (2)) Sch 3 (items 1, 2, 4–7) and Sch 6 (item 33): 16 July 1999 (s 2(3)–(6), (12)) Sch 8 (items 1–17, 21): 1 July 1998 (s 2(13)) Sch 8 (item 18): 1 July 1999 (s 2(13))

s 446 — Passive income

(1) Subject to this Division, for the purposes of this Part, the following amounts are passive income of a company of a statutory accounting period: (a) dividends (within the meaning of section 6) paid to the company in the statutory accounting period; (b) unit trust dividends (within the meaning of Division 6C of Part III) paid to the company in the statutory accounting period; (c) a distribution made to the company where the distribution is taken to be a dividend because of section 47; (d) tainted interest income derived by the company in the statutory accounting period; (e) annuities derived by the company in the statutory accounting period; (f) tainted rental income derived by the company in the statutory accounting period; (g) tainted royalty income derived by the company in the statutory accounting period; (h) an amount derived by the company in the statutory accounting period as consideration for the assignment, in whole or in part, of any copyright, patent, design, trade mark or other like property or right; (j) income derived from carrying on a business of trading in tainted assets; (k) net gains that accrued to the company in the statutory accounting period in respect of the disposal of tainted assets; (m) net tainted commodity gains that accrued to the company during the statutory accounting period; (n) net tainted currency exchange gains that accrued to the company during the statutory accounting period. (2) Despite anything in subsection (1), the passive income of a life assurance company of a statutory accounting period is calculated using the formula: where: adjusted passive income means the amount that, apart from this subsection, would be the passive income of the company of the statutory accounting period. total assets means the average of the total assets of the company for the statutory accounting period. untainted policy liabilities means so much of the company’s policy liabilities, as defined in the Valuation Standard (within the meaning of the Income Tax Assessment Act 1997 ), as calculated by a Fellow or Accredited Member of the Institute of Actuaries of Australia, for the statutory accounting period as is referable to life assurance policies that do not give rise to tainted services income of the company of any statutory accounting period. (4) Despite anything in subsection (1), the passive income of a general insurance company of a statutory accounting period is worked out using the formula: where: adjusted passive income means the amount that, apart from this subsection, would be the passive income of the company of the statutory accounting period. net assets means the excess at the end of the statutory accounting period of the total assets of the company over the total liabilities of the company. outstanding claims means the amount that the company would, at the end of the statutory accounting period, based on proper and reasonable estimates, need to set aside and invest in order to meet liabilities of the company that have arisen or will arise: (a) under general insurance policies (including reinsurance policies, but not including life assurance policies); and (b) in respect of events that occurred during or before the period. solvency amount is the amount worked out under subsection (5). tainted outstanding claims means so much of the outstanding claims of the company at the end of the statutory accounting period as is referable to general insurance policies that give rise to tainted services income of the company of any statutory accounting period. total assets means the total assets of the company at the end of the statutory accounting period. (5) In subsection (4): solvency amount is the amount worked out using the formula: where: maximum event retention means the amount that, at the end of the statutory accounting period, the company has determined is the maximum that would be payable to the owners of policies as a result of the happening of any one event. The amount must be worked out on the basis of a reasonable and proper estimate. minimum solvency means the greater of: (a) 20% of the company’s premium income (within the meaning of the Insurance Act 1973 ) during the statutory accounting period; and (b) 15% of the company’s outstanding claims as at the end of the statutory accounting period. outstanding claims means the amount that the company would, at the end of the statutory accounting period, based on proper and reasonable estimates, need to set aside and invest in order to meet liabilities of the company that have arisen or will arise: (a) under general insurance policies (including reinsurance policies, but not including life assurance policies); and (b) in respect of events that occurred during or before the period. tainted outstanding claims means so much of the outstanding claims of the company at the end of the statutory accounting period as is referable to general insurance policies that give rise to tainted services income of the company of any statutory accounting period.

Amendment history: Inserted by No 5 of 1991, item 334 | item 371 | item 434, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 120 of 1995, Sch 1 item 86 | Sch 1 item 87 | Sch 1 item 88, effective Sch 1 (items 1–57, 59–90) and Sch 2 (items 1, 3, 4): 25 Oct 1995 (s 2(1)) Sch 1 (item 58): 23 Nov 1994 (s 2(2)) | Amended by No 16 of 1999, effective s 4, Sch 1, Sch 3 (items 8–10, 12(3)), Sch 5, 6, Sch 7 (items 1–8) and Sch 8–11: 9 Apr 1999 (s 2(1)) | Amended by No 89 of 2000, Sch 2 item 58 | Sch 2 item 59 | Sch 2 item 60 | Sch 2 item 61, effective s 4, Sch 1 (item 66), Sch 2 (items 1–24, 35, 36, 48, 53–62), Sch 3 (items 1–29, 98–100), Sch 5 (items 32–34(1)) and Sch 8 (items 1–8, 11): 30 June 2000 (s 2(1)) Sch 1 (item 67): 1 pm (A.C.T.) 11 Nov 1999 (s 2(2)) Sch 2 (items 25, 26) and Sch 3 (items 30–97): 1 July 2000 (s 2(3), (8), (9)) | Amended by No 53 of 2016, Sch 5 item 26, effective Sch 3 (item 1), Sch 5 (items 1, 3, 6–28, 75), Sch 6 (items 1–20) and Sch 8 (item 1): 5 May 2016 (s 2(1) items 2, 4)

s 447 — Tainted sales income

(1) Subject to this Division, for the purposes of this Part, the following amounts are tainted sales income of a company of a statutory accounting period: (a) income from the sale of goods by the company where all of the following conditions are satisfied: (i) the goods were sold to the company by another entity; (ii) either of the following sub ‑ subparagraphs applies at the time of the sale of the goods to the company: (A) the seller of the goods to the company was an associate of the company and a Part X Australian resident; (B) the goods were sold to the company by an associate of the company who was not a Part X Australian resident, in the course of a business carried on by the associate at or through a permanent establishment of the associate in Australia; (iii) if the goods were altered by the company—the income does not pass the substantial alteration test set out in subsection (4); (b) income from the sale of goods by the company where all of the following conditions are satisfied: (i) the goods were sold to the company by another entity; (ii) either of the following sub ‑ subparagraphs applies at the time of the purchase of the goods from the company: (A) the purchaser of the goods from the company was an associate of the company and a Part X Australian resident; (B) the purchaser of the goods from the company was an associate of the company who was not a Part X Australian resident and the purchase was made in the course of a business carried on by the purchaser at or through a permanent establishment of the purchaser in Australia; (iii) if the goods were altered by the company—the income does not pass the substantial alteration test set out in subsection (4); (c) income from the sale of goods (in this paragraph called the manufactured goods ) by the company where all of the following conditions are satisfied: (i) the manufactured goods were manufactured by the company; (ii) any of the raw materials or goods from which the manufactured goods were manufactured were sold to the company by another entity; (iii) either of the following sub ‑ subparagraphs applies at the time of the sale to the company of the raw materials or goods from which the manufactured goods were manufactured: (A) the entity who sold to the company the raw materials or goods from which the manufactured goods were manufactured was an associate of the company and a Part X Australian resident; (B) the raw materials or goods from which the manufactured goods were manufactured were sold to the company by an associate of the company who was not a Part X Australian resident, in the course of a business carried on by the associate at or through a permanent establishment of the associate in Australia; (iv) the income does not pass the substantial manufacture test set out in subsection (4A); (d) income from the sale of goods (in this paragraph called the manufactured goods ) by the company where all of the following conditions are satisfied: (i) the manufactured goods were manufactured by the company; (ii) any of the raw materials or goods from which the manufactured goods were manufactured were sold to the company by another entity; (iii) either of the following sub ‑ subparagraphs applies at the time of the purchase of the manufactured goods from the company: (A) the purchaser of the manufactured goods from the company was an associate of the company and a Part X Australian resident; (B) the purchaser of the manufactured goods from the company was an associate of the company who was not a Part X Australian resident and the purchase was made in the course of a business carried on by the purchaser at or through a permanent establishment of the purchaser in Australia; (iv) the income does not pass the substantial manufacture test set out in subsection (4A); (e) income from the sale of goods (in this paragraph called the primary production goods ) by the company where all of the following conditions are satisfied: (i) the primary production goods were: (A) primary products produced, raised or grown by the company; or (B) goods manufactured by the company, in whole or in part, from primary products produced, raised or grown by the company; (ii) any of the propagative material from which the primary products were produced, raised or grown was sold to the company by another entity; (iii) either of the following sub ‑ subparagraphs applies at the time of the sale to the company of the propagative material: (A) the entity who sold the propagative material to the company was an associate of the company and a Part X Australian resident; (B) the propagative material was sold to the company by an associate of the company who was not a Part X Australian resident, in the course of a business carried on by the associate at or through a permanent establishment of the associate in Australia; (iv) the income does not pass the substantial production test set out in subsection (4B); (f) income from the sale of goods (in this paragraph called the primary production goods ) by the company where all of the following conditions are satisfied: (i) the primary production goods were: (A) primary products produced, raised or grown by the company; or (B) goods manufactured by the company, in whole or in part, from primary products produced, raised or grown by the company; (ii) any of the propagative material from which the primary products were produced, raised or grown was sold to the company by another entity; (iii) either of the following sub ‑ subparagraphs applies at the time of the purchase of the primary production goods from the company: (A) the purchaser of the primary production goods from the company was an associate of the company and a Part X Australian resident; (B) the purchaser of the primary production goods from the company was an associate of the company who was not a Part X Australian resident and the purchase was made in the course of a business carried on by the purchaser at or through a permanent establishment of the purchaser in Australia; (iv) the income does not pass the substantial production test set out in subsection (4B). (2) Where: (a) a company provides any of the following services: (i) drinks and meals; (ii) accommodation in a hotel, motel, guest ‑ house or similar place; (iii) the provision of, or the use of facilities for, entertainment, recreation or instruction; and (b) if subparagraph (a)(ii) or (iii) applies—the transaction for the provision of the services includes the sale of goods of a kind that are commonly supplied in connection with the services concerned; the tainted sales income of the company does not include income from the sale of: (c) if subparagraph (a)(i) applies—the drink or food concerned; or (d) if subparagraph (a)(ii) or (iii) applies—the goods referred to in paragraph (b). (3) The tainted sales income of a company of a statutory accounting period does not include passive income of the company of the statutory accounting period. (4) For the purposes of this section, income from the sale of goods by a company passes the substantial alteration test if: (a) the company substantially altered the goods; and (b) a substantial part of that alteration was carried out by the directors or employees of the company. (4A) For the purposes of this section, income from the sale of goods by a company passes the substantial manufacture test if a substantial part of the manufacture of the goods was carried out by the directors or employees of the company. (4B) For the purposes of this section, income from the sale of goods by a company passes the substantial production test if: (a) if the goods are primary products—a substantial part of the production, raising or growing of the goods was carried out by the directors or employees of the company; or (b) if the goods are manufactured by the company, in whole or in part, from primary products produced, raised or grown by the company—a substantial part of: (i) the manufacture of the goods; and (ii) those production, raising or growing activities; was carried out by the directors or employees of the company. (4C) For the purposes of subsections (4), (4A) and (4B), the effect of an activity on the market value of the goods concerned is to be ignored. (5) If, apart from this subsection, goods are purchased or sold by 2 or more entities acting jointly, subsection (1) is to be applied successively as if each such entity were the sole purchaser or seller, as the case may be. (6) In this section: animals includes fish. primary products means: (a) agricultural or horticultural produce; or (b) trees or crops, whether on or attached to land or not; or (c) timber; or (d) animals (whether dead or alive); or (e) the bodily produce (including natural increase) of animals.

Amendment history: Inserted by No 5 of 1991, item 334, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 80 of 1992, item 63, effective s 52(2) and 53(2): 1 July 1992 (s 2(3)) Remainder: 30 June 1992 (s 2(1))

s 448 — Tainted services income

(1) Subject to this Division, for the purposes of this Part, the following amounts are tainted services income of a company of a statutory accounting period: (a) income (other than premium income) from the provision of services by the company to an entity, if: (i) the entity was a Part X Australian resident at the time the income was derived; and (ii) the services were not provided in connection with a business carried on by the entity at that time at or through a permanent establishment of the entity in a listed or unlisted country; (b) income (other than premium income) from the provision of services by the company to an entity who was not a Part X Australian resident at the time the income was derived, in connection with a business carried on by the entity at that time at or through a permanent establishment of the entity in Australia; (c) income consisting of life assurance premiums in respect of a life assurance policy if, at the time the policy was entered into, the owner of the policy was a Part X Australian resident; (d) income consisting of premiums (other than life assurance premiums) in respect of insurance (other than reinsurance) where any of the following conditions are satisfied at the time the policy was entered into: (i) any insured person was a Part X Australian resident, and the policy was not entered into in connection with a business carried on by the person at or through a permanent establishment of the person in a listed or unlisted country; (ii) any insured property was situated in Australia; (iii) any insured event was an event which could happen only in Australia; (e) income consisting of premiums in respect of reinsurance, if: (i) the insurer whose risks are directly covered by the reinsurance was a Part X Australian resident at the time the policy was entered into; and (ii) the policy was not entered into in connection with a business carried on by the insurer at that time at or through a permanent establishment of the insurer in a listed or unlisted country; (f) income consisting of premiums in respect of reinsurance, if: (i) the insurer whose risks are directly covered by the reinsurance was not a Part X Australian resident at the time the policy was entered into; and (ii) the policy was entered into in connection with a business carried on by the insurer at that time at or through a permanent establishment of the insurer in Australia; (g) income of the company covered by subsection (1A). (1A) Income of the company is covered by this subsection if: (a) it is income from the provision of services by the company to an entity under a scheme (within the meaning of the Income Tax Assessment Act 1997 ); and (b) the entity is an associate of the company; and (c) those services are received by another entity; and (d) the other entity satisfies either of these requirements: (i) the other entity was a Part X Australian resident at the time the income was derived, and the services were not received in connection with a business carried on by the other entity at that time at or through a permanent establishment of the other entity in a listed or unlisted country; (ii) the other entity was not a Part X Australian resident at the time the income was derived, and the services were received in connection with a business carried on by the other entity at that time at or through a permanent establishment of the other entity in Australia; and (e) the income would be tainted services income if: (i) this section did not include paragraph (1)(g) or this subsection; and (ii) the income were from the provision of those services by the company to the other entity; and (f) a reasonable person would conclude (having regard to all the circumstances) that the scheme was entered into or carried out for a purpose, other than an incidental purpose, of enabling entities satisfying the requirements of subparagraph (d)(i) or (ii) to receive those services. (2) The tainted services income of a company of a statutory accounting period does not include income from the sale of goods by the company. (3) Where: (a) a company provides services directly related to goods sold by the company; and (b) either of the following conditions is satisfied: (i) the company substantially altered the goods with the result that the market value of the goods was substantially enhanced; (ii) the company did not acquire the goods from another entity; the tainted services income of the company does not include income from the provision of those services. (4) Where a company provides any of the following services: (a) drinks and meals; (b) accommodation in a hotel, motel, guest ‑ house or similar place; (c) the provision of, or of the use of facilities for, entertainment, recreation or instruction; the tainted services income of the company does not include income from the provision of those services. (5) The tainted services income of a company of a statutory accounting period does not include the passive income of the company of the statutory accounting period. (6) The tainted services income of a company of a statutory accounting period does not include income where: (a) the income is not passive income of the company of the statutory accounting period; and (b) the income is covered by any of the following subparagraphs: (i) income derived by the company by way of rent in respect of a lease of land; (ii) royalties derived by the company; (iii) income derived from carrying on a business of trading in assets; (iv) gains that accrued to the company in the statutory accounting period in respect of the disposal of assets; (v) gains that accrued to the company in the statutory accounting period from disposing of commodity investments; (vi) currency exchange gains that accrued to the company in the statutory accounting period; (vii) in the case of a life assurance company—an amount that, apart from subsection 446(2), would be passive income of the company of the statutory accounting period; (viii) in the case of a general insurance company—the amount that, apart from subsection 446(4), would be passive income of the company of the statutory accounting period. (7) If, apart from this subsection, services are provided to 2 or more entities acting jointly, this section is to be applied successively as if each such entity were the sole recipient.

Amendment history: Inserted by No 5 of 1991, item 334 | item 434, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 155 of 1997, Sch 1 item 55, effective 24 Oct 1997 (s 2) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6)

s 449 — AFI subsidiaries—interest income

(1) The passive income of a company of a statutory accounting period does not include tainted interest income where, at the time the income was derived, the company was an AFI subsidiary whose sole or principal business was financial intermediary business. (2) The tainted services income of a company of a statutory accounting period does not include income where the following conditions are satisfied: (a) at the time the income was derived, the company was an AFI subsidiary whose sole or principal business was financial intermediary business; (b) the income consisted of interest, or a payment in the nature of interest, derived by the company from a loan made in the course of carrying on that business; (c) the loan was made to the Commonwealth. (3) The passive income, or the tainted services income, of a company of a statutory accounting period does not include income where the following conditions are satisfied: (a) at the time the income was derived, the company was an AFI subsidiary whose sole or principal business was financial intermediary business; (b) the income consisted of interest, or a payment in the nature of interest, derived by the company from a deposit with a central bank. (4) In the application of subsection 448(1) to income derived by a company, where the following conditions are satisfied: (a) at the time the income was derived, the company was an AFI subsidiary whose sole or principal business was financial intermediary business; (b) the income consisted of interest, or a payment in the nature of interest, derived by the company from a loan made in the course of carrying on that business; a reference in that subsection to the time the income was derived is to be read as a reference to the time the loan was made.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2)

s 450 — AFI subsidiaries—asset disposals and currency transactions

(1) The passive income, or the tainted services income, of a company of a statutory accounting period does not include income where the following conditions are satisfied: (a) at the time the income was derived, the company was an AFI subsidiary whose sole or principal business was financial intermediary business; (b) the income was derived from carrying on a business of trading in any or all of the following tainted assets: (i) non ‑ share futures contracts; (ii) non ‑ share forward contracts; (iii) interest rates swap contracts; (iv) currency swap contracts; (v) forward exchange rate contracts; (vi) forward interest rate contracts; (vii) a right or option in respect of such a contract; (viii) any similar financial instrument. (2) For the purposes of this Part, in determining the net gains that accrued to a company in a statutory accounting period in respect of the disposal of tainted assets, where the following conditions are satisfied in relation to the disposal of a tainted asset: (a) at the time of the disposal of the tainted asset, the company was an AFI subsidiary whose sole or principal business was financial intermediary business; (b) the disposal was made in the course of carrying on that business; (c) the tainted asset is covered by paragraph (1)(b); the disposal of the tainted asset is to be disregarded. (3) For the purposes of this Part, in determining the net tainted currency exchange gains that accrued to a company during a statutory accounting period, where the following conditions are satisfied in relation to a particular currency exchange gain or a particular currency exchange loss: (a) at the time the currency exchange gain or the currency exchange loss, as the case may be, was realised, the company was an AFI subsidiary whose sole or principal business was financial intermediary business; (b) the currency exchange gain, or the currency exchange loss, as the case may be, was realised: (i) in the course of carrying on that business; and (ii) in the course of currency dealing; that currency exchange gain or that currency exchange loss, as the case requires, is to be disregarded. (4) The passive income of a company of a statutory accounting period does not include income where the following conditions are satisfied: (a) at the time the income was derived, the company was an AFI subsidiary whose sole or principal business was financial intermediary business; (b) the income was derived from carrying on a business of trading in either of the following tainted assets: (i) loans (including deposits with a bank or other financial institution); (ii) debenture stock, bonds, debentures, certificates of entitlement, bills of exchange, promissory notes or other securities. (5) For the purposes of this Part (other than subsection (7)), in determining the net gains that accrued to a company in a statutory accounting period in respect of the disposal of tainted assets, where the following conditions are satisfied in relation to the disposal of a tainted asset: (a) at the time of the disposal of the tainted asset, the company was an AFI subsidiary whose sole or principal business was financial intermediary business; (b) the disposal was made in the course of carrying on that business; (c) the tainted asset is covered by paragraph (4)(b); the disposal of the tainted asset is to be disregarded. (6) For the purposes of this Part, the tainted services income of a company of a statutory accounting period includes income from trading in assets where the following conditions are satisfied: (a) at the time the income was derived, the company was an AFI subsidiary whose sole or principal business was financial intermediary business; (b) the assets are covered by paragraph (4)(b); (c) the assets were acquired from, or disposed of to, another entity where either of the following conditions are satisfied at the time of the acquisition or disposal: (i) the entity was a Part X Australian resident, and the acquisition or disposal was not in connection with a business carried on by the entity at or through a permanent establishment of the entity in a listed or unlisted country; (ii) the entity was not a Part X Australian resident, but the acquisition or disposal was in connection with a business carried on by the entity at or through a permanent establishment of the entity in Australia. (7) For the purposes of this Part, the tainted services income of a company of a statutory accounting period includes net gains that accrued to the company in the statutory accounting period in respect of the disposal of tainted assets, where the following conditions are satisfied: (a) at the time of the disposal of the tainted asset, the company was an AFI subsidiary whose sole or principal business was financial intermediary business; (b) the disposal was made in the course of carrying on that business; (c) the tainted asset is covered by paragraph (4)(b); (d) the tainted asset was acquired from, or disposed of to, another entity where either of the following conditions are satisfied at the time of the acquisition or disposal: (i) the entity was a Part X Australian resident, and the acquisition or disposal was not in connection with a business carried on by the entity at or through a permanent establishment of the entity in a listed or unlisted country; (ii) the entity was not a Part X Australian resident, but the acquisition or disposal was in connection with a business carried on by the entity at or through a permanent establishment of the entity in Australia. (8) For the purposes of this Part, the tainted services income of a company of a statutory accounting period includes factoring income where the following conditions are satisfied: (a) at the time the income was derived, the company was an AFI subsidiary whose sole or principal business was financial intermediary business; (b) the debt to which the factoring income relates was acquired from, or disposed of to, another entity where either of the following conditions are satisfied at the time of the acquisition or disposal: (i) the entity was a Part X Australian resident, and the acquisition or disposal was not in connection with a business carried on by the entity at or through a permanent establishment of the entity in a listed or unlisted country; (ii) the entity was not a Part X Australian resident, but the acquisition or disposal was in connection with a business carried on by the entity at or through a permanent establishment of the entity in Australia.

Amendment history: Inserted by No 5 of 1991, item 371, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6)

s 451 — Active income test—substantiation requirements for company

(1) The substantiation requirements for a company in relation to a statutory accounting period are as follows: (a) the company must keep (in Australia or elsewhere) such accounting records (in this section called the general accounting records ) as correctly record and explain the matters, transactions, acts and operations that are relevant to the preparation of the recognised accounts of the company for the statutory accounting period; (b) the general accounting records must be so kept as to enable the recognised accounts of the company for the statutory accounting period to be prepared; (c) the company must retain, for the retention period in relation to the statutory accounting period: (i) the recognised accounts of the company for the statutory accounting period; and (ii) the general accounting records of the company for the statutory accounting period; (d) the company must comply with a request made in a notice given to it under subsection (2) in relation to the statutory accounting period. (2) An entity that is an attributable taxpayer in relation to a company, being a CFC, as at the end of a statutory accounting period of the company may, by notice in writing served on the company (in this section called the taxpayer’s notice ), request the company: (a) to give to the taxpayer, within the period and in the manner specified in the taxpayer’s notice, copies of such of the following documents as are specified in the notice: (i) the recognised accounts of the company for the statutory accounting period; (ii) the general accounting records of the company for the statutory accounting period; or (b) to prepare a document containing particulars of the basis of the calculation of the tainted income ratio of the company for the statutory accounting period and to give to the taxpayer, within the period and in the manner specified in the taxpayer’s notice, a copy of that document; or (c) if the company was a partner in a partnership at any time during the statutory accounting period: (i) to obtain from the partnership, in accordance with a request made in a notice given to the partnership by the company under subsection 452(2), copies of specified documents; and (ii) to give those copies to the taxpayer, within the period and in the manner specified in the taxpayer’s notice. (3) The period specified in the taxpayer’s notice must end: (a) later than 60 days after the date of service of the taxpayer’s notice; and (b) before the end of the retention period in relation to the statutory accounting period. (4) Upon written application made by the taxpayer within the period specified in the taxpayer’s notice, the Commissioner may, by notice in writing served on the taxpayer, extend the period specified in the taxpayer’s notice. (5) Where: (a) an application under subsection (4) is made before the end of the period specified in the taxpayer’s notice; and (b) at the end of the period, the Commissioner has not notified the taxpayer of the Commissioner’s decision on the application; the following provisions have effect: (c) if the Commissioner’s decision is not notified to the taxpayer before the end of the retention period in relation to the statutory accounting period concerned—the Commissioner is taken to have extended the period under subsection (4) to the end of the retention period; (d) if the Commissioner’s decision is notified to the taxpayer before the end of the retention period in relation to the statutory accounting period concerned—the Commissioner is taken to have extended the period under subsection (4) to the end of the day (in this subsection called the decision day ) on which the Commissioner’s decision is notified to the taxpayer; (e) if the Commissioner decides to extend the period—subject to subsection (6), the extended period must end after the decision day. (6) The period as extended under subsection (4) must end before the end of the retention period in relation to the statutory accounting period. (7) A reference in this section to the period specified in the taxpayer’s notice is a reference to the period as extended under subsection (4). (8) A refusal or failure to comply with the taxpayer’s notice is not an offence. (9) Subsection 262A(4) does not apply to records kept or obtained under or for the purposes of this section.

s 452 — Active income test—substantiation requirements for partnership

(1) The substantiation requirements for a partnership in relation to a statutory accounting period are as follows: (a) the partnership must keep (in Australia or elsewhere) such accounting records (in this section called the general accounting records ) as correctly record and explain the matters, transactions, acts and operations that are relevant to the preparation of the recognised accounts of the partnership for the statutory accounting period; (b) the general accounting records must be so kept as to enable the recognised accounts of the partnership for the statutory accounting period to be prepared; (c) the partnership must retain, for the retention period in relation to the statutory accounting period: (i) the recognised accounts of the partnership for the statutory accounting period; and (ii) the general accounting records of the partnership for the statutory accounting period; (d) the partnership must comply with a request made in a notice given to it under subsection (2) in relation to the statutory accounting period. (2) A company that is a CFC at the end of a statutory accounting period of the company may, by notice in writing served on a partnership in which the company was a partner at any time during the statutory accounting period, request the partnership: (a) to give to the company, within the period and in the manner specified in the notice, copies of such of the following documents as are specified in the notice: (i) the recognised accounts of the partnership for the statutory accounting period; (ii) the general accounting records of the partnership for the statutory accounting period; or (b) to prepare a document containing particulars of the basis of the calculation of: (i) the notional gross tainted turnover of the partnership for the statutory accounting period; and (ii) the notional gross turnover of the partnership for the statutory accounting period; and to give to the company, within the period and in the manner specified in the notice, a copy of that document. (3) The period specified in the notice must end: (a) later than 30 days after the date of service of the notice; and (b) before the end of the retention period in relation to the statutory accounting period. (4) Upon written application made by the company within the period specified in the notice, the Commissioner may, by notice in writing served on the company, extend the period specified in the notice. (5) Where: (a) an application under subsection (4) is made before the end of the period specified in the notice; and (b) at the end of the period, the Commissioner has not notified the company of the Commissioner’s decision on the application; the following provisions have effect: (c) if the Commissioner’s decision is not notified to the company before the end of the retention period in relation to the statutory accounting period concerned—the Commissioner is taken to have extended the period under subsection (4) to the end of the retention period; (d) if the Commissioner’s decision is notified to the company before the end of the retention period in relation to the statutory accounting period concerned—the Commissioner is taken to have extended the period under subsection (4) to the end of the day (in this subsection called the decision day ) on which the Commissioner’s decision is notified to the company; (e) if the Commissioner decides to extend the period—subject to subsection (6), the extended period must end after the decision day. (6) The period as extended under subsection (4) must end before the end of the retention period in relation to the statutory accounting period. (7) A reference in this section to the period specified in the notice is a reference to the period as extended under subsection (4). (8) A refusal or failure to comply with the notice is not an offence. (9) Subsection 262A(4) does not apply to records kept or obtained under or for the purposes of this section.