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INCOME TAX ASSESSMENT ACT 1997 - SECT 727.15 When does an indirect value shift have consequences under this Division?

INCOME TAX ASSESSMENT ACT 1997 - SECT 727.15

When does an indirect value shift have consequences under this Division?

  (1)   Indirect value shift is defined very broadly, but the application of this Division is limited in various ways.

  (2)   The losing entity must be a company or trust (except a superannuation entity). However, the gaining entity can be any kind of entity, including an individual.

  (3)   This Division does not apply if entities deal with each other at arm's length, or provide economic benefits in return for full market value.

  (4)   The losing entity and the gaining entity must be connected by having had the same ultimate controller . In the case of closely held entities, they may instead be connected by having had a high level of common ownership .

  (5)   The only interests affected are those owned by entities involved in the indirect value shift or by their associates.

  (6)   There are a range of exclusions, such as:

  (a)   exclusions for minor indirect value shifts; and

  (b)   a series of rules designed to provide safe harbour treatment for common transactions relating to services; and

  (c)   anti - overlap provisions to prevent double - counting.

  (7)   Rules of thumb are included to make it easier to determine the market value of some kinds of economic benefits.

  (8)   To reduce compliance costs for:

  (a)   * small business entities; and

  (b)   entities that meet the CGT small business net asset threshold ($6 million);

interests owned by those entities are not affected by this Division.

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