Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) The object of this section is to ensure that an entity is not prevented from being a * subsidiary member of a * consolidated group or * consolidatable group just because there are minor holdings of * shares in a company issued under * arrangements for employee shareholdings. (It does not matter whether the company is the entity or is interposed between the entity and a * member of the group.)
Note: A company that is prevented from being a subsidiary member of a consolidated group may be a head company (so there could be 2 consolidated or consolidatable groups, instead of the one that this section ensures exists).
(2) This Part (except Division 719) operates as if a company that meets the requirement of subsection (3) at a particular time were a * wholly‑owned subsidiary of an entity (the holding entity ) at the time.
(3) The company must be one that would be a * wholly‑owned subsidiary of the holding entity at the time if the * shares in the company that are to be disregarded under subsection (4) did not exist.
(4) Disregard each of the * shares described in subsection (5) if the total number of those shares is not more than 1% of the number of ordinary shares in the company.
(5) A * share in the company that is beneficially owned by an entity may be disregarded under subsection (4) if:
(a) the entity acquired (as defined in section 139G of the Income Tax Assessment Act 1936 ) the share either:
(i) in the circumstances described in subsection 139C(1) or (2) of that Act; or
(ii) by exercising a right the entity acquired (as so defined) in those circumstances; and
(b) all the shares in the company available for acquisition in those circumstances are ordinary shares and all the rights available for acquisition in those circumstances are rights to acquire ordinary shares; and
(c) if the entity acquired the share in those circumstances—at the time of the acquisition, at least 75% of the permanent employees (as defined in section 139GB of that Act) of the employer (as defined in section 139GA of that Act) were or had earlier been entitled to acquire in those circumstances:
(i) shares in the company or rights to acquire shares in the company; or
(ii) shares in a holding company (as defined in section 139GC of that Act) of the company or rights to acquire such shares; and
(d) the conditions in subsections 139CD(6) and (7) of that Act are met in relation to the acquisition of the share by the entity; and
(e) the company is not covered by section 139DF of that Act.
Note: Section 139CD of the Income Tax Assessment Act 1936 sets out certain preconditions for shares and rights acquired under employee share schemes to be qualifying shares and qualifying rights. Section 139C of that Act explains when a share or right is acquired under an employee share scheme. Section 139DF prevents shares and rights relating to certain companies from being qualifying shares and rights.
(6) The * share may be disregarded under subsection (4) even though the condition in paragraph (5)(c) is not met, if:
(a) the conditions in paragraphs (5)(a), (b), (d) and (e) are met; and
(b) the Commissioner has made a determination under subsection 139CD(8) of the Income Tax Assessment Act 1936 in relation to the share.