Commonwealth Numbered Acts

TAXATION LAWS AMENDMENT (FOREIGN INCOME) ACT 1990 No. 5 of 1991 - SECT 9

9. After section 47 of the Principal Act the following section is inserted:
Distribution benefits - CFCs

"47A. (1) Subject to subsection (2), if:

   (a)  a company (in this section called the `first company') has profits
        immediately before a distribution time for a distribution benefit in
        relation to the first company; and

   (b)  the distribution time occurred after 3 June 1990; and

   (c)  the first company is a CFC at the distribution time; and

   (d)  the first company is a resident of an unlisted country at the
        distribution time; so much of the distribution payment in relation to
        the distribution time as would not otherwise be a dividend and does
        not exceed the amount of those profits is taken, for the purposes of
        this Act, to be a dividend paid by the first company:

   (e)  to the recipient of the benefit as a shareholder in the first company;
        and

   (f)  out of profits derived by the first company; and

   (g)  at the distribution time.

"(2) If:

   (a)  either of the following subparagraphs applies:

   (i)  by virtue of subsection (1), the whole or a part of the distribution
        payment is included in the assessable income of a taxpayer of the year
        of income in which the distribution time occurred under section 44;

   (ii) by virtue of subsection (1), an amount is included in the assessable
        income of a taxpayer of a year of income under section 458 in respect
        of the distribution payment; and

   (b)  the taxpayer's return of income for the year of income was not
        prepared on the basis that the distribution payment had the
        consequence specified in subsection (1); that subsection has effect in
        relation to the taxpayer and in relation to that distribution payment
        as if the reference in that subsection to the purposes of this Act
        were a reference to the purposes of this Act (other than Division 18,
        section 365 and Division 6 of Part X).

"(3) Subject to subsections (9) and (12), a reference in this section to a
distribution benefit in relation to the first company is a reference to an
eligible benefit where the following conditions are satisfied:

   (a)  the eligible benefit was provided to:

   (i)  an associated entity in relation to the first company; or

   (ii) another entity that, immediately after the time of the provision of
        the eligible benefit, was an associated entity in relation to the
        first company;

   (b)  the eligible benefit was provided by:

   (i)  the first company; or

   (ii) an entity (in this subsection called the `arranger') other than the
        first company under an arrangement between:

                (A)  the first company; and

                (B)  the arranger or another entity;

   (c)  if subparagraph (b) (ii) applies - the first company made, or entered
        into an undertaking to make, one or more transfers of property or
        services to the arranger or to another entity (which transfers are in
        this section called the `arrangement transfers') that are
        attributable, in whole or in part, to the provision of the eligible
        benefit.

"(4) Where the first company entered into an undertaking to make one or more
arrangement transfers, the time of the arrangement transfers is the time the
undertaking was entered into.

"(5) Where, at a particular time, an entity (in this subsection called the
`provider') waives or releases the obligation of another entity (in this
subsection called the `recipient') to pay or repay to the provider an amount:

   (a)  the waiver or release is taken to constitute an eligible benefit
        provided at that time by the provider to the recipient; and

   (b)  if the eligible benefit is a distribution benefit in relation to the
        first company - each of the following times is a distribution time for
        the eligible benefit:

   (i)  if the eligible benefit was provided by the first company - the time
        of the provision of the eligible benefit; or

   (ii) in any other case - the time, or each of the times, of the arrangement
        transfers concerned;

   (c)  if the eligible benefit is a distribution benefit in relation to the
        first company - the distribution payment in relation to the
        distribution time is:

   (i)  if the benefit was provided by the first company - the amount the
        payment or repayment of which is waived or released; or

   (ii) in any other case - so much of the amount or market value of the
        arrangement transfer as is attributable to the provision of the
        eligible benefit.

"(6) For the purposes of subsection (5), an entity is taken to be under an
obligation to pay or repay an amount even if the amount is not due for payment
or repayment.

"(7) Where, at a particular time, an entity (in this subsection called the
`provider') makes a loan to another entity (in this subsection called the
`recipient'), where:

   (a)  the parties to the loan are not at arm's length with each other in
        relation to the loan; or

   (b)  the purpose, or one of the purposes, of the making of the loan was to
        facilitate, directly or indirectly (through one or more interposed
        companies, partnerships or trusts), the payment of a dividend that is,
        or would be:

   (i)  exempt from tax under section 23AJ (in whole or in part); or

   (ii) an exempting receipt for the purposes of section 377; or

   (c)  the purpose, or one of the purposes, of the making of the loan was to
        facilitate, directly or indirectly, the provision of an eligible
        benefit by the recipient, being an eligible benefit that is a
        distribution benefit in relation to any company; the following
        provisions have effect:

   (d)  the making of the loan is taken to constitute an eligible benefit
        provided by the provider to the recipient at that time;

   (e)  if the eligible benefit is a distribution benefit in relation to the
        first company - each of the following times is a distribution time for
        the eligible benefit:

   (i)  if the benefit was provided by the first company - the time of the
        provision of the benefit; or

   (ii) in any other case - the time, or each of the times, of the arrangement
        transfers concerned;

   (f)  if the eligible benefit is a distribution benefit in relation to the
        first company - the distribution payment in relation to the
        distribution time is:

   (i)  if the benefit was provided by the first company - the amount of the
        loan; or

   (ii) in any other case - so much of the amount or market value of the
        arrangement transfer as is attributable to the provision of the
        eligible benefit.

"(8) Where, at a particular time:

   (a)  an entity (in this subsection called the `provider') acquires from a
        company (in this subsection called the `recipient'):

   (i)  a share in the recipient;

   (ii) a right to acquire a share in the recipient;

   (iii) an option to acquire a share in the recipient; or

   (b)  an entity (in this subsection also called the `provider') acquires
        from the trustee of a unit trust (in this subsection also called the
        `recipient'):
  (i)   a unit in the recipient;


   (ii) a right to acquire a unit in the recipient;

   (iii) an option to acquire a unit in the recipient; the following
        provisions have effect:

   (c)  the acquisition is taken to constitute an eligible benefit provided by
        the provider to the recipient at that time;

   (d)  if the eligible benefit is a distribution benefit in relation to the
        first company - each of the following is a distribution time for the
        eligible benefit:

   (i)  if the benefit was provided by the first company - the time of the
        provision of the benefit; or

   (ii) in any other case - the time, or each of the times, of the arrangement
        transfers concerned;

   (e)  if the eligible benefit is a distribution benefit in relation to the
        first company - the distribution payment in relation to the
        distribution time is:

   (i)  if the benefit was provided by the first company - the amount or
        market value of the consideration paid or given by the first company
        in respect of the acquisition; or

   (ii) in any other case - so much of the amount or market value of the
        arrangement transfer as is attributable to the provision of the
        eligible benefit;

   (f)  if:

   (i)  the eligible benefit is a distribution benefit in relation to the
        first company; and

   (ii) the provider transferred property or services to the recipient in
        respect of the acquisition; in determining the profits of the company
        immediately before the distribution time, or the first distribution
        time, as the case requires, for the distribution benefit, the
        following assumptions are to be made:

   (iii) if the benefit was provided by the first company - the assumption
        that, immediately before the distribution time, the company had:

                (A)  disposed of the property or services to an entity other
                     than the recipient; and

                (B)  received, in respect of that disposal, consideration
                     equal to the market value of the property or services;

   (iv) if subparagraph (iii) does not apply - the assumption that,
        immediately before the distribution time, the company had:

                (A)  disposed of equivalent property or services to an entity
                     other than the recipient or the entity who provided the
                     eligible benefit; and

                (B)  received, in respect of that disposal, consideration
                     equal to the market value of the property or services.

"(9) An eligible benefit that is covered by subsection (8) and provided at a
particular time is not a distribution benefit in relation to the first company
if, at that time, there is no entity who is:

   (a)  either:

   (i)  the holder of an eligible equity interest in the first company; or

   (ii) an associate of an entity who is the holder of an eligible equity
        interest in the first company; and

   (b)  the holder of an eligible equity interest in the recipient referred to
        in that subsection.

"(10) Where:

   (a)  an entity (in this subsection called the `provider') transfers
        property or services to another entity (in this subsection called the
        `recipient'); and

   (b)  the property or services are transferred:

   (i)  for no consideration; or

   (ii) for a consideration less than the market value of the property or
        services; and

   (c)  in the case of a transfer of services - the services do not consist of
        the making of a loan; and

   (d)  in any case - the property or services are not transferred by way of
        consideration for the acquisition from a company of:

   (i)  a share in the company; or

   (ii) a right to acquire a share in the company; or

   (iii) an option to acquire a share in the company; and

   (e)  in any case - the property or services are not transferred in respect
        of the acquisition from the trustee of a unit trust of:

   (i)  a unit in the unit trust; or

   (ii) a right to acquire a unit in the unit trust; or

   (iii) an option to acquire a unit in the unit trust; and

   (f)  in the case of a transfer of property - the property does not consist
        of a payment in respect of a call on a share in a company; the
        following provisions have effect:

   (g)  the transfer is taken to constitute an eligible benefit provided by
        the provider to the recipient at that time;

   (h)  if the eligible benefit is a distribution benefit in relation to the
        first company - each of the following is a distribution time for the
        eligible benefit:

   (i)  if the benefit was provided by the first company - the time of the
        provision of the benefit; or

   (ii) in any other case - the time, or each of the times, of the arrangement
        transfers concerned;

   (j)  if the eligible benefit is a distribution benefit in relation to the
        first company - the distribution payment in relation to the
        distribution time is:

   (i)  if the benefit was provided by the first company - the amount by which
        the amount or market value of the property or services exceeds the
        consideration (including nil consideration) mentioned in paragraph
        (b); or

   (ii) if subparagraph (i) does not apply and there is only one arrangement
        transfer - the amount by which so much of the amount or market value
        of the arrangement transfer as is attributable to the provision of the
        eligible benefit exceeds the consideration (including nil
        consideration) mentioned in paragraph (b); or

   (iii) if subparagraph (i) does not apply and there are 2 or more
        arrangement transfers - the amount worked out in relation to the
        arrangement transfer using the following formula:
   Total Excess    X      Arrangement transfer

Total arrangement transfers where: `Total Excess' means the amount by which so
much of the total amount or market value of all of the arrangement transfers
as is attributable to the provision of theeligible benefit exceeds the
consideration (including nil consideration) mentioned in paragraph (b);
`Arrangement transfer' means the amount or market value of the arrangement
transfer concerned; `Total arrangement transfers' means the total amount or
market value of all of the arrangement transfers;

   (k)  if the eligible benefit is a distribution benefit in relation to the
        first company - in determining the profits of the company immediately
        before a distribution time for the distribution benefit, the following
        assumptions are to be made:

   (i)  if the benefit was provided by the first company - the assumption
        that, immediately before the distribution time, the company had:

                (A)  disposed of the property or services to an entity other
                     than the recipient; and

                (B)  received, in respect of that disposal, consideration
                     equal to the market value of the property or services;

   (ii) if subparagraph (i) does not apply and there is only one arrangement
        transfer - the assumption that, immediately before the distribution
        time, the company had:

                (A)  disposed of the property or services covered by the
                     arrangement transfer to an entity other than the entity
                     who provided the eligible benefit; and

                (B)  received, in respect of that disposal, consideration
                     equal to the market value of the property or services;

   (iii) if subparagraph (i) does not apply and there are 2 or more
        arrangement transfers - the assumption that, immediately before each
        distribution time, the company had:

                (A)  disposed of the property or services covered by the
                     arrangement transfer concerned to an entity other than
                     the entity who provided the eligible benefit; and

                (B)  received, in respect of that disposal, consideration
                     equal to the market value of the property or services.

"(11) Where, at a particular time, an entity (in this subsection called the
`provider') makes a payment to another entity, being a company (in this
subsection called the `recipient'), in respect of a call on a share in the
recipient:

   (a)  the making of the payment is taken to constitute an eligible benefit
        provided by the provider to the recipient at that time; and

   (b)  if the eligible benefit is a distribution benefit in relation to the
        first company - each of the following is a distribution time for the
        eligible benefit:

   (i)  if the benefit was provided by the first company - the time of the
        provision of the benefit; or

   (ii) in any other case - the time, or each of the times, of the arrangement
        transfers concerned;

   (c)  if the eligible benefit is a distribution benefit in relation to the
        first company - the distribution payment in relation to the
        distribution time is:

   (i)  if the benefit was provided by the first company - the amount of the
        payment; or

   (ii) in any other case - so much of the amount or market value of the
        arrangement transfer as is attributable to the provision of the
        eligible benefit.

"(12) An eligible benefit that is covered by subsection (11) and provided at a
particular time is not a distribution benefit in relation to the first company
if, at that time, there is no entity who is:

   (a)  either:

   (i)  the holder of an eligible equity interest in the first company; or

   (ii) an associate of an entity who is the holder of an eligible equity
        interest in the first company; and

   (b)  the holder of an eligible equity interest in the recipient referred to
        in that subsection.

"(13) If:

   (a)  apart from this subsection, a particular eligible benefit that is
        covered by subsection (8) or (11) and provided at a particular time is
        not a distribution benefit in relation to the first company only
        because of subsection (9) or (12); and

   (b)  at a later time, there is an entity who is:

   (i)  either:

                (A)  the holder of an eligible equity interest in the first
                     company; or

                (B)  an associate of an entity who is the holder of an
                     eligible equity interest in the first company; and

   (ii) the holder of an eligible equity interest in the recipient referred to
        in whichever of subsections (8) and (11) is applicable; the following
        provisions have effect:

   (c)  this section has effect as if subsection (9) or (12), as the case
        requires, had never applied in relation to that eligible benefit;

   (d)  section 170 does not prevent the amendment of an assessment at any
        time for the purposes of giving effect to this subsection.

"(14) If:

   (a)  apart from this subsection, a particular eligible benefit (in this
        subsection called the `first eligible benefit') that is covered by
        subsection (8) or (11) and provided at a particular time is not a
        distribution benefit in relation to the first company only because of
        subsection (9) or (12); and

   (b)  the recipient referred to in whichever of subsections (8) and (11) is
        applicable provides an eligible benefit (in this subsection called the
        `second eligible benefit') to:
  (i)    the first company; or

  (ii)   the provider referred to in whichever of those subsections is
applicable; or

   (iii) an associated entity in relation to:

                (A)  the first company; or

                (B)  that provider; and

   (c)  the provision of the first eligible benefit facilitated, directly or
        indirectly, the provision of the second eligible benefit; the
        following provisions have effect:

   (d)  this section has effect as if subsection (9) or (12), as the case
        requires, had never applied in relation to the first eligible benefit;

   (e)  section 170 does not prevent the amendment of an assessment at any
        time for the purposes of giving effect to this subsection.

"(15) In determining whether a company has profits at a particular time, it is
to be assumed that the accounts of the company had been drawn up immediately
before that time.

"(16) For the purposes of this section, where:

   (a)  the first company has profits (in this subsection called the `original
        profits') immediately before a distribution time for a distribution
        benefit in relation to the first company; and

   (b)  by virtue of subsection (1), an amount (in this subsection called the
        `original assessable amount') is included in the assessable income of
        a taxpayer (in this subsection called the `original taxpayer') of a
        year of income (in this subsection called the `original year of
        income') under section 44, 458 or 459 in respect of the distribution
        payment in relation to the distribution time; and

   (c)  any of the following subparagraphs applies:

   (i)  the original taxpayer is:

                (A)  a resident at any time during the original year of
                     income; and

                (B)  a company or a natural person (other than a company or a
                     natural person in the capacity of a trustee);

   (ii) the original taxpayer is the trustee of a corporate unit trust in
        relation to the original year of income;

   (iii) the original taxpayer is the trustee of a public trading trust in
        relation to the original year of income;

   (iv) the original taxpayer is the trustee of an eligible entity (within the
        meaning of Part IX) in relation to the original year of income;

   (v)  the original taxpayer is the trustee of a resident trust estate
        (within the meaning of Division 6) in relation to the year of income
        who is liable to be assessed and pay tax under section 99 or 99A in
        respect of a part of the net income of the trust estate; then, in
        determining the profits that the first company has at a later time, no
        account is to be taken of so much of the original profits as is equal
        to the original assessable amount.

"(17) For the purposes of this section, where:

   (a)  the first company has profits (in this subsection called the `original
        profits') immediately before a distribution time for a distribution
        benefit in relation to the first company; and

   (b)  by virtue of subsection (1), an amount (in this subsection called the
        `original assessable amount') is included in the assessable income of
        a taxpayer (in this subsection called the `original taxpayer') of a
        year of income (in this subsection called the `original year of
        income') under section 44, 458 or 459 in respect of the distribution
        payment in relation to the distribution time; and

   (c)  all of the following conditions are satisfied:

   (i)  the original taxpayer is the trustee of a trust estate who is liable
        to be assessed and pay tax under section 98 in respect of a share in
        the net income of the trust estate of the original year of income;

   (ii) the beneficiary who was entitled to that share was a resident at any
        time during the original year of income;

   (iii) the whole or a part (which whole or part is in this subsection called
        the `beneficiary's portion of the original assessable amount') of the
        share of the net income is attributable to the original assessable
        amount; then, in determining the profits that the first company has at
        a later time, no account is to be taken of so much of the original
        profits as is equal to the beneficiary's portion of the original
        assessable amount.

"(18) For the purposes of this section, where:

   (a)  the first company has profits (in this subsection called the `original
        profits') immediately before a distribution time for a distribution
        benefit in relation to the first company; and

   (b)  by virtue of subsection (1), an amount (in this subsection called the
        `original assessable amount') is included in the assessable income of
        a taxpayer (in this subsection called the `original taxpayer') of a
        year of income (in this subsection called the `original year of
        income') under section 44, 458 or 459 in respect of the distribution
        payment in relation to the distribution time; and

   (c)  the original taxpayer is the trustee of a trust estate or a
        partnership; and

   (d)  the following conditions are satisfied in relation to another taxpayer
        (in this subsection called the `actual taxpayer'):

   (i)  an amount is included in the assessable income of the actual taxpayer
        of a year of income (in this subsection called the `assessment year of
        income') under subsection 92 (1) or section 97 or 100;

   (ii) the actual taxpayer is:

                (A)  a resident at any time during the assessment year of
                     income, being a company or a natural person (other than a
                     company or a natural person in the capacity of a
                     trustee); or

                (B)  the trustee of a corporate unit trust in relation to the
                     assessment year of income; or

                (C)  the trustee of a public trading trust in relation to the
                     assessment year of income; or

                (D)  the trustee of an eligible entity (within the meaning of
                     Part IX) in relation to the assessment year of income; or

                (E)  the trustee of a trust estate who is liable to be
                     assessed and pay tax under section 98 in respect of a
                     share in the net income of a trust estate; or

                (F)  the trustee of a trust estate who is liable to be
                     assessed and pay tax under section 99 or 99A in respect
                     of a part of the net income of a trust estate;

   (iii) if sub-subparagraph (ii) (A), (B), (C) or (D) applies - the whole or
        a part of the amount so included in the actual taxpayer's assessable
        income (which whole or part is in this subsection called the `actual
        taxpayer's portion of the original assessable amount') is attributable
        (either directly or indirectly through one or more interposed
        partnerships or trusts) to the original assessable amount;

   (iv) if sub-subparagraph (ii) (E) applies:

                (A)  the beneficiary who was entitled to the share concerned
                     was a resident at any time during the assessment year of
                     income; and

                (B)  the whole or a part (which whole or part is in this
                     subsection also called the `actual taxpayer's portion of
                     the original assessable amount') of the share of the net
                     income is attributable (either directly or indirectly
                     through one or more interposed partnerships or trusts) to
                     the original assessable amount;

   (v)  if sub-subparagraph (ii) (F) applies:

                (A)  the trust estate was a resident trust estate (within the
                     meaning of Division 6) in relation to the assessment year
                     of income; and

                (B)  the whole or a part (which whole or part is in this
                     subsection also called the `actual taxpayer's portion of
                     the original assessable amount') of the part of the net
                     income is attributable (either directly or indirectly
                     through one or more interposed partnerships or trusts) to
                     the original assessable amount; then, in determining the
                     profits that the first company has at a later time, no
                     account is to be taken of so much of the original profits
                     as is equal to the actual taxpayer's portion of the
                     original assessable amount.

"(19) The provisions of section 102AAJ apply for the purposes of this section
in like manner as they apply for the purposes of Division 6AAA.

"(20) For the purposes of this section, the question whether a company is a
resident of an unlisted country is to be determined in the same manner in
which that question is determined for the purposes of Part X.

"(21) In this section: `arrangement' means:

   (a)  any agreement, arrangement, understanding, promise or undertaking,
        whether express or implied and whether or not enforceable, or intended
        to be enforceable, by legal proceedings; and

   (b)  any scheme, plan, proposal, action, course of action or course of
        conduct, whether there are 2 or more parties or only one party
        involved; `associate' has the same meaning as in Part X; `associated
        entity', in relation to a company, means either of the following
        entities:

   (a)  a shareholder in the company;

   (b)  an entity who is an associate of a shareholder in the company; `CFC'
        has the same meaning as in Part X; `distribution benefit' has the
        meaning given by subsection (3) of this section; `eligible equity
        interest':

   (a)  in relation to a company, means any of the following:

   (i)  a share, or an interest in a share, in the company;

   (ii) a right to acquire a share, or an interest in a share, in the company;

   (iii) an option to acquire a share, or an interest in a share, in the
        company; or

   (b)  in relation to a unit trust, means any of the following:

   (i)  a unit, or an interest in a unit, in the unit trust;

   (ii) a right to acquire a unit, or an interest in a unit, in the unit
        trust;

   (iii) an option to acquire a unit, or an interest in a unit, in the unit
        trust; or `entity' has the same meaning as in Part X; `loan' includes:

   (a)  an advance of money; and

   (b)  the provision of credit or any other form of financial accommodation;
        and

   (c)  the payment of an amount for, on account of, on behalf or at the
        request of an entity where there is an obligation (whether expressed
        or implied) to repay the amount; and

   (d)  a transaction (whatever its terms or form) which in substance effects
        a loan of money; `property' has the same meaning as in Division 6AAA;
        `services' has the same meaning as in Division 6AAA; `statutory
        accounting period' has the same meaning as in Part X; `transfer' has
        the same meaning as in Division 6AAA.".