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INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-6 - THE IMPUTATION SYSTEM    View history reference

History

Pt 3-6 inserted by No 48 of 2002.

Division 207 - Effect of receiving a franked distribution    View history reference

History

Div 207 inserted by No 48 of 2002.

Subdivision 207-F - No gross-up or tax offset where the imputation system has been manipulated    View history reference

History

Subdiv 207-F inserted by No 48 of 2002.

Operative provisions

SECTION 207-145  Distribution that is made to an entity  

 View history reference

Whole of distribution manipulated

207-145(1)  

If a *franked distribution is made to an entity in one or more of the following circumstances:


(a) the entity is not a qualified person in relation to the distribution for the purposes of Division 1A of former Part IIIAA of the Income Tax Assessment Act 1936;
 View history reference


(b) the Commissioner has made a determination under paragraph 177EA(5)(b) of that Act that no imputation benefit (within the meaning of that section) is to arise in respect of the distribution for the entity;


(c) the Commissioner has made a determination under paragraph 204-30(3)(c) of this Act that no *imputation benefit is to arise in respect of the distribution for the entity;


(d) the distribution is made as part of a *dividend stripping operation;


(da) the distribution is one to which section 207-157 (which is about distribution washing) applies;
 View history reference

then, for the purposes of this Act:


(e) the amount of the *franking credit on the distribution is not included in the assessable income of the entity under section 207-20 or 207-35; and


(f) the entity is not entitled to a *tax offset under this Division because of the distribution; and
 View history reference


(g) if the distribution *flows indirectly through the entity to another entity - subsection 207-35(3) and section 207-45 do not apply to that other entity.

History

S 207-145(1) amended by No 68 of 2014, s 3 and Sch 3 item 6, by substituting "this Division" for "this Subdivision" in para (f), applicable to events that occur on or after 1 July 2002.

S 207-145(1) amended by No 68 of 2014, s 3 and Sch 3 item 1, by inserting para (da), applicable to distributions made on or after 1 July 2013.

S 207-145(1) amended by No 101 of 2006, s 3 and Sch 2 item 710, by inserting "former" before the reference to repealed inoperative "Part IIIAA" in para (a), effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive.

Part of share of distribution manipulated

207-145(2)  

If:


(a) a *franked distribution is made to an entity; and


(b) the Commissioner makes a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 that no imputation benefit (within the meaning of that section) is to arise in respect of a specified part of the distribution (the specified part) for the entity;

then, for the purposes of this Act:


(c) the amount of the distribution is taken to have been reduced by the specified part; and


(d) the amount of the *franking credit on the distribution is to be worked out as follows:
 *Franked distribution
apart from this section - Specified part
*Franked distribution
apart from this section
×*Franking credit
on the *franked distribution
apart from this section
 

Example:

A franked distribution of $70 is made to the trustee of a trust. Apart from this section, the franking credit on the distribution ($30) would be included in the assessable income of the trust under section 207-35.

The Commissioner has made a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 that no imputation benefit (within the meaning of that section) is to arise for the trustee in respect of $49 of the distribution.

Under this subsection, the amount included in the assessable income of the trust under section 207-35 because of the distribution is reduced from $30 to $9.

If there is a beneficiary of the trust that is presently entitled to the trust's income, the amount of the distribution that flows indirectly to the beneficiary is reduced from $70 to $21 under this subsection.

What happens if both subsection 207-90(2) and subsection (2) of this section would apply

207-145(3)  

If, apart from this subsection, both subsection 207-90(2) and subsection (2) of this section would apply to an entity in relation to a *franked distribution, then:


(a) apply subsection 207-90(2) first; and


(b) apply subsection (2) of this section on the basis that the amount of the *franked distribution had been reduced under subsection 207-90(2).

History

S 207-145 substituted by No 83 of 2004, s 3 and Sch 10 item 14, applicable to events that occur on or after 1 July 2002, subject to the rules on the application of Part 3-6 of the Income Tax Assessment Act 1997 set out in the Income Tax (Transitional Provisions) Act 1997. S 207-145 formerly read:

Gross-up and tax offset under section 207-20 are denied where there is manipulation of the imputation system  
207-145(1) Where an entity makes a *franked distribution to another entity in one or more of the following circumstances:


(a) the receiving entity is not a qualified person in relation to the distribution for the purposes of Division 1A of Part IIIAA of the Income Tax Assessment Act 1936;


(b) the Commissioner has made a determination under paragraph 204-30(3)(b) that no *imputation benefit is to arise for the receiving entity in respect of the distribution;


(c) the distribution is made as part of a *dividend stripping operation;


(d) the Commissioner has made a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 that no franking credit benefit (within the meaning of that section) is to arise in respect of the distribution to the entity;

then:


(e) the *franking credit on the distribution is not included in the assessable income of the entity under subsection 207-20(1); and


(f) the receiving entity is not entitled to a *tax offset under subsection 207-20(2) as a result of the distribution.
207-145(2) If the Commissioner makes a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 that no franking credit benefit (within the meaning of that section) is to arise in respect of a specified part of a *franked distribution to an entity, the amount included in the assessable income of the entity under subsection 207-20(1), and the *tax offset to which the entity is entitled under subsection 207-20(2), is worked out using the formula:


*Franked distribution - Specified part
Franked distribution
×*Franking
credit

S 207-145 inserted by No 48 of 2002.

[CCH Note: It is necessary to have regard to the rules in former Division 1A of Part IIIAA of the Income Tax Assessment Act 1936, as in force at 30 June 2002, in determining whether an entity is a qualified person for the purposes of paragraphs 207-145(1)(a) and 207-150(1)(a) of ITAA 1997 in respect of a franked distribution made directly or indirectly to the entity after 30 June 2002: see Taxation Determination TD 2007/11. The rules relating to "qualified persons" in Division 1A of Part IIIAA are reproduced below:

Division 1A - Circumstances in which a taxpayer can qualify for a franking credit, a franking rebate or the intercorporate dividend rebate

History

Div 1A inserted by No 93 of 1999.

Subdivision A - Preliminary

History

Subdiv A inserted by No 93 of 1999.

SECTION 160APHC OBJECT OF DIVISION  
160APHC The object of this Division is to set out the circumstances in which a taxpayer can qualify for a franking credit, a franking rebate, or the intercorporate dividend rebate, in respect of a dividend paid on shares or in respect of a distribution from a partnership or trust that is derived from such a dividend.

History

S 160APHC inserted by No 93 of 1999.

SECTION 160APHD DEFINITIONS  
160APHD In this Division, unless the contrary intention appears:

associate has the meaning given by section 318 but includes:


(a) in relation to a trustee - the controller of the trust; and


(b) in relation to a company that is a member of a wholly-owned group (determined in accordance with Subdivision 975-W of the Income Tax Assessment Act 1997) - any other company that is a member of the group.

benchmark portfolio of shares has the meaning given by section 160AQZH.

closely held fixed trust : a trust is a closely held fixed trust at a particular time if, at that time, it is a fixed trust and not more than 20 entities (as defined in section 960-100 of the Income Tax Assessment Act 1997 and counting entities who are associates as one entity) have interests in the trust that together entitle them to not less than 75% of:


(a) the beneficial interests in the income of the trust; or


(b) the beneficial interests in the capital of the trust.

controller , in relation to a trust, means a person:


(a) who beneficially owns, or is able in any way, whether directly or indirectly, to control the application of more than 50% of the interests in the trust property or in the trust income; or


(b) who has power to appoint or remove the trustee of the trust; or


(c) according to whose directions, instructions or wishes, the trustee of the trust is accustomed or under an obligation, whether formal or informal, to act.

distribution : a distribution in respect of an interest in shares is taken to be made in the circumstances specified in subsection 177EA(15).

employee share scheme security means:


(a) a share that is, or except for subsections 139C(3) and (4) would be, a qualifying share for the purposes of Division 13A of Part III; or


(b) a share acquired as a result of the exercise of a qualifying right within the meaning of Division 13A of Part III; or


(c) an interest in a share where:


(i) it is an interest in a share referred to in paragraph (a) or (b); and

(ii) if it is defeasible or subject to forfeiture - it becomes indefeasible, or ceases to be subject to forfeiture (other than forfeiture resulting from fraud, dishonesty or defalcation), as the case may be, within 10 years after it was issued; and

(iii) if it is an interest as a beneficiary of a trust - the sole activities of the trust are obtaining shares, or rights to acquire shares, and providing those shares or rights to employees of a company or to associates of those employees.

ex dividend has the meaning given by section 160APHE.

fixed trust has the same meaning as in Schedule 2F.

franked distribution has the meaning given by subsection 177EA(16).

interest , in relation to shares or other property, means any legal or equitable interest in the shares or other property.

materially diminish has the meaning given by section 160APHM.

non-fixed trust has the same meaning as in Schedule 2F.

position , in relation to shares or an interest in shares, has the meaning given by section 160APHJ as that meaning is affected by sections 160APHK and 160APHL.

preference shares in a company means shares in the company that:


(a) have a fixed dividend entitlement or, having regard to the terms of their issue, are likely to have a fixed dividend return; or


(b) having regard to the terms of their issue and other relevant matters, are less risky than ordinary shares in the company.

prescribed person , in relation to a unit trust, has the meaning given by section 160APHS.

primary qualification period , in relation to a taxpayer in relation to shares or an interest in shares, means the period beginning on the day after the day on which the taxpayer acquired the shares or interest and ending:


(a) if the shares are not preference shares - on the 45th day after the day on which the shares or interest became ex dividend; or


(b) if the shares are preference shares - on the 90th day after the day on which the shares or interest became ex dividend.

qualification period , in relation to a taxpayer in relation to shares or an interest in shares, means the primary qualification period or the secondary qualification period in relation to the taxpayer in relation to the shares or interest.

qualified person , in relation to a dividend paid on shares, has the meaning given by section 160APHO, 160APHP, 160APHQ, 160APHR or 160APHT as that meaning is affected by section 160APHU.

rebateable distribution means a distribution to which section 45Z applies and in respect of which the taxpayer is entitled to a rebate under section 46 or 46A.

rebateable dividend means a dividend for which the taxpayer is entitled to a rebate under section 46 or 46A.

related payment : the making of a related payment has a meaning affected by sections 160APHN and 160APHNA.

secondary qualification period , in relation to a taxpayer in relation to shares or an interest in shares, means:


(a) if the shares are not preference shares - the period beginning on the 45th day before, and ending on the 45th day after, the day on which the shares or interest became ex dividend; or


(b) if the shares are preference shares - the period beginning on the 90th day before, and ending on the 90th day after, the day on which the shares or interest become ex dividend.

share includes:


(a) the interest in a corporate limited partnership (within the meaning of Division 5A of Part III) that a partner in the partnership has; and


(b) if a company does not have a share capital - the interest in the company that a member has.

substantially identical securities has the meaning given by section 160APHF.

wholly-owned group : the question whether 2 or more companies are members of the same wholly-owned group is to be determined in the same way as under Subdivision 975-W of the Income Tax Assessment Act 1997.

widely held trust , at a particular time, means:


(a) a trust that, at that time, is neither a closely held fixed trust nor a non-fixed trust; or


(b) a trust the trustee of which is the subject of a declaration that is in force under regulations made for the purposes of paragraph 160APHR(1)(j); or


(c) a unit trust if, at that time:


(i) at least 75% of the units are held by a person who is, or persons each of whom is, a person referred to in any of paragraphs 160APHR(1)(a) to (j) or a prescribed person in relation to the trust; and

(ii) all of the units carry the same rights; and

(iii) if the units are redeemable, they are redeemable for a price determined on the basis of the trust's net asset value, according to Australian accounting principles; and

(iv) the trust engages only in qualifying activities within the meaning of subsection 160APHR(11).

History

S 160APHD inserted by No 93 of 1999.

SECTION 160APHE MEANING OF EX DIVIDEND  


160APHE(1) A share in respect of which a dividend is to be paid, or an interest (other than an interest as a beneficiary of a widely held trust) in such a share, becomes ex dividend on the day after the last day on which the acquisition by a person of the share will entitle the person to receive the dividend.


160APHE(2) An interest as a beneficiary of a widely held trust in a share in respect of which a dividend is to be paid becomes ex dividend on the day after the last day on which the acquisition by a person of the interest will entitle the person to receive a distribution from the trust.

History

S 160APHE inserted by No 93 of 1999.

SECTION 160APHF SUBSTANTIALLY IDENTICAL SECURITIES  


160APHF(1) Definition.  
In this Division:

substantially identical securities , in relation to shares, or in relation to an interest in shares, in a company (the relevant company), means property that is fungible with, or economically equivalent to, the shares or interest.


160APHF(2) Meanings of subsections (3) and (4) not limited by subsection (1).  
Subsections (3) and (4) do not limit, by implication, the meaning of subsection (1).


160APHF(3) Substantially identical securities in relation to shares.  
The following are taken to be substantially identical securities in relation to shares (the relevant shares) in the relevant company:


(a) other shares in the relevant company that are of the same class as the relevant shares;


(b) other shares in the relevant company that are of a different class from the relevant shares where there is no material difference between those classes of shares or the other shares are exchangeable at a fixed rate for the relevant shares;


(c) shares in another company that holds predominantly shares in the relevant company of the same class as shares of any of the kinds mentioned in paragraphs (a) and (b);


(d) shares in another company that are, or other property that is, exchangeable at a fixed rate for the relevant shares or for shares in the relevant company of any of the kinds mentioned in paragraphs (a) and (b);


(e) a vested and indefeasible interest in a trust whose assets consist predominantly of shares in the relevant company of the same class as shares of any of the kinds mentioned in paragraphs (a) and (b);


(f) an interest in a partnership whose assets consist predominantly of shares in the relevant company of the same class as shares of any of the kinds mentioned in paragraphs (a) and (b).


160APHF(4) Substantially identical securities in relation to interests in shares.  
The following interests are taken to be substantially identical securities in relation to an interest in shares (the relevant shares) in the relevant company:


(a) a vested and indefeasible interest in a trust whose assets consist predominantly of:


(i) other shares in the relevant company that are of the same class as the relevant shares; or

(ii) other shares in the relevant company that are of a different class from the relevant shares where there is no material difference between those classes of shares or the other shares are exchangeable at a fixed rate for the relevant shares;


(b) an interest in a partnership whose assets consist predominantly of:


(i) other shares in the relevant company that are of the same class as the relevant shares; or

(ii) other shares in the relevant company that are of a different class from the relevant shares where there is no material difference between those classes of shares or the other shares are exchangeable at a fixed rate for the relevant shares;


(c) if the interest in the relevant shares is a unit in a unit trust - any other unit of the same class in the trust;


(d) if the interest in the relevant shares is a vested and indefeasible interest in the whole of a share in the relevant company - that share or any other share of the same class;


(e) if the interest in the relevant shares is a vested and indefeasible interest in part of a share in the relevant company - any other vested and indefeasible interest in a corresponding part of another share in the relevant company of the same class;


(f) if the interest in the relevant shares is exchangeable at a fixed rate for another interest in shares, or for shares, in the relevant company - the other interest or the shares, as the case may be.


160APHF(5) Commissioner may determine an interest in the corpus of a trust to be vested and indefeasible.  
If:


(a) a person has an interest in so much of the corpus of a trust as is comprised by shares or an interest in shares; and


(b) apart from this subsection, the interest in the trust would not be a vested or indefeasible interest; and


(c) the Commissioner considers that the interest in the trust should be treated as being vested and indefeasible, having regard to:


(i) the circumstances in which the interest is capable of not vesting or the defeasance can happen; and

(ii) the likelihood of the interest not vesting or the defeasance happening; and

(iii) the nature of the trust; and

(iv) any other matter the Commissioner thinks relevant;

the Commissioner may determine that the interest in the trust is to be taken to be vested and indefeasible.


160APHF(6) Effect of determination.  
A determination made under subsection (5) has effect according to its terms.

History

S 160APHF inserted by No 93 of 1999.

SECTION 160APHG SPECIAL PROVISIONS RELATING TO ACQUISITION OR DISPOSAL OF SHARES OR INTERESTS IN SHARES BY PARTNERS AND TRUST BENEFICIARIES  


160APHG(1) Partnerships.  
If a partnership acquires, holds, or disposes of, shares or an interest in shares, each partner in the partnership is taken to acquire, hold, or dispose of, as the case may be, an interest in the shares.


160APHG(2) Taxpayers becoming or ceasing to be partners.  
If the assets of a partnership include shares or an interest in shares:


(a) where a taxpayer becomes a partner in the partnership - the taxpayer is taken to acquire an interest in the shares; or


(b) where a taxpayer ceases to be a partner in the partnership - the taxpayer is taken to dispose of the taxpayer's interest in the shares.


160APHG(3) Trusts that are not widely held trusts.  
If the trustee of a trust (other than a widely held trust) acquires, holds, or disposes of, shares or an interest in shares, each beneficiary of the trust (including, if the trust is a discretionary trust, a potential beneficiary) is taken to acquire, hold, or dispose of, as the case may be, an interest in the shares.


160APHG(4) Taxpayers becoming or ceasing to be beneficiaries of trusts that are not widely held trusts.  
If a trust estate (other than the trust estate of a widely held trust) includes shares or an interest in shares:


(a) where a taxpayer becomes a beneficiary (including, if the trust is a discretionary trust, a potential beneficiary) of the trust - the taxpayer is taken to acquire an interest in the shares; or


(b) where a taxpayer ceases to be a beneficiary (including, if the trust is a discretionary trust, a potential beneficiary) of the trust - the taxpayer is taken to dispose of the taxpayer's interest in the shares.


160APHG(5) Position of beneficiary of widely held trust if trustee makes the trustee's first acquisition of shares or interests.  
If:


(a) the trust estate of a widely held trust does not include shares or an interest in shares; and


(b) the trustee of the trust acquires shares or an interest in shares;

each beneficiary of the trust is taken to acquire an interest in the shares.


160APHG(6) Position of beneficiary of widely held trust if trust estate includes shares or interests.  
If the trust estate of a widely held trust has included, or includes, shares or interests in shares, each person who is a beneficiary of the trust holds an interest in the shares while the person is such a beneficiary.


160APHG(7) Disposal of shares or interests by trustee of widely held trust.  
If the trustee of a widely held trust disposes of some only of the shares or interests in shares that form part of the trust estate, no beneficiary of the trust is taken, because of the disposal, to dispose of that beneficiary's interest in the shares but, if the trustee disposes of all the shares and interests, each beneficiary is taken to dispose of the beneficiary's interest in the shares.


160APHG(8) Taxpayers becoming or ceasing to be beneficiaries of widely held trust.  
If the trust estate of a widely held trust has included or includes shares or an interest in shares:


(a) a taxpayer who becomes a beneficiary of the trust is taken to acquire an interest in the shares at the time when the taxpayer becomes the beneficiary, whether or not the trust estate includes the shares or interest in the shares at that time; and


(b) a taxpayer who is a beneficiary of the trust and acquires a further interest in the trust (whether by subscription for, or purchase of, further units or otherwise) is taken to acquire a further interest in the shares at the time when the taxpayer acquires the further interest in the trust, whether or not the trust estate includes the shares or interest in the shares at that time; and


(c) a taxpayer who disposes of an interest in the trust (whether by redemption or sale of units or otherwise) but remains a beneficiary of the trust is taken to dispose of an interest in the shares at the time when the taxpayer disposes of the interest in the trust, whether or not the trust estate includes the shares or interest in the shares at that time; and


(d) a taxpayer who ceases to be a beneficiary of a trust is taken to dispose of the interest in shares that the taxpayer held as a beneficiary of the trust at the time when the taxpayer ceases to be a beneficiary of the trust, whether or not the trust estate includes the shares or interest in the shares at that time.

Note 1:

The interest that a partner in a partnership has in shares which, or an interest in which, is included in the assets of the partnership is worked out under section 160APHK.

Note 2:

The interest that a beneficiary of a trust has in shares which, or an interest in which, is held by the trustee of the trust is worked out under section 160APHL.

History

S 160APHG inserted by No 93 of 1999.

SECTION 160APHH OTHER SPECIAL PROVISIONS RELATING TO ACQUISITION OR DISPOSAL OF SHARES OR INTERESTS IN SHARES  


160APHH(1) Shares or interests acquired or disposed of under a contract.  
If:


(a) a taxpayer acquires or disposes of shares, or an interest in shares, under a contract; and


(b) the price payable for the acquisition or disposal is fixed under the contract; and


(c) either of the following applies:


(i) the contract is unconditional;

(ii) the contract is subject to a condition being complied with before the contract takes effect and the condition has been complied with;

the taxpayer is taken, for the purposes of this Division, to have acquired or disposed of, as the case may be, the shares, or the interest, at the time of the making of the contract.


160APHH(2) Bonus shares.  
If shares (the bonus shares) are issued to a taxpayer in respect of existing shares:


(a) if any part of the bonus shares is, or is taken to be, a dividend that is included in the taxpayer's assessable income - the bonus shares are taken for the purposes of this Division to have been acquired by the taxpayer at the time when they were issued; or


(b) otherwise - the bonus shares:


(i) are taken for the purposes of section 160APHR to have been acquired by the taxpayer at the time when they were issued; and

(ii) are taken for the purposes of the other provisions of this Division to have been acquired by the taxpayer at the time when the existing shares were acquired and to have been held by the taxpayer continuously from that time until they were issued.

In calculating the number of days for which the taxpayer is taken to have continuously held bonus shares as mentioned in subparagraph (b)(ii), any days before the bonus shares were issued in respect of which the taxpayer materially diminished risks of loss or opportunities for gain in respect of the existing shares are to be excluded, but the exclusion of those days is not taken to break the continuity of the period for which the taxpayer is taken to have held bonus shares.


160APHH(3) Shares or interest distributed in satisfaction of interest.  
If:


(a) a taxpayer holds an interest in shares:


(i) under a trust; or

(ii) as a partner in a partnership; and


(b) the shares, or an interest in the shares, is distributed to the taxpayer in satisfaction of the interest referred to in paragraph (a);

the taxpayer is taken, for the purposes of this Division, to have held the shares or interest so distributed, to the extent to which the shares or interest distributed satisfies the interest referred to in paragraph (a), from the time when the taxpayer acquired the interest referred to in that paragraph.

In calculating the number of days for which the taxpayer is taken to have continuously held the shares or interest so distributed, any days in respect of which the trustee or partnership materially diminished risks of loss or opportunities for gain in respect of the shares or interest are to be excluded, but the exclusion of those days is not taken to break the continuity of the period for which the taxpayer is taken to have held the shares or interest.


160APHH(4) Shares or interest passing to executor or administrator.  
If any shares or interest in shares held by a person who has died has passed to the executor of the will, or the administrator of the estate, of the dead person, the executor or administrator is taken, for the purposes of this Division, to have acquired the shares at the time when they were acquired by the dead person.

In calculating the number of days for which the executor or administrator is taken to have continuously held the shares or interest, any days in respect of which the person materially diminished risks of loss or opportunities for gain in respect of the shares or interest are to be excluded, but the exclusion of those days is not taken to break the continuity of the period for which the executor or administrator is taken to have held the shares or interest.


160APHH(5) Shares or interest held by person under a legal disability transferred to a trustee.  
If:


(a) a person who holds shares or an interest in shares becomes subject to a legal disability; and


(b) the shares or interest is transferred to a trustee to be held in trust for the person while the person is under a legal disability;

both the person and the trustee are taken, for the purposes of this Division, to have held the shares or interest for the periods in which the shares or interest was held by either of them.

In calculating the number of days for which the trustee is taken to have continuously held the shares or interest, any days in respect of which the person materially diminished risks of loss or opportunities for gain in respect of the shares or interest are to be excluded, but the exclusion of those days is not taken to break the continuity of the period for which the trustee is taken to have held the shares or interest.


160APHH(6) Shares held by a bare trustee for a sole beneficiary.  
If:


(a) a person (the trustee) holds shares in trust for another person (the beneficiary); and


(b) the beneficiary:


(i) is the sole beneficiary of the trust; and

(ii) is absolutely entitled under the trust to the shares;

the following provisions have effect:


(c) this Division applies as if:


(i) the shares were held by the beneficiary and not by the trustee; and

(ii) the acts of the trustee in relation to the shares were acts of the beneficiary;


(d) if the shares were acquired by the trustee as a result of a disposal by the beneficiary, that acquisition and disposal are to be disregarded;


(e) if the shares are subsequently acquired by the beneficiary as a result of a disposal by the trustee, that acquisition and disposal are to be disregarded.

History

S 160APHH(6) substituted by No 58 of 2000, s 3 and Sch 3 item 2, effective 16 July 1999. Despite this amendment, a taxpayer who was entitled to a franking credit or a franking rebate in respect of a dividend paid, or a distribution made, before 31 May 2000 continues to be entitled to the franking credit or franking rebate. S 160APHH(6) formerly read:


160APHH(6) Shares or interest transferred to a bare trustee.  
If:


(a) a person who holds shares or an interest in shares transfers the shares or interest to a trustee; and


(b) immediately after the transfer occurs:


(i) the trustee holds the shares or interest in trust for the person; and

(ii) the person is the sole beneficiary of the trust and is absolutely entitled under the trust to the shares or interest;

the following paragraphs have effect:


(c) the trustee is taken, for the purposes of this Division, to have held the shares or interest during any period in which the person held the shares or interest; and


(d) the person is taken, for the purposes of this Division, to hold the shares or interest during any period in which:


(i) the trustee holds the shares or interest in trust for the person; and

(ii) the person is the sole beneficiary of the trust, and is absolutely entitled under the trust to the shares or interest.

In calculating the number of days for which the person or the trustee is taken to have continuously held the shares or interest, any days in respect of which the person or trustee materially diminished risks of loss or opportunities for gain in respect of the shares or interest are to be excluded, but the exclusion of those days is not taken to break the continuity of the period for which the person or the trustee is taken to have held the shares or interest.


160APHH(7) What happens if paragraph (6)(b) ceases to apply to beneficiary.  
If paragraph (6)(b) ceases to apply to the beneficiary, then, after the time when it so ceases to apply (the relevant time):


(a) if the trust has become a widely held trust:


(i) the shares are taken to have been disposed of by the beneficiary to the trustee at the relevant time; and

(ii) the beneficiary is taken to have acquired the beneficiary's interest in the shares immediately after the disposal; or


(b) in any other case - this Division applies to the beneficiary and the trustee as if subsection (6) had never applied;

and the respective positions of the beneficiary and the trustee in relation to the shares or interest are to be determined accordingly.

History

S 160APHH(7) substituted by No 58 of 2000, s 3 and Sch 3 item 2, effective 16 July 1999. Despite this amendment, a taxpayer who was entitled to a franking credit or a franking rebate in respect of a dividend paid, or a distribution made, before 31 May 2000 continues to be entitled to the franking credit or franking rebate. S 160APHH(7) formerly read:


160APHH(7) Subsection (6) not to apply if trust becomes a widely held trust.  
Subsection (6) does not apply in respect of any shares or interest in shares if the trust becomes a widely held trust:


(a) if the shares that were transferred, or in which the interest was transferred, were not preference shares - within 45 days; or


(b) if the shares that were transferred, or in which the interest was transferred, were preference shares - within 90 days;

after the shares or interest were transferred to the trustee.


160APHH(8) Certain disposals to be disregarded.  
If:


(a) a taxpayer holds, or holds an interest in, shares; and


(b) the taxpayer disposes of the shares or interest; and


(c) the taxpayer is, under subsection 26BC(4), to be treated in the determination of the matters mentioned in paragraphs 26BC(4)(a) and (b) as if the transaction effecting the disposal had not been entered into;

the disposal is to be taken for the purposes of this Division not to have occurred.


160APHH(9) Change of trustees not to affect continuity of holding of shares or interests.  
Any person who was a trustee of a trust during part only of a continuous period in which shares or an interest in shares formed part of the trust estate is taken, for the purposes of this Division, to have held the shares or interest throughout that period.


160APHH(10) Certain disposals of shares or interests between companies in the same wholly-owned group not to affect continuity of holding.  
A company that is a member of a wholly-owned group is taken, for the purposes of this Division, to have held shares or an interest in shares throughout a continuous period if:


(a) the company held the shares or interest during part of the period; and


(b) during the remainder of the period the shares or interest was held by another company or other companies that were members of the same group.

In calculating the number of days in the continuous period during which the first-mentioned company is taken to have held the shares or interest, any days in the part of the period in which the shares or interest was held by a company that made an election in relation to the shares or interest under section 160APHR are to be excluded, but the exclusion of those days is not taken to break the continuity of the period for which the first-mentioned company is taken to have held the shares or interest.

History

S 160APHH inserted by No 93 of 1999.

SECTION 160APHI CERTAIN DISPOSALS OF SHARES OR INTERESTS ARE TO BE TAKEN TO BE DISPOSALS OF RELATED SHARES OR INTERESTS  


160APHI(1) Effect of section.  
The effect of this section is that, in the calculation of the period for which a taxpayer is taken to have held shares or an interest in shares (the primary securities) during a qualification period in relation to the taxpayer in relation to the primary securities:


(a) a disposal of the primary securities is taken in certain circumstances to be a disposal of certain other securities and not to be a disposal of the primary securities; and


(b) a disposal of certain other securities is taken in certain circumstances to be a disposal of the primary securities and not to be a disposal of the other securities.


160APHI(2) Meaning of related securities.  
In this section:

related securities means:


(a) the primary securities; and


(b) any shares, or interests in shares, held by connected persons:


(i) that are substantially identical securities in relation to the primary securities; and

(ii) in respect of which a connected person has been paid, or is entitled to be paid, a franked dividend or a franked distribution or, in the case of a connected person that is a company, a rebateable dividend or a rebateable distribution, being in either case a dividend or distribution corresponding to the dividend or distribution paid on the primary securities;

but does not include shares or interests in shares:


(c) in relation to which an election is in force under section 160APHR; and


(d) which were not acquired or disposed of for the purpose, or for purposes that included the purpose (whether or not the predominant purpose), of avoiding the application of this section.


160APHI(3) Meaning of connected persons.  
The following persons are connected persons for the purposes of this section:


(a) the taxpayer;


(b) if, at a time during the qualification period, an associate of the taxpayer, under an arrangement to which they were parties, disposed of shares or an interest in shares - the associate;


(c) if the taxpayer is a company - another company that is in the same wholly-owned group.


160APHI(4) Related securities to be taken to be disposed of on a last-in first-out basis.  
All related securities held by connected persons at a particular time constitute a group of securities for the purposes of this section and, subject to subsections (5), (6) and (7), any disposals of securities in the group that were effected by any connected persons during the qualification period are to be taken, in the order in which they occurred, as having been disposals on a last-in first-out basis, that is to say, as having been:


(a) first, disposals of the latest securities in the group to be acquired by any of the connected persons; and


(b) secondly, disposals of the next latest securities in the group to be so acquired, and so on.


160APHI(5) Subsection (4) not to apply to disposal between companies in the same wholly-owned group.  
Subsection (4) does not apply in respect of the disposal of securities by a company in a wholly-owned group to another company in the same wholly-owned group.


160APHI(6) Time of acquisition of related securities held by company that is a member of wholly-owned group.  
If subsection 160APHH(10) applies to a company that is a member of a wholly-owned group in respect of any related securities in relation to a period, the securities are taken, for the purposes of subsection (4), to have been acquired at the beginning of the period.


160APHI(7) Subsection (4) not to apply if primary securities not held for requisite continuous period.  
If primary securities are disposed of during a qualification period and:


(a) if section 160APHO applies to the taxpayer in respect of the securities - the taxpayer has not satisfied subsection 160APHO(2) in relation to the qualification period; or


(b) if the primary securities are an interest in shares and section 160APHP applies to the taxpayer in respect of the interest - the taxpayer has not held the interest for the continuous period referred to in subsection 160APHP(1);

subsection (4) does not apply in respect of the disposal.


160APHI(8) Where value of securities actually disposed of is less than value of securities taken to be disposed of.  
If the value of any securities actually disposed of is less than the value of the securities that are taken to be disposed of, only such of the last-mentioned securities are taken to be disposed of as have a value equal to the value of the securities actually disposed of.


160APHI(9) Where value of securities actually disposed of exceeds value of securities taken to be disposed of.  
If the value of any securities actually disposed of exceeds the value of the securities that are taken to have been disposed of, such other related securities as have a value equal to the excess are taken to be disposed of in accordance with subsection (4).


160APHI(10) Where a disposal is taken to be a disposal of 2 or more parcels of securities.  
If, as a result of the application of subsection (4), a disposal of securities is taken to be a disposal of 2 or more parcels of related securities because those parcels of securities were acquired at the same time:


(a) the connected persons may agree as to the parcel of related securities that is to be taken to be disposed of; or


(b) if they are unable to agree, the Commissioner may determine the parcel of related securities that is taken to be disposed of.


160APHI(11) Where 2 or more disposals are taken to be disposals of the same securities.  
If, as a result of the application of subsection (4), the disposals of 2 or more parcels of related securities would be taken to constitute a disposal of the same securities because those 2 parcels of related securities were disposed of at the same time:


(a) the connected persons may agree as to the related securities that are to be taken to be respectively disposed of by the disposals of the parcels of related securities; or


(b) if they are unable to agree, the Commissioner may determine the related securities that are to be taken to be respectively disposed of by the disposals of the parcels of related securities.


160APHI(12) Notional re-acquisition of securities that are taken to constitute a disposal of other securities.  
If, as a result of this section, the primary securities are taken to have been disposed of by the taxpayer but are actually still held by the taxpayer, they are taken to have been re-acquired by the taxpayer immediately after the time when they are taken to be disposed of.


160APHI(13) Effect of agreement or determination.  
An agreement or determination made under subsection (10) or (11) has effect according to its terms.

History

S 160APHI inserted by No 93 of 1999.

SECTION 160APHJ POSITION IN RELATION TO SHARES OR INTERESTS ETC.  


160APHJ(1) Regulations may prescribe what constitutes a position.  
The regulations may, either generally, or as otherwise provided in the regulations, prescribe:


(a) what is a position, a short position, a long position or a net position in relation to shares or an interest in shares; and


(b) when a position relates to particular shares or a particular interest in shares; and


(c) how the delta of a position is to be calculated;

and the following provisions of this section have effect subject to any such regulations.


160APHJ(2) Meaning of position.  
A position, in relation to shares or an interest in shares, is anything that has a delta in relation to the shares or interest, and includes, without limiting the generality of the above:


(a) a short sale, or a future sale, of:


(i) the shares or interest; or

(ii) property that is substantially similar to, or related to, the shares or interest; and


(b) a purchase, or a future purchase, of property that is substantially similar to, or related to, the shares or interest; and


(c) an option to buy or sell the shares or interest; and


(d) an option to buy or sell:


(i) property that is substantially similar to, or related to, the shares or interest; or

(ii) an interest in such property; and


(e) an option in relation to the shares or interest that is embedded in other property; and


(f) a non-recourse loan made to acquire the shares or interest; and


(g) an indemnity or guarantee in respect of the shares or interest.

However, if a share, or an interest in a share, is an employee share scheme security, a condition attached to the share or interest, or a term of the document that created the interest, that prevents the holder of the share or interest from disposing of it or could result in the share or interest being forfeited is not a position in relation to the share or interest.


160APHJ(3) Meaning of short position.  
A short position, in relation to shares or an interest in shares, is a position that has a negative delta in relation to the shares or interest. For example, a short sale, a sold future, a sold call option, a bought put option, and a sold share index future, are short positions.


160APHJ(4) Meaning of long position.  
A long position, in relation to shares or an interest in shares, is a position that has a positive delta in relation to the shares or interest. For example, a share purchase, a bought future, a bought call option, a sold put option, and a bought share index future, are long positions. To avoid doubt, shares or interests in shares are to be treated as a long position (with a delta of +1) in relation to themselves.


160APHJ(5) Meaning of net position.  
The net position of a taxpayer or fund in relation to shares, or in relation to an interest in shares, is calculated by adding the taxpayer's or fund's:


(a) long positions in the shares or interest (calculated on the basis of their deltas); and


(b) short positions in the shares or interest (calculated on the basis of their deltas).

For example, if a taxpayer sells 2 call options (each of which has a delta of -0.5) in respect of shares in a company and buys one share in the company (which has a delta of +1) in respect of those call options, the taxpayer has a net position of nil as a result of those transactions. In such a case, the taxpayer has materially diminished risks of loss and opportunities for gain in relation to the share.


160APHJ(6) Certain short positions in companies that deal in commodities to be disregarded.  
If:


(a) a taxpayer holds shares, or an interest in shares, in a company; and


(b) the sole or dominant business of the company is producing, purchasing, consuming, trading in, or otherwise dealing in, any of the commodities mentioned in subsection (7); and


(c) the taxpayer is a controller of the company for the purposes of section 140-20 of the Income Tax Assessment Act 1997;

then, any of the taxpayer's short positions in the shares or interest that:


(d) relate to any of those commodities; and


(e) are taken in the ordinary course of the taxpayer's business;

are to be disregarded for the purposes of subsection (5).


160APHJ(7) Commodities to which subsection (6) applies.  
The commodities referred to in subsection (6) are as follows:


(a) minerals;


(b) gold;


(c) ores of a metal included in the table of metals in the former subsection 330-60(1) of the Income Tax Assessment Act 1997.

History

S 160APHJ(7)(c) amended by No 77 of 2001, s 3 and Sch 2 item 91, by inserting "the former" before "subsection". For application provisions see note under former s 23AH(6) in note under s 23AH.


160APHJ(8) Certain short positions of life assurance companies or trustees of eligible entities to be disregarded.  
If:


(a) a taxpayer that is a life assurance company or a trustee of an eligible entity (within the meaning of Part IX) holds shares or an interest in shares; and


(b) the company, or the relevant fund or unit trust, has a short position arising from the obligations of the company or trustee to pass on to holders of policies issued by the company or to beneficiaries in the fund or trust the risks of loss and opportunities for gain in relation to the shares or interest; and


(c) the full value of any franking rebate in respect of the shares or interest is passed on to the holders of those policies or to those beneficiaries; and


(d) the obligations referred to in paragraph (b) do not directly or indirectly reduce the taxable income of the company, or of the fund or trust, or increase any loss (for the purposes of this Act) incurred by the company, or by the fund or trust;

the short position referred to in paragraph (b) is to be disregarded for the purposes of subsection (5) only in so far as the net position of the company, or of the fund or trust, is relevant to section 160AQT, 160AQYA or 160AQZA.


160APHJ(9) Short position of associate of taxpayer in shares or interest to be attributable to taxpayer.  
If, under an arrangement to which a taxpayer and an associate of the taxpayer are parties, the associate has a short position in shares, or in an interest in shares, held by the taxpayer, the associate's position is taken, for the purposes of subsection (5), to be a position that the taxpayer has.


160APHJ(10) Deltas of positions to be taken not to have changed in certain circumstances.  
If:


(a) a taxpayer acquires shares or interests in shares; and


(b) on the day of the acquisition, or on a later day, the taxpayer enters into or has positions in relation to any of the shares or interests;

then, so long as the taxpayer continues to hold the shares or interests, continues to have those positions and does not enter into any further positions in relation to the shares or interests:


(c) in calculating the delta of a position held by the taxpayer in relation to the shares or interests:


(i) for the purposes of this Division other than paragraphs 106APHO(1)(b) and 160APHP(1)(b); or

(ii) for the purposes of either of those paragraphs in its application to a related payment under an arrangement entered into before the commencement of this subsection, other than an arrangement that has been varied, renewed or replaced after that commencement;
those positions are taken to continue to have the deltas that they had on the later of the following days:

(iii) the day on which the shares or interests were acquired;

(iv) a day on which any of the positions was entered into; or


(d) in calculating the delta of a position held by the taxpayer in relation to the shares or interests for the purposes of paragraph 160APHO(1)(b) or 160APHP(1)(b) in its application to a related payment under an arrangement:


(i) entered into after the commencement of this subsection (including an arrangement that renewed or replaced an arrangement entered into before that commencement); or

(ii) entered into before that commencement that was varied after that commencement;
those positions are taken to continue to have the deltas that they had on the latest of the following days:

(iii) the day on which the shares or interests were acquired by the taxpayer;

(iv) a day on which any of the positions that the taxpayer has in relation to the shares or interests was entered into;

(v) if the secondary qualification period in relation to the taxpayer in relation to the shares or interests is the second, or a subsequent, qualification period since the shares or interests were acquired by the taxpayer-the first day of the secondary qualification period.


160APHJ(11) This section has effect subject to sections 160APHK and 160APHL.

History

S 160APHJ inserted by No 93 of 1999.

SECTION 160APHK ASSETS OF PARTNERSHIP INCLUDE SHARES OR INTEREST IN SHARES: HOW TO DETERMINE A PARTNER'S INTEREST IN THE SHARES  


160APHK(1) Application.  
If:


(a) the assets of a partnership include, or include an interest in, a share (the relevant share); and


(b) an amount is included in the partnership's assessable income because of the partnership holding and the whole or a part of that amount (the dividend income) is:


(i) a dividend; or

(ii) attributable, through one or more interposed trusts or partnerships, to a dividend; and


(c) there is a partnership amount in respect of the partnership in relation to a taxpayer who is a partner in the partnership, being a partnership amount that is wholly or partly attributable to the dividend income;

this section sets out how the taxpayer's interest in the relevant share is to be calculated in determining whether the taxpayer is a qualified person for the purposes of Subdivision B or BA in relation to a dividend paid on the share.

Note:

The calculation is not required unless the partnership is a qualified person in relation to the dividend. If the partnership is not a qualified person, no partner in the partnership can receive a franking rebate or franking credit through the partnership.


160APHK(2) Partnership holding.  
For the purposes of this section, the partnership holding is the share, or the interest in the share, that is included in the assets of the partnership as mentioned in subsection (1).


160APHK(3) Calculation of interest.  
For the purposes of subsections 160APHG(1) and (2), the taxpayer's interest in the relevant share is the amount worked out by using the formula:


Partnership holding × Partner's share of the dividend income 
    The dividend income

where:

partner's share of the dividend income means the partnership amount in relation to the partner to the extent to which that amount is attributable to the dividend income.


160APHK(4) A position held by partnership is to be attributed to a partner to whom the position relates.  
A position, or an appropriate part of a position, of the partnership in relation to the partnership holding is taken to be a position of a partner in a partnership if the position relates to the partner's interest in the relevant share.


160APHK(5) When a position of partnership relates to a partner.  
Without limiting by implication the circumstances in which a position of the partnership can be regarded as relating to the partner's interest in the relevant share, a position of the partnership relates to that interest if:


(a) the whole or a part of the profit or loss from the position will be distributed to, or deducted from an amount that would otherwise be distributed to, the partner; or


(b) the benefit or detriment of the position will otherwise be wholly or partly passed to the partner.

History

S 160APHK inserted by No 93 of 1999.

SECTION 160APHL TRUSTEE HOLDING SHARES OR INTEREST IN SHARES: HOW TO DETERMINE A BENEFICIARY'S INTEREST IN THE SHARES  


160APHL(1) Application in respect of a trust other than a widely held trust.  
If:


(a) the trustee of a trust other than a widely held trust holds, or holds an interest in, a share (the relevant share); and


(b) an amount is included in the assessable income of the trust estate because of the trust holding and the whole or a part of that amount (the dividend income) is:


(i) a dividend; or

(ii) attributable, through one or more interposed trusts or partnerships, to a dividend; and


(c) there is a trust amount in respect of the trust estate in relation to a taxpayer who is a beneficiary of the trust estate, being a trust amount that is wholly or partly attributable to the dividend income;

this section sets out how the taxpayer's interest in the relevant share is to be calculated in determining whether the taxpayer is a qualified person for the purposes of Subdivision B or BA in relation to a dividend paid on the share.

Note:

The calculation is not required unless the trustee is a qualified person in relation to the dividend. If the trustee is not a qualified person, no beneficiary of the trust can receive a franking rebate or franking credit through the trust.


160APHL(2) Application in respect of widely held trust.  
If:


(a) the trustee of a trust that is a widely held trust has held or holds, or has held or holds interests in, shares (the relevant shares); and


(b) an amount is included in the assessable income of the trust estate because of the trust holding and the whole or a part of that amount (the dividend income) is:


(i) a dividend; or

(ii) attributable, through one or more interposed trusts or partnerships, to a dividend; and


(c) there is a trust amount in respect of the trust estate in relation to a taxpayer who is a beneficiary of the trust estate, being a trust amount that is wholly or partly attributable to the dividend income;

this section sets out how the taxpayer's interest in the relevant shares is to be calculated in determining whether the taxpayer is a qualified person for the purposes of Subdivision B or BA in relation to a dividend paid on the shares.

Note:

The calculation is not required unless the trustee is a qualified person in relation to the dividend. If the trustee is not a qualified person, no beneficiary of the trust can receive a franking rebate or franking credit through the trust.


160APHL(3) Trust holding in relation to trust other than a widely held trust.  
For the purposes of the application of this section in respect of a trust other than a widely held trust, the trust holding is the share, or the interest in a share, that is held by the trustee as mentioned in subsection (1).


160APHL(4) Trust holding in relation to a widely held trust.  
For the purposes of the application of this section in respect of a widely held trust, the trust holding is all the shares and interests in shares that the trustee has held or holds as mentioned in subsection (2).


160APHL(5) Calculation of interest under a trust other than a widely held trust.  
For the purposes of subsections 160APHG(3) and (4) in relation to a taxpayer referred to in subsection (1), the taxpayer's interest in the relevant share is the amount worked out by using the formula:
Trust holding × Beneficiary's share of the dividend income 
     The dividend income

where:

beneficiary's share of dividend income means the trust amount in relation to the taxpayer to the extent to which that amount is attributable to the dividend income.


160APHL(6) Calculation of interest under a widely held trust.  
For the purposes of subsections 160APHG(5) to (8) in relation to a taxpayer referred to in subsection (2), the taxpayer's interest in the relevant shares is the amount worked out by using the formula:
Trust holding × Beneficiary's share of the dividend income 
     The dividend income

where:

beneficiary's share of dividend income means the trust amount in relation to the taxpayer to the extent to which that amount is attributable to the dividend income.


160APHL(7) Taxpayer's interest to be a long position.  
The taxpayer's interest in the relevant share worked out under subsection (5), or the taxpayer's interest in the relevant shares worked out under subsection (6), is a long position with a delta of + 1 in relation to itself.


160APHL(8) Trust other than widely held trusts: when trustee's position attributed to taxpayer.  
If the trust is not a widely held trust, a position, or an appropriate part of a position, of the trustee in relation to the trust holding is taken to be a position of the taxpayer to the extent to which the position relates to the taxpayer's interest in the relevant share. However, if the trustee has a position in relation to 2 or more shares or interests in shares, the trustee's position is taken to constitute separate positions in relation to each of the shares or interests in accordance with an allocation made in a reasonable way.


160APHL(9) When a position of the trustee of a trust other than a widely held trust relates to the taxpayer's interest.  
Without limiting by implication the circumstances in which a position of the trustee of a trust other than a widely held trust will be taken to relate to the taxpayer's interest in a share or shares, a position of the trustee relates to that interest if:


(a) the position relates wholly or partly to shares in which the taxpayer has a vested and indefeasible interest; or


(b) the whole or a part of the profits or losses from the position will be distributed to, or deducted from an amount that would otherwise be distributed to, the taxpayer; or


(c) the benefit or detriment of the position will be wholly or partly passed to the taxpayer.


160APHL(10) Additional positions of the taxpayer.  
If:


(a) the trust is not a family trust within the meaning of Schedule 2F; and


(b) the trust is not a trust for the purposes of this Act merely because of the reference to executors and administrators in paragraph (a) of the definition of trustee in subsection 6(1); and


(c) the taxpayer's interest in the relevant share or the relevant shares is not an employee share scheme security;

the taxpayer has, in addition to any other long and short positions (including the positions that the taxpayer is taken to have under subsection (8)) in relation to the taxpayer's interest in the relevant share or relevant shares, a short position equal to the taxpayer's long position under subsection (7) and a long position equal to so much of the taxpayer's interest in the trust holding as is a fixed interest.


160APHL(11) A vested and indefeasible interest constitutes a fixed interest.  
For the purposes of subsection (10), the taxpayer's interest in the trust holding is a fixed interest to the extent that the interest is constituted by a vested and indefeasible interest in so much of the corpus of the trust as is comprised by the trust holding.


160APHL(12) Certain interests in trust holding taken to be defeasible.  
Subject to subsection (13), if the taxpayer has an interest in the trust holding and either:


(a) the interest may be redeemed under the terms of the trust for less than its value; or


(b) the value of the interest may be materially reduced by:


(i) if the trust is a unit trust - the issue of further units; or

(ii) otherwise - the creation of other interests under the trust;

the interest is taken to be defeasible.


160APHL(13) Case where interest not defeasible.  
If:


(a) the trust is a unit trust and the taxpayer holds units in the unit trust; and


(b) the units are redeemable or further units are able to be issued; and


(c) where units in the unit trust are listed for quotation in the official list of an approved stock exchange (within the meaning of section 470) - the units held by the taxpayer will be redeemed, or any further units will be issued, for the price at which other units of the same kind in the unit trust are offered for sale on the approved stock exchange at the time of the redemption or issue; and


(d) where the units are not listed as mentioned in paragraph (c) - the units held by the taxpayer will be redeemed, or any further units will be issued, for a price determined on the basis of the unit trust's net asset value, according to Australian accounting principles, at the time of the redemption or issue;

then the mere fact that the units are redeemable, or that the further units are able to be issued, does not mean that the taxpayer's interest, as a unit holder, in so much of the corpus of the trust as is comprised by the trust holding is defeasible.


160APHL(14) Commissioner may determine an interest to be vested and indefeasible.  
If:


(a) the taxpayer has an interest in so much of the corpus of the trust as is comprised by the trust holding; and


(b) apart from this subsection, the interest would not be a vested or indefeasible interest; and


(c) the Commissioner considers that the interest should be treated as being vested and indefeasible, having regard to:


(i) the circumstances in which the interest is capable of not vesting or the defeasance can happen; and

(ii) the likelihood of the interest not vesting or the defeasance happening; and

(iii) the nature of the trust; and

(iv) any other matter the Commissioner thinks relevant;

the Commissioner may determine that the interest is to be taken to be vested and indefeasible.


160APHL(15) Effect of determination.  
A determination made under subsection (14) has effect according to its terms.

History

S 160APHL inserted by No 93 of 1999.

SECTION 160APHM MATERIAL DIMINUTION OF RISKS OF LOSS OR OPPORTUNITIES FOR GAIN IN RESPECT OF SHARES OR INTERESTS IN SHARES  


160APHM(1) Regulations may prescribe what constitutes material diminution.  
The regulations may prescribe the circumstances in which a taxpayer is taken to have materially diminished risks of loss or opportunities for gain in respect of shares or interests in shares, and the following provisions of this section have effect subject to any such regulations.


160APHM(2) Material diminution if net position has less than 30% of risks and opportunities.  
A taxpayer is taken to have materially diminished risks of loss or opportunities for gain on a particular day in respect of shares held by the taxpayer, or in respect of an interest held by the taxpayer in shares, if the taxpayer's net position on that day in relation to the shares or interest has less than 30% of those risks and opportunities.


160APHM(3) Net position worked out by reference to deltas.  
A taxpayer's net position is worked out using the financial concept known as delta (see section 160APHJ). For example, an option to sell a share with a delta of minus 0.5 in relation to the share reduces the risks of loss and opportunities for gain by 50%.

History

S 160APHM inserted by No 93 of 1999.

SECTION 160APHN RELATED PAYMENTS  


160APHN(1) This section gives examples of, but does not limit, what constitutes, for the purposes of this Division, the making of a related payment by a taxpayer or an associate of a taxpayer in respect of a dividend paid in respect of shares, or in respect of a distribution made in respect of interests in shares, held by the taxpayer.


160APHN(2) The taxpayer or associate is taken, for the purposes of this Division, to have made, to be under an obligation to make, or to be likely to make, a related payment in respect of the dividend or distribution if, under an arrangement, the taxpayer or associate has done, is under an obligation to do, or may reasonably be expected to do, as the case may be, anything having the effect of passing the benefit of the dividend or distribution to one or more other persons.


160APHN(3) Without limiting subsection (2), the doing of any of the following by the taxpayer or an associate of the taxpayer in the circumstances mentioned in subsection (4) may have the effect of passing the benefit of the dividend or distribution to one or more other persons:


(a) causing a payment or payments to be made to, or in accordance with the directions of, the other person or other persons; or


(b) causing an amount or amounts to be credited to, or applied for the benefit of, the other person or other persons; or


(c) causing services to be provided to, or in accordance with the directions of, the other person or other persons; or


(d) causing property to be transferred to, or in accordance with the directions of, the other person or other persons; or


(e) allowing any property or money to be used by the other person or other persons or by someone nominated by the other person or other persons; or


(f) causing an amount or amounts to be set off against, or to be otherwise applied in reduction of, a debt or debts owed by the other person or other persons to the taxpayer or associate; or


(g) agreeing to treat an amount or amounts owed to the other person or other persons by the taxpayer or associate as having been increased.


160APHN(4) The circumstances referred to in subsection (3), are where:


(a) the amount or the sum of the amounts paid, credited or applied; or


(b) the value or the sum of the values of the services provided, of the property transferred or of the use of the property or money; or


(c) the amount or the sum of the amounts of the set-offs, reductions or increases;

as the case may be:


(d) is, or may reasonably be expected to be, equal to; or


(e) approximates or may reasonably be expected to approximate; or


(f) is calculated by reference to;

the amount of the dividend or distribution.


160APHN(5) The distribution by a trustee of a dividend to a beneficiary or beneficiaries of the trust who are presently entitled to it does not constitute the making of a related payment in respect of the dividend.


160APHN(6) If an amount is taken into account in any way in favour of, or is notionally accredited to, a person in fixing a price or value, or in determining another amount, the first-mentioned amount is taken, for the purposes of this section, to be credited to the other person.


160APHN(7) This section has effect subject to section 160APHNA.

History

S 160APHN inserted by No 93 of 1999.

SECTION 160APHNA CERTAIN PAYMENTS NOT TO BE REGARDED AS RELATED PAYMENTS  
160APHNA If:


(a) a company (the relevant company) is a member of a wholly-owned group; and


(b) all the shares in the relevant company are held by one or more other companies that are members of the group; and


(c) the company or companies holding those shares (each a seller) enter into a contract or contracts to sell the shares to one or more persons (each a buyer) who are not members of the group; and


(d) within 6 months after a contract is entered into as mentioned in paragraph (c) by a seller to a buyer to sell any of those shares, the relevant company pays a dividend in respect of the shares to the seller; and


(e) it is reasonable to assume that no substantial part of the dividend is attributable to profits of the relevant company before it became, or after it ceased to be, a member of the group; and


(f) the price paid for the sale of the shares was reduced by an amount representing the didvidend;

the reduction in price is taken not to be the making of a related payment in respect of the dividend.

History

S 160APHNA inserted by No 93 of 1999.

Subdivision B - Qualification for franking benefits and intercorporate dividend rebate

History

Subdiv B inserted by No 93 of 1999.

SECTION 160APHO PERSONS QUALIFIED BY HOLDING SHARES OR INTERESTS IN SHARES FOR A PRESCRIBED NUMBER OF DAYS DURING A QUALIFICATION PERIOD  


160APHO(1) A taxpayer who has held shares or an interest in shares on which a dividend has been paid is a qualified person in relation to the dividend if:


(a) where neither the taxpayer nor an associate of the taxpayer has made, is under an obligation to make, or is likely to make, a related payment in respect of the dividend - the taxpayer has satisfied subsection (2) in relation to the primary qualification period in relation to the dividend; or


(b) where the taxpayer or an associate of a taxpayer has made, is under an obligation to make, or is likely to make, a related payment in respect of the dividend - the taxpayer has satisfied subsection (2) in relation to the secondary qualification period in relation to the dividend.


160APHO(2) A taxpayer who has held shares or an interest in shares on which a dividend has been paid satisfies this subsection in relation to a qualification period in relation to the shares or interest if, during the period:


(a) where the taxpayer held the shares - the taxpayer held the shares for a continuous period (not counting the day on which the taxpayer acquired the shares or, if the taxpayer has disposed of the shares, the day on which the disposal occurred) of not less than:


(i) if the shares are not preference shares - 45 days; or

(ii) if the shares are preference shares - 90 days; or


(b) where the taxpayer held the interest in the shares - the taxpayer held the interest for a continuous period (not counting the day on which the taxpayer acquired the interest or, if the taxpayer has disposed of the interest, the day on which the disposal occurred) of not less than:


(i) if the shares are not preference shares - 45 days; or

(ii) if the shares are preference shares - 90 days.


160APHO(3) In calculating the number of days for which the taxpayer continuously held the shares or interest, any days on which the taxpayer has materially diminished risks of loss or opportunities for gain in respect of the shares or interest are to be excluded, but the exclusion of those days is not taken to break the continuity of the period for which the taxpayer held the shares or interest.


160APHO(4) This section does not apply to a taxpayer in respect of an interest in shares held by the taxpayer as a beneficiary of a widely held trust.

History

S 160APHO inserted by No 93 of 1999.

SECTION 160APHP PERSONS QUALIFIED BY HOLDING INTERESTS IN SHARES AS BENEFICIARIES OF A WIDELY HELD TRUST FOR A PRESCRIBED NUMBER OF DAYS DURING A QUALIFYING PERIOD  


160APHP(1) A taxpayer who as a beneficiary of a widely held trust has held an interest in shares contained in the trust holding (within the meaning of subsection 160APHL(4)) of the widely held trust is a qualified person in relation to a dividend paid on any of the shares to which a distribution from the trust to the taxpayer is attributable if:


(a) where neither the taxpayer nor an associate of the taxpayer has made, is under an obligation to make, or is likely to make, a related payment in respect of the distribution - during the primary qualification period in relation to the taxpayer in relation to the interest; or


(b) where the taxpayer or an associate of the taxpayer has made, is under an obligation to make, or is likely to make, a related payment in respect of the distribution - during the secondary qualification period in relation to the taxpayer in relation to the interest;

the taxpayer has held an interest in the shares contained in the trust holding as a beneficiary of the trust for a continuous period (not counting the day on which the taxpayer acquired the interest or, if the taxpayer has disposed of the interest, the day on which the disposal occurred) of not less than 45 days.


160APHP(2) In calculating the number of days for which the taxpayer continuously held the interest, any days on which the taxpayer has materially diminished risks of loss or opportunities for gain in respect of the interest are to be excluded, but the exclusion of those days is not taken to break the continuity of the period for which the taxpayer held the interest.

History

S 160APHP inserted by No 93 of 1999.

SECTION 160APHQ PERSONS QUALIFIED BY HOLDING SHARES OR INTERESTS IN SHARES WHERE THE SHARES WERE ISSUED IN CONNECTION WITH A WINDING UP  
160APHQ A taxpayer who has held shares, or an interest in shares, in a company on which a dividend is paid is a qualified person in relation to the dividend if:


(a) the shares were issued in connection with a proposed winding up of the company; and


(b) the shares or interest was not disposed of by the taxpayer before the commencement of the winding up; and


(c) neither the taxpayer nor an associate of the taxpayer has made, is under an obligation to make, or is likely to make, a related payment in respect of the dividend.

History

S 160APHQ inserted by No 93 of 1999.

SECTION 160APHR PERSONS QUALIFIED BY ELECTING TO HAVE FRANKING CREDIT CEILINGS AND FRANKING REBATE CEILINGS APPLIED BY REFERENCE TO FRANKING CREDITS OR REBATES ON A BENCHMARK PORTFOLIO OF SHARES  


160APHR(1) Taxpayers who may make election.  
Subject to this section, a taxpayer referred to in any of the following paragraphs may elect to have Subdivision BA of Division 7 apply to the taxpayer, in respect of a year of income specified in the election (the specified year of income) and all later years of income, in relation to shares, or an interest in shares, managed by or on behalf of the taxpayer as or in a discrete fund (the managed fund):


(a) the trustee of a unit trust that, at the time when the election is made, is a listed widely held trust (as defined in section 272-115 in Schedule 2F to the Income Tax Assessment Act 1936;


(b) the trustee of a unit trust that, at the time when the election is made, is an unlisted very widely held trust (as defined in section 272-120 in Schedule 2F to the Income Tax Assessment Act 1936;


(c) a life assurance company within the meaning of section 110;


(d) a general insurance company (as defined in subsection 121AB(4));


(e) a friendly society;


(f) an organisation referred to in subparagraph 23(eb)(i) that only carries on business as a registered health benefits organisation within the meaning of the National Health Act 1953;


(g) the trustee of a fund (other than an excluded fund) that is a complying superannuation fund for the purposes of Part IX in relation to the specified year of income;


(h) the trustee of a fund (other than an excluded fund) that is a complying ADF for the purposes of Part IX in relation to the specified year of income;


(i) the trustee of a unit trust that is a pooled superannuation trust for the purposes of Part IX in relation to the specified year of income;


(j) a taxpayer who is declared by the regulations to be a taxpayer, or is included in a class of taxpayers who are declared by the regulations to be taxpayers, to whom this section applies in relation to the specified year of income;


(k) the trustee of a unit trust if, at the time when the election is made:


(i) at least 75% of the units are held by a person who is, or persons each of whom is, a person referred to in a preceding paragraph or a prescribed person in relation to the trust; and

(ii) all of the units carry the same rights; and

(iii) if the units are redeemable, they are redeemable for a price determined on the basis of the trust's net asset value, according to Australian accounting principles; and

(iv) the trust engages only in qualifying activities.

[CCH Note: Yields for the ASX All Ordinaries Index are set out on the ATO assist web site at www.ato.gov.au - under "Business", search for "franking".]


160APHR(2) Regulations may preclude election.  
A taxpayer referred to in any of paragraphs (1)(a) to (i) and (k) cannot make an election under subsection (1) if, under the regulations, the taxpayer is precluded from making such an election.


160APHR(3) Election ineffective if related payments made.  
An election under subsection (1) does not have any effect in respect of a particular dividend or distribution if:


(a) the taxpayer or an associate of the taxpayer has made, is under an obligation to make, or is likely to make, a related payment in respect of the dividend or distribution; and


(b) the payment was or will be a payment of a prescribed kind.


160APHR(4) Prescribed kinds of payments.  
For the purposes of subsection (3), a payment is taken to have been, or will be, a payment of a prescribed kind if:


(a) unless the regulations otherwise provide, the payment occurred or will occur pursuant to:


(i) an obligation under a securities lending arrangement (other than such an obligation to which section 160AQUA applies); or

(ii) an obligation under an arrangement of a kind known as an equity swap; or


(b) the payment is included in a class of payments declared by the regulations to be payments to which subsection (3) applies.


160APHR(5) Consequences of ineffective elections.  
If an election under subsection (1) does not have any effect in respect of a particular dividend or distribution because of subsection (3), neither the share nor the interest in respect of which the dividend or distribution was made, nor the positions that the taxpayer has in relation to the share or interest, are to be taken into account in calculating the net equity exposure that the managed fund has in shares, or interests in shares, included in the fund for the purposes of section 160AQZH.


160APHR(6) Commissioner's consent required for revocation of election.  
An election under subsection (1) is irrevocable without the consent of the Commissioner.


160APHR(7) Breach of condition of consent.  
If:


(a) the Commissioner consents to the revocation of an election subject to specified conditions; and


(b) the election is revoked but any of the conditions is breached;

the revocation of the election is taken not to have been made.


160APHR(8) Taxpayer making election is a qualified person.  
A taxpayer who makes an election under subsection (1) is a qualified person in relation to every dividend paid during a year of income to which the election applies on shares to which the election applies which are held by the taxpayer or in which the taxpayer has an interest.

History

S 160APHR(8) amended by No 58 of 2000, s 3 and Sch 3 item 4, by inserting "to which the election applies which are" after "shares", effective 16 July 1999.


160APHR(9) Effect of determination by Commissioner.  
If the Commissioner has made a determination under subsection 177EA(5) in respect of:


(a) a dividend paid in respect of shares held by a taxpayer; or


(b) a distribution that:


(i) was derived from a dividend paid in respect of shares; and

(ii) is made in respect of an interest held by a taxpayer in the shares;

the following paragraphs have effect:


(c) if the shares or interest is included in a discrete fund to which an election under subsection (1) relates - the Commissioner may determine that the election ceases or ceased to have effect from the beginning of the year of income in which the determination was made or from the beginning of a later year of income specified in the determination;


(d) if the shares or interest is not included in such a fund - the taxpayer is not entitled, without the consent of the Commissioner, to make an election under subsection (1).

A determination under this subsection has effect according to its terms.


160APHR(10) Effect of entering into certain positions.  
If:


(a) an election made by a taxpayer under subsection (1) is in force in respect of the shares or interests in shares included in a discrete fund managed by or on behalf of the taxpayer; and


(b) the Commissioner informs the taxpayer that the Commissioner is of the opinion that:


(i) the taxpayer has entered into, or caused another person (for example, the asset overlay manager of the fund) on behalf of the taxpayer, to enter into; or

(ii) under an arrangement to which the taxpayer and an associate are parties, the associate has entered into;
a position or positions that, apart from this subsection, would not be taken into account under subsection 160AQZH(2) for a purpose of materially diminishing risks of loss and opportunities for gain in respect of the shares or interests;

the following provisions have effect:


(c) the short position or positions are to be taken into account under subsection 160AQZH(2);


(d) the Commissioner may determine that the election ceases or ceased to have effect from a time specified in the determination;


(e) if such a determination is made:


(i) the determination has effect according to its terms; and

(ii) the taxpayer is not entitled to make another election under subsection (1) without the consent of the Commissioner; and

(iii) if the Commissioner consents to the making of such an election subject to specified conditions and the election is made but any of the conditions is breached - the election is taken not to have been made.


160APHR(11) Definitions.  
In this section:

excluded fund has the meaning given by subsection 10(1) of the Superannuation Industry Supervision Act 1993.

qualifying activity means an activity that:


(a) is an investment or business activity; and


(b) is conducted in accordance with the trust instrument or deed, and any prospectus, of the relevant trust; and


(c) is conducted at arm's length.

History

S 160APHR inserted by No 93 of 1999.

SECTION 160APHS PRESCRIBED PERSONS IN RELATION TO A UNIT TRUST  


160APHS(1) This section has effect for the purposes of subparagraph (c)(i) of the definition of widely held trust in section 160APHD and subparagraph 160APHR(1)(k)(i).


160APHS(2) A company is a prescribed person in relation to a unit trust if:


(a) the company is a non-resident; or


(b) were the company to receive a distribution from the trust, the distribution would be exempt income of the company for the purposes of this Part.


160APHS(3) A trustee is a prescribed person in relation to a unit trust if:


(a) all the beneficiaries in the trust are prescribed persons under other provisions of this section; or


(b) were the trustee to receive a distribution from the trust, the distribution would be exempt income of the trust estate for the purposes of this Part.


160APHS(4) A partnership is a prescribed person in relation to a unit trust if:


(a) all the partners are prescribed persons under other provisions of this section; or


(b) were the partnership to receive a distribution from the trust, the distribution would be exempt income of the partnership for the purposes of this Part.


160APHS(5) An individual (other than a trustee) is a prescribed person in relation to a unit trust if:


(a) he or she is a non-resident; or


(b) were he or she to receive a distribution from the trust, the distribution would be exempt income of the individual for the purposes of this Part.


160APHS(6) The Commonwealth, each of the States, the Australian Capital Territory, the Northern Territory and Norfolk Island are prescribed persons in relation to a unit trust.

History

S 160APHS inserted by No 93 of 1999.

SECTION 160APHT INDIVIDUAL TAXPAYERS QUALIFIED AS SMALL SHAREHOLDERS  


160APHT(1) A taxpayer is a qualified person in relation to all dividends paid during a year of income on shares that the taxpayer held or held an interest in if:


(a) the taxpayer is an individual; and


(b) the total of the amounts of the rebates to which the taxpayer would be entitled under sections 160AQU, 160AQX and 160AQZ in respect of the year of income if the taxpayer were a qualified person in relation to each of those dividends does not exceed $5000.


160APHT(2) A taxpayer is not a qualified person under subsection (1) in relation to a dividend if the taxpayer or an associate of the taxpayer:


(a) has made; or


(b) is under an obligation to make; or


(c) is likely to make;

a related payment in respect of the dividend or a distribution attributable to the dividend.

History

S 160APHT substituted by No 89 of 2000, s 3 and Sch 3 item 98, applicable to assessments for the 1999/2000 and later years of income. S 160APHT formerly read:

INDIVIDUALS QUALIFIED BY ELECTING TO HAVE A FRANKING REBATE CEILING APPLIED  
160APHT(1) A taxpayer who is an individual may elect to have a franking rebate ceiling applied in respect of him or her in relation to a specified year of income in accordance with Subdivision BB of Division 7.
160APHT(2) Subject to subsection (3), if a taxpayer makes such an election, the taxpayer is a qualified person in relation to every dividend paid during the year of income specified in the election on shares that the taxpayer held or in which the taxpayer held an interest.
160APHT(3) A taxpayer is not a qualified person under subsection (2) in relation to a dividend if the taxpayer or an associate of the taxpayer has made, is under an obligation to make, or is likely to make, a related payment in respect of the dividend or a distribution attributable to the dividend.

S 160APHT inserted by No 93 of 1999.

SECTION 160APHU BENEFICIARY OR PARTNER NOT TO BE A QUALIFIED PERSON IF TRUSTEE OR PARTNERSHIP IS NOT A QUALIFIED PERSON: TRUSTEE OR PARTNERSHIP MAY BE ENTITLED TO DEDUCTION  


160APHU(1) Disqualification of beneficiary or partner.  
If a taxpayer that is a trustee or partnership is not a qualified person in relation to a dividend (including a trustee or partnership that is not a qualified person because of a previous application of this subsection), then, despite any other provision of this Subdivision (except subsection 160APHH(6)), no beneficiary of the trust or partner in the partnership is a qualified person in relation to the dividend.

History

S 160APHU(1) amended by No 58 of 2000, s 3 and Sch 3 item 5, by inserting "(except subsection 160APHH(6))" after "Subdivision", effective 16 July 1999.


160APHU(2) Allowable deduction to trustee or partnership in certain circumstances.  
If:


(a) a taxpayer that is a trustee or a partnership is not a qualified person in relation to a dividend; and


(b) the dividend is not paid to the trustee or partnership as the holder of the shares on which the dividend is paid (that is, the trustee or partnership receives a trust amount or partnership amount in respect of the dividend);

a deduction is allowable to the trustee or partnership, from the assessable income of the trust estate or partnership of the year of income in which the relevant trust amount or partnership amount was received, of an amount equal to the sum of the amounts represented by the letters PR and EPR in the definition of potential rebate amount in section 160APA in so far as it relates to the trust amount or partnership amount.

History

S 160APHU inserted by No 93 of 1999.

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