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  • Strict control test



    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    A foreign company will be treated as a CFC under the strict control test if a group of five or fewer Australian '1 per cent entities', together with their associates, own or are entitled to acquire a control interest of at least 50% in the foreign company.

    An Australian 1 per cent entity is an Australian entity that, together with its associates, holds an interest of at least 1% in the foreign company.

    An Australian entity is an Australian partnership, an Australian trust, or an entity - other than a partnership or trust - that is a Part X Australian resident. A Part X Australian resident is a resident of Australia who is not treated solely as a resident of another country under a double taxation agreement between Australia and that country.

    The associate-inclusive control interest of an entity is the sum of interests held by the entity and its associates in the foreign company. Interests that the entity and its associates are entitled to acquire are also taken into account.

    Example 1
    Strict control test

    This test will be satisfied if three Australian residents each hold interests of 30%, 10% and 10% respectively in a foreign company.

    Last modified: 05 Dec 2006QC 17522