Income Tax Assessment Act 1997
CHAPTER 3
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SPECIALIST LIABILITY RULES
PART 3-95
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VALUE SHIFTING
Division 727
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Indirect value shifting affecting interests in companies and trusts, and arising from non-arm
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s length dealings
Subdivision 727-E
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Key concepts
Common-ownership nexus and ultimate stake of a particular percentage
SECTION 727-405 Ultimate stake of a particular percentage in a company 727-405(1)
This section sets out 3 tests of whether an entity has an ultimate stake of a particular percentage (the test percentage ) in a company.
Voting power
727-405(2)
The first test is that, after tracing, to the * ultimate owners who ultimately hold it, the direct and indirect ownership of all * shares in the company that carry the right to exercise voting power in the company, that ownership is held by the entity to the extent of the test percentage of that voting power.
Dividends
727-405(3)
The second test is that, after tracing, to the * ultimate owners who ultimately hold it, the direct and indirect ownership of all * shares in the company that carry the right to receive any dividends that the company may pay, that ownership is held by the entity to the extent of the test percentage of those dividends.
Capital distributions
727-405(4)
The third test is that, after tracing, to the * ultimate owners who ultimately hold it, the direct and indirect ownership of all * shares in the company that carry the right to receive any distribution of capital of the company, that ownership is held by the entity to the extent of the test percentage of the distribution.
Certain shares ignored
727-405(5)
In tracing the ownership of * shares in a company, ignore * shares whose * dividends can reasonably be regarded as being equivalent to the payment of interest on a loan having regard to:
(a) how the dividends are calculated; and
(b) the conditions applying to the payment of the dividends; and
(c) any other relevant matters.
View history note
Hide history noteSECTION 727-405 Ultimate stake of a particular percentage in a company 727-405(1)
This section sets out 3 tests of whether an entity has an ultimate stake of a particular percentage (the test percentage ) in a company.
Note:
In applying the tests, follow the rules in section 727-415 .
Voting power
727-405(2)
The first test is that, after tracing, to the * ultimate owners who ultimately hold it, the direct and indirect ownership of all * shares in the company that carry the right to exercise voting power in the company, that ownership is held by the entity to the extent of the test percentage of that voting power.
Dividends
727-405(3)
The second test is that, after tracing, to the * ultimate owners who ultimately hold it, the direct and indirect ownership of all * shares in the company that carry the right to receive any dividends that the company may pay, that ownership is held by the entity to the extent of the test percentage of those dividends.
Capital distributions
727-405(4)
The third test is that, after tracing, to the * ultimate owners who ultimately hold it, the direct and indirect ownership of all * shares in the company that carry the right to receive any distribution of capital of the company, that ownership is held by the entity to the extent of the test percentage of the distribution.
Certain shares ignored
727-405(5)
In tracing the ownership of * shares in a company, ignore * shares whose * dividends can reasonably be regarded as being equivalent to the payment of interest on a loan having regard to:
(a) how the dividends are calculated; and
(b) the conditions applying to the payment of the dividends; and
(c) any other relevant matters.
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