Tax Laws Amendment (2004 Measures No. 2) Act 2004 (83 of 2004)

Schedule 10   Franked distributions received through certain partnerships and trustees

Part 2   Amendments commencing on 29 June 2002

Income Tax Assessment Act 1997

15   Sections 207-160, 207-165 and 207-170

Repeal the sections, substitute:

207-160 Distribution that is treated as an interest payment

(1) For the purposes of this Subdivision, a *franked distribution is treated as an interest payment for an entity to whom the distribution *flows indirectly if:

(a) all or a part of the entity's individual interest or share amount in relation to the distribution that is mentioned in subsection 207-50(2), (3) or (4) could reasonably be regarded as the payment of interest on a loan, having regard to:

(i) the way in which that individual interest or share amount was calculated; and

(ii) the conditions applying to the payment or application of that individual interest or share amount; and

(iii) any other relevant matters; and

(b) the entity's interest in the last intermediary entity (see subsection (2)):

(i) was acquired, or was acquired for a period that was extended, at or after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; or

(ii) was acquired as part of a *financing arrangement for the entity (including an arrangement extending to an earlier arrangement) that was entered into at or after that time.

(2) The entity's interest in the last intermediary entity is:

(a) if the distribution *flows indirectly to the entity as a partner in a partnership under subsection 207-50(2) - the entity's interest in the partnership; or

(b) if the distribution flows indirectly to the entity as a beneficiary of a trust under subsection 207-50(3) - the entity's interest in the trust; or

(c) if the distribution flows indirectly to the entity as the trustee of a trust under subsection 207-50(4) - the entity's interest in the trust in respect of which the entity is liable to be assessed.