INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 11A - Dividends, interest and royalties paid to non-residents and to certain other persons  

Subdivision A - General  

SECTION 128J   AUSTRALIAN ENTITIES  

128J(1)   [Australian entities]  

For the purposes of this Division, the following are Australian entities:

(a) the Commonwealth, a State or an authority of the Commonwealth or of a State and the trustees of a fund established by the Commonwealth, a State or such an authority; and

(b) a natural person who is ordinarily resident in Australia.

128J(2)   [Limitations re beneficial interests]  

For the purposes of this Division but subject to this section, an entity (not being an entity referred to in subsection (1)) is an Australian entity if, and only if:

(a) the beneficial interests in relation to the entity of persons who are themselves Australian entities are, and the capacity of such persons to participate, whether directly or indirectly, according to their own judgment, in the control of the entity, is, substantially preponderant; and

(b) the beneficial interests in relation to the entity of persons other than Australian entities are not, and the capacity of persons other than Australian entities to participate, whether directly or indirectly, according to their own judgment, in the control of the entity, is not, concentrated to a significant extent in one such person, or in 2 or more such persons who are associated persons;

and, in the case of an entity being a company, it is a resident of Australia.

128J(3)   [Relevant factors]  

In the application of subsection (2), but subject to the succeeding provisions of this section, the Commissioner shall regard a company having a share capital as an Australian entity if, and only if, he is satisfied that the company is a resident of Australia and that:

(a) the beneficial interests in:

(i) the paid-up share capital of the company;

(ii) distributions of capital on liquidation of the company or on a return of capital by the company; and

(iii) dividends paid by the company;

and the rights to cast votes on every question arising at a meeting of the company, are vested, to the extent of not less than 60%, in persons who are themselves Australian entities and are able to exercise their voting rights according to their own judgment;

(b) no person who is not an Australian entity is, and no 2 or more such persons who are associated persons are, beneficially interested to the extent of more than 20% in any of the matters referred to in subparagraphs (a)(i), (ii) and (iii), or entitled to exercise, according to his or their own judgment, more than 20% of the total number of votes that could be cast on a question arising at a meeting of the company; and

(c) no person who is not an Australian entity has rights, otherwise than by virtue of the voting rights in respect of shares, to be a director of the company or to affect the appointment of the directors of the company or any of them.

128J(4)   [Factors disregarded]  

In determining whether a company having a share capital is an Australian entity, redeemable shares in the capital of the company that are beneficially owned by an Australian entity, and the capital represented by, dividends payable in respect of, and voting rights attributable to, any such shares so owned, shall be disregarded.

128J(5)   [Entity other than company]  

In determining whether an entity other than a company having a share capital is an Australian entity, the Commissioner shall have regard to the provisions made by subsections (3) and (4) in relation to such a company.

128J(6)   [Inappropriate not to regard as entity]  

The Commissioner may, for the purposes of this Division, regard an entity as an Australian entity notwithstanding that it may not, or does not, fully comply with the foregoing provisions of this section that are applicable in relation to it, or that there is a difficulty in applying those provisions in relation to the entity, if, having regard to the general effect of those provisions and to the circumstances giving rise to the difficulty or other special circumstances that exist in relation to the entity, the Commissioner considers that it would be inappropriate not to regard the entity as an Australian entity.

128J(7)   [Inappropriate to regard as entity]  

The Commissioner may, for the purposes of this Division, regard an entity as not being an Australian entity notwithstanding that it does comply with the foregoing provisions of this section that are applicable to it if, having regard to the general effect of those provisions and to special circumstances that exist in relation to the entity, the Commissioner considers that it would be inappropriate to regard the entity as an Australian entity.

128J(8)   [Special circumstances outlined]  

The special circumstances to which regard may be had under subsections (6) and (7) include the existence of:

(a) options or other rights, including contractual or equitable rights, whether absolute or contingent, to receive or acquire, whether presently or in the future, shares in the capital of a company or other rights or interests; or

(b) abnormal arrangements made for the purpose of securing benefits under this Division.

128J(9)   [Whether entity at particular time]  

In determining, for the purposes of this Division, whether an entity is to be regarded as an Australian entity as at a particular time, the Commissioner shall apply the provisions of this section as if a reference in those provisions to a matter were a reference to that matter as subsisting at that time.