INCOME TAX ASSESSMENT ACT 1936

PART X - ATTRIBUTION OF INCOME IN RESPECT OF CONTROLLED FOREIGN COMPANIES  

Division 8 - Active income test  

Subdivision E - Passive income, tainted sales income and tainted services income  

SECTION 446   PASSIVE INCOME  

446(1)  
Subject to this Division, for the purposes of this Part, the following amounts are passive income of a company of a statutory accounting period:


(a) dividends (within the meaning of section 6 ) paid to the company in the statutory accounting period;


(b) unit trust dividends (within the meaning of Division 6C of Part III ) paid to the company in the statutory accounting period;


(c) a distribution made to the company where the distribution is taken to be a dividend because of section 47 ;


(d) tainted interest income derived by the company in the statutory accounting period;


(e) annuities derived by the company in the statutory accounting period;


(f) tainted rental income derived by the company in the statutory accounting period;


(g) tainted royalty income derived by the company in the statutory accounting period;


(h) an amount derived by the company in the statutory accounting period as consideration for the assignment, in whole or in part, of any copyright, patent, design, trade mark or other like property or right;


(j) income derived from carrying on a business of trading in tainted assets ;


(k) net gains that accrued to the company in the statutory accounting period in respect of the disposal of tainted assets ;


(m) net tainted commodity gains that accrued to the company during the statutory accounting period;


(n) net tainted currency exchange gains that accrued to the company during the statutory accounting period.

446(2)  


Despite anything in subsection (1), the passive income of a life assurance company of a statutory accounting period is calculated using the formula:


Adjusted passive income   × Total assets   - Untainted policy
  liabilities
Total assets

where:

adjusted passive income
means the amount that, apart from this subsection, would be the passive income of the company of the statutory accounting period.

total assets
means the average of the total assets of the company for the statutory accounting period.

untainted policy liabilities
means so much of the company ' s policy liabilities, as defined in the Valuation Standard (within the meaning of the Income Tax Assessment Act 1997 ), as calculated by a Fellow or Accredited Member of the Institute of Actuaries of Australia, for the statutory accounting period as is referable to life assurance policies that do not give rise to tainted services income of the company of any statutory accounting period.

446(3)  
(Repealed by No 89 of 2000)

446(4)  


Despite anything in subsection (1), the passive income of a general insurance company of a statutory accounting period is worked out using the formula:


Adjusted passive income   × Net assets   + Tainted
outstanding claims
- Solvency
amount
Total assets

where:

adjusted passive income
means the amount that, apart from this subsection, would be the passive income of the company of the statutory accounting period.

net assets
means the excess at the end of the statutory accounting period of the total assets of the company over the total liabilities of the company.

outstanding claims
means the amount that the company would, at the end of the statutory accounting period, based on proper and reasonable estimates, need to set aside and invest in order to meet liabilities of the company that have arisen or will arise:


(a) under general insurance policies (including reinsurance policies, but not including life assurance policies); and


(b) in respect of events that occurred during or before the period.

solvency amount
is the amount worked out under subsection (5).

tainted outstanding claims
means so much of the outstanding claims of the company at the end of the statutory accounting period as is referable to general insurance policies that give rise to tainted services income of the company of any statutory accounting period.

total assets
means the total assets of the company at the end of the statutory accounting period.

446(5)  


In subsection (4):

solvency amount
is the amount worked out using the formula:

Graphic

where:

maximum event retention
means the amount that, at the end of the statutory accounting period, the company has determined is the maximum that would be payable to the owners of policies as a result of the happening of any one event. The amount must be worked out on the basis of a reasonable and proper estimate.

minimum solvency
means the greater of:


(a) 20% of the company ' s premium income (within the meaning of the Insurance Act 1973 ) during the statutory accounting period; and


(b) 15% of the company ' s outstanding claims as at the end of the statutory accounting period.

outstanding claims
means the amount that the company would, at the end of the statutory accounting period, based on proper and reasonable estimates, need to set aside and invest in order to meet liabilities of the company that have arisen or will arise:


(a) under general insurance policies (including reinsurance policies, but not including life assurance policies); and


(b) in respect of events that occurred during or before the period.

tainted outstanding claims
means so much of the outstanding claims of the company at the end of the statutory accounting period as is referable to general insurance policies that give rise to tainted services income of the company of any statutory accounting period.


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