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 448   TAINTED SERVICES INCOME  

448(1)   [Amounts constituting tainted services income]  

Subject to this Division, for the purposes of this Part, the following amounts are tainted services income of a company of a statutory accounting period:


(a) income (other than premium income) from the provision of services by the company to an entity, if:


(i) the entity was a Part X Australian resident at the time the income was derived; and

(ii) the services were not provided in connection with a business carried on by the entity at that time at or through a permanent establishment of the entity in a listed or unlisted country;


(b) income (other than premium income) from the provision of services by the company to an entity who was not a Part X Australian resident at the time the income was derived, in connection with a business carried on by the entity at that time at or through a permanent establishment of the entity in Australia;


(c) income consisting of life assurance premiums in respect of a life assurance policy if, at the time the policy was entered into, the owner of the policy was a Part X Australian resident;


(d) income consisting of premiums (other than life assurance premiums) in respect of insurance (other than reinsurance) where any of the following conditions are satisfied at the time the policy was entered into:


(i) any insured person was a Part X Australian resident, and the policy was not entered into in connection with a business carried on by the person at or through a permanent establishment of the person in a listed or unlisted country;

(ii) any insured property was situated in Australia;

(iii) any insured event was an event which could happen only in Australia;


(e) income consisting of premiums in respect of reinsurance, if:


(i) the insurer whose risks are directly covered by the reinsurance was a Part X Australian resident at the time the policy was entered into; and

(ii) the policy was not entered into in connection with a business carried on by the insurer at that time at or through a permanent establishment of the insurer in a listed or unlisted country;


(f) income consisting of premiums in respect of reinsurance, if:


(i) the insurer whose risks are directly covered by the reinsurance was not a Part X Australian resident at the time the policy was entered into; and

(ii) the policy was entered into in connection with a business carried on by the insurer at that time at or through a permanent establishment of the insurer in Australia;


(g) income of the company covered by subsection (1A).

448(1A)   [Provision of services under a scheme]  

Income of the company is covered by this subsection if:


(a) it is income from the provision of services by the company to an entity under a scheme (within the meaning of the Income Tax Assessment Act 1997 ); and


(b) the entity is an associate of the company; and


(c) those services are received by another entity; and


(d) the other entity satisfies either of these requirements:


(i) the other entity was a Part X Australian resident at the time the income was derived, and the services were not received in connection with a business carried on by the other entity at that time at or through a permanent establishment of the other entity in a listed or unlisted country;

(ii) the other entity was not a Part X Australian resident at the time the income was derived, and the services were received in connection with a business carried on by the other entity at that time at or through a permanent establishment of the other entity in Australia; and


(e) the income would be tainted services income if:


(i) this section did not include paragraph (1)(g) or this subsection; and

(ii) the income were from the provision of those services by the company to the other entity; and


(f) a reasonable person would conclude (having regard to all the circumstances) that the scheme was entered into or carried out for a purpose, other than an incidental purpose, of enabling entities satisfying the requirements of subparagraph (d)(i) or (ii) to receive those services.

448(2)   [Income from sale of goods]  

The tainted services income of a company of a statutory accounting period does not include income from the sale of goods by the company.

448(3)   [Services directly related to goods sold]  

Where:


(a) a company provides services directly related to goods sold by the company; and


(b) either of the following conditions is satisfied:


(i) the company substantially altered the goods with the result that the market value of the goods was substantially enhanced;

(ii) the company did not acquire the goods from another entity;

the tainted services income of the company does not include income from the provision of those services.

448(4)   [Excluded services income]  

Where a company provides any of the following services:


(a) drinks and meals;


(b) accommodation in a hotel, motel, guest-house or similar place;


(c) the provision of, or of the use of facilities for, entertainment, recreation or instruction;

the tainted services income of the company does not include income from the provision of those services.

448(5)   [Passive income]  

The tainted services income of a company of a statutory accounting period does not include the passive income of the company of the statutory accounting period.

448(6)   [Income not included in tainted services income]  

The tainted services income of a company of a statutory accounting period does not include income where:


(a) the income is not passive income of the company of the statutory accounting period; and


(b) the income is covered by any of the following subparagraphs:


(i) income derived by the company by way of rent in respect of a lease of land;

(ii) royalties derived by the company;

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

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

(v) gains that accrued to the company in the statutory accounting period from disposing of commodity investments;

(vi) currency exchange gains that accrued to the company in the statutory accounting period;

(vii) in the case of a life assurance company - an amount that, apart from subsection 446(2) , would be passive income of the company of the statutory accounting period;

(viii) in the case of a general insurance company - the amount that, apart from subsection 446(4) , would be passive income of the company of the statutory accounting period.

448(6A)  
(Repealed by No 96 of 2004)

448(7)   [2 or more entities acting jointly]  

If, apart from this subsection, services are provided to 2 or more entities acting jointly, this section is to be applied successively as if each such entity were the sole recipient.


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