INCOME TAX ASSESSMENT ACT 1936

PART III - LIABILITY TO TAXATION  

Division 2 - Income  

Subdivision D - Dividends  

SECTION 47A   DISTRIBUTION BENEFITS - CFCs  

47A(1)  
Subject to subsection (2), if:


(a) a company (in this section called the first company ) has profits immediately before a distribution time for a distribution benefit in relation to the first company; and


(b) the distribution time occurred after 3 June 1990; and


(c) the first company is a CFC at the distribution time; and


(d) the first company is a resident of an unlisted country at the distribution time;

so much of the distribution payment in relation to the distribution time as would not otherwise be a dividend and does not exceed the amount of those profits is taken, for the purposes of this Act, to be a dividend paid by the first company:


(e) to the recipient of the benefit as a shareholder in the first company; and


(f) out of profits derived by the first company; and


(g) at the distribution time.

47A(2)  


If:


(a) any of the following subparagraphs applies:


(i) by virtue of subsection (1), the whole or a part of the distribution payment is included in the assessable income of a taxpayer of the year of income in which the distribution time occurred under section 44 ;

(ii) by virtue of subsection (1), the whole or a part of the distribution payment would, apart from section 23AI or section 768-5 of the Income Tax Assessment Act 1997 , be included in the assessable income of a taxpayer of the year of income in which the distribution time occurred under section 44 ; and

(iii) (Repealed by No 96 of 2004)

(iv) (Repealed by No 96 of 2004)


(b) both of the following subparagraphs apply:


(i) the taxpayer ' s return of income for the year of income was not prepared on the basis that the distribution payment had the consequence specified in subsection (1);

(ii) the taxpayer has not notified the Commissioner, in writing, within 12 months after the end of the year of income, that the distribution payment had the consequence specified in subsection (1);

that subsection has effect in relation to the taxpayer and in relation to that distribution payment as if the reference in that subsection to the purposes of this Act were a reference to the purposes of this Act (other than section 365 of this Act and Division 770 of the Income Tax Assessment Act 1997 ).

47A(3)  
Subject to subsections (9) and (12), a reference in this section to a distribution benefit in relation to the first company is a reference to an eligible benefit where the following conditions are satisfied:


(a) the eligible benefit was provided to:


(i) an associated entity in relation to the first company; or

(ii) another entity that, immediately after the time of the provision of the eligible benefit, was an associated entity in relation to the first company;


(b) the eligible benefit was provided by:


(i) the first company; or

(ii) an entity (in this subsection called the arranger ) other than the first company under an arrangement between:

(A) the first company; and

(B) the arranger or another entity;


(c) if subparagraph (b)(ii) applies - the first company made, or entered into an undertaking to make, one or more transfers of property or services to the arranger or to another entity (which transfers are in this section called the arrangement transfers ) that are attributable, in whole or in part, to the provision of the eligible benefit.

47A(4)  
Where the first company entered into an undertaking to make one or more arrangement transfers , the time of the arrangement transfers is the time the undertaking was entered into.

47A(5)  
Where, at a particular time, an entity (in this subsection called the provider ) waives or releases the obligation of another entity (in this subsection called the recipient ) to pay or repay to the provider an amount:


(a) the waiver or release is taken to constitute an eligible benefit provided at that time by the provider to the recipient; and


(b) if the eligible benefit is a distribution benefit in relation to the first company - each of the following times is a distribution time for the eligible benefit:


(i) if the eligible benefit was provided by the first company - the time of the provision of the eligible benefit; or

(ii) in any other case - the time, or each of the times, of the arrangement transfers concerned;


(c) if the eligible benefit is a distribution benefit in relation to the first company - the distribution payment in relation to the distribution time is:


(i) if the benefit was provided by the first company - the amount the payment or repayment of which is waived or released; or

(ii) in any other case - so much of the amount or market value of the arrangement transfer as is attributable to the provision of the eligible benefit.

47A(6)  
For the purposes of subsection (5), an entity is taken to be under an obligation to pay or repay an amount even if the amount is not due for payment or repayment.

47A(7)  
Where, at a particular time, an entity (in this subsection called the provider ) makes a loan to another entity (in this subsection called the recipient ), where:


(a) the parties to the loan are not at arm ' s length with each other in relation to the loan; or


(b) the purpose, or one of the purposes, of the making of the loan was to facilitate, directly or indirectly (through one or more interposed companies, partnerships or trusts), the payment of a dividend that is, or would be, non-assessable non-exempt income under section 768-5 of the Income Tax Assessment Act 1997 (in whole or in part); or


(c) the purpose, or one of the purposes, of the making of the loan was to facilitate, directly or indirectly, the provision of an eligible benefit by the recipient, being an eligible benefit that is a distribution benefit in relation to any company;

the following provisions have effect:


(d) the making of the loan is taken to constitute an eligible benefit provided by the provider to the recipient at that time;


(e) if the eligible benefit is a distribution benefit in relation to the first company - each of the following times is a distribution time for the eligible benefit:


(i) if the benefit was provided by the first company - the time of the provision of the benefit; or

(ii) in any other case - the time, or each of the times, of the arrangement transfers concerned;


(f) if the eligible benefit is a distribution benefit in relation to the first company - the distribution payment in relation to the distribution time is:


(i) if the benefit was provided by the first company - the amount of the loan; or

(ii) in any other case - so much of the amount or market value of the arrangement transfer as is attributable to the provision of the eligible benefit.

47A(8)  
Where, at a particular time:


(a) an entity (in this subsection called the provider ) acquires from a company (in this subsection called the recipient ):


(i) a share in the recipient;

(ii) a right to acquire a share in the recipient;

(iii) an option to acquire a share in the recipient; or


(b) an entity (in this subsection also called the provider ) acquires from the trustee of a unit trust (in this subsection also called the recipient ):


(i) a unit in the recipient;

(ii) a right to acquire a unit in the recipient;

(iii) an option to acquire a unit in the recipient;

the following provisions have effect:


(c) the acquisition is taken to constitute an eligible benefit provided by the provider to the recipient at that time;


(d) if the eligible benefit is a distribution benefit in relation to the first company - each of the following is a distribution time for the eligible benefit:


(i) if the benefit was provided by the first company - the time of the provision of the benefit; or

(ii) in any other case - the time, or each of the times, of the arrangement transfers concerned;


(e) if the eligible benefit is a distribution benefit in relation to the first company - the distribution payment in relation to the distribution time is:


(i) if the benefit was provided by the first company - the amount or market value of the consideration paid or given by the first company in respect of the acquisition; or

(ii) in any other case - so much of the amount or market value of the arrangement transfer as is attributable to the provision of the eligible benefit;


(f) if:


(i) the eligible benefit is a distribution benefit in relation to the first company; and

(ii) the provider transferred property or services to the recipient in respect of the acquisition;
in determining the profits of the company immediately before the distribution time, or the first distribution time, as the case requires, for the distribution benefit, the following assumptions are to be made:

(iii) if the benefit was provided by the first company - the assumption that, immediately before the distribution time, the company had:

(A) disposed of the property or services to an entity other than the recipient; and

(B) received, in respect of that disposal, consideration equal to the market value of the property or services;

(iv) if subparagraph (iii) does not apply - the assumption that, immediately before the distribution time, the company had:

(A) disposed of equivalent property or services to an entity other than the recipient or the entity who provided the eligible benefit; and

(B) received, in respect of that disposal, consideration equal to the market value of the property or services.

47A(9)  


An eligible benefit that is covered by subsection (8) and provided at a particular time is not a distribution benefit in relation to the first company if, at that time, there is no entity (other than the provider referred to in that subsection) who is:


(a) either:


(i) the holder of an eligible equity interest in the first company; or

(ii) an associate of an entity who is the holder of an eligible equity interest in the first company; and


(b) the holder of an eligible equity interest in the recipient referred to in that subsection.

47A(10)  
Where:


(a) an entity (in this subsection called the provider ) transfers property or services to another entity (in this subsection called the recipient ); and


(b) the property or services are transferred:


(i) for no consideration; or

(ii) for a consideration less than the market value of the property or services; and


(c) in the case of a transfer of services - the services do not consist of the making of a loan; and


(d) in any case - the property or services are not transferred by way of consideration for the acquisition from a company of:


(i) a share in the company; or

(ii) a right to acquire a share in the company; or

(iii) an option to acquire a share in the company; and


(e) in any case - the property or services are not transferred in respect of the acquisition from the trustee of a unit trust of:


(i) a unit in the unit trust; or

(ii) a right to acquire a unit in the unit trust; or

(iii) an option to acquire a unit in the unit trust; and


(f) in the case of a transfer of property - the property does not consist of a payment in respect of a call on a share in a company;

the following provisions have effect:


(g) the transfer is taken to constitute an eligible benefit provided by the provider to the recipient at that time;


(h) if the eligible benefit is a distribution benefit in relation to the first company - each of the following is a distribution time for the eligible benefit:


(i) if the benefit was provided by the first company - the time of the provision of the benefit; or

(ii) in any other case - the time, or each of the times, of the arrangement transfers concerned;


(j) if the eligible benefit is a distribution benefit in relation to the first company - the distribution payment in relation to the distribution time is:


(i) if the benefit was provided by the first company - the amount by which the amount or market value of the property or services exceeds the consideration (including nil consideration) mentioned in paragraph (b); or

(ii) if subparagraph (i) does not apply and there is only one arrangement transfer - so much of the amount or market value of the arrangement transfer as is attributable to the provision of the eligible benefit; or

(iii) if subparagraph (i) does not apply and there are 2 or more arrangement transfers - the amount worked out in relation to the arrangement transfer using the following formula:


Total Excess   ×   Arrangement transfer  
Total arrangement transfers


where:
  • Total Excess means so much of the total amount or market value of all the arrangement transfers as is attributable to the provision of the eligible benefit.
  • Arrangement transfer means the amount or market value of the arrangement transfer concerned.
  • Total arrangement transfers means the total amount or market value of all of the arrangement transfers.

  • (k) if the eligible benefit is a distribution benefit in relation to the first company - in determining the profits of the company immediately before a distribution time for the distribution benefit, the following assumptions are to be made:


    (i) if the benefit was provided by the first company - the assumption that, immediately before the distribution time, the company had:

    (A) disposed of the property or services to an entity other than the recipient; and

    (B) received, in respect of that disposal, consideration equal to the market value of the property or services;

    (ii) if subparagraph (i) does not apply and there is only one arrangement transfer - the assumption that, immediately before the distribution time, the company had:

    (A) disposed of the property or services covered by the arrangement transfer to an entity other than the entity who provided the eligible benefit; and

    (B) received, in respect of that disposal, consideration equal to the market value of the property or services;

    (iii) if subparagraph (i) does not apply and there are 2 or more arrangement transfers - the assumption that, immediately before each distribution time, the company had:

    (A) disposed of the property or services covered by the arrangement transfer concerned to an entity other than the entity who provided the eligible benefit; and

    (B) received, in respect of that disposal, consideration equal to the market value of the property or services.

    47A(10A)  


    Subsection (10) does not apply to a transfer that is taken by section 70-30 or 70-110 of the Income Tax Assessment Act 1997 to have occurred.

    47A(11)  
    Where, at a particular time, an entity (in this subsection called the provider ) makes a payment to another entity, being a company (in this subsection called the recipient ), in respect of a call on a share in the recipient:


    (a) the making of the payment is taken to constitute an eligible benefit provided by the provider to the recipient at that time; and


    (b) if the eligible benefit is a distribution benefit in relation to the first company - each of the following is a distribution time for the eligible benefit:


    (i) if the benefit was provided by the first company - the time of the provision of the benefit; or

    (ii) in any other case - the time, or each of the times, of the arrangement transfers concerned;


    (c) if the eligible benefit is a distribution benefit in relation to the first company - the distribution payment in relation to the distribution time is:


    (i) if the benefit was provided by the first company - the amount of the payment; or

    (ii) in any other case - so much of the amount or market value of the arrangement transfer as is attributable to the provision of the eligible benefit.

    47A(12)  


    An eligible benefit that is covered by subsection (11) and provided at a particular time is not a distribution benefit in relation to the first company if, at that time, there is no entity (other than the provider referred to in that subsection) who is:


    (a) either:


    (i) the holder of an eligible equity interest in the first company; or

    (ii) an associate of an entity who is the holder of an eligible equity interest in the first company; and


    (b) the holder of an eligible equity interest in the recipient referred to in that subsection.

    47A(13)  
    If:


    (a) apart from this subsection, a particular eligible benefit that is covered by subsection (8) or (11) and provided at a particular time is not a distribution benefit in relation to the first company only because of subsection (9) or (12); and


    (b) at a later time, there is an entity (other than the provider referred to in subsection (8) or (11), as the case may be) who is:


    (i) either:

    (A) the holder of an eligible equity interest in the first company; or

    (B) an associate of an entity who is the holder of an eligible equity interest in the first company; and

    (ii) the holder of an eligible equity interest in the recipient referred to in whichever of subsections (8) and (11) is applicable; and


    (ba) if the eligible benefit consists of the acquisition of a share or unit - at that later time, the share or unit has not been redeemed or bought back by the recipient mentioned in subsection (8) for a consideration equal to or greater than the arm ' s length value of the share or unit;

    the following provisions have effect:


    (c) this section has effect as if subsection (9) or (12), as the case requires, had never applied in relation to that eligible benefit;


    (d) section 170 does not prevent the amendment of an assessment at any time for the purposes of giving effect to this subsection.

    47A(14)  
    If:


    (a) apart from this subsection, a particular eligible benefit (in this subsection called the first eligible benefit ) that is covered by subsection (8) or (11) and provided at a particular time is not a distribution benefit in relation to the first company only because of subsection (9) or (12); and


    (b) the recipient referred to in whichever of subsections (8) and (11) is applicable provides an eligible benefit (in this subsection called the second eligible benefit ) to:


    (i) the first company; or

    (ii) the provider referred to in whichever of those subsections is applicable; or

    (iii) an associated entity in relation to:

    (A) the first company; or

    (B) that provider; and


    (c) the provision of the first eligible benefit facilitated, directly or indirectly, the provision of the second eligible benefit; and


    (ca) if the second eligible benefit is covered by subsection (8) or (11):


    (i) the second eligible benefit is provided on or after 13 September 1990; or

    (ii) both:

    (A) the second eligible benefit was provided before 13 September 1990; and

    (B) the Commissioner is of the opinion that the provision of the second eligible benefit had, or would be likely to have, the effect of enabling any taxpayer to avoid tax;

    the following provisions have effect:


    (d) this section has effect as if subsection (9) or (12), as the case requires, had never applied in relation to the first eligible benefit;


    (e) section 170 does not prevent the amendment of an assessment at any time for the purposes of giving effect to this subsection.

    47A(15)  
    In determining whether a company has profits at a particular time, it is to be assumed that the accounts of the company had been drawn up immediately before that time.

    47A(16)  
    For the purposes of this section, where:


    (a) the first company has profits (in this subsection called the original profits ) immediately before a distribution time for a distribution benefit in relation to the first company; and


    (b) by virtue of subsection (1), an amount (in this subsection called the original assessable amount ) is included in the assessable income of a taxpayer (in this subsection called the original taxpayer ) of a year of income (in this subsection called the original year of income ) under section 44 in respect of the distribution payment in relation to the distribution time; and


    (c) any of the following subparagraphs applies:


    (i) the original taxpayer is:

    (A) a resident at any time during the original year of income; and

    (B) a company or a natural person (other than a company or a natural person in the capacity of a trustee);

    (ii) (Repealed by No 53 of 2016)

    (iii) the original taxpayer is the trustee of a public trading trust in relation to the original year of income;

    (iv) the original taxpayer is the trustee of a complying superannuation fund, a non-complying superannuation fund, a complying approved deposit fund, a non-complying approved deposit fund or a pooled superannuation trust in relation to the original year of income;

    (v) the original taxpayer is the trustee of a resident trust estate (within the meaning of Division 6 ) in relation to the year of income who is liable to be assessed and pay tax under section 99 or 99A in respect of a part of the net income of the trust estate;

    then, in determining the profits that the first company has at a later time, no account is to be taken of so much of the original profits as is equal to the original assessable amount.

    47A(17)  
    For the purposes of this section, where:


    (a) the first company has profits (in this subsection called the original profits ) immediately before a distribution time for a distribution benefit in relation to the first company; and


    (b) by virtue of subsection (1), an amount (in this subsection called the original assessable amount ) is included in the assessable income of a taxpayer (in this subsection called the original taxpayer ) of a year of income (in this subsection called the original year of income ) under section 44 in respect of the distribution payment in relation to the distribution time; and


    (c) all of the following conditions are satisfied:


    (i) the original taxpayer is the trustee of a trust estate who is liable to be assessed and pay tax under section 98 in respect of a share in the net income of the trust estate of the original year of income;

    (ii) the beneficiary who was entitled to that share was a resident at any time during the original year of income;

    (iii) the whole or a part (which whole or part is in this subsection called the beneficiary ' s portion of the original assessable amount ) of the share of the net income is attributable to the original assessable amount;

    then, in determining the profits that the first company has at a later time, no account is to be taken of so much of the original profits as is equal to the beneficiary ' s portion of the original assessable amount.

    47A(18)  
    For the purposes of this section, where:


    (a) the first company has profits (in this subsection called the original profits ) immediately before a distribution time for a distribution benefit in relation to the first company; and


    (b) by virtue of subsection (1), an amount (in this subsection called the original assessable amount ) is included in the assessable income of a taxpayer (in this subsection called the original taxpayer ) of a year of income (in this subsection called the original year of income ) under section 44 in respect of the distribution payment in relation to the distribution time; and


    (c) the original taxpayer is the trustee of a trust estate or a partnership; and


    (d) the following conditions are satisfied in relation to another taxpayer (in this subsection called the actual taxpayer ):


    (i) an amount is included in the assessable income of the actual taxpayer of a year of income (in this subsection called the assessment year of income ) under subsection 92(1) or section 97 or 100 ;

    (ii) the actual taxpayer is:

    (A) a resident at any time during the assessment year of income, being a company or a natural person (other than a company or a natural person in the capacity of a trustee); or

    (B) (Repealed by No 53 of 2016)

    (C) the trustee of a public trading trust in relation to the assessment year of income; or

    (D) the trustee of a complying superannuation fund, a non-complying superannuation fund, a complying approved deposit fund, a non-complying approved deposit fund or a pooled superannuation trust in relation to the assessment year of income; or

    (E) the trustee of a trust estate who is liable to be assessed and pay tax under section 98 in respect of a share in the net income of a trust estate; or

    (F) the trustee of a trust estate who is liable to be assessed and pay tax under section 99 or 99A in respect of a part of the net income of a trust estate; or

    (G) the trustee of a trust estate where trustee beneficiary non-disclosure tax is payable under Division 6D on the whole or part of the net income of the trust estate;

    (iii) if sub-subparagraph (ii)(A), (B), (C) or (D) applies - the whole or a part of the amount so included in the actual taxpayer ' s assessable income (which whole or part is in this subsection called the actual taxpayer ' s portion of the original assessable amount ) is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the original assessable amount;

    (iv) if sub-subparagraph (ii)(E) applies:

    (A) the beneficiary who was entitled to the share concerned was a resident at any time during the assessment year of income; and

    (B) the whole or a part (which whole or part is in this subsection also called the actual taxpayer ' s portion of the original assessable amount ) of the share of the net income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the original assessable amount;

    (v) if sub-subparagraph (ii)(F) applies:

    (A) the trust estate was a resident trust estate (within the meaning of Division 6 ) in relation to the assessment year of income; and

    (B) the whole or a part (which whole or part is in this subsection also called the actual taxpayer ' s portion of the original assessable amount ) of the part of the net income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the original assessable amount;

    (vi) if sub-subparagraph (ii)(G) applies:

    (A) the trust estate was a resident trust estate (within the meaning of Division 6 ) in relation to the assessment year of income; and

    (B) the whole or a part (which whole or part is in this subsection also called the actual taxpayer ' s portion of the original assessable amount ) of the whole or the part of the share of the net income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the original assessable amount;

    then, in determining the profits that the first company has at a later time, no account is to be taken of so much of the original profits as is equal to the actual taxpayer ' s portion of the original assessable amount.

    47A(18A)  


    An assessment may be made of a taxpayer on the assumption that subsection (2) will not be applicable in relation to a particular distribution payment made during a year of income of the taxpayer.

    47A(18B)  


    Where:


    (a) the assessment mentioned in subsection (18A) is made; and


    (b) after the making of the assessment, the Commissioner becomes aware that subsection (2) was applicable in relation to the distribution payment concerned;

    then, in spite of anything in section 170 , the Commissioner may amend the assessment at any time for the purposes of ensuring that the assessment is made as if subsection (18A) of this section were disregarded.

    47A(19)  
    The provisions of section 102AAJ apply for the purposes of this section in like manner as they apply for the purposes of Division 6AAA .

    47A(20)  
    For the purposes of this section, the question whether a company is a resident of an unlisted country is to be determined in the same manner in which that question is determined for the purposes of Part X .

    47A(21)  


    In this section:

    arm ' s length value
    , in relation to the redemption or buy-back of a share in a company or a unit in a unit trust, means the amount that the company or trustee could reasonably be expected to have been required to pay to obtain the redemption or buy-back of the share or unit under a transaction where the parties to the transaction are dealing with each other at arm ' s length in relation to the transaction.

    arrangement
    means:


    (a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and


    (b) any scheme, plan, proposal, action, course of action or course of conduct, whether there are 2 or more parties or only one party involved.

    associate
    has the same meaning as in Part X .

    associated entity
    , in relation to a company, means either of the following entities:


    (a) a shareholder in the company;


    (b) an entity who is an associate of a shareholder in the company.

    CFC
    has the same meaning as in Part X .

    distribution benefit
    has the meaning given by subsection (3) of this section.

    eligible equity interest
    :


    (a) in relation to a company, means any of the following:


    (i) a share, or an interest in a share, in the company;

    (ii) a right to acquire a share, or an interest in a share, in the company;

    (iii) an option to acquire a share, or an interest in a share, in the company; or


    (b) in relation to a unit trust, means any of the following:


    (i) a unit, or an interest in a unit, in the unit trust;

    (ii) a right to acquire a unit, or an interest in a unit, in the unit trust;

    (iii) an option to acquire a unit, or an interest in a unit, in the unit trust.

    entity
    has the same meaning as in Part X .

    loan
    includes:


    (a) an advance of money; and


    (b) the provision of credit or any other form of financial accommodation; and


    (c) the payment of an amount for, on account of, on behalf or at the request of an entity where there is an obligation (whether expressed or implied) to repay the amount; and


    (d) a transaction (whatever its terms or form) which in substance effects a loan of money.

    property
    has the same meaning as in Division 6AAA .

    services
    has the same meaning as in Division 6AAA .

    statutory accounting period
    has the same meaning as in Part X .

    transfer
    has the same meaning as in Division 6AAA .


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