Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-5 - CORPORATE TAXPAYERS AND CORPORATE DISTRIBUTIONS  

Division 166 - Income tax consequences of changing ownership or control of a widely held or eligible Division 166 company  

Subdivision 166-E - Concessional tracing rules  

Stakes of less than 10% in the tested company

SECTION 166-230   Indirect stakes of less than 10% in the tested company  

166-230(1)    


This section modifies how the ownership tests in section 166-145 are applied to the tested company if it is the case, or it is reasonable to assume that:


(a) an entity (the stakeholder ) indirectly holds any of these stakes in the tested company:


(i) a *voting stake that carries rights to less than 10% of the voting power in the company; or

(ii) a *dividend stake that carries the right to receive less than 10% of any dividends that the company may pay; or

(iii) a *capital stake that carries the right to receive less than 10% of any distribution of capital of the company; and


(b) either:


(i) the stakeholder indirectly holds the stake in the tested company by holding *shares directly in a company (the top interposed entity ) that is interposed between the stakeholder and the tested company; or

(ii) the stakeholder indirectly holds the stake in the tested company by holding another interest directly in an entity (the top interposed entity ) that is not a company and that is interposed between the stakeholder and the tested company.
Note 1:

There might also be other entities interposed between the top interposed entity and the tested company.

Note 2:

Other rules might affect this provision: see subsection (3) and sections 166-272 , 166-275 and 166-280 .

Note 3:

For paragraph (a), Division 167 has special rules for working out rights to voting power, dividends and capital distributions in a company whose shares do not all carry the same rights to those matters.



Top interposed entity deemed to hold stakes directly in the tested company

166-230(2)    


The tests are applied to the tested company as if, at the *ownership test time:


(a) if the stake is a *voting stake - the top interposed entity controls, or is able to control, the voting power in the tested company that is carried by that stake at that time; and


(b) if the stake is a *dividend stake - the top interposed entity *indirectly had the right to receive, for its own benefit, any *dividends the tested company may pay in respect of that stake at that time; and


(c) if the stake is a *capital stake - the top interposed entity indirectly had the right to receive, for its own benefit, any distributions of capital of the tested company in respect of that stake at that time; and


(d) in any case - the top interposed entity were a person (other than a company).

Note:

The persons who actually control the voting power and have rights to dividends and capital are taken not to control that power or have those rights: see section 166-265 .



Acquisition of top interposed entity by another entity

166-230(3)    


If:


(a) a new entity (the new interposed entity ) acquires all the *shares or other interests in the top interposed entity (the old interposed entity ); and


(b) the new interposed entity has the same classes of shares or other interests as the old interposed entity; and


(c) if the new interposed entity is a company - the shares are not *redeemable shares; and


(d) in any case - each stakeholder holds the same proportion, or a reasonably equivalent proportion, of the total *voting stakes, *dividend stakes or *capital stakes in the new interposed entity immediately after the acquisition as the stakeholder held in the old interposed entity immediately before the acquisition;

then, at all times that the old interposed entity held or is taken to have held a stake in the tested company, the new interposed entity is taken to have held that stake.


166-230(4)    
Except for the purposes of determining whether a time is an alteration time (within the meaning of section 165-115L ), section 166-272 (which is about the same shares or interests) is to be disregarded when applying subsection (3).

Acquisition of tested company by new interposed entity

166-230(5)    
If:


(a) a new entity (the new interposed entity ) that is a company acquires all the *shares in the tested company; and


(b) assuming that the time immediately before the acquisition had been an *ownership test time, section 166-225 would have applied the tests to the tested company as if there were a single notional entity as described in subsection 166-225(2) in respect of some or all of the *voting stakes, *dividend stakes or *capital stakes in the tested company; and


(c) the new interposed entity has the same classes of shares as the tested company; and


(d) the shares are not *redeemable shares; and


(e) each entity that held a proportion of the voting stakes, dividend stakes or capital stakes in the tested company immediately before the acquisition (disregarding section 166-225 ) holds the same proportion, or a reasonably equivalent proportion, of that kind of stake in the new interposed entity immediately after the acquisition;

then, at all times that the single notional entity mentioned in paragraph (b) held or is taken to have held a stake in the tested company, the new interposed entity is taken to have held that stake.


166-230(6)    
Except for the purposes of determining whether a time is an alteration time (within the meaning of section 165-115L ), section 166-272 (which is about the same shares or interests) is to be disregarded when applying subsection (5) of this section.



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