CHAPTER 3
-
SPECIALIST LIABILITY RULES
PART 3-90
-
CONSOLIDATED GROUPS
History
Part 3-90 inserted by No 68 of 2002, s 3 and Sch 1 item 2, effective 24 October 2002 and applicable on and after 1 July 2002 (see sec
700-1
of the
Income Tax (Transitional Provisions) Act 1997
).
Division 703
-
Consolidated groups and their members
History
Div 703 inserted by No 68 of 2002, s 3 and Sch 1 item 2, effective 24 October 2002 and applicable on and after 1 July 2002 (see sec
700-1
of the
Income Tax (Transitional Provisions) Act 1997
).
Basic concepts
SECTION 703-35
Treating entities as wholly-owned subsidiaries by disregarding employee shares
703-35(1)
The object of this section is to ensure that an entity (the
first entity
) is not prevented from being a *subsidiary member of a *consolidated group or *consolidatable group just because there are minor holdings of *membership interests in an entity (the
employee share scheme entity
) issued under *arrangements for employee shareholdings. (It does not matter whether the employee share scheme entity is the first entity or is interposed between the first entity and a *member of the group).
Note:
A company that is prevented from being a subsidiary member of a consolidated group may be a head company (so there could be 2 consolidated or consolidatable groups, instead of the one that this section ensures exists).
History
S 703-35(1) substituted by
No 56 of 2007
, s 3 and Sch 3 item 24, effective 12 April 2007.
No 56 of 2007
, s 3 and Sch 3 item 39 contains the following application provision:
(1)
The amendment applies to acquisitions of stapled securities, and of rights to acquire stapled securities, on or after 1 July 2006.
(2)
In this item:
acquisition
has the same meaning as in Division
13A
of Part
III
of the
Income Tax Assessment Act 1936
.
S 703-35(1) formerly read:
703-35(1)
The object of this section is to ensure that an entity is not prevented from being a
*
subsidiary member of a
*
consolidated group or
*
consolidatable group just because there are minor holdings of
*
shares in a company issued under
*
arrangements for employee shareholdings. (It does not matter whether the company is the entity or is interposed between the entity and a
*
member of the group.)
Note:
A company that is prevented from being a subsidiary member of a consolidated group may be a head company (so there could be 2 consolidated or consolidatable groups, instead of the one that this section ensures exists).
703-35(2)
This Part (except Division
719
) operates as if an entity that meets the requirement of subsection (3) at a particular time were a *wholly-owned subsidiary of an entity (the
holding entity
) at the time.
History
S 703-35(2) substituted by
No 56 of 2007
, s 3 and Sch 3 item 24, effective 12 April 2007.
No 56 of 2007
, s 3 and Sch 3 item 39 contains the following application provision:
(1)
The amendment applies to acquisitions of stapled securities, and of rights to acquire stapled securities, on or after 1 July 2006.
(2)
In this item:
acquisition
has the same meaning as in Division
13A
of Part
III
of the
Income Tax Assessment Act 1936
.
S 703-35(2) formerly read:
703-35(2)
This Part (except Division
719
) operates as if a company that meets the requirement of subsection (3) at a particular time were a
*
wholly-owned subsidiary of an entity (the
holding entity
) at the time.
703-35(3)
The entity must be one that would be a *wholly-owned subsidiary of the holding entity at the time if the *membership interests in the entity that are to be disregarded under subsection (4) did not exist.
History
S 703-35(3) substituted by
No 56 of 2007
, s 3 and Sch 3 item 24, effective 12 April 2007.
No 56 of 2007
, s 3 and Sch 3 item 39 contains the following application provision:
(1)
The amendment applies to acquisitions of stapled securities, and of rights to acquire stapled securities, on or after 1 July 2006.
(2)
In this item:
acquisition
has the same meaning as in Division
13A
of Part
III
of the
Income Tax Assessment Act 1936
.
S 703-35(3) formerly read:
703-35(3)
The company must be one that would be a
*
wholly-owned subsidiary of the holding entity at the time if the
*
shares in the company that are to be disregarded under subsection (4) did not exist.
703-35(4)
Disregard:
(a)
each of the *shares described in subsection (5) if the total number of those shares is not more than 1% of the number of ordinary shares in the company; and
(b)
each of the *membership interests in an entity described in subsection (5) if the total number of those membership interests is not more than 1% of the number of membership interests of that kind in the entity.
History
S 703-35(4) amended by No 133 of 2009, s 3 and Sch 1 item 52, by substituting
"
subsection (5)
"
for
"
subsection (7)
"
in para (b), applicable in relation to the ESS interests mentioned in subsections
83A-5(1)
and
(2)
of the
Income Tax (Transitional Provisions) Act 1997
.
S 703-35(4) substituted by
No 56 of 2007
, s 3 and Sch 3 item 24, effective 12 April 2007.
No 56 of 2007
, s 3 and Sch 3 item 39 contains the following application provision:
(1)
The amendment applies to acquisitions of stapled securities, and of rights to acquire stapled securities, on or after 1 July 2006.
(2)
In this item:
acquisition
has the same meaning as in Division
13A
of Part
III
of the
Income Tax Assessment Act 1936
.
S 703-35(4) formerly read:
703-35(4)
Disregard each of the
*
shares described in subsection (5) if the total number of those shares is not more than 1% of the number of ordinary shares in the company.
703-35(5)
A *share or *membership interest in a company may be disregarded under subsection (4) if:
(a)
the entity who holds the beneficial interest in the share or membership interest acquired that beneficial interest:
(i)
under an *employee share scheme; or
(ii)
by exercising a right, a beneficial interest in which was acquired under an employee share scheme; and
(b)
paragraphs
83A-105(1)(a)
and (b) and subsection
83A-105(2)
apply to the beneficial interest acquired under the scheme; and
(c)
in the case of a membership interest
-
the interest is part of a stapled security.
History
S 703-35(5) substituted for s 703-35(5), (6) and (7) by No 133 of 2009, s 3 and Sch 1 item 53, applicable in relation to the ESS interests mentioned in subsections
83A-5(1)
and
(2)
of the
Income Tax (Transitional Provisions) Act 1997
. S 703-35(5) formerly read:
703-35(5)
A
*
share in a company that is beneficially owned by an entity may be disregarded under subsection (4) if:
(a)
the entity acquired (as defined in section
139G
of the
Income Tax Assessment Act 1936
) the share either:
(i)
in the circumstances described in subsection 139C(1) or (2) of that Act; or
(ii)
by exercising a right the entity acquired (as so defined) in those circumstances; and
(b)
all the shares in the company available for acquisition in those circumstances are ordinary shares and all the rights available for acquisition in those circumstances are rights to acquire ordinary shares; and
(c)
if the entity acquired the share in those circumstances
-
at the time of the acquisition, at least 75% of the permanent employees (as defined in section
139GB
of that Act) of the employer (as defined in section
139GA
of that Act) were or had earlier been entitled to acquire in those circumstances:
(i)
shares in the company or rights to acquire shares in the company; or
(ii)
shares in a holding company (as defined in section
139GC
of that Act) of the company or rights to acquire such shares; and
(d)
the conditions in subsections 139CD(6) and (7) of that Act are met in relation to the acquisition of the share by the entity; and
(e)
the company is not covered by section
139DF
of that Act.
Note:
Section
139CD
of the
Income Tax Assessment Act 1936
sets out certain preconditions for shares and rights acquired under employee share schemes to be qualifying shares and qualifying rights. Section
139C
of that Act explains when a share or right is acquired under an employee share scheme. Section 139DF prevents shares and rights relating to certain companies from being qualifying shares and rights.
S 703-35(5) amended by
No 56 of 2007
, s 3 and Sch 3 item 25, by substituting
"
a company
"
for
"
the company
"
(first occurring), effective 12 April 2007.
No 56 of 2007
, s 3 and Sch 3 item 39 contains the following application provision:
(1)
The amendment applies to acquisitions of stapled securities, and of rights to acquire stapled securities, on or after 1 July 2006.
(2)
In this item:
acquisition
has the same meaning as in Division
13A
of Part
III
of the
Income Tax Assessment Act 1936
.
703-35(6)
(Repealed by No 133 of 2009)
History
S 703-35(5) substituted for s 703-35(5), (6) and (7) by No 133 of 2009, s 3 and Sch 1 item 53, applicable in relation to the ESS interests mentioned in subsections
83A-5(1)
and
(2)
of the
Income Tax (Transitional Provisions) Act 1997
. S 703-35(6) formerly read:
703-35(6)
The
*
share may be disregarded under subsection (4) even though the condition in paragraph (5)(c) is not met, if:
(a)
the conditions in paragraphs (5)(a), (b), (d) and (e) are met; and
(b)
the Commissioner has made a determination under subsection
139CD(8)
of the
Income Tax Assessment Act 1936
in relation to the share.
703-35(7)
(Repealed by No 133 of 2009)
History
S 703-35(5) substituted for s 703-35(5), (6) and (7) by No 133 of 2009, s 3 and Sch 1 item 53, applicable in relation to the ESS interests mentioned in subsections
83A-5(1)
and
(2)
of the
Income Tax (Transitional Provisions) Act 1997
. S 703-35(7) formerly read:
703-35(7)
A *membership interest of a particular kind in an entity that is beneficially owned by another entity may be disregarded under subsection (4) if:
(a)
the membership interest forms part of a stapled security (within the meaning of Division
13A
of Part
III
of the
Income Tax Assessment Act 1936
); and
(b)
the stapled security is treated as a *qualifying share because of Subdivision
DB
of that Division.
Note:
The kinds of membership interest that form part of a stapled security are an ordinary share and one or more other interests that are either shares or units in a unit trust: see section
139GCD
of the
Income Tax Assessment Act 1936
.
S 703-35(7) inserted by
No 56 of 2007
, s 3 and Sch 3 item 26, effective 12 April 2007.
No 56 of 2007
, s 3 and Sch 3 item 39 contains the following application provision:
(1)
The amendment applies to acquisitions of stapled securities, and of rights to acquire stapled securities, on or after 1 July 2006.
(2)
In this item:
acquisition
has the same meaning as in Division
13A
of Part
III
of the
Income Tax Assessment Act 1936
.
S 703-35 inserted by No 68 of 2002, s 3 and Sch 1 item 2, effective 24 October 2002 and applicable on and after 1 July 2002 (see sec
700-1
of the
Income Tax (Transitional Provisions) Act 1997
).
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