Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 842 - Exempt Australian source income and gains of foreign residents  

Subdivision 842-I - Investment manager regime  

Independent Australian fund managers

SECTION 842-250   Reductions in IMR concessions if independent Australian fund manager entitled to substantial share of IMR entity ' s income  

842-250(1)    
The application of section 842-215 to an *IMR entity for an income year is modified, as provided by subsection (4) of this section, if:


(a) an entity is an *independent Australian fund manager for the IMR entity; and


(b) that entity, or another entity *connected with the entity, has a direct or indirect right to receive part of the profits of the IMR entity for the year; and


(c) the sum of the amounts that the entity, and any other entity connected with the entity, receive for the year in connection with the entity being that independent Australian fund manager exceeds 20% of the amount (the unadjusted concessional amount ) worked out under subsection (3); and


(d) the requirements of subsection 842-215(3) in relation to the year are not met.

842-250(2)    
However, this section does not apply if:


(a) the circumstances giving rise to the requirements of paragraph (1)(c) being met arose outside the control of:


(i) the *IMR entity; or

(ii) the *independent Australian fund manager or any entity *connected with the independent Australian fund manager; and


(b) the independent Australian fund manager, or an entity connected with the independent Australian fund manager, is taking steps to address those circumstances.

842-250(3)    
Work out the unadjusted concessional amount as follows:


  Amount not assessable or exempt Amounts not deductible + Disregarded capital gains Disregarded capital losses  

where:

amount not assessable or exempt
is the sum of:


(a) the amount (the 842-215(1)(a) amount ) of the *IMR entity ' s income for the income year that is, or would (apart from this section) be, *non-assessable non-exempt income of the IMR entity because of paragraph 842-215(1)(a) ; and


(b) the amount (the 842-215(2)(a) amount ) of the IMR entity ' s income for the income year that is, or would (apart from this section) be, non-assessable non-exempt income of the IMR entity because of paragraph 842-215(2)(a) , and not because of paragraph 842-215(1)(a) .

amounts not deductible
is the amount obtained by adding together:


(a) the sum of the amounts that are not deductible by the *IMR entity for the income year because of paragraph 842-215(1)(b) ; and


(b) the sum of the amounts that are not deductible by the IMR entity for the income year because of paragraph 842-215(2)(b) , and not because of paragraph 842-215(1)(b) ; and


(c) the sum of the amounts that would otherwise be deductible by the IMR entity for the income year under section 8-1 if the income in relation to which they were incurred were not income that is *non-assessable non-exempt income of the IMR entity because of paragraph 842-215(1)(a) ; and


(d) the sum of the amounts that would otherwise be deductible by the IMR entity for the income year under section 8-1 if the income in relation to which they were incurred were not income that is non-assessable non-exempt income of the IMR entity because of paragraph 842-215(2)(a) , and not because of paragraph 842-215(1)(a) .

disregarded capital gains
is the amount obtained by adding together:


(a) the sum (the 842-215(1)(c) amount ) of the amounts of the *capital gains that:


(i) are from *CGT events that happen in the income year; and

(ii) are, or would (apart from this section) be, disregarded in relation to the *IMR entity, because of paragraph 842-215(1)(c) ; and


(b) the sum (the 842-215(2)(c) amount ) of the amounts of the capital gains that:


(i) are from CGT events that happen in the income year; and

(ii) are, or would (apart from this section) be, disregarded in relation to the IMR entity because of paragraph 842-215(2)(c) , and not because of paragraph 842-215(1)(c) .

disregarded capital losses
is the amount obtained by adding together:


(a) the sum of the amounts of the *capital losses that:


(i) are from *CGT events that happen in the income year; and

(ii) are disregarded in relation to the *IMR entity because of paragraph 842-215(1)(c) ; and


(b) the sum of the amounts of the capital losses that:


(i) are from CGT events that happen in the income year; and

(ii) are disregarded in relation to the IMR entity because of paragraph 842-215(2)(c) , and not because of paragraph 842-215(1)(c) .


842-250(4)    
Apply the sum referred to in paragraph (1)(c) to reduce (including reduce to zero) the following amounts:


(a) the 842-215(1)(a) amount;


(b) the 842-215(2)(a) amount;


(c) the 842-215(1)(c) amount;


(d) the 842-215(2)(c) amount.

Do not apply the sum to reduce an amount referred to in a paragraph (other than paragraph (a)) unless the sum has been applied to reduce to zero the amount referred to in each paragraph preceding that paragraph.


842-250(5)    
If the 842-215(1)(c) amount or the 842-215(2)(c) amount relates to more than one *capital gain, a reduction of the amount under subsection (4) is taken to reduce each of the capital gains by the following amount:


  The amount of the reduction under subsection (4) × The amount of the *capital gain  
  The amount being reduced under subsection (4)  


842-250(6)    
Without limiting the circumstances in which the requirements of paragraph (1)(c) are not met, those requirements are taken not to be met in relation to the *IMR entity for an income year if they are not met in relation to the IMR entity for a period (a qualifying period ) of up to 5 consecutive income years including the income year (but not including any future income years).

842-250(7)    
In ascertaining for the purposes of subsection (6) whether the requirements of paragraph (1)(c) are not met in relation to the *IMR entity for a qualifying period, assume that the qualifying period is the income year referred to in subsection (1).

842-250(8)    
For the purposes of paragraphs (1)(b) and (c) (including paragraph (1)(c) as affected by subsections (6) and (7)), disregard any direct or indirect entitlements (including contingent entitlements) of the *independent Australian fund manager, or any entity *connected with the independent Australian fund manager, to remuneration from the *IMR entity:


(a) to the extent that the remuneration is subject to income tax in relation to the income year referred to in subsection (1); and


(b) to the extent that the remuneration is subject to taxation in relation to that income year under a *foreign law.


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