INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 11A - Dividends, interest and royalties paid to non-residents and to certain other persons  

Subdivision A - General  

SECTION 128K   MEANING OF AUSTRALIAN PARTICIPATION IN ENTERPRISE  

128K(1)   [Australian influence]  

For the purposes of this Division but subject to this section, an enterprise is one in which there is substantial Australian participation if it is an enterprise in the ownership and control of which there is substantial participation by an Australian entity or Australian entities and the extent and concentration of that participation are such as to represent an effective Australian influence in the carrying on of the enterprise.

128K(2)   [Limitations re beneficial interests and casting votes]  

In the application of subsection (1), but subject to the succeeding provisions of this section, the Commissioner shall regard an enterprise carried on by a company having a share capital as one in which there is substantial Australian participation if, and only if, the beneficial interests in respect of:


(a) the paid-up share capital of the company;


(b) distributions of capital on liquidation of the company or on a return of capital by the company; and


(c) dividends paid by the company;

and the rights to cast votes on every question arising at a meeting of the company, are vested:


(d) to the extent of not less than 20%, in one Australian entity;


(e) to the extent of not less than 30%, in Australian entities to the number of not more than 5; or


(f) to the extent of not less than 40%, in any number of Australian entities;

being an entity which, or entities each of which, is able to exercise its voting rights according to its own judgment.

128K(3)   [Associated persons]  

For the purposes of subsection (2), 2 or more Australian entities that are associated persons shall be deemed to be one Australian entity.

128K(4)   [Factors disregarded]  

For the purposes of the application of this section in relation to an enterprise carried on by a company having a share capital, redeemable shares in the capital of the company that are beneficially owned by an Australian entity, and the capital represented by, dividends payable in respect of, and voting rights attributable to, any such shares so owned shall be disregarded.

128K(5)   [No share capital]  

In determining whether an enterprise carried on otherwise than by a company having a share capital is an enterprise in which there is substantial Australian participation, the Commissioner shall have regard to the provisions made by the preceding subsections of this section in relation to such a company.

128K(6)   [Inappropriate not to regard as enterprise]  

The Commissioner may, for the purposes of this Division, regard an enterprise as one in which there is substantial Australian participation notwithstanding that it may not, or does not, fully comply with the foregoing provisions of this section that are applicable to it, or that there is a difficulty in applying those provisions in relation to the enterprise, if, having regard to the general effect of those provisions and to the circumstances giving rise to the difficulty or other special circumstances that exist in relation to the enterprise, the Commissioner considers that it would be inappropriate not to regard the enterprise as one in which there is substantial Australian participation.

128K(7)   [Inappropriate to regard as Australian enterprise]  

The Commissioner may, for the purposes of this Division, regard an enterprise as not being one in which there is substantial Australian participation notwithstanding that it does comply with the foregoing provisions of this section that are applicable in relation to it, if, having regard to the general effect of those provisions and to special circumstances that exist in relation to the enterprise, the Commissioner considers that it would be inappropriate to regard the enterprise as one in which there is substantial Australian participation.

128K(8)   [Special circumstances outlined]  

The special circumstances to which regard may be had under subsections (6) and (7) include the existence of:


(a) options or other rights, including contractual or equitable rights, whether absolute or contingent, to receive or acquire, whether presently or in the future, shares in the capital of a company or other rights or interests ; or


(b) abnormal arrangements made for the purposes of securing benefits under this Division.

128K(9)   [Whether enterprise at particular time]  

In determining whether an enterprise is to be regarded, as at a particular time, as an entity in which there is substantial Australian participation, the Commissioner shall apply the provisions of this section as if a reference in those provisions to a matter were a reference to that matter as subsisting at that time.


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