INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-5 - CORPORATE TAXPAYERS AND CORPORATE DISTRIBUTIONS  

Division 197 - Tainted share capital accounts  

Subdivision 197-A - What transfers into a company ' s share capital account does this Division apply to?  

SECTION 197-40   Exclusion for post-demutualisation transfers relating to life insurance companies  

197-40(1)  
Subject to subsection (2), this Division does not apply to the transferred amount if:


(a) a *life insurance company (the demutualised company ) has demutualised; and


(b) the demutualisation was implemented in accordance with a demutualisation method specified in Division 9AA of Part III of the Income Tax Assessment Act 1936 ; and


(c) the amount is transferred after the end of the listing period in relation to the demutualisation (see subsection 121AE(6) of that Act); and


(d) the company transferring the amount to its *share capital account is either:


(i) the demutualised company (whichever demutualisation method was used); or

(ii) if the demutualisation method was the method specified in section 121AH , 121AI , 121AJ , 121AK or 121AL of the Income Tax Assessment Act 1936 - the company (the issuing company ) that issued the ordinary shares referred to in that section; and


(e) if subparagraph (d)(i) applies - the following conditions are satisfied in relation to the transferred amount:


(i) the amount is transferred from an account of the demutualised company consisting of shareholders ' capital (within the meaning of the Life Insurance Act 1995 ) in relation to a statutory fund (within the meaning of that Act);

(ii) the amount was part of such an account at the time of the demutualisation; and


(f) if subparagraph (d)(ii) applies - the amount is transferred from a capital reserve created at the time of or in connection with the demutualisation.

197-40(2)  
If the sum of:


(a) the transferred amount; and


(b) all amounts that were previously transferred to the demutualised company ' s *share capital account, from another account of the demutualised company, as described in subsection (1); and


(c) if the demutualisation method was the method specified in section 121AH , 121AI , 121AJ , 121AK or 121AL of the Income Tax Assessment Act 1936 - all amounts that were previously transferred to the issuing company ' s share capital account, from another account of the issuing company, as described in subsection (1); and


(d) all amounts that were previously transferred, in connection with the demutualisation, to the share capital account of the issuing company (within the meaning of section 197-35 ) as described in subsection 197-35(1) , or to its retained profit account as described in paragraph 197-35(2)(c) ;

exceeds the listing day company valuation amount (see subsection (3)), subsection (1) does not stop this Division from applying to so much of the transferred amount as equals the lesser of the transferred amount and the amount of the excess.

Note:

If there are several transfers of amounts to the share capital account of the demutualised company or the issuing company, this section must be applied separately in relation to each transferred amount, in the order in which the transfers are made.

197-40(3)  
The listing day company valuation amount has the same meaning as it has for the purposes of table 1 in section 121AS of the Income Tax Assessment Act 1936 , as that table applies in relation to the demutualised company (see note 3 to that table).


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