Income Tax Assessment Act 1997



Division 703 - Consolidated groups and their members  

Basic concepts  

SECTION 703-35   Treating entities as wholly-owned subsidiaries by disregarding employee shares  


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).

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).


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.


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.



(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.


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.

(Repealed by No 133 of 2009)

(Repealed by No 133 of 2009)

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