Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Act 2019 (34 of 2019)

Schedule 4   Sovereign immunity

Part 2   Application and transitional provisions

Income Tax (Transitional Provisions) Act 1997

7   At the end of Part 4-5

Add:

Division 880 - Sovereign entities and activities

Table of sections

880-1 Application of Division 880 of the Income Tax Assessment Act 1997

880-5 Certain income of sovereign entity in respect of a scheme is non-assessable non-exempt income if covered by a private ruling

880-10 Certain amounts of sovereign entity in respect of a scheme are not deductible if covered by a private ruling

880-15 Sovereign entity's capital gain from membership interest etc. - gain disregarded

880-20 Sovereign entity's capital loss from membership interest etc. - loss disregarded

880-25 Asset of sovereign entity - deemed sale and purchase

880-1 Application of Division 880 of the Income Tax Assessment Act 1997

Division 880 of the Income Tax Assessment Act 1997 applies to the 2019-20 income year and later income years.

880-5 Certain income of sovereign entity in respect of a scheme is non-assessable non-exempt income if covered by a private ruling

An amount of ordinary income or statutory income of a sovereign entity for an income year is not assessable income and is not exempt income if:

(a) the amount is a return on an investment asset under a scheme; and

(b) the sovereign entity acquired the investment asset on or before 27 March 2018 under the scheme; and

(c) on or before 27 March 2018, the sovereign entity applied for a private ruling in relation to the scheme; and

(d) before 1 July 2026, the Commissioner gave the entity a private ruling confirming that income from the investment asset was not subject to income tax, or withholding tax, because of the doctrine of sovereign immunity; and

(e) the private ruling applied during at least part of the period:

(i) starting on 27 March 2018; and

(ii) ending before 1 July 2026;

regardless of whether the private ruling started to apply before 27 March 2018, or ceased to apply before 1 July 2026; and

(f) the scheme carried outis not materially different to the scheme specified in the private ruling; and

(g) the income year is:

(i) unless subparagraph (ii) applies - the 2025-26 income year or an earlier income year; or

(ii) if the last income year to which the private ruling relates is a later income year than the 2025-26 income year - that later income year, or an earlier income year.

880-10 Certain amounts of sovereign entity in respect of a scheme are not deductible if covered by a private ruling

A sovereign entity cannot deduct an amount for an income year if:

(a) the amount is a loss in respect of an investment asset under a scheme; and

(b) the requirements in paragraphs 880-5(b) to (g) are satisfied.

880-15 Sovereign entity's capital gain from membership interest etc. - gain disregarded

Disregard a capital gain of a sovereign entity from a CGT event that happens in relation to a CGT asset if:

(a) the capital gain arises under a scheme; and

(b) the CGT asset is a membership interest, non-share equity interest or debt interest in another entity; and

(c) the requirements in paragraphs 880-5(b) to (g) are satisfied (on the assumption that references in those paragraphs to the investment asset were references to the CGT asset).

880-20 Sovereign entity's capital loss from membership interest etc. - loss disregarded

Disregard a capital loss of a sovereign entity from a CGT event that happens at a time if, on the assumption that the loss were a capital gain that happened at that time, the capital gain would be disregarded because of section 880-15.

880-25 Asset of sovereign entity - deemed sale and purchase

(1) This section applies if:

(a) a sovereign entity acquired an asset (other than money) on or before 27 March 2018 under a scheme; and

(b) on or before 27 March 2018, the sovereign entity applied for a private ruling in relation to the scheme; and

(c) before 1 July 2026, the Commissioner gave the entity a private ruling confirming that income from the asset was not subject to income tax, or withholding tax, because of the doctrine of sovereign immunity; and

(d) the private ruling applied during at least part of the period:

(i) starting on 27 March 2018; and

(ii) ending before 1 July 2026;

regardless of whether the private ruling started to apply before 27 March 2018, or ceased to apply before 1 July 2026; and

(e) the sovereign entity holds the asset on the day mentioned in subsection (5).

(2) For the purposes mentioned in subsection (3), the sovereign entity is taken:

(a) to have disposed of the asset, immediately before the day mentioned in subsection (5), for a consideration equal to its market value; and

(b) to have acquired the asset again, immediately after the disposal mentioned in paragraph (a), for a consideration equal to the higher of the following:

(i) its market value immediately before that disposal;

(ii) its cost base immediately before that disposal.

(3) The purposes are as follows:

(a) the purposes of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997;

(b) if the asset is a revenue asset - determining whether an amount is included in, or can be deducted from, the assessable income of the entity.

(4) Despite subsection (3):

(a) disregard any capital gain or capital loss the sovereign entity makes because of the disposal mentioned in paragraph (2)(a); or

(b) if the asset is a revenue asset - disregard any amount that could (apart from this subsection) be included in, or be deducted from, the assessable income of the entity as a result of that disposal.

(5) For the purposes of paragraphs (1)(e) and (2)(a), the day is:

(a) unless paragraph (b) applies - the later of the following days:

(i) 1 July 2026;

(ii) the day before the private ruling ceases to apply; or

(b) a day earlier than the day mentioned in paragraph (a), if:

(i) the scheme mentioned in paragraph (1)(a) is not, when it is first carried out, materially different to the scheme specified in the private ruling; and

(ii) it becomes, on the earlier day, materially different to the scheme specified in the private ruling.