INCOME TAX ASSESSMENT ACT 1936

PART III - LIABILITY TO TAXATION  

Division 7A - Distributions to entities connected with a private company  

Subdivision E - Payments and loans through interposed entities  

SECTION 109T   PAYMENTS AND LOANS BY A PRIVATE COMPANY TO AN ENTITY THROUGH ONE OR MORE INTERPOSED ENTITIES  

109T(1)   [When Division operates]  

This Division operates as if a private company makes a payment or loan to an entity (the target entity ) as described in section 109V or 109W if:


(a) the private company makes a payment or loan to another entity (the first interposed entity ) that is interposed between the private company and the target entity; and


(b) a reasonable person would conclude (having regard to all the circumstances) that the private company made the payment or loan solely or mainly as part of an arrangement involving a payment or loan to the target entity; and


(c) either:


(i) the first interposed entity makes a payment or loan to the target entity; or

(ii) another entity interposed between the private company and the target entity makes a payment or loan to the target entity.

109T(2)   This section operates regardless of certain factors.  

For the purposes of this section, it does not matter:


(a) whether the interposed entity made the payment or loan to the target entity before, after or at the same time as the first interposed entity received the payment or loan from the private company; or


(b) whether or not the interposed entity paid or lent the target entity the same amount as the private company paid or lent the first interposed entity.

109T(3)   This section does not operate if the payment or loan to the first interposed entity is treated as a dividend.  

This Division does not operate as described in subsection (1) (and sections 109V and 109W ) if the private company is taken under Subdivision B (as it applies apart from this Subdivision) to pay a dividend as a result of the payment or loan to the first interposed entity.


 

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