Income Tax Assessment Act 1936

PART III - LIABILITY TO TAXATION  

Division 9C - Assessable income diverted under certain tax avoidance schemes  

SECTION 121G   DIVERTED INCOME AND DIVERTED TRUST INCOME  

121G(1)  
Where:


(a) a taxpayer, not being a taxpayer in the capacity of a trustee, has acquired property (in this subsection referred to as the relevant property ) under a tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of a tax avoidance agreement;


(b) by reason that the taxpayer derives any income from the relevant property, an amount (in this subsection referred to as the relevant amount ) would, apart from the operation of the relevant exempting provisions, be included in the assessable income of the taxpayer of a year of income otherwise than under Division 5 , section 97 , section 99B or section 100 ;


(c) apart from this Division, the relevant amount would not be included in the assessable income of the taxpayer of the year of income; and


(d) so much of the amount or value of the consideration provided by the taxpayer under or in connection with the tax avoidance agreement as the Commissioner is satisfied was provided in respect of the acquisition by the taxpayer of the relevant property substantially exceeds the amount or value of the consideration that might reasonably be expected to have been provided by the taxpayer in respect of the acquisition of the relevant property if the taxpayer were liable to pay tax, in respect of any income derived by the taxpayer from the relevant property, at the public company rate applicable for the financial year in which the taxpayer acquired the relevant property,

the diverted income of the taxpayer of the year of income shall include the relevant amount.

121G(2)  
Where:


(a) a taxpayer, not being a taxpayer in the capacity of a trustee, has acquired property (in this subsection referred to as the relevant property ), being an interest in a partnership, under a tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of a tax avoidance agreement;


(b) by reason of the ownership by the taxpayer of the relevant property, an amount (in this subsection referred to as the relevant amount ) would, apart from the operation of the relevant exempting provisions, be included, under Division 5 , in the assessable income of the taxpayer of a year of income (in this subsection referred to as the relevant year of income );


(c) apart from this Division, the relevant amount would not be included in the assessable income of the taxpayer of the relevant year of income; and


(d) so much of the amount or value of the consideration provided by the taxpayer under or in connection with the tax avoidance agreement as the Commissioner is satisfied was provided in respect of the acquisition by the taxpayer of the relevant property substantially exceeds the amount or value of the consideration that might reasonably be expected to have been provided by the taxpayer in respect of the acquisition of the relevant property if the taxpayer were liable to pay tax, in respect of any income derived by the taxpayer from the relevant property, at the public company rate applicable for the financial year in which the taxpayer acquired the relevant property,

the diverted income of the taxpayer of the relevant year of income shall include the relevant amount.

121G(3)  
Where:


(a) a taxpayer, not being a taxpayer in the capacity of a trustee, has acquired property (in this subsection referred to as the relevant property ), being a beneficial interest in a trust estate, under a tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of a tax avoidance agreement;


(b) by reason of the ownership by the taxpayer of the relevant property, an amount (in this subsection referred to as the relevant amount ) would, apart from the operation of the relevant exempting provisions, be included, under Division 6 , in the assessable income of the taxpayer of a year of income (in this subsection referred to as the relevant year of income );


(c) apart from this Division, the relevant amount would not be included in the assessable income of the taxpayer of the relevant year of income; and


(d) so much of the amount or value of the consideration provided by the taxpayer under or in connection with the tax avoidance agreement as the Commissioner is satisfied was provided in respect of the acquisition by the taxpayer of the relevant property substantially exceeds the amount or value of the consideration that might reasonably be expected to have been provided by the taxpayer in respect of the acquisition of the relevant property if the taxpayer were liable to pay tax, in respect of any income derived by the taxpayer from the relevant property, at the public company rate applicable for the financial year in which the taxpayer acquired the relevant property,

the diverted income of the taxpayer of the relevant year of income shall include the relevant amount.

121G(4)  
Where:


(a) a taxpayer, being a taxpayer in the capacity of a trustee of a trust estate, has acquired property (in this subsection referred to as the relevant property ) under a tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of a tax avoidance agreement;


(b) by reason that the taxpayer derives any income from the relevant property, an amount (in this subsection referred to as the relevant amount ) would, apart from the operation of the relevant exempting provisions, be included in the assessable income of the trust estate of a year of income otherwise than under Division 5 , section 97 , section 99B or section 100 ;


(c) apart from this Division, the relevant amount would not be included in the assessable income of the trust estate of the year of income; and


(d) (Omitted by No 97 of 1989)


(e) so much of the amount or value of the consideration provided by the taxpayer under or in connection with the tax avoidance agreement as the Commissioner is satisfied was provided in respect of the acquisition by the taxpayer of the relevant property substantially exceeds the amount or value of the consideration that might reasonably be expected to have been provided by the taxpayer in respect of the acquisition of the relevant property if the taxpayer were liable to pay tax, in respect of any income derived by the taxpayer from the relevant property, at the public company rate applicable for the financial year in which the taxpayer acquired the relevant property,

the diverted trust income of the trust estate of the year of income shall include the relevant amount.

121G(5)  
Where:


(a) a taxpayer, being a taxpayer in the capacity of a trustee of a trust estate, has acquired property (in this subsection referred to as the relevant property ), being an interest in a partnership, under a tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of a tax avoidance agreement;


(b) by reason of the ownership by the taxpayer of the relevant property, an amount (in this subsection referred to as the relevant amount ) would, apart from the operation of the relevant exempting provisions, be included, under Division 5 , in the assessable income of the trust estate of a year of income (in this subsection referred to as the relevant year of income );


(c) apart from this Division, the relevant amount would not be included in the assessable income of the trust estate of the relevant year of income; and


(d) (Omitted by No 97 of 1989)


(e) so much of the amount or value of the consideration provided by the taxpayer under or in connection with the tax avoidance agreement as the Commissioner is satisfied was provided in respect of the acquisition by the taxpayer of the relevant property substantially exceeds the amount or value of the consideration that might reasonably be expected to have been provided by the taxpayer in respect of the acquisition of the relevant property if the taxpayer were liable to pay tax, in respect of any income derived by the taxpayer from the relevant property, at the public company rate applicable for the financial year in which the taxpayer acquired the relevant property,

the diverted trust income of the trust estate of the relevant year of income shall include the relevant amount.

121G(6)  
Where:


(a) a taxpayer, being a taxpayer in the capacity of a trustee of a trust estate (in this subsection referred to as the relevant trust estate ), has acquired property (in this subsection referred to as the relevant property ), being a beneficial interest in another trust estate, under a tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of a tax avoidance agreement;


(b) by reason of the ownership by the taxpayer of the relevant property, an amount (in this subsection referred to as the relevant amount ) would, apart from the operation of the relevant exempting provisions, be included, under section 97 , 99B or 100 , in the assessable income of the relevant trust estate of a year of income (in this subsection referred to as the relevant year of income );


(c) apart from this Division, the relevant amount would not be included in the assessable income of the relevant trust estate of the relevant year of income; and


(d) (Omitted by No 97 of 1989)


(e) so much of the amount or value of the consideration provided by the taxpayer under or in connection with the tax avoidance agreement as the Commissioner is satisfied was provided in respect of the acquisition by the taxpayer of the relevant property substantially exceeds the amount or value of the consideration that might reasonably be expected to have been provided by the taxpayer in respect of the acquisition of the relevant property if the taxpayer were liable to pay tax, in respect of any income derived by the taxpayer from the relevant property, at the public company rate applicable for the financial year in which the taxpayer acquired the relevant property,

the diverted trust income of the relevant trust estate of the relevant year of income shall include the relevant amount.

121G(7)  


(Omitted by No 29 of 1982)

121G(8)   [Deductions not allowable - subsection (2), (3), (5) and (6)]  

Where:


(a) a deduction is allowable or deductions are allowable, in calculating the net income of a partnership or trust estate of a year of income, in respect of losses or outgoings (in this subsection referred to as the relevant losses or outgoings ) incurred under or in connection with a tax avoidance agreement;


(b) if no deduction were allowable, in calculating that net income, in respect of the relevant losses or outgoings and no relevant exempting provisions were applicable in relation to a taxpayer, an amount would be included in the assessable income of the taxpayer of a year of income by reason that the taxpayer owned an interest in the partnership or a beneficial interest in the trust estate or owned an interest in any other partnership or a beneficial interest in any other trust estate; and


(c) if the deduction or deductions were allowed, in calculating that net income, in respect of the relevant losses or outgoings and no relevant exempting provision were applicable in relation to the taxpayer:


(i) no amount would be included in the assessable income of the taxpayer of the year of income by reason that the taxpayer owned an interest in a partnership or a beneficial interest in a trust estate as mentioned in paragraph (b); or

(ii) an amount would be included in the assessable income of the taxpayer of the year of income by reason that the taxpayer owned an interest in a partnership or a beneficial interest in a trust estate as mentioned in paragraph (b) but the amount that would be so included in that assessable income would be less than the amount referred to in paragraph (b),

then, for the purposes of the application of subsections (2), (3), (5) and (6) in relation to the taxpayer in relation to the tax avoidance agreement, no deduction shall be allowed in respect of the relevant losses or outgoings in calculating the net income of the partnership or trust estate referred to in paragraph (a).

121G(9)  


(Omitted by No 29 of 1982)

121G(10)  


For the purposes of the application of subsection (8), a reference to a deduction that is allowable in calculating the net income of a partnership does not include a reference to a deduction allowable to the partnership in respect of expenditure taken under sections 70-90 and 70-95 and subsection 70-100(3) of the Income Tax Assessment Act 1997 to have been incurred in the acquisition of trading stock by the partnership.

121G(11)  
In determining for the purposes of this section the amount or value of the consideration that might reasonably be expected to have been provided by a taxpayer in respect of the acquisition of property by the taxpayer if the taxpayer were liable to pay tax in respect of any income derived by the taxpayer from the property at the public company rate applicable for the financial year in which the taxpayer acquired the property, the possibility that the taxpayer would be entitled to a rebate of tax in respect of any of that income shall be disregarded.

121G(12)  


In determining for the purposes of this section whether an amount would, apart from the operation of the relevant exempting provisions, be included in the assessable income of a taxpayer or a trust estate of a year of income, section 128D of this Act and section 802-15 of the Income Tax Assessment Act 1997 shall be disregarded.

121G(13)  
For the purposes of this section, where:


(a) a taxpayer acquired property, being an interest in a trust estate or partnership, before the time when a tax avoidance agreement was entered into; and


(b) under the tax avoidance agreement, or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance agreement, the amount of the share (in this subsection referred to as the relevant share ) of the taxpayer of the income of the trust estate or partnership of any year of income was or is increased,

the following provisions apply:


(c) the property referred to in paragraph (a) shall be taken to have been acquired by the taxpayer under the tax avoidance agreement; and


(d) any consideration provided by the taxpayer in respect of the increase in the amount of the relevant share shall be taken to be consideration provided by the taxpayer in respect of the acquisition of the property referred to in paragraph (a).

121G(14)  
For the purposes of the application of this section in relation to the acquisition of property by a person under a tax avoidance agreement, the Commissioner may be satisfied that consideration provided by the person under or in connection with the tax avoidance agreement was provided by the person in respect of the acquisition of the property notwithstanding, in a case where the person acquired property from another person, that the consideration was not provided to that other person.


 

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