Income Tax Assessment Act 1936

PART X - ATTRIBUTION OF INCOME IN RESPECT OF CONTROLLED FOREIGN COMPANIES  

Division 10 - Post-attribution asset disposals  

SECTION 461   REDUCTION OF DISPOSAL CONSIDERATION OR CAPITAL PROCEEDS IF ATTRIBUTED INCOME NOT DISTRIBUTED  

461(1)  


If:


(a) it is necessary, for the purposes of applying a provision of this Act in the assessment of a taxpayer for a year of income, to take into account:


(i) the amount of consideration received, entitled to be received or taken to have been received, by the taxpayer in respect of the disposal of an asset; or

(ii) the capital proceeds from a CGT event happening in relation to a CGT asset;
being an asset that is an interest in an attribution account entity (the disposal entity ); and


(b) immediately before the disposal or CGT event takes place, either or both of the following conditions are satisfied:


(i) there is an attribution surplus for the disposal entity in relation to the taxpayer;

(ii) there is an attribution surplus for one or more other attribution account entities in relation to the taxpayer, where each such entity is one in which the taxpayer has an indirect attribution account interest held through the disposal entity;

then, for the purposes of this Act:


(c) the consideration or capital proceeds that, apart from this section, would be taken into account under the provision referred to in paragraph (a) in respect of the disposal or CGT event is, subject to subsection (3), taken to be reduced by so much of the amount of the attribution surplus, or sum of the attribution surpluses, as the case requires; and


(d) an attribution debit is taken to arise at the time of the disposal or the CGT event under section 372 , in relation to the taxpayer, for each attribution account entity (the surplus entity ) in relation to which there is a surplus to which paragraph (c) applies; and


(e) the amount of the attribution debit is equal to so much of the surplus as is taken into account under paragraph (c); and


(f) there is no grossed up amount in relation to the attribution debit under section 373 .

461(3)  


For the purposes of paragraph (1)(c):


(a) if the disposal of the asset or the CGT event causes the taxpayer ' s attribution account percentage for a surplus entity to be reduced by a proportion, then only that proportion of the attribution surplus for the entity is, subject to this subsection, to be taken into account under that paragraph; and


(b) if there is only one attribution surplus referred to in that paragraph and (after any application of paragraph (a) of this subsection) it exceeds the consideration from the disposal or the capital proceeds from the CGT event, then only so much of the surplus as does not exceed that consideration or those capital proceeds is to be taken into account under paragraph (1)(c); and


(c) where there are 2 or more attribution surpluses referred to in paragraph (1)(c) and (after any application of paragraph (a) of this subsection) their sum exceeds the consideration from the disposal or the capital proceeds from the CGT event, then:


(i) if the taxpayer makes an election that, for the purposes of this paragraph, a part of each surplus (after any application of paragraph (a)) such that the sum of the amounts to which the election relates equals that consideration or those capital proceeds - only the part to which the election relates of each surplus is to be taken into account under paragraph (1)(c); or

(ii) if subparagraph (i) does not apply - only a proportion of each surplus (after any application of paragraph (a)) is to be taken into account under paragraph (1)(c), being the proportion calculated using the formula:


Consideration
Total surplus

where:

consideration
means the amount of the consideration or the capital proceeds.

total surplus
means the sum of the attribution surpluses (after any application of paragraph (a)).

461(4)  


An election for the purposes of paragraph (3)(c) must be made on or before the date of lodgment of the taxpayer ' s return of income for the year of income referred to in paragraph (1)(a) or within such further period after the lodgment of the return as the Commissioner allows.

461(4A)  


In determining, for the purposes of this section, whether there was an attribution surplus immediately before a CGT event, and the amount of such a surplus, also take into account any attribution credit that later arises because the CGT event caused section 104-175 of the Income Tax Assessment Act 1997 (as it notionally applies to the CGT event entity under Division 7 ) to operate.

461(5)  
In this section:

"interest"
, in relation to an attribution account entity, means:


(a) if the entity is a company - an interest in shares in the company, or an entitlement to acquire such an interest; or


(b) if the entity is a partnership - an interest of a partner in the profits or property of the partnership, or an entitlement of a partner to acquire such an interest; or


(c) if the entity is a trust - an entitlement of a beneficiary to a share of the income or corpus of the trust, or an entitlement of a beneficiary to acquire such an entitlement.


 

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