Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES

PART 3-6 - THE IMPUTATION SYSTEM

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Division 207 - Effect of receiving a franked distribution

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Subdivision 207-F - No gross-up or tax offset where the imputation system has been manipulated

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Operative provisions

SECTION 207-160 Distribution that is treated as an interest payment

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207-160(1)
For the purposes of this Subdivision, a *franked distribution is treated as an interest payment for an entity to whom the distribution *flows indirectly if:

(a) all or a part of the entity ' s individual interest or share amount in relation to the distribution that is mentioned in subsection 207-50(2) , (3) or (4) could reasonably be regarded as the payment of interest on a loan, having regard to:

(i) the way in which that individual interest or share amount was calculated; and

(ii) the conditions applying to the payment or application of that individual interest or share amount; and

(iii) any other relevant matters; and

(b) the entity ' s interest in the last intermediary entity (see subsection (2)):

(i) was acquired, or was acquired for a period that was extended, at or after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; or

(ii) was acquired as part of a *financing arrangement for the entity (including an arrangement extending to an earlier arrangement) that was entered into at or after that time.

207-160(2)
The entity ' s interest in the last intermediary entity is:

(a) if the distribution *flows indirectly to the entity as a partner in a partnership under subsection 207-50(2) - the entity ' s interest in the partnership; or

(b) if the distribution flows indirectly to the entity as a beneficiary of a trust under subsection 207-50(3) - the entity ' s interest in the trust; or

(c) if the distribution flows indirectly to the entity as the trustee of a trust under subsection 207-50(4) - the entity ' s interest in the trust in respect of which the entity is liable to be assessed.

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History

S 207-160 substituted for s 207-160, 207-165 and 207-170 by No 83 of 2004, s 3 and Sch 10 item 15, applicable to events that occur on or after 1 July 2002, subject to the rules on the application of Part 3-6 of the Income Tax Assessment Act 1997 set out in the Income Tax (Transitional Provisions) Act 1997 . S 207-160 formerly read:

Interest payments - distributions that flow indirectly to a beneficiary of a trust
207-160(1)
For the purposes of this Subdivision, a *franked distribution is treated as an interest payment if:

(a) it *flows indirectly to an entity as beneficiary of a trust; and

(b) the entity ' s interest in the trust:

(i) was acquired, or was acquired for a period that was extended, at or after the commencing time; or

(ii) was acquired as part of a *financing arrangement for the entity (including an arrangement extending to an earlier arrangement) entered into at or after the commencing time; and

(c) having regard to the matters in subsection (2), the distribution could reasonably be regarded as equivalent to the payment of interest on a loan.

207-160(2)
A *distribution that *flows indirectly to a beneficiary of a trust can reasonably be regarded as equivalent to the payment of interest on a loan if:

(a) an amount is included in the assessable income of the entity, for the income year in which the distribution is made, that is attributable to the distribution; and

(b) having regard to the following matters, the amount could reasonably be regarded as equivalent to the payment of interest on a loan:

(i) the way in which the amount was calculated;

(ii) the conditions applying to the inclusion of the amount;

(iii) any other relevant matters.

207-160(3)
The commencing time , for the purposes of subsection (1), is 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997.

S 207-160 inserted by No 48 of 2002.

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