INCOME TAX ASSESSMENT ACT 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 855 - Capital gains and foreign residents  

Subdivision 855-A - Disregarding a capital gain or loss by foreign residents  

SECTION 855-30   Principal asset test  

855-30(1)  
The purpose of this section is to define when an entity ' s underlying value is principally derived from Australian real property (see paragraph 855-5(2)(b) ).

855-30(2)  
A *membership interest held by an entity (the holding entity ) in another entity (the test entity ) passes the principal asset test if the sum of the *market values of the test entity ' s assets that are *taxable Australian real property exceeds the sum of the *market values of its assets that are not taxable Australian real property.

Note:

The market value of any of the latter kind of assets that are duplicated within the test entity ' s corporate group could be disregarded (see section 855-32 ).

855-30(3)  
For the purposes of subsection (2), treat an asset of an entity (the first entity ) that is a *membership interest in another entity (the other entity ) as if it were instead the following 2 assets:


(a) an asset that is *taxable Australian real property (the TARP asset );


(b) an asset that is not taxable Australian real property (the non-TARP asset ).

855-30(4)  
For the purposes of subsection (2), treat the *market value of the TARP asset and the non-TARP asset according to the following table.


Market value of the TARP asset and the non-TARP asset
Item If: the market value of the TARP asset is: the market value of the non-TARP asset is:
1 (a) the first entity ' s *direct participation interest in the other entity is less than 10%; or zero the *market value of the *membership interest mentioned in subsection (3)
(b) the holding entity ' s *total participation interest in the other entity is less than 10%
2 item 1 does not apply the product of: the product of:
(a) the sum of the *market values of all the assets of the other entity that are *taxable Australian real property; and (a) the sum of the market values of all the assets of the other entity that are not taxable Australian real property; and
(b) the first entity ' s *direct participation interest in the other entity (b) the first entity ' s direct participation interest in the other entity

Note 1:

For the purposes of item 2 of the table, it is necessary to work out the market value of any TARP assets and non-TARP assets in relation to any membership interests held by the other entity before working out the value of the TARP asset and non-TARP asset held by the first entity.

Note 2:

The market value of an asset of the other entity that is not taxable Australian real property, and is duplicated within the other entity ' s corporate group, could be disregarded (see section 855-32 ).

855-30(5)  
For the purposes of this section, disregard the *market value of any asset acquired by the test entity, or by any other entity, if the *acquisition was done for a purpose (other than an incidental purpose) that included ensuring that a *membership interest in any entity would not pass the principal asset test in this section.


 

Disclaimer and notice of copyright applicable to materials provided by CCH Australia Limited

CCH Australia Limited ("CCH") believes that all information which it has provided in this site is accurate and reliable, but gives no warranty of accuracy or reliability of such information to the reader or any third party. The information provided by CCH is not legal or professional advice. To the extent permitted by law, no responsibility for damages or loss arising in any way out of or in connection with or incidental to any errors or omissions in any information provided is accepted by CCH or by persons involved in the preparation and provision of the information, whether arising from negligence or otherwise, from the use of or results obtained from information supplied by CCH.

The information provided by CCH includes history notes and other value-added features which are subject to CCH copyright. No CCH material may be copied, reproduced, republished, uploaded, posted, transmitted, or distributed in any way, except that you may download one copy for your personal use only, provided you keep intact all copyright and other proprietary notices. In particular, the reproduction of any part of the information for sale or incorporation in any product intended for sale is prohibited without CCH's prior consent.