Income Tax Assessment Act 1997
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.
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 ).
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||the sum of the *total participation interests held by the holding entity and its *associates in the other entity is less than 10%||zero||the *market value of the *membership interest mentioned in subsection (3)|
|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|
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.
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 ).
For the purposes of working out the *total participation interests held by the holding entity and its *associates under item 1 of the table in subsection (4), take into account:
(a) a particular *direct participation interest; or
(b) a particular *indirect participation interest;
held in the other entity only once if it would otherwise be counted more than once because the entity holding it is an associate of the holding entity.
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.
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