| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011759302187
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: Sale and re-purchase arrangement
Question 1
Is Sub Co not a subsidiary member of the X Co tax consolidated group immediately prior to the commencement of the transaction?
Answer
Yes
Question 2
Does Sub Co again become a subsidiary member of the X Co tax consolidated group when the B Prefs are acquired by X Co under transaction?
Answer
Yes
Question 3
At the time when Sub Co exits the X Co tax consolidated group upon exercise of the Put and Call Option prior to termination, does item 2 of the table in section 701-60 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to determine the tax cost setting amount of the B Prefs for X Co? If item 2 of the table in section 701-60 applies, are the B Prefs included at step 4 under subsection 711-20(1) of the ITAA 1997 on exit?
Answer
At the time when Sub Co exits the X Co tax consolidated group, item 2 rather than item 3 of the table in section 701-60 of the ITAA 1997 applies in relation to the B Prefs. The B Prefs are not included at step 4 under subsection 711-20(1) of the ITAA 1997 on exit.
Question 4
Are dividends paid by X Co on its ordinary shares (M Ords) frankable distributions pursuant to section 202-40 of the ITAA 1997?
Answer
Yes
Question 5
Does section 177EA of the Income Tax Assessment Act 1936 (ITAA 1936) apply to X Co in relation to dividends it pays on the X Ords out of profits?
Answer
No
Question 6
Does section 177D of the ITAA 1936 Act apply to X Co in relation to the scheme or any aspect of the scheme?
Answer
No
Question 7
Are dividends paid to Parent Co, including dividends credited under dividend reinvestment terms in the X Co constitution, on the X Ords, assessable income of Parent Co under section 44 of the ITAA 1936?
Answer
Yes
Question 8
Is Parent Co entitled to a franking tax offset under section 207-20 of the ITAA 1997 in respect of franked dividends Parent Co receives on the X Ords?
Answer
Yes
Question 9
Does section 177EA of the ITAA 1936 Act apply to Parent Co in relation to franked dividends Parent Co receives on the X Ords?
Answer
No
Question 10
Will accumulated dividends paid by Sub Co to Y Co on the B Prefs be subject to dividend withholding tax under subsection 128B(1) of the ITAA 1936?
Answer
No
Question 11
Does section 177CA of the ITAA 1936 and the provisions dealing with avoidance of withholding tax apply to Y Co in relation to the transaction?
Answer
No
This ruling applies for the following periods:
Year ending 30 September 2010
Year ending 30 September 2011
Year ending 30 September 2012
Year ending 30 September 2013
Year ending 30 September 2014
Year ending 30 September 2015
The scheme commences on:
The income year ending 30 September 2010
Relevant Facts and Circumstances
This financing transaction concerns the provision of a loan by Parent Co to its wholly owned non-resident subsidiary, P-Sub, via the use of sale and repurchase agreements (repos).
The loan was effected by the sale and repurchase of preference shares. X Co, a subsidiary of Parent Co, purchased the preference shares in an Australian company (outside the Parent Co tax consolidated group) from Y Co, a subsidiary of P-Sub. At the end of the repos, the preference shares were repurchased by Y Co.
The repos placed P-Sub in funds to finance its business.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 6(1)
Income Tax Assessment Act 1936 Section 44
Income Tax Assessment Act 1936 Subparagraph 44(1)(a)(i)
Income Tax Assessment Act 1936 Section 128B
Income Tax Assessment Act 1936 Subsection 128B(1)
Income Tax Assessment Act 1936 Subsection 128B(3)
Income Tax Assessment Act 1936 Paragraph 128B(3)(ga)
Income Tax Assessment Act 1936 Subsection 128B(4)
Income Tax Assessment Act 1936 former Subsection 160APHM(2)
Income Tax Assessment Act 1936 former Subsection 160APHN(2)
Income Tax Assessment Act 1936 former Section 160APHO
Income Tax Assessment Act 1936 former Subsection 160APHO(2)
Income Tax Assessment Act 1936 Section 177CA
Income Tax Assessment Act 1936 Section 177D
Income Tax Assessment Act 1936 Paragraph 177D(b)
Income Tax Assessment Act 1936 Section 177EA
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Section 202-40
Income Tax Assessment Act 1997 Subsection 202-40(1)
Income Tax Assessment Act 1997 Section 202-45
Income Tax Assessment Act 1997 Section 207-20
Income Tax Assessment Act 1997 Section 207-75
Income Tax Assessment Act 1997 Paragraph 207-75(1)(b)
Income Tax Assessment Act 1997 Paragraph 207-145(1)(a)
Income Tax Assessment Act 1997 Section 701-1
Income Tax Assessment Act 1997 Section 701-15
Income Tax Assessment Act 1997 Subsection 701-15(2)
Income Tax Assessment Act 1997 Subsection 701-15(3)
Income Tax Assessment Act 1997 Section 701-20
Income Tax Assessment Act 1997 Subsection 701-20(2)
Income Tax Assessment Act 1997 Section 701-60
Income Tax Assessment Act 1997 Paragraph 703-15(2)(b)
Income Tax Assessment Act 1997 Section 703-20
Income Tax Assessment Act 1997 Section 703-30
Income Tax Assessment Act 1997 Subsection 703-30(1)
Income Tax Assessment Act 1997 Section 705-25
Income Tax Assessment Act 1997 Section 705-30
Income Tax Assessment Act 1997 Section 705-35
Income Tax Assessment Act 1997 Section 705-60
Income Tax Assessment Act 1997 Section 711-5
Income Tax Assessment Act 1997 Subsection 711-5(2)
Income Tax Assessment Act 1997 Subsection 711-5(3)
Income Tax Assessment Act 1997 Subsection 711-5(4)
Income Tax Assessment Act 1997 Section 711-20
Income Tax Assessment Act 1997 Subsection 711-20(1)
Income Tax Assessment Act 1997 Section 711-45
Income Tax Assessment Act 1997 Subsection 711-45(1)
Income Tax Assessment Act 1997 Subsection 960-130(1)
Income Tax Assessment Act 1997 Section 960-135
Income Tax Assessment Act 1997 Section 974-20
Income Tax Assessment Act 1997 Subsection 974-75(1)
Income Tax Assessment Act 1997 Section 974-135
Income Tax Assessment Act 1997 Section 995-1
International Tax Agreements Act 1953 Section 4
International Tax Agreements Act 1953 Schedule Sch1
International Tax Agreements Act 1953 Section Sch1-Art10
International Tax Agreements Act 1953 Subsection Sch1-Art10(2)
International Tax Agreements Act 1953 Subsection Sch1-Art10(3)
International Tax Agreements Act 1953 Paragraph Sch1-Art10(3)(b)
International Tax Agreements Act 1953 Subsection Sch1-Art10(8)
International Tax Agreements Act 1953 Subsection Sch1-Art10(7)
International Tax Agreements Act 1953 Paragraph Sch1-Art3(1)(o)
Income Tax Rates Act 1986 Section 3
Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 Section 7