Income Tax Assessment Amendment (Foreign Investment) Act 1992 (Cth)

Income Tax Assessment Amendment (Foreign Investment) Act 1992

No. 190 of 1992

An Act to amend the law relating to income tax

[Assented to 18 December 1992]

The Parliament of Australia enacts:

Short title etc.

1.(1) This Act may be cited as the Income Tax Assessment Amendment (Foreign Investment) Act 1992.

(2) In this Act, “Principal Act” means the Income Tax Assessment Act 19361.

Commencement

2. This Act commences, or is taken to have commenced, on 1 January 1993.

Foreign income and foreign tax

3. Section 6AB of the Principal Act is amended:
(a) by inserting “26D,” in subsection (1) before “102AAZD”;

(b)
by omitting from subsection (1) “or 459A” and substituting “, 459A or 529”;
(c)
by inserting in subparagraph (2)(b)(i) “or 160AFCK” after “160AFCA”;
(d)
by adding at the end of paragraph (2)(b) the following subparagraphs:
“(v) tax that is taken, because of section 160AFCE, 160AFCF, 160AFCG or 160AFCH, to have been paid in respect of an amount included in assessable income under section 529;
(vi) tax that is taken, because of section 160AFCJ, to have been paid in respect of the section 23AK exempt part of a FIF attribution account payment (within the meaning of section 160AFCJ).”;
(e)
by omitting from subsection (3A) “or 160AFCD” and substituting “, 160AFCD, 160AFCE, 160AFCF, 160AFCG, 160AFCH, 160AFCJ or 160AFCK”;
(f)
by omitting from paragraph (3A)(a) “or 459A” and substituting “, 459A or 529”;
(g)
by adding at the end of subsection (3A) the following word and paragraph:
“; or (c) the section 23AK exempt part of a FIF attribution account payment (within the meaning of section 160AFCJ).”.

Grossing-up of foreign income

4. Section 6AC of the Principal Act is amended:
(a)
by inserting “or 160AFCK” after “160AFCA” in subsection (3);
(b)
by adding at the end the following subsection:
“(6) If a taxpayer is, because of section 160AFCE, 160AFCF, 160AFCG or 160AFCH, taken to have paid an amount of foreign tax in respect of an amount included in the assessable income of the taxpayer under section 529 (the section 529 amount’), the section 529 amount is taken, for the purposes of this Act (other than sections 160AFCE, 160AFCF, 160AFCG, 160AFCH and 605) to be increased by the amount of that tax.”.

5. After section 23AJ of the Principal Act the following section is inserted:

Exemption of amounts paid out of attributed foreign investment fund income

“23AK.(1) If:
(a) either:

(i) a FIF attribution account payment of a kind referred to in paragraph 603(1)(a), (b), (c), (d), (f) or (g) is made to a taxpayer (other than a partnership or taxpayer in the capacity of trustee of a trust); or
(ii) a FIF attribution account payment of a kind referred to in paragraph 603(1)(e) is made to a taxpayer; and
(b) on the making of the payment, a FIF attribution debit arises, for the FIF attribution account entity making the payment, in relation to the taxpayer;

the following provisions have effect:

(c)
if the payment is of a kind referred to in paragraph 603(1)(a) or (b)—the payment is exempt from tax to the extent of the debit;
(d)
if the payment is of a kind referred to in paragraph 603(1)(c) and, apart from this section, an amount would be included in the taxpayer’s assessable income under section 92 in respect of an individual interest in the net income of the partnership of the year of income referred to in that paragraph—that amount is not so included, to the extent of the debit;
(e)
if the payment is of a kind referred to in paragraph 603(1)(d) and, apart from this section, an amount would:
(i) be included in the taxpayer’s assessable income under section 97, 98A or 100; or
(ii) be assessable to the trustee of the trust referred to in that paragraph under section 98;
in respect of a share of the net income of the trust of the year of income referred to in that paragraph—that amount is not so included, or not so assessable, to the extent of the debit;
(f)
if the payment is of a kind referred to in paragraph 603(1)(e)—the payment is not, to the extent of the debit, assessable to the taxpayer as mentioned in that paragraph;
(g)
if the payment is of a kind referred to in paragraph 603(1)(f) and, apart from this section, an amount would be included in the taxpayer’s assessable income, of the year of income referred to in that paragraph, under section 99B in respect of the trust property referred to in that paragraph—that amount is not so included to the extent of the debit;
(h) if the payment is of a kind referred to in paragraph 603(1)(g)—the payment is exempt from tax to the extent of the debit.
“(2) This section is to be disregarded for the purposes of applying:
(a)
the definition of ‘foreign income deduction’ in sections 79D and 160AFD; and
(b)
any other provision of this Act to determine allowable deductions.

“(3) In this section:

‘FIF attribution account entity’ has the same meaning as in Part XI;

‘FIF attribution account payment’ has the same meaning as in Part XI;

‘FIF attribution debit’ has the same meaning as in Part XI;

‘trust’ has the same meaning as in Part XI, but does not include a trust covered by subsection 605(9).”.

6. After section 26C of the Principal Act the following section is inserted:

Assessable income of taxpayer to include foreign tax in certain circumstances

“26D. If a taxpayer is taken under subsection 160AFCJ(3) for the purposes of the application of Division 18 of Part III in relation to a year of income to have paid, and to have been personally liable for, an amount of foreign tax worked out using the formula referred to in that subsection, the taxpayer’s assessable income of the year of income includes an amount equal to so much of the amount of the foreign tax as the taxpayer would be taken under subsection 160AFCJ(3) for the purposes of the application of that Division to have paid, and to have been personally liable for, if the formula referred to in that subsection had not included the components (EP × DT).”.

Value at end of year of income

7. Section 31 of the Principal Act is amended by adding at the end the following subsections:

“(4) Subject to the following provisions of this section, the value to be taken into account at the end of the 1991-92 year of income, and at the end of each later year of income, of an article of trading stock that consists of an interest in a FIF is to be its cost price.

“(5) Subject to subsection (6), if the taxpayer elects that this subsection is to apply to the taxpayer in relation to all the taxpayer’s interests in FIFs, the value to be taken into account at the end of the year of income of every article of trading stock that is an interest in a FIF is to be its market value.

“(6) Subsection (5) does not apply to the taxpayer unless the election is made before the taxpayer furnishes a return in respect of income of the first year of income in which any notional accounting period of a FIF in which the taxpayer has an interest ends but, if the election is so made, that subsection applies to the taxpayer in respect of that first year of income and in respect of all later years of income.

“(7) If:
(a) subsection (4) would, apart from this subsection, apply to the taxpayer in respect of the 1991-92 year of income; and

(b)
an article of trading stock was on hand at the beginning of that year of income; and
(c)
the value of that article of trading stock that was taken into account at the beginning of that year of income was greater or less than its cost price;

then:

(d)
subsection (4) does not apply in relation to that article of trading stock; and
(e)
the value of that article of trading stock that is to be taken into account at the end of that year of income, or at the end of any later year of income to which subsection (5) does not apply, is the value referred to in paragraph (c) of this subsection.
“(8) In this section:

‘FIF’ has the same meaning as in Part XI;

‘notional accounting period’, in relation to a FIF, has the same meaning as in Part XI.”.

General domestic losses of post-1989 years of income

8. Section 79E of the Principal Act is amended by omitting “or 23AJ” from the definition of “exempt income” in subsection (12) and substituting “, 23AJ or 23AK”.

General domestic losses of pre-1990 years of income

9. Section 80 of the Principal Act is amended by omitting “or 23AJ” from the definition of “exempt income” in subsection (3) and substituting “, 23AJ or 23AK”.

Interpretation

10. Section 95 of the Principal Act is amended by adding at the end the following subsection:

“(3) In this Division, a trust estate that is not a resident trust estate in relation to a year of income is referred to as a non-resident trust estate in relation to that year of income.”.

11.(1) After section 96 of the Principal Act the following sections are inserted:

Certain provisions not to apply in respect of interests in non-resident trust estates to which Part XI applies

“96A.(1) An amount is not to be included under section 97 in the assessable income of a year of income of a beneficiary of a trust estate if:

(a)
the beneficiary is a resident; and
(b)
the trust estate is a non-resident trust estate in relation to that year of income; and

(c) section 529 applies to the beneficiary in relation to each notional accounting period of the relevant trust that ended or began in that year of income.
“(2) If:
(a)
the assessable income of the trust estate of a resident public unit trust of a year of income includes any foreign investment fund income; and
(b)
the sum of:
(i) the values of all the interests of a beneficiary of the trust estate who is a natural person (otherwise than in the capacity of a trustee), and any associates of that beneficiary, in FIFs and resident public unit trusts; and
(ii) the values of all FLPs in which that beneficiary and any associates of that beneficiary had interests;

at the end of the year of income did not exceed $50,000; then:

(c)
in calculating the beneficiary’s share of the net income of the trust estate of the year of income, that net income is taken to be the amount that would have been that net income if that foreign investment fund income had not been included in that assessable income; and
(d)
in calculating the beneficiary’s share of the net income of any subsequent year of income, that net income is taken to be the amount that would have been that net income if section 23AK or section 613 applied as if no FIF attribution account credit arose for the relevant trust for the year of income mentioned in paragraph (c).

“(3) For the purposes of subsection (2), the value at the end of the year of income of a person’s interest in a FIF or in a resident public unit trust, or of a FLP in which a person has an interest, is taken to be:

(a)
the cost incurred by the person in acquiring the interest in the FIF, resident public unit trust or FLP, as the case may be; or
(b)
the market value of the interest in the FIF or resident public unit trust, or of the FLP, as the case may be, at the end of the year of income;

whichever is the greater amount.

“(4) For the purposes of this section, a unit trust is a resident public unit trust in relation to a year of income if:

(a)
it is a public unit trust for the purposes of Division 6AAA at all times during the year of income; and
(b)
either of the following conditions was satisfied at any time during the year of income:

(i) the central management and control of the unit trust was in Australia;
(ii) a person who was a resident or persons who were residents held more than 50% of:
(A)
the beneficial interests in the income of the unit trust; or
(B)
the beneficial interests in the property of the unit trust.
“(5) In this section:

‘interest’, in relation to a resident public unit trust, means a unit in the trust or an entitlement to acquire such a unit.

“(6) Expressions used in this section that are also used in Part XI have, unless the contrary intention appears, the same meanings as in that Part.

Beneficiary of non-resident trust estate

“96B.(1) If at any time during the 1992-93 year of income or a later year of income a taxpayer had an interest (including an interest that is to arise at a future time or is contingent on the happening of an event) in a non-resident trust estate in relation to the year of income, this section has effect for the purposes of the application of this Division to the taxpayer in relation to the trust estate in relation to the year of income.

“(2) The taxpayer is taken to be a beneficiary of the trust estate who is presently entitled to a share of the income of the trust estate of the year of income and who is not under a legal disability.

“(3) The taxpayer’s share of the net income of the trust estate of the year of income is the amount calculated in accordance with section 96C.

Calculation of beneficiary’s share of net income of non-resident trust estate

“96C.(1) If all of the income, profits or gains derived by a nonresident trust estate during the year of income consisted of either or both of the following:

(a)
income, profits or gains to which beneficiaries of the trust estate were presently entitled;
(b)
income, profits or gains to which beneficiaries of the trust estate were not presently entitled but which were distributed to beneficiaries of the trust estate during the year of income or within 2 months after the end of the year of income;

the share of a taxpayer referred to in section 96B of the net income of the trust estate of the year of income is the amount worked out using the formula:

In the formula:

‘Net income’ means the net income of the trust estate of the year of income;

‘Attribution percentage’ means the percentage of the total income, profits and gains derived by the trust estate during the year of income to which the taxpayer was presently entitled or to which the taxpayer was not presently entitled but which was distributed to the taxpayer during the year of income or within 2 months after the end of the year of income.

“(2) If subsection (1) does not apply in respect of a non-resident trust estate of the year of income, the share of a taxpayer referred to in section 96B of the net income of the trust estate of the year of income is the amount determined by calculating:

(a)
the part of the taxpayer’s share of the net income that is attributable to any interest or interests in the trust estate that the taxpayer had in the trust estate throughout the whole of the year of income; and
(b)
the part or parts of the taxpayer’s share of the net income that is or are attributable to any interest or interests in the trust estate that the taxpayer had throughout a particular part or particular parts of the year of income;

and adding up the amounts so calculated.

“(3) The part of the taxpayer’s share of the net income that is attributable to an interest or interests that the taxpayer had throughout the whole of the year of income is the amount worked out using the formula:

“(4) The part of the taxpayer’s share of the net income that is attributable to an interest that the taxpayer had throughout a particular part of the year of income is the amount worked out using the formula:

“(5) For the purposes of the formulas in subsections (3) and (4):

‘Net income’ means the net income of the trust estate of the year of income;

‘Attribution percentage’ means:

(a) the percentage of the income of the trust estate represented by the share of the income to which the taxpayer was entitled, or was entitled to acquire, at the test time because of:
(i) the taxpayer’s interest or interests in the trust estate; and

(ii) any interest or interests in the trust estate that the taxpayer was entitled to acquire; or
(b) the percentage of the corpus of the trust estate represented by the share of the corpus to which the taxpayer was entitled, or was entitled to acquire, at the test time because of:
(i) the taxpayer’s interest or interests in the trust estate; and
(ii) any interest or interests in the trust estate that the taxpayer was entitled to acquire;

or, if those percentages differ, the greater of those percentages;

‘Number of days held’ means the number of days in the part of the year of income throughout which the taxpayer had the interest;

‘Total number of days’ means the number of days in the year of income;

‘the test time’ means:

(a)
if the taxpayer had an interest or interests in the trust estate at the end of the year of income—the end of the year of income; or
(b)
if the taxpayer ceased during the year of income to have any interest in the trust estate—the time immediately before the taxpayer ceased to have such an interest.

“(6) If, apart from this subsection, the sum of the attribution percentages at a particular time in relation to a non-resident trust estate of all taxpayers who are residents would exceed 100%, the attribution percentage of each of those taxpayers is the percentage worked out using the formula:

where:

‘Individual percentage’ means the percentage that, apart from this subsection, would be the attribution percentage of the taxpayer concerned;

‘Total percentage’ means the sum of the percentages that, apart from this subsection, would be the attribution percentages of all taxpayers that are residents.

“(7) For the purposes of subsection (5):
(a)
the percentage of the income of the trust estate represented by the share of the income to which the taxpayer was entitled, or was entitled to acquire, at the test time because of the interest or interests referred to in subparagraph (a)(i) or (ii) of the definition of ‘attribution percentage’ in that subsection; or
(b)
the percentage of the corpus of the trust estate represented by the share of the corpus to which the taxpayer was entitled, or was entitled to acquire, at the test time because of the interest

or interests referred to in subparagraph (b)(i) or (ii) of the definition of ‘attribution percentage’ in that subsection; is to be worked out by:

(c) ascertaining whichever of the following is applicable:
(i) the income of the trust estate for the year of income;
(ii) the corpus of the trust estate as at the end of the year of income; and
(d)
assuming that the share to which the taxpayer was entitled, or became entitled to acquire, at the test time because of the interest or interests was the same at all other times during the year of income; and
(e)
ascertaining the percentage concerned:
(i) if the test time is a time other than the end of the year of income—at the end of the year of income instead of at the test time; and
(ii) on that assumption.
“(8) In this section:

‘entitled to acquire’ has the same meaning as in Part XI.

“(9) A reference in this section to income, profits or gains having been distributed to a beneficiary of a trust estate is a reference to an amount included in such income, profits or gains having been paid or credited to, or applied for the benefit of, such a beneficiary.”.

(2) The sections inserted in the Principal Act by subsection (1) apply to assessments in respect of income of the 1992-93 year of income and in respect of income of all later years of income.

Payment of interest by taxpayer on distributions from certain non-resident trust estates

12.(1) Section 102AAM of the Principal Act is amended by inserting after subsection (1) the following subsections:

“(1A) For the purposes of subsection (1), unless the contrary is established by the taxpayer:

(a)
a distributed amount in relation to a listed country trust estate in relation to a non-resident trust’s year of income is taken to be wholly attributable to income and profits of the trust estate of that year of income that represent eligible designated concession income in relation to a listed country; and
(b)
a distributed amount in relation to a trust estate that was not a listed country trust estate in relation to a non-resident trust’s year of income is taken to be wholly attributable to income and profits of the trust estate of that year of income that have not been subject to tax in any listed country in a tax accounting period.

“(1B) This section does not apply to a distributed amount that is attributable to income or profits of the estate of a deceased person if the amount was paid to, or applied for the benefit of, the taxpayer within 3 years after the death of that person.

“(1C) This section does not apply to a distributed amount that was included in the assessable income of a taxpayer of a year of income under section 99B in relation to a trust estate if, at all times during the year of income, the trust:

(a)
was a public unit trust; and
(b)
was not a controlled foreign trust.”.

(2) The amendments made by subsection (1) apply to assessments in respect of income of the 1992-93 year of income and in respect of income of all later years of income.

Interpretation

13. Section 160AE of the Principal Act is amended by inserting in subsection (1) the following definitions:

“ ‘FIF’ has the same meaning as in Part XI;

‘FIF attributed tax account debit’ has the same meaning as in Part XI;

‘FIF attribution account entity’ has the same meaning as in Part XI;

‘FIF attribution account payment’ has the same meaning as in Part XI;

‘foreign investment fund income’ has the same meaning as in Part XI;

‘foreign trust’ has the same meaning as in Part XI;

‘notional accounting period’ has the same meaning as in Part XI;

‘notional assessable income’ has the same meaning as in Part X;

‘notional income’ has the same meaning as in Part XI;”.

Passive income

14. Section 160AEA of the Principal Act is amended:
(a)
by inserting “26D,” in paragraph (1)(n) before “102AAZD”;
(b)
by omitting from paragraph (1)(n) “or 459A” and substituting “, 459A or 529”;
(c)
by omitting from subsection (1) “but does not include offshore banking income.” and substituting:
“but does not include:
(o) offshore banking income; or
(p) an amount that arose from an asset necessarily held by the taxpayer in connection with an insurance business actively carried on by the taxpayer.”.

15. After section 160AFCD of the Principal Act the following sections are inserted:

Foreign tax in respect of certain amounts assessable under section 529 from interest in foreign company

“160AFCE.(1) If:
(a)
an amount (‘the section 529 amount’) is included in the assessable income of a taxpayer, being a company, of a year of income under section 529; and
(b)
the section 529 amount was determined by the application of the calculation method set out in Subdivision D of Division 18 of Part XI in respect of a notional accounting period of a foreign company; and
(c)
at the end of the notional accounting period the foreign company was related to the taxpayer; and
(d)
an amount (‘the gross deductible amount’) is a notional deduction under that Subdivision from the foreign company’s notional income of the notional accounting period because the foreign company paid an amount in respect of foreign tax;

subsection (2) has effect.

“(2) The taxpayer is taken, for the purposes of this Division, to have paid, and to have been personally liable for, in respect of the section 529 amount, in the year of income, an amount of foreign tax worked out using the formula:

In the formula:

‘Taxpayer’s share of calculated profit of foreign company’ means the share of the calculated profit of the foreign company in respect of the notional accounting period to which the taxpayer is entitled as determined under Subdivision D of Division 18 of Part XI;

‘Calculated profit of foreign company’ means the calculated profit of the foreign company in respect of the notional accounting period as determined under Subdivision D of Division 18 of Part XI.

Foreign tax if taxpayer has indirect interest in foreign company

“160AFCF.(1) This section applies if:
(a)
a taxpayer, being a company, had an interest in a foreign company (‘the first tier foreign company’) during the whole or a part of the notional accounting period of the first tier foreign company (‘the relevant period’) that ended in a year of income of the taxpayer (‘the taxpayer’s year of income’); and
(b)
the first tier foreign company had an interest in another foreign company (‘the second tier foreign company’) during the whole

or a part of the notional accounting period of the second tier foreign company that ended in the relevant period.
“(2) If:
(a)
an amount is included in the notional income of the first tier foreign company of the relevant period under section 576; and
(b)
an amount (the section 529 amount’) is included in the assessable income of the taxpayer of a year of income under section 529;
(c)
the section 529 amount was determined by the application of the calculation method set out in Subdivision D of Division 18 of Part XI in respect of the notional accounting period of the first tier foreign company; and
(d)
at the end of the notional accounting period of the second tier foreign company, the first tier foreign company and the second tier foreign company were related to the taxpayer; and
(e)
an amount (the gross deductible amount’) is a notional deduction under that Subdivision from the second tier foreign company’s notional income of that notional accounting period because the second tier foreign company paid an amount in respect of foreign tax;

subsection (3) has effect.

“(3) The taxpayer is taken, for the purposes of this Division, to have paid and to have been personally liable for, in respect of the section 529 amount (in addition to any foreign tax that the taxpayer is taken to have paid, and been personally liable for, under section 160AFCE), an amount of foreign tax worked out using the formula:

For the purposes of this subsection:

‘Taxpayer’s share of calculated profit of second tier foreign company’

means so much of the taxpayer’s share of the calculated profit of the first tier foreign company in respect of the relevant period as is attributable to the taxpayer’s indirect interest in the second tier foreign company;

‘Calculated profit of first tier foreign company’ means the calculated profit of that foreign company in relation to the relevant period as determined by the application of the calculation method set out in Subdivision D of Division 18 of Part XI;

‘Calculated profit of second tier foreign company’ means the calculated profit of the second tier foreign company in respect of the notional accounting period of that foreign company that ended in the relevant period as determined by the application of the calculation method set out in Subdivision D of Division 18 of Part XI.

Foreign tax in respect of certain amounts assessable under section 529 from interest in foreign trust

“160AFCG.(1) If:
(a)
an amount (‘the section 529 amount’) is included in the assessable income of a taxpayer of a year of income under section 529; and
(b)
the section 529 amount was determined by the application of the calculation method set out in Subdivision D of Division 18 of Part XI in respect of a notional accounting period of a foreign trust; and
(c)
an amount (‘the gross deductible amount’) is a notional deduction under that Subdivision from the foreign trust’s notional income of the notional accounting period because the foreign trust paid an amount in respect of foreign tax;

subsection (2) has effect.

In the formula:

‘Taxpayer’s share of calculated profit of foreign trust’ means the share of the calculated profit of the foreign trust in respect of the notional accounting period to which the taxpayer is entitled as determined under Subdivision D of Division 18 of Part XI;

‘Calculated profit of foreign trust’ means the calculated profit of the foreign trust in respect of the notional accounting period as determined under Subdivision D of Division 18 of Part XI.

Foreign tax if taxpayer has indirect interest in foreign trust

“160AFCH.(1) This section applies if:
(a)
a taxpayer had an interest in a foreign trust (‘the first tier foreign trust’) during the whole or a part of the notional accounting period of the first tier foreign trust (‘the relevant period’) that ended in a year of income of the taxpayer (‘the taxpayer’s year of income’); and
(b)
the first tier foreign trust had an interest in another foreign trust (‘the second tier foreign trust’) during the whole or a part of the notional accounting period of the second tier foreign trust that ended in the relevant period.

“(2) If:
(a)
an amount is included in the notional income of the first tier foreign trust of the relevant period under section 576; and
(b)
an amount (the section 529 amount’) is included in the assessable income of the taxpayer of a year of income under section 529;
(c)
the section 529 amount was determined by the application of the calculation method set out in Subdivision D of Division 18 of Part XI in respect of the notional accounting period of the first tier foreign trust; and
(d)
an amount (the gross deductible amount’) is a notional deduction under that Subdivision from the second tier foreign trust’s notional income of the notional accounting period of the second tier foreign trust because the second tier foreign trust paid an amount in respect of foreign tax;

subsection (3) has effect.

“(3) The taxpayer is taken, for the purposes of this Division, to have paid and to have been personally liable for, in respect of the section 529 amount (in addition to any foreign tax that the taxpayer is taken to have paid, and been personally liable for, under section 160AFCG), an amount of foreign tax worked out using the formula:

For the purposes of this subsection:

‘Taxpayer’s share of calculated profit of second tier foreign trust’ means so much of the taxpayer’s share of the calculated profit of the first tier foreign trust in respect of the relevant period as is attributable to the taxpayer’s indirect interest in the second tier foreign trust;

‘Calculated profit of first tier foreign trust’ means the calculated profit of that foreign trust in relation to the relevant period as determined by the application of the calculation method set out in Subdivision D of Division 18 of Part XI;

‘Calculated profit of second tier foreign trust’ means the calculated profit of the second tier foreign trust in respect of the notional accounting period of that foreign trust that ended in the relevant period as determined by the application of the calculation method set out in Subdivision D of Division 18 of Part XI.

Foreign tax in respect of amounts exempt under section 23AK

“160AFCJ.(1) If a FIF attribution account payment made to a resident taxpayer by a FIF attribution account entity in a year of income is, in whole or in part (the section 23AK exempt part’), exempt from tax under section 23AK, the following provisions have effect.

“(2) The section 23AK exempt part is taken, for the purposes of paragraph l60AF(1)(a) but not (d), to be included in the taxpayer’s assessable income of the year of income.

“(3) The taxpayer is taken for the purposes of this Division to have paid, and to have been personally liable for, in respect of the section 23AK exempt part, in the year of income, an amount of foreign tax worked out using the formula:

In the formula:

‘EP’ [Exempt Percentage] means the percentage of the FIF attribution account payment represented by the section 23AK exempt part;

‘DT’ [Direct Tax] means any foreign tax that, disregarding this section and section 160AFC, the taxpayer is taken for the purposes of this Division to have paid, and to have been personally liable for, in respect of the FIF attribution account payment;

‘AEP’ [Adjusted Exempt Percentage] means the percentage that would be formula component EP if the FIF attribution account payment were reduced by any part of that payment that is exempt under section 23AJ;

‘UT’ [Underlying Tax] means any foreign tax that, disregarding this section, the taxpayer is taken, for the purposes of this Division, to have paid, and to have been personally liable for, under section 160AFC or under subparagraph 6AB(3)(a)(ii) in respect of the FIF attribution account payment;

‘AT’ [Attributed Tax] means the amount of any FIF attributed tax account debit arising for the FIF attribution account entity in relation to the taxpayer on the making of the FIF attribution account payment, to the extent that the amount of the debit does not exceed the amount of the formula component AEP ×UT.

Foreign tax if CFC has interest in FIF

“160AFCK.(1) This section applies if:
(a)
a taxpayer, being a company, is an attributable taxpayer of a CFC for a statutory accounting period of the CFC (‘the relevant period’) that ended in a year of income of the taxpayer; and
(b)
the calculation method set out in Subdivision D of Division 18 of Part XI was used to determine the amount of foreign investment fund income of a FIF that is included in the notional assessable income of the CFC for the relevant period.
“(2) If:
(a)
an amount (‘the section 529 amount’) is included in the notional assessable income of the CFC for the relevant period under section 529; and
(b)
an amount (‘the section 456 amount’) is included in the notional

assessable income of the taxpayer of a year of income under section 456; and
(c)
the section 529 amount was determined by the application of the calculation method set out in Subdivision D of Division 18 of Part XI in respect of the notional accounting period of the FIF; and
(d)
an amount (‘the gross deductible amount’) is a notional deduction under that Subdivision from the FIF’s notional income of that notional accounting period because the FIF paid an amount in respect of foreign tax; and
(e)
if the FIF is a company, the CFC and the FIF were related to the taxpayer at the end of the notional accounting period of the FIF; and
(f)
if the FIF is not a company, the CFC is related to the taxpayer at the end of the notional accounting period of the FIF;

subsection (3) has effect.

“(3) The taxpayer is taken for the purposes of this Division to have paid, and to have been personally liable for, in respect of the section 456 amount (in addition to any foreign tax that the taxpayer is taken to have paid, and to have been personally liable for, under section 160AFCA), an amount of foreign tax worked out using the formula:

In the formula:

‘Attribution credit arising for the FIF’ means the attribution credit that, except for subsection 371 (2D), would arise for the FIF under subsection 371(2A) at the end of the relevant period;

‘Calculated profit of the FIF’ means the calculated profit of the FIF in respect of the notional accounting period of the FIF that ended in the relevant period as determined by the application of the calculation method set out in Subdivision D of Division 18 of Part XI.”.

Return of capital on investment in trust

16. Section 160ZM of the Principal Act is amended by omitting from subsection (1A) “Section 23AI” and substituting “Sections 23AI and 23AK”.

Attribution credit

17. Section 371 of the Principal Act is amended:
(a) by inserting after paragraph (1)(a) the following paragraphs: “(aa) both the following conditions apply:
(i) an amount is included in the taxpayer’s assessable income under section 456 in respect

of the attributable income of another attribution account entity (‘the other entity’) for a statutory accounting period of the other entity;
(ii) that amount was calculated by reference to another amount (the Part XI amount’) that under Part XI was included in the attributable income of the other entity because the other entity had an interest in the eligible entity; or
(ab) each of the following conditions applies:
(i) an amount is included in the taxpayer’s assessable income under section 456 in respect of the attributable income of another attribution account entity (‘the other entity’) for a statutory accounting period of the other entity;
(ii) the amount so included was calculated by reference to another amount that under Part XI was included in the attributable income of the other entity because the other entity had an interest in another attribution account entity (‘the interposed entity’);
(iii) the other amount referred to in subparagraph
(ii) of this paragraph was calculated by reference to an amount (‘the section 576 amount’) that under section 576 was included in the notional income of the interposed entity because the interposed entity had an interest in the eligible entity; or”;

(b)

by inserting in subsection (2) “(2A), (2B),” after “subsections”;

(c)

by inserting after subsection (2) the following subsections:

“(2A) If an attribution credit arises under paragraph (1)(aa) for an eligible entity, the amount of the attribution credit is to be worked out using the formula:
In the formula:
‘FIF income’ means the amount of the foreign investment fund income included, in relation to the eligible entity, under Part XI in the notional assessable income of the other entity for the statutory accounting period of the other entity referred to in paragraph (1)(aa);
‘Section 456 amount’ means the amount included in the taxpayer’s assessable income under section 456 in respect of the statutory accounting period referred to in paragraph (1)(aa) of the other entity;

‘Notional assessable income’ means the notional assessable income of the other entity under Part X for the statutory accounting period referred to in paragraph (1)(aa).

“(2B) If an attribution credit arises under paragraph (1)(ab) for an eligible entity, the amount of the attribution credit is to be worked out using the formula:

For the purposes of this subsection:

‘FIF income’ means the amount worked out using the formula:

‘FIF income of the eligible entity’ means the amount of the foreign investment fund income included, in relation to the eligible entity, under section 576 in the notional income of the interposed entity referred to in subparagraph (1)(ab)(ii) for the notional accounting period of the interposed entity that ends during the statutory accounting period of the other entity referred to in subparagraph (1)(ab)(i);

‘Section 529 amount’ means the amount included in the notional assessable income of the other entity referred to in subparagraph (1)(ab)(i) under section 529 in respect of the statutory accounting period referred to in that subparagraph because of an interest that that other entity holds in the interposed entity;

‘Notional income of the interposed entity’ means the notional income of the interposed entity referred to in subparagraph (1)(ab)(ii) under Part XI for the notional accounting period of that entity that ends during the statutory accounting period of the other entity referred to in subparagraph (1)(ab)(ii);

‘Section 456 amount’ means the amount included in the taxpayer’s assessable income under section 456 in respect of the statutory accounting period referred to in subparagraph (1)(ab)(i) of the other entity referred to in that subparagraph;

‘Notional assessable income’ means the notional assessable income of the other entity referred to in subparagraph (1)(ab)(i) under Part X for the statutory accounting period referred to in that subparagraph.

“(2C) If subsection (2A) applies to a taxpayer in respect of one or more eligible entities in respect of a particular section 456 amount, the amount of the attribution credit arising under paragraph (1)(a) for the other entity referred to in paragraph (1)(aa) is reduced by the attribution credit or the sum of the

attribution credits that, except for subsection (2D), would arise for the eligible entity or eligible entities under subsection (2A).
“(2D) If subsection (2B) applies to a taxpayer in respect of one or more eligible entities in respect of a particular amount included in the notional income of the interposed entity referred to in subparagraph (1)(ab)(ii), the amount of the attribution credit arising under paragraph (1)(aa) for the interposed entity is to be reduced by the attribution credit or the sum of the attribution credits arising for the eligible entity or eligible entities under subsection (2B).”;
(d) by inserting after paragraph (5)(a) the following paragraphs: “(aa) in a paragraph (1)(aa) case—at the end of the notional accounting period of the eligible entity that gave rise to the Part XI amount referred to in subparagraph (1)(aa)(ii); or

(ab) in a paragraph (1)(ab) case—at the end of the notional accounting period of the eligible entity that gave rise to the section 576 amount referred to in subparagraph (1)(ab)(iii); or”.

Attributed tax account credit

18. Section 375 of the Principal Act is amended:
(a) by inserting after paragraph (1)(d) the following paragraph:
“(da) the following subparagraphs apply:
(i) an amount (‘the section 456 amount’) is included in the assessable income of the taxpayer under section 456 in respect of a statutory accounting period of a CFC;
(ii) the taxpayer is taken by section 160AFCK to have paid, and to be personally liable for, an amount of foreign tax in relation to the section 456 amount;”;
(b) by inserting after “case” in paragraph (3)(a) “or a paragraph (1)(da) case”.

Exempting receipt of a section 6 resident company

19. Section 380 of the Principal Act is amended by omitting subparagraph (a)(i) and substituting the following subparagraph:

“(i) if, on the making of the payment, an attribution debit, or a FIF attribution debit within the meaning of Part XI, arises for the other company in relation to the Australian company—so much (if any) of the dividend as exceeds the sum of those debits; or”.

Basic assumptions

20. Section 383 of the Principal Act is amended by omitting from paragraph (c) “B to D” and substituting “B to E”.

Additional assumption for unlisted country CFC

21. Section 384 of the Principal Act is amended:
(a)
by omitting from paragraphs (2)(a), (b) and (d) “B to D” (wherever occurring) and substituting “B to E”;
(b)
by inserting after paragraph (2)(c) the following paragraph:
“(ca) amounts included in the notional assessable income of the eligible CFC for the eligible period under Part XI as so modified; and”;
(c) by adding at the end of paragraph (2)(d) the following word and subparagraph:
“; and (iv) amounts included under Part XI as so modified.”.

Additional assumption for listed country CFC

22. Section 385 of the Principal Act is amended:
(a)
by omitting from paragraphs (2)(a), (b) and (d) “B to D” (wherever occurring) and substituting “B to E”;
(b)
by inserting after paragraph (2)(c) the following paragraph:
“(ca) amounts included in the notional assessable income of the eligible CFC for the eligible period under Part XI as so modified; and”;
(c) by adding at the end of paragraph (2)(d) the following word and subparagraph:
“; and (v) amounts included under Part XI as so modified.”;
(d) by omitting from subsection (4) “paragraph (2)(a)” and substituting “paragraphs (2)(a) and (ca)”.

Certain provisions to be disregarded in calculating attributable income

23. Section 389 of the Principal Act is amended by omitting from paragraph (a) “, 38” and substituting “and 23AK, sections 38”.

Modifications of net income of partnerships and trusts

24.(1) Section 399 of the Principal Act is amended:
(a)
by omitting from subsection (2) “402(2)(a)”;
(b)
by inserting in subsection (2) “402(2)(c)” before “and 403(b)”.

(2)

The amendment made by paragraph (1)(a) applies to the calculation of a CFC’s attributable income of any eligible period, whether beginning before or after the commencement of this section.

(3)

The amendment made by paragraph (1)(b) applies to the calculation of a CFC’s attributable income in respect of a dividend received after 25 June 1992.

Additional notional exempt income—unlisted or listed country CFC

25.(1) Section 402 of the Principal Act is amended by omitting subsection (3) and substituting the following subsections:

“(2A) If:

(a)
an amount would, apart from this subsection, be included in the notional assessable income of the eligible CFC for the eligible period under paragraph 384(2)(ca) or 385(2)(ca); and
(b)
at the end of the eligible period the CFC was authorised under the law of its place of residence to carry on life insurance business; and
(c)
at the end of that period the gross value of the CFC’s assets for use in carrying on life insurance business was 50% or more of the gross value of all of the CFC’s assets; and
(d)
during the eligible period a FIF within the meaning of Part XI managed funds of the CFC that were maintained by the CFC in a manner similar to the manner in which companies carrying on life insurance business in Australia maintain statutory funds under Division 3 of Part III of the Life Insurance Act 1945; and
(e)
the FIF was principally engaged during the eligible period in the management of funds of other persons by the investing of those funds at the discretion of the FIF;

then, so much of the amount referred to in paragraph (a) as relates to the FIF is notional exempt income of the eligible CFC in relation to the eligible period.

“(2B) A reference in paragraph (2A)(c) to the gross value of an asset of the CFC at the end of the eligible period is a reference to that value as shown in a balance-sheet of the CFC that was prepared as at the end of that period.

“(2C) If, at the end of the eligible period, any of the CFC’s assets (the relevant assets’) are for use partly in carrying on life insurance business and partly for other purposes, a reference in paragraph (2A)(c) to the gross value at the end of that period of the CFC’s assets for use in carrying on life insurance business is a reference to so much only of the gross value at the end of that period of the relevant assets as is proportionate to the extent to which they are for use at the end of that period in carrying on life insurance business.

“(3) If:
(a)
an attribution account entity makes an attribution account payment to the eligible CFC in the eligible period; and
(b)
apart from this subsection, the whole or part of the attribution account payment would be included in the notional assessable income of the eligible CFC in relation to the eligible taxpayer for the eligible period; and
(c)
on the making of the attribution account payment, an attribution debit arises for the attribution account entity in relation to the eligible taxpayer;

then so much (if any) of the whole or the part of the attribution account payment as does not exceed the grossed-up amount of the attribution debit is notional exempt income of the eligible CFC for the eligible period.”.

(2) The amendment made by subsection (1) applies to any attribution account payment made after 25 June 1992.

26. After section 431 of the Principal Act the following Subdivision is inserted in Division 7 of Part X:

“Subdivision E—Modifications Relating to Application of Part XI

Exemption of attributable taxpayer from Part XI

“431A.(1) For the purpose of applying this Act in calculating the attributable income of the eligible CFC, section 494 is to be disregarded and the following provisions have effect.

“(2) If:
(a)
an amount of foreign investment fund income that accrued to the eligible CFC from a FIF in respect of a notional accounting period of the FIF would, apart from this subsection, be included in the eligible CFC’s notional assessable income of the eligible period; and
(b)
the statutory accounting period of the CFC coincides with that notional accounting period of the FIF; and
(c)
section 456 applies to the eligible taxpayer at the end of the statutory accounting period of the FIF;

section 529 does not apply to the eligible CFC in relation to the FIF in respect of the notional accounting period of the FIF referred to in paragraph (a).

“(3) If:
(a)
an amount of foreign investment fund income that accrued to the eligible CFC from a FIF in respect of a notional accounting period of the FIF would, apart from this subsection, be included in the eligible CFC’s notional assessable income of the eligible period; and
(b)
each of 2 or more statutory accounting periods of the FIF occurs partly within that notional accounting period of the FIF; and
(c)
section 456 applies to the eligible taxpayer at the end of each of those statutory accounting periods of the FIF;

section 529 does not apply to the eligible CFC in relation to the FIF in respect of the notional accounting period of the FIF referred to in paragraph (a).

Dividends paid before attribution credit arises

“431B. For the purpose of applying this Act in calculating the attributable income of the eligible CFC for a statutory accounting period, section 530 has effect as if the reference in paragraph (a) of subsection (1) of that section to a FIF attribution account payment being made by a FIF to a taxpayer during a notional accounting period of the FIF were a reference to such a payment being made by a FIF to the eligible CFC after the end of that notional accounting period and before the end of the statutory accounting period of the eligible CFC in which that notional accounting period ended.”.

27. After Part X of the Principal Act the following Part is inserted:

“PART XI—FOREIGN INVESTMENT FUNDS AND FOREIGN LIFE ASSURANCE POLICIES

“Division 1—Preliminary

“Subdivision A—Application of Part

Taxpayers to be taxed on share of income of certain foreign investment funds and foreign life assurance policies

“469.(1) This Part applies to a taxpayer who has an interest or interests in what is referred to in this Part as a foreign investment fund (‘FIF’). That expression refers to certain non-resident companies and non-resident trusts.

“(2) This Part also applies to a taxpayer who has an interest in a foreign life assurance policy (‘FLP’). That expression refers to certain life assurance policies issued by a non-resident. A taxpayer is regarded as having an interest in a FLP if, and only if, the taxpayer has the legal title to the FLP.

“(3) The object of this Part is to include in a taxpayer’s assessable income of a year of income an amount (‘foreign investment fund income’) that represents income attributable to an interest or interests in a FIF or a FLP held by the taxpayer during the accounting period (‘notional accounting period’) of the FIF or FLP that ends in that year of income.

“(4) The provision of this Act (‘the operative provision’) that includes foreign investment fund income in a taxpayer’s assessable income is section 529, which is contained in Division 16.

“(5) The operative provision does not apply, or its application is affected, in certain circumstances, which are set out in Divisions 2 to 15.

“(6) Division 18 contains the provisions for determining whether any foreign investment fund income accrued from a FIF or a FLP to a taxpayer in respect of a notional accounting period.

There are 3 methods provided for making a determination in respect of a FIF. These are called:

(a)
the market value method;
(b)
the deemed rate of return method;
(c)
the calculation method.

The method available to the taxpayer in respect of a particular notional accounting period of a FIF generally depends on the level of detailed information that the taxpayer has about the FIF’s income and on the method used by the taxpayer to determine whether foreign investment fund income accrued from that FIF in previous notional accounting periods.

There are 2 methods provided for making a determination in respect of a FLP. These are called:

(d)
the deemed rate of return method;
(e)
the cash surrender value method.

“(7) Division 19 provides for the keeping of accounts to avoid double taxation in respect of interests in FIFs or FLPs.

“(8) Division 20 provides for the recording of the amount of the foreign tax credits allowed in respect of foreign investment fund income.

“(9) Division 21 contains provisions that apply in certain circumstances if an interest in a FIF or a FLP is disposed of.

“(10) Division 22 provides for the keeping of records relating to interests in FIFs and FLPs.

“Subdivision B—Meaning of Certain Expressions used in this Part

Definitions

“470. In this Part, unless the contrary intention appears:

‘accounts’ means ledgers, journals, profit and loss accounts and balance-sheets and includes statements, reports and notes attached to, or intended to be read with, any of the above;

‘acquisition’, in relation to an interest in a FIF or a FLP, has the meaning given by section 488;

‘approved stock exchange’ means:

(a)
a stock exchange named in regulations made for the purposes of this definition; or
(b)
until regulations are so made—a stock exchange named in Schedule 3;

‘associate’ has the meaning given by Subdivision E;

‘Australian entity’ has the meaning given by section 471;

‘Australian partnership’ has the meaning given by section 472;

‘Australian tax’ means income tax or withholding tax;

‘Australian trust’ has the meaning given by section 473;

‘balance-sheet’ includes any similar statement and also includes statements, reports and notes attached to, or intended to be read with, a balance-sheet or similar statement;

‘calculation method’ has the meaning given by paragraph 534(2)(c);

‘CFC has the same meaning as in Part X;

‘CFT’ has the same meaning as in Part X;

‘convertible note’:

(a)
in relation to a foreign company, has the same meaning as in Division 3A of Part III; or
(b)
in relation to a foreign trust, means an instrument issued by the trustee of the trust, being an instrument that, if the trust were a company, would be a convertible note issued by the company, and includes an instrument that would be a convertible note within the meaning of Division 3A of Part III if:
(i) references in that Division to a company were references to the trust, or to the trustee of the trust, as the context requires; and
(ii) references in that Division to shares were references to interests in the trust;

‘deemed rate of return method’ has the meaning given by paragraph 534(2)(b) in relation to a FIF and the meaning given by paragraph 534(3)(a) in relation to a FLP;

‘disposal’, in relation to an interest in a FIF or a FLP, has the meaning given by section 488;

‘distribution’ has the meaning given by section 474;

‘entitled to acquire’ has the meaning given by section 475;

‘entity’ means any of the following:

(a)
a company;
(b)
a partnership;
(c)
a person in the capacity of trustee;
(d)
any other person;

‘FIF’ or ‘foreign investment fund’ has the meaning given to FIF by section 481;

‘FLP’ or ‘foreign life assurance policy’ has the meaning given to FLP by section 482;

‘foreign company’ has the meaning given by section 481;

‘foreign trust’ has the meaning given by section 481;

‘general insurance business’ means insurance business other than life insurance business;

‘interest’, in relation to a FIF or a FLP, has the meaning given by section 483;

‘life insurance business’ means life insurance business as defined by section 4 of the Life Insurance Act 1945;

‘Lloyd’s’ means The Society of Lloyd’s incorporated by the Lloyd’s Act 1871 of the United Kingdom;

‘market value method’ has the meaning given by paragraph 534(2)(a);

‘notional accounting period’:

(a)
in relation to a FIF, has the meaning given by section 486; or
(b)
in relation to a FLP, has the meaning given by section 487;

‘Part XI Australian resident’ means a resident within the meaning of section 6 but does not include an entity if:

(a)
there is a double tax agreement in force in respect of a foreign country; and
(b)
that agreement contains a provision that is expressed to apply if, apart from the provision, the entity would, for the purposes of the agreement, be both a resident of Australia and a resident of the foreign country; and
(c)
that provision has the effect that the entity is, for the purposes of the agreement, a resident solely of the foreign country;

‘profit and loss account’ includes any similar statement and also includes statements, reports and notes attached to, or intended to be read with, a profit and loss account or similar statement;

‘quoted price’ has the meaning given by section 476;

‘resident Part IX entity’ has the meaning given by section 477;

‘share’, in relation to a foreign company, includes any interest in the capital of the company that is in the nature of a share or stock, including such an interest in the nature of a preference share (whether or not redeemable), a bonus share or a share with deferred rights;

‘statutory accounting period’ has the same meaning as in Part X;

‘tax detriment’ has the meaning given by section 478;

‘the operative provision’ means section 529;

‘trading stock’ does not include securities within the meaning of the Corporations Law;

‘trust’ means:

(a) an entity in the capacity of trustee (including an entity that is taken to be a trustee because of section 268); or

(b) as the case requires, a trust or a trust estate;

‘wholly-owned subsidiary’ has the meaning given by section 479.

Australian entity

“471. For the purposes of this Part, each of the following is an Australian entity:

(a)
an Australian partnership;
(b)
an Australian trust;

(c) an entity (other than a partnership or trust) that is a Part XI Australian resident.

Australian partnership

“472. For the purposes of this Part, a partnership is an Australian partnership at a particular time if at least one of the partners is an Australian entity at that time.

Australian trust

“473. For the purposes of this Part, a trust is an Australian trust at a particular time (‘the test time’) if:

(a) at any time in the period of 12 months immediately preceding the test time:
(i) any trustee of the trust was a resident; or
(ii) the central management and control of the trust was in Australia; or
(b) assuming that period had been a year of income:
(i) the trust would have been a corporate unit trust and a resident unit trust for the purposes of Division 6B of Part III in relation to that year of income; or
(ii) the trust would have been a public trading trust and a resident unit trust for the purposes of Division 6C of Part III in relation to that year of income.

Distributions by a FIF or a FLP

“474.(1) Some calculations made under this Part involve taking into account distributions made by a FIF or a FLP to a person who has an interest in the FIF or FLP.

“(2) A reference in this Part to a distribution made by a FIF or a FLP to a person who has an interest in the FIF or FLP is a reference to any amount paid or credited, or any property distributed, to the person by the FIF or in relation to the FLP that constitutes income derived, or a receipt of capital, by the person and:

(a) without limiting the generality of the above, includes a reference to:
(i) the issue by a FIF to a person of a further interest in the FIF in satisfaction of the person’s entitlement to a payment by the FIF; and
(ii) in the case of a FLP—any payment to a person of a bonus or a refund of premium under or in respect of the FLP; but
(b) does not include a reference to the issue by a FIF or a FLP to a person of a further interest in the FIF or FLP without any consideration being paid or given by the person for the interest.

Entitlement to acquire

“475. For the purposes of this Part, a person is taken to be entitled to acquire anything that the person is absolutely or contingently entitled to acquire, whether because of any constituent document of a company, the exercise of any right or option or for any other reason.

Quoted price

“476.(1) It is necessary for the purposes of several provisions of this Part to value an interest in a FIF by reference to the quoted price on a particular day on a stock market of the class of interests in which the interest is included.

“(2) For the purposes of such a provision, that quoted price is:
(a)
if there was more than one transaction on that stock market on that day in interests in that class—the last published price at which such an interest was traded on that stock market on that day; or
(b)
if information as to the price mentioned in paragraph (a) was not published or there were no transactions on that stock market on that day in such interests—the last price at which an offer was made on that day to buy such an interest.

Resident Part IX entity

“477. For the purposes of this Part, a trust is a resident Part IX entity at a particular time (‘the test time’) if:

(a) the trust:
(i) was established in Australia; or
(ii) had its central management and control in Australia at any time in the period of 12 months immediately preceding the test time; and
(b) assuming that period had been a year of income, the trust would have been an eligible entity in relation to that year of income for the purposes of Part IX.

(a) if any foreign investment fund income accrued to the taxpayer from the FIF in respect of that notional accounting period—the basis of the calculation of:

(i) that foreign investment fund income; and
(ii) any unapplied previous foreign investment fund loss referred to in subsection 542(2); or
(b) if any foreign investment fund loss was incurred by the taxpayer from the FIF in respect of that notional accounting period—the basis of the calculation of that foreign investment fund loss.

Interest in FIF—if deemed rate of return method was applied

“617. If, in the case of an interest or interests in a FIF, the deemed rate of return method was applied to determine whether foreign investment fund income accrued to the taxpayer from the FIF in respect of the notional accounting period of the FIF that ended in the year of income, the taxpayer must make and keep records in Australia containing particulars of the basis of the calculation of the foreign investment fund income that accrued to the taxpayer from the FIF in respect of that period.

Interest in FIF—if calculation method was applied

“618. If, in the case of an interest or interests in a FIF, the calculation method was applied to determine whether foreign investment fund income accrued to the taxpayer from the FIF in respect of the notional accounting period of the FIF that ended in the year of income, the taxpayer must make and keep records in Australia containing particulars of:

(a) if there is a calculated profit in respect of the FIF in respect of that notional accounting period—the basis of the calculation of:
(i) that calculated profit; and
(ii) so much (if any) of any calculated loss or calculated losses in respect of a preceding notional accounting period or preceding notional accounting periods of the FIF as was taken into account under section 572 in determining that calculated profit; and
(b) the basis of the calculation of any foreign investment fund income that accrued to the taxpayer from the FIF in respect of that period.

Interest in FLP

“619. In the case of an interest in a FLP, the taxpayer must make and keep records in Australia containing particulars of:

(a) if the cash surrender value method was applied to determine whether foreign investment fund income accrued to the taxpayer from the FLP in respect of the notional accounting period of the FLP that ended in the year of income:
(i) if any foreign investment fund income accrued to the

taxpayer from the FLP in respect of that notional accounting period—the basis of the calculation of:
(A)
that foreign investment fund income; and
(B)
any unapplied previous foreign investment fund loss referred to in subsection 600(2); or
(ii) if any foreign investment fund loss was incurred by the taxpayer from the FLP in respect of that notional accounting period—the basis of the calculation of that foreign investment fund loss.

(b) if the deemed rate of return method was applied to determine whether foreign investment fund income accrued to the taxpayer from the FLP in respect of the notional accounting period of the FLP that ended in the year of income—the basis of the calculation of the foreign investment fund income that accrued to the taxpayer from the FLP in respect of that period.

Interest in FIF or FLP—if exemption applied

“620. If the taxpayer is wholly or partly exempt from taxation under this Part in respect of the interest or interests in a FIF or a FLP in respect of the notional accounting period of the FIF or FLP that ended in the year of income, the taxpayer must make and keep records in Australia containing particulars of the basis on which the exemption applied, including any acts, transactions, calculations and other circumstances relevant to the application of the exemption.

Offence of failing to keep records

“621. A person who contravenes section 615, 616, 617, 618, 619 or 620 is guilty of an offence punishable on conviction by a fine not exceeding $3,000.

Manner in which records required to be kept

“622. A person who is required by this Division to make and keep records must:

(a)
make and keep the records in writing in the English language or so as to enable the records to be readily accessible and convertible into writing in the English language; and
(b)
make and keep the records so as to enable the person’s liability under this Act to be readily ascertained.

If calculation method was applied—defence for failing to keep records if information unobtainable

“623. In a prosecution of a person for an offence against section 618 for failing to keep a record containing particulars of the basis of a calculation, it is a defence if the person proves that the calculation was based on information that the person believed to be contained in the accounts (other than published accounts) of a FIF and that the person

made all reasonable efforts to obtain particulars of the accounts or the relevant parts of the accounts but was unable to obtain them.

Treatment of partnerships

“624.(1) Subject to subsections (2) and (3), the following provisions apply to a partnership as if the partnership were a person:

(a)
sections 614 to 623;
(b)
subsections 262A(4) and (5), in so far as those subsections apply to records kept under or for the purposes of this Division;
(c)
Part HI of the Taxation Administration Act 1953, in so far as that Part of that Act relates to the provisions covered by paragraph (a) or (b) of this subsection.

“(2) If, because of subsection (1), an offence is taken to have been committed by a partnership, that offence is taken to have been committed by each of the partners.

“(3) In a prosecution of a person for an offence because of subsection (2), it is a defence if the person proves that the person:

(a)
did not aid, abet, counsel or procure the act or omission because of which the offence was taken to have been committed; and
(b)
was not in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, an act or omission because of which the offence is taken to have been committed.”.

28. The Principal Act is amended by adding at the end of the following Schedules:

“SCHEDULE 3 Section 470

APPROVED STOCK EXCHANGES FOR THE PURPOSES OF PART XI

Argentina

Buenos Aires stock exchange
Cordoba stock exchange
La Plata stock exchange
Medoza stock exchange
Rusario stock exchange

Australia

Australian Stock Exchange Limited

Austria

Vienna stock exchange

SCHEDULE 3—continued

Belgium

Antwerp stock exchange
Brussels stock exchange
Liege stock exchange

Brazil

Belo Horizonte stock exchange
Curtiba stock exchange
Fortalezo stock exchange
Porto Alegro stock exchange
Recife stock exchange
Rio de Janeiro stock exchange
Salvador stock exchange
Santos stock exchange
Sao Paulo stock exchange

Canada

Calgary stock exchange
Montreal stock exchange
Toronto stock exchange
Vancouver stock exchange
Winnipeg stock exchange

Chile

Santiago stock exchange
Valparaiso stock exchange

China

Shanghai stock exchange
Shenzen stock exchange

Denmark

Copenhagen stock exchange

Finland

Helsinki stock exchange

France

Bordeaux stock exchange
Lille stock exchange
Lyons stock exchange
Marseilles stock exchange
Paris stock exchange

SCHEDULE 3— continued

Germany

Berlin stock exchange
Dusseldorf stock exchange
Frankfurt stock exchange
Hamburg stock exchange
Hanover stock exchange
Munich stock exchange
Stuttgart stock exchange

Greece

Athens stock exchange

Hong Kong

Hong Kong stock exchange

Hungary

Budapest stock exchange

India

Bombay stock exchange
Calcutta stock exchange
Delhi stock exchange
Madras stock exchange

Indonesia

Jakarta stock exchange
Surabaya stock exchange

Ireland

Dublin stock exchange

Israel

Tel Aviv stock exchange

Italy

Bologna stock exchange
Florence stock exchange
Genoa stock exchange
Milan stock exchange
Naples stock exchange
Palermo stock exchange
Rome stock exchange
Trieste stock exchange
Turin stock exchange
Venice stock exchange

SCHEDULE 3— continued

Jamaica

Jamaica stock exchange

Japan

Hiroshima stock exchange
Kyoto stock exchange
Nagoya stock exchange
Niigata stock exchange
Osaka stock exchange
Pukvoka stock exchange
Sapparo stock exchange
Tokyo stock exchange

Korea, Republic of

Seoul stock exchange

Luxembourg

Luxembourg stock exchange

Malaysia

Kuala Lumpur stock exchange

Mexico

Mexican stock exchange

Netherlands

Amsterdam stock exchange

New Zealand

New Zealand stock exchange

Nigeria

Nigerian stock exchange

Norway

Oslo stock exchange

Pakistan

Karachi stock exchange

Philippines

Makati stock exchange
Manila stock exchange

Portugal

Lisbon stock exchange
Oporto stock exchange

SCHEDULE 3— continued

Singapore

Singapore stock exchange

Slovenia

Ljubljana stock exchange

South Africa

Johannesburg stock exchange

Spain

Barcelona stock exchange
Bilbao stock exchange
Madrid stock exchange
Valencia stock exchange

Sweden

Stockholm stock exchange

Switzerland

Basle stock exchange
Geneva stock exchange
Zurich stock exchange

Taiwan

Taiwan stock exchange

Thailand

Thailand stock exchange

Trinidad and Tobago

Trinidad and Tobago stock exchange

Turkey

Istanbul stock exchange

United Kingdom

London stock exchange

United States

American stock exchange
Boston stock exchange
Cincinnati stock exchange
Midwest stock exchange
NASDAQ stock exchange
New York stock exchange
Pacific stock exchange
Philadelphia stock exchange

SCHEDULE 3—continued

Uruguay

Montevideo stock exchange

Venezuela

Caracas stock exchange
Maracaibo stock exchange

Yugoslavia

Belgrade stock exchange

“SCHEDULE 4 Section 496

BUSINESS ACTIVITIES THAT ARE NOT ELIGIBLE ACTIVITIES FOR THE PURPOSES OF DIVISION 3 OF PART XI

(a)
Banking* and the provision of finance.
(b)
Financial intermediation services.
(c)
Investment in tainted assets, or tainted commodity investments, within the meaning of section 317.*
(d)
Life insurance business.*
(e)
General insurance business.*
(f)
Management of funds.
(g) Activities in connection with real property.*
*Note: subsection 496(2) provides to the effect that the references in this Schedule to banking, investment, life insurance business, general insurance business, and activities in connection with real property, as being activities that are not eligible activities do not affect the exemptions provided for by Divisions 4, 5, 6 and 7 of Part XI.

“SCHEDULE 5 Section 499

APPROVED INTERNATIONAL SECTORAL CLASSIFICATION SYSTEMS FOR PURPOSES OF PART XI

Bloomberg’s Information Systems

Financial Times—Actuaries World Index

Morgan Stanley Capital International Index

Salomon—Russell Global Equity Index

Standard and Poor’s Composite Index (S&P 500)”.

“SCHEDULE 6 Section 513

EXEMPT FOREIGN TRUSTS FOR PURPOSES OF PART XI ESTABLISHED IN COUNTRIES THAT PROHIBIT DIRECT FOREIGN INVESTMENT ON STOCK EXCHANGES IN THOSE COUNTRIES

India

Himalaya Fund
India Fund
India Growth Fund
India Magnum Fund

Korea, Republic of

Baring Korea Fund
Daechan Korea Trust
GT Korea Fund
Korea Emerging Company Trust
Korea Equity Trust
Korea-Euro Fund
Korea Growth
Korea International Trust
Korea Liberalisation Fund Ltd
Korea Nineteen Ninety Trust
Korea Small Company Fund
Korea Trust
Seoul International
Seoul Trust

Taiwan

Formosa Fund
Taipei Fund
Taiwan Fund
Taiwan (RoC) Fund

_____________________________________________________________________________________

NOTE

1. No. 27, 1936, as amended. For previous amendments, see No. 88, 1936; No. 5, 1937; No. 46, 1938; No. 30, 1939; Nos. 17 and 65, 1940; Nos. 58 and 69, 1941; Nos. 22 and 50, 1942; No. 10, 1943; Nos. 3 and 28, 1944; Nos. 4 and 37, 1945; No. 6, 1946; Nos. 11 and 63, 1947; No. 44, 1948; No. 66, 1949; No. 48, 1950; No. 44, 1951; Nos. 4, 28 and 90, 1952; Nos. 1, 28, 45 and 81, 1953; No. 43, 1954; Nos. 18 and 62, 1955; Nos. 25, 30 and 101, 1956; Nos. 39 and 65, 1957; No. 55, 1958; Nos. 12, 70 and 85, 1959; Nos. 17, 18, 58 and 108, 1960; Nos. 17, 27 and 94, 1961; Nos. 39 and 98, 1962; Nos. 34 and 69, 1963; Nos. 46, 68, 110 and 115, 1964; Nos. 33, 103 and 143, 1965; Nos. 50 and 83, 1966; Nos. 19, 38, 76 and 85, 1967; Nos. 4, 70, 87 and 148, 1968; Nos. 18, 93 and 101, 1969; No. 87, 1970; Nos. 6, 54 and 93, 1971; Nos. 5, 46, 47, 65 and 85, 1972; Nos. 51, 52, 53, 164 and 165, 1973; No. 216, 1973 (as amended by

NOTE—continued

No. 20, 1974); Nos. 26 and 126, 1974; Nos. 80 and 117, 1975; Nos. 50, 53, 56, 98, 143, 165 and 205, 1976; Nos. 57, 126 and 127, 1977; Nos. 36, 57, 87, 90, 123, 171 and 172, 1978; Nos. 12, 19, 27, 43, 62, 146, 147 and 149, 1979; Nos. 19, 24, 57, 58, 124, 133, 134 and 159, 1980; Nos. 61, 92, 108, 109, 110, 111, 154 and 175, 1981; Nos. 29, 38, 39, 76, 80, 106 and 123, 1982; Nos. 14, 25, 39, 49, 51, 54 and 103, 1983; Nos. 14, 42, 47, 63, 76, 115, 124, 165 and 174, 1984; No. 12, 1984 (as amended by No. 65, 1985); Nos. 47, 49, 104, 123, 168 and 174, 1985; No. 173, 1985 (as amended by No. 49, 1986); Nos. 41, 46, 48, 51, 109, 112 and 154, 1986; No. 49, 1986 (as amended by No. 141, 1987); No. 52, 1986 (as amended by No. 141, 1987); No. 90, 1986 (as amended by No. 141, 1987); Nos. 23, 58, 61, 120, 145 and 163, 1987; No. 62, 1987 (as amended by No. 108, 1987); No. 108, 1987 (as amended by No. 138, 1987); No. 138, 1987 (as amended by No. 11, 1988); No. 139, 1987 (as amended by Nos. 11 and 78, 1988); Nos. 8, 11, 59, 75, 78, 80, 87, 95, 97, 127 and 153, 1988; Nos. 2, 11, 56, 70, 73, 105, 107, 129, 163 and 167, 1989; No. 97, 1989 (as amended by No. 105, 1989); Nos. 20, 35, 45, 57, 58, 60, 61, 87, 119 and 135, 1990; Nos. 4, 5, 6, 48, 55 and 100, 1991; and No. 101, 1992.

[Minister’s second reading speech made in—

House of Representatives on 3 November 1992
Senate on 24 November 1992