Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1997 - SECT 719.10

  (1)   A potential MEC group derived from one or more * eligible tier - 1 companies of a * top company consists of the following members:

  (a)   those eligible tier - 1 companies;

  (b)   all of the other entities (if any) which:

  (i)   meet the requirements of the table; or

  (ii)   are entities for which the requirements in section   701C - 10 of the Income Tax (Transitional Provisions) Act 1997 are met; or

  (iii)   are entities for which the requirements in section   701C - 15 of the Income Tax (Transitional Provisions) Act 1997 are met.

 

Requirements for other entities
Column 1 Income tax treatment requirements	Column 2 Australian residence requirements	Column 3 Ownership requirements
The entity must be a company, trust or partnership and, if it is a company, all or some of its taxable income (if any) must have been taxable at a rate that is or equals the * corporate tax rate apart from this Part The entity must not be covered by an item in the table in section   703 - 20 The entity must not be a non - profit company (as defined in the Income Tax Rates Act 1986 )	The entity must: (a) be an Australian resident (but not a * prescribed dual resident), if it is a company; or (b) meet the conditions in item   1, 2 or 3 of the table in section   703 - 25, if it is a trust; or (c) be a partnership	The entity must be: (a) a * wholly - owned subsidiary of any of those * eligible tier - 1 companies; or (b) an entity that would be covered by paragraph   (a), if it were assumed that all of the membership interests that are beneficially owned by any of those eligible tier - 1 companies were owned by a single one of those eligible tier - 1 companies

  (2)   For the purposes of column 3 of the table, if there are one or more entities interposed between an entity (the test entity ) and an eligible tier - 1 company, the test entity can be a wholly - owned subsidiary of the eligible tier - 1 company only if each of the interposed entities:

  (a)   meets the conditions in columns 1 and 2 of the table; or

  (b)   holds membership interests only as a nominee of one or more entities each of which is:

  (i)   an eligible tier - 1 company of the top company; or

  (ii)   a wholly - owned subsidiary of an eligible tier - 1 company of the top company, being a subsidiary that meets the conditions in columns 1 and 2 of the table.

  (3)   For the purposes of subparagraph   (2)(b)(ii), in determining whether an entity is a wholly - owned subsidiary of an eligible * tier - 1 company of the * top company, assume that all of the * membership interests that are beneficially owned by eligible tier - 1 companies of the top company were owned by a single eligible tier - 1 company of the top company.

Only one eligible tier - 1 company in a potential MEC group

  (6)   To avoid doubt, if:

  (a)   there is only one * eligible tier - 1 company of a * top company; and

  (b)   there are no entities which meet the requirements of the table in subsection   (1); and

  (c)   there are no entities for which the requirements mentioned in subparagraph   (1)(b)(ii) are met; and

  (d)   there are no entities for which the requirements mentioned in subparagraph   (1)(b)(iii) are met;

the * potential MEC group derived from the eligible tier - 1 company consists of the eligible tier - 1 company alone.

When potential MEC group ceases to exist

  (7)   If a * potential MEC group is derived from one or more * eligible tier - 1 companies of a * top company, the potential MEC group ceases to exist when:

  (a)   none of those companies are eligible tier - 1 companies of the top company; or

  (b)   there is a change in the identity of the top company, and the eligible tier - 1 companies that were members of the group immediately before the change are not the same as the eligible tier - 1 companies that are members of the group immediately after the change.

Continuity of potential MEC group

  (8)   If:

  (a)   a * potential MEC group is derived from one or more * eligible tier - 1 companies of a * top company; and

  (b)   there is a change in the identity of the top company in relation to the potential MEC group; and

  (c)   the eligible tier - 1 companies that were members of the group immediately before the change are the same as the eligible tier - 1 companies that are members of the group immediately after the change;

the change does not affect the continuity of:

  (d)   the group; or

  (e)   the status of any of those companies as eligible tier - 1 companies of the top company.