Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1997 - SECT 770.135

  (1)   This Division applies to an entity (other than a * CFC) as if it had paid an amount of * foreign income tax worked out under subsection   (7) in respect of an amount included in its assessable income if:

  (a)   the amount is included in its assessable income as described in subsection   (2); and

  (b)   the conditions in subsections   (3) and (5) are satisfied.

  (2)   An amount is included in an entity's assessable income as described in this subsection if the entity is a company and the amount is included under:

  (a)   section   456 (a section   456 case ) of the 1936 Act in relation to a * CFC and a statutory accounting period; or

  (b)   section   457 (a section   457 case ) of that Act in relation to a CFC.

Note:   Section   456 of the 1936 Act includes, in the assessable income of certain Australian shareholders, amounts that are attributable to the profits of an Australian - controlled foreign company.

  Section   457 does likewise when a controlled foreign company changes residence from an unlisted to a listed country or to Australia.

Tax paid condition

  (3)   An amount of * foreign income tax, income tax or * withholding tax (the tax amount ) must have been paid:

  (a)   for a section   456 case--by the * CFC in respect of an amount included in the notional assessable income of the CFC for the statutory accounting period; or

  (b)   for a section   457 case--by the CFC.

Note:   Section   770 - 130 deems foreign income tax to have been paid in certain circumstances.

  (3A)   For the purposes of paragraphs   (3)(a) and (b), the tax amount does not include an amount of * foreign IIR tax or * foreign UTPR tax that is treated as not being foreign tax under subsection   393(2) of the 1936 Act.

  (4)   For the purposes of paragraphs   (3)(a) and (b), the tax amount includes an amount that is taken to have been paid by the * CFC under subsection   393(4) of the 1936 Act (about tax paid on reinsurance premiums).

Association condition

  (5)   If the entity is a company, it must have an * attribution percentage of 10% or more:

  (a)   for a section   456 case--in relation to the * CFC at the end of the statutory accounting period; or

  (b)   for a section   457 case--in relation to the CFC at the residence - change time (within the meaning of section   457 of the 1936 Act).

Amount of foreign income tax

  (7)   The amount worked out under this subsection is:

  (a)   for a section   456 case--the sum of all the tax amounts for the statutory accounting period multiplied by the company's * attribution percentage in relation to the * CFC at the time mentioned in paragraph   (5)(a); or

  (b)   for a section   457 case--the sum of all the tax amounts to the extent they are attributable to the amount included in the company's assessable income under section   457 of the 1936 Act.

Grossing - up of attributed amount

  (8)   For the purposes of this Act except this section and section   371 of the 1936 Act (for a section   456 case or a section   457 case), the amount included in the entity's assessable income as described in subsection   (2) is taken to be increased by the amount of tax worked out under subsection   (7).

Note:   Section   371 of the 1936 Act records an amount in an attribution account when the amount is included in the assessable income of an attributable taxpayer in relation to a CFC.