Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) A group of entities is a country by country reporting group (or CBC reporting group ) if:
(a) none of the entities is an individual; and
(b) any of the following requirements are satisfied:
(i) the group is consolidated for accounting purposes as a single group;
(ii) the group is a * notional listed company group.
(2) Each entity in the group is a member of the * CBC reporting group.
(3) Subsection (5) applies if:
(a) all the members of a group that is consolidated for accounting purposes as a single group (the smaller group ) are members of:
(ii) a * notional listed company group; and
(b) at least one entity is a member of the group mentioned in subparagraph (a)(i) or (ii) but is not a member of the smaller group.
(4) Subsection (5) also applies if:
(a) all the * members of a notional listed company group (the smaller group ) are members of:
(ii) a group that is consolidated for accounting purposes as a single group; and
(b) at least one entity is a member of the group mentioned in subparagraph (a)(i) or (ii) but is not a member of the smaller group.
(5) For the purposes of subsection (1), treat the smaller group as not being any of the following:
(a) a group that is consolidated for accounting purposes as a single group;
(b) a * notional listed company group.
(6) For the purposes of this section, assume that paragraph 960 - 575(4)(a) were disregarded:
(a) in determining whether a * notional listed company group exists; and
(b) in identifying the * members of a notional listed company group.
Note: The effect of that assumption is that certain exceptions in accounting or other principles to requirements to consolidate for accounting purposes are taken into account in working out the membership of the country by country reporting group. Where such exceptions apply, a country by country reporting group may have fewer members than the equivalent notional listed company group.
(a) adjusts the value of those interests for income tax purposes to take account of material changes in market value that are attributable to the value shift; and
(b) treats the value shift as a partial realisation to the extent that value is shifted between interests held by different owners, and in some other cases.
Method statement
Step 1. Group together all * down interests that:
(a) are of the kind referred to in the relevant item; and
(b) immediately before the * decrease time, had the same * adjustable value as the down interest; and
(c) immediately before that time had the same * market value as the down interest; and
(d) sustained the same decrease in market value as the down interest because of the * direct value shift.
Step 2. Work out the value shifted from that group of * down interests to the * up interests referred to in the relevant item using the following formula:
Step 3. Work out the notional adjustable value of the value shifted from that group of * down interests to those * up interests using the formula:
Step 4. The decrease in the * adjustable value of the * down interest under the relevant item is equal to:
Step 5. For a * taxing event generating a gain under the relevant item, the amount of the gain is equal to:
Method statement
Step 1. If the * market value of the * up interest increases because of the * direct value shift, group together all up interests of the kind referred to in the relevant item that:
(a) immediately before the * increase time, had the same * adjustable value as the up interest; and
(b) sustained the same increase in market value as the up interest because of the * direct value shift.
If the * up interest is issued at a * discount, group together all * up interests of the kind referred to in the relevant item that:
(c) immediately before the * increase time, had the same * adjustable value as the up interest; and
(d) because of the direct value shift, are issued at the same discount as the up interest.
Step 2. The notional adjustable value of the value shifted from the * down interests referred to in the relevant item to all the * up interests referred to in that item has already been worked out under one or more applications of step 3 of the method statement in section 725 - 365.
Step 3. Use the following formula to work out how much of that notional adjustable value is attributable to the value shifted to the group of * up interests referred to in step 1 of this method statement:
Step 4. The uplift in the * adjustable value of the * up interest under the relevant item is equal to:
Method statement
Step 1. If the * market value of the * up interest increases because of the direct value shift, group together all * up interests of the kind referred to in the relevant item that sustained the same increase in market value as the up interest because of the direct value shift.
If the up interest is issued at a discount, group together all up interests of the kind referred to in the relevant item that are issued at a discount of the same amount as the up interest because of the direct value shift.
Step 2. The value shifted to that group of * up interests from the * down interests referred to in the relevant item is the amount worked out using the formula:
where:
sum of the group increases or discounts means (as appropriate):
(a) the sum of the increases in * market value of all * up interests in the group because of the * direct value shift; or
(b) the sum of the * discounts at which all * up interests in the group were issued because of the * direct value shift.
total value of the direct value shift means:
(a) if the sum of the decreases in * market value of all * down interests because of the * direct value shift is equal to or greater than the sum of the increases in market value of all * up interests and all * discounts given because of the shift--the sum of the decreases; or
(b) if the sum of the decreases in market value of all down interests because of the direct value shift is less than the sum of the increases in market value of all up interests and all discounts given because of the shift--the sum of the increases and discounts.
Step 3. The uplift in the * adjustable value of the * up interest under the relevant item is equal to:
Method statement
Step 1. Group together all * down interests of the kind referred to in the relevant item that:
(a) immediately before the * decrease time, had the same * adjustable value as the down interest; and
(b) immediately before that time had the same * market value as the down interest; and
(c) sustained the same decrease in market value as the down interest because of the * direct value shift.
Step 2. Work out the value shifted from that group of * down interests to the * up interests referred to in the relevant item using the formula:
Step 3. The decrease in * adjustable value of the * down interest under the relevant item is equal to:
(a) prevents losses from arising, because of the value shift, on realisation of direct or indirect equity or loan interests in the losing entity; and
(b) within limits, prevents gains from arising, because of the value shift, on realisation of direct or indirect equity or loan interests in the gaining entity.
This Subdivision tells you:
• which method to use to work out the consequences of an indirect value shift for equity or loan interests, and indirect equity or loan interests, in the losing entity and in the gaining entity; and
• which interests, and which owners, are affected.
Under the realisation time method:
• losses on realisation of affected interests in the losing entity are reduced; and
• gains on realisation of affected interests in the gaining entity are reduced, within limits worked out by reference to the reductions in losses on affected interests in the losing entity; and
• certain 95% services indirect value shifts are disregarded.
This Subdivision also explains how its reduction of a loss or gain affects CGT assets, trading stock and revenue assets.
Under the adjustable value method:
• the adjustable values of affected interests in the losing entity are reduced; and
• the adjustable values of affected interests in the gaining entity are uplifted, within limits worked out by references to the reductions in the adjustable values of affected interests in the losing entity.
The consequences of that are:
• the cost base and reduced cost base of the interests are reduced or uplifted (or both); and
• if the interests are also trading stock or revenue assets, there are further consequences for them in their character as such.
If:
(a) an Australian corporate tax entity receives a foreign equity distribution from a foreign company, either directly or indirectly through one or more interposed trusts or partnerships; and
(b) the Australian corporate tax entity holds a participation interest of at least 10% in the foreign company;
the distribution is non - assessable non - exempt income for the Australian corporate tax entity.
(a) a company has a capital gain or capital loss arising from a CGT event that happens in relation to a share in a foreign company; and
(b) the company holds a direct voting percentage of 10% or more in the foreign company for a certain period before the CGT event happens;
Method statement
Step 1. Work out the * market value at that time of all * assets included in the total assets of the foreign company at that time.
Step 2. Work out the * market value (see subsection (2)) at that time of all * active foreign business assets of the foreign company at that time.
Step 3. Divide the result of step 2 by the result of step 1.
Step 4. Express the result of step 3 as a percentage, and round that percentage to the nearest whole percentage point (rounding a number ending in .5 upwards).
Step 5. The active foreign business asset percentage is:
(a) if the result of step 4 is less than 10%--zero; or
(b) if the result of step 4 is 10% or more, but less than 90%--that result; or
(c) if the result of step 4 is 90% or more--100%.
Method statement
Step 1. Work out the foreign company's average value of total assets at that time under subsection (2).
Step 2. Work out the foreign company's average value of active foreign business assets at that time under subsection (3).
Step 3. Divide the result of step 2 by the result of step 1.
Step 4. Express the result of step 3 as a percentage, and round that percentage to the nearest whole percentage point (rounding a number ending in .5 upwards).
Step 5. The active foreign business asset percentage is:
(a) if the result of step 4 is less than 10%--zero; or
(b) if the result of step 4 is 10% or more, but less than 90%--that result; or
(c) if the result of step 4 is 90% or more--100%.
Method statement
Step 1. Work out the sum of the values (see subsection (5)) of every * asset included in the total assets of the foreign company at the end of the most recent period:
(a) that ends no later than that time, but no more than 12 months before that time; and
(b) for which the foreign company has * recognised company accounts.
Step 2. Work out the sum of the values (see subsection (5)) of every * asset included in the total assets of the foreign company at the end of the most recent period:
(a) that ends at least 6 months, but no more than 18 months, before the end of the period mentioned in step 1; and
(b) for which the foreign company has * recognised company accounts.
Note: See subsection (6) if the foreign company does not have recognised company accounts for a period mentioned in this step.
Step 3. Work out the sum of the results of steps 1 and 2, and divide that sum by 2.
Method statement
Step 1. Work out the sum of the values (see subsections (4) and (5)) of every * active foreign business asset of the foreign company at the end of the most recent period:
(a) that ends no later than that time, but no more than 12 months before that time; and
(b) for which the foreign company has * recognised company accounts.
Step 2. Work out the sum of the values (see subsections (4) and (5)) of every * active foreign business asset of the foreign company at the end of the most recent period:
(a) that ends at least 6 months, but no more than 18 months, before the end of the period mentioned in step 1; and
(b) for which the foreign company has * recognised company accounts.
Note: See subsection (6) if the foreign company does not have recognised company accounts for a period mentioned in this step.
Step 3. Work out the sum of the results of steps 1 and 2, and divide that sum by 2.
This Subdivision modifies the general tax rules for people in Australia who are temporary residents, whether Australian residents or foreign residents.
Generally foreign income derived by temporary residents is non - assessable non - exempt income and capital gains and losses they make are also disregarded for CGT purposes. There are some exceptions for employment - related income and capital gains on shares and rights acquired under employee share schemes.
Temporary residents are also partly relieved of record - keeping obligations in relation to the controlled foreign company rules.
Interest paid by temporary residents is not subject to withholding tax and may be non - assessable non - exempt income for a foreign resident.
You may get a non - refundable tax offset for foreign income tax paid on your assessable income.
There is a limit on the amount of the tax offset.
A resident of a foreign country does not get the offset for some foreign income taxes.
You may also get the offset for foreign income tax paid on some amounts that are not taxed in Australia.
The amount of your tax offset is based on the amount of foreign income tax you have paid.
However, there is a limit on the maximum amount of your offset. The limit is the greater of $1,000 and an amount worked out under this Subdivision. This amount is based on a comparison between your tax liability and the tax liability you would have if certain foreign - taxed and foreign - sourced income and related deductions were disregarded.
You may choose to use the limit of $1,000 and not work out this amount.
There is an increase in the limit to ensure foreign income tax paid on some amounts that are not taxed always forms part of the offset.
Your assessable income includes a forex realisation gain you make as a result of a forex realisation event.
You can deduct a forex realisation loss that you make as a result of a forex realisation event.
There are 5 main types of forex realisation events:
(a) forex realisation event 1 happens if you dispose of foreign currency, or a right to receive foreign currency, to another entity;
(b) forex realisation event 2 happens if you cease to have a right to receive foreign currency (otherwise than because you disposed of the right to another entity);
(c) forex realisation event 3 happens if you cease to have an obligation to receive foreign currency;
(d) forex realisation event 4 happens if you cease to have an obligation to pay foreign currency;
(e) forex realisation event 5 happens if you cease to have a right to pay foreign currency.
There are special rules for certain short - term forex realisation gains and losses.
You may choose roll - over relief for certain facility agreements.
You may elect to receive concessional tax treatment for a qualifying forex account that passes the limited balance test.
You may choose retranslation for a qualifying forex account.
(a) you have a right to issue eligible securities and another entity or entities must acquire the securities; and
(b) the economic effect of the agreement is to enable you to obtain finance in a particular foreign currency.
(a) a forex realisation gain or a forex realisation loss you make as a result of forex realisation event 4 is disregarded if the event happens because you discharge your obligation under an eligible security issued by you under the agreement; and
(b) if you issue an eligible security under the agreement otherwise than as a result of a roll - over--you are taken to have been given a loan (the notional loan ); and
(c) if an eligible security is rolled - over under the agreement--the period of the notional loan is extended by the term of the new security; and
(d) forex realisation event 6 happens if you discharge your obligation under the notional loan; and
(e) forex realisation event 7 happens if a material variation is made to the agreement.
You may elect to have this Subdivision apply to one or more qualifying forex accounts held by you.
If you elect to have this Subdivision apply to an account, a forex realisation gain or a forex realisation loss you make in relation to the account as a result of forex realisation event 2 or 4 is disregarded if the account passes the limited balance test.
For an account to pass the limited balance test, the combined balance of all the accounts covered by your election must not be more than the foreign currency equivalent of $250,000.
The limited balance test includes a buffer provision which allows the combined balance to be more than the foreign currency equivalent of $250,000, but not more than the foreign currency equivalent of $500,000, for not more than 2 15 - day periods in any income year.
(a) a forex realisation gain or a forex realisation loss you make in relation to the account as a result of forex realisation event 2 or 4 is disregarded; and
(b) forex realisation event 8 enables any gains or losses to be worked out on a retranslation basis.
(a) a forex realisation gain or a forex realisation loss you make in relation to an arrangement that is not a Division 230 financial arrangement as a result of forex realisation event 1 to 5 or 8 is disregarded; and
(b) forex realisation event 9 enables any gains or losses to be worked out on a retranslation basis.
A distribution that an Australian corporate tax entity makes to a foreign resident is not subject to dividend withholding tax, and is not assessable income, to the extent that the entity declares it to be conduit foreign income.
An Australian corporate tax entity has an amount that is non - assessable non - exempt income if it receives a distribution including conduit foreign income from another such entity and it makes a distribution including conduit foreign income.
This Subdivision sets out the method of working out an entity's conduit foreign income.
It also discourages streaming of distributions to entities that can take advantage of the receipt of conduit foreign income.
This Subdivision applies if an entity would otherwise get a tax advantage in Australia from cross - border conditions that are inconsistent with the internationally accepted arm's length principle.
The entity is treated for income tax and withholding tax purposes as if arm's length conditions had operated.
Guide to Division 820
820 - B Thin capitalisation rules for outward investing entities (non - ADI)
820 - C Thin capitalisation rules for inward investing entities (non - ADI)
820 - D Thin capitalisation rules for outward investing entities (ADI)
820 - E Thin capitalisation rules for inward investing entities (ADI)
820 - EA Some financial entities may choose to be treated as ADIs
820 - FA How the thin capitalisation rules apply to consolidated groups and MEC groups
820 - FB Grouping branches of foreign banks and foreign financial entities with a consolidated group, MEC group or single Australian resident company
820 - G Calculating the average values
820 - HA Controlled foreign entity debt and controlled foreign entity equity
820 - J Equity interests in trusts and partnerships
820 - JA Worldwide debt and equity concepts
820 - K Zero - capital amounts
820 - KA Cost - free debt capital and excluded equity interests
820 - L Record keeping requirements