Ap_att02

Attributable taxpayers

Are you an attributable taxpayer in relation to a non-resident company?

ASSOCIATE INCLUSIVE CONTROL INTEREST = direct control interests + indirect control interests.

What is the extent of the indirect control interests?

Unless you are an attibutable taxpayer you can forget about these provisions.

So are you an attributable taxpayer?

Before we can answer this we will have to think about the meaning of the term ASSOCIATE INCLUSIVE CONTROL INTEREST. It is defined as

the AGGREGATE of ...

the DIRECT and INDIRECT CONTROL INTERESTS ...

held by the taxpayer and his associates. (associate is defined at sec 318)

So if we know what direct and indirect CONTROL INTERESTS are and can add them all up, we can work out the ASSOCIATE INCLUSIVE CONTROL INTEREST

DIRECT CONTROL INTERESTS are defined in sec 350 and based on the interests of the taxpayer in

The issued capital of the company

the voting rights of the taxpayer and.....

the entitlements to distributions of capital.

INDIRECT CONTROL INTERESTS arise when the taxpayer is not a direct shareholder of the controlled foreign company deriving the income ... BUT has an interest in a controlled foreign entity which has a DIRECT CONTROL INTEREST in that CONTROLLED FOREIGN COMPANY.

So what is a controlled foreign entity?

Refer sec 339 to 342

controlled foreign company, (sec 340)

controlled foreign partnership,(sec 341)

controlled foreign trust (sec 342)

In other words, if the taxpayer is 'hiding' his control of the foreign company by interposing other foreign entities over which he exercises control, he will be an attributable taxpayer.

WHAT IS THE EXTENT OF THE INDIRECT CONTROL INTERESTS?

INDIRECT CONTROL INTEREST

CONTROL INTEREST HELD BY AUSTRALIAN ENTITY IN INTERPOSED ENTITY

INTEREST IN CONTROLLED FOREIGN CO.HELD BY INTERPOSED ENTITY

If you are NOT an attributable taxpayer, you can forget about these provisions and just return your foreign dividends and trust distributions when the directors or trustees declare them.

Refer para 21-140 of CCH Master Tax Guide for details.