Income Tax Assessment Act| Apprentice Tax Practitioner Program
Subdivision 149-D—How to treat holdings of less than 1% in certain entities
149-100 What this Subdivision is about
If the entity is a company covered by paragraph 149-50(1)(a), (e) or (f) or a publicly traded unit trust, this Subdivision has rules that make it easier for it to determine who had underlying interests in the asset.
Table of sections
Special tracing rules for certain companies and publicly traded unit trusts
149-110 Holdings of less than 1% in the entity
149-115 Holdings of less than 1% in interposed company or unit trust
149-120 Notional single shareholder or unitholder of head entity
149-125 Notional single shareholder or unitholder of interposed company or trust
149-130 Notional shareholder taken to have minimum rights to distributions
149-135 Income and capital unitholding of less than 1%
When the rules in this Subdivision do not apply
149-140 If company or unit trust would not otherwise pass the continuity of ownership test
(1) All holdings of shares or units of less than 1% in the entity are treated as if they were held by a single notional individual. This means that the entity does not have to trace through to the actual ultimate owners who have underlying interests in the asset.
(2) A similar rule applies if another company covered by paragraph 149-50(1)(a), (e) or (f) or publicly traded unit trust is interposed between the entity and those ultimate owners. All holdings of less than 1% in the interposed company or trust are treated as if they were held by a different single notional individual.
(3) This means that the entity does not have to trace through the interposed company or trust to the actual ultimate owners who have underlying interests in the asset.
Note: The rules in this Subdivision may not apply if they would hide a change in majority underlying interests in the asset: see section 149-140.
[This is the end of the Guide.]
Special tracing rules for certain companies and publicly traded unit trusts
149-110 Holdings of less than 1% in the entity
(1) If the entity (the head entity) is a company covered by paragraph 149-50(1)(a), (e) or (f) or a
*publicly traded unit trust, this Subdivision modifies how it may determine under section 149-60 the *ultimate owners who had *underlying interests in the asset at a particular time.(2) If the entity is a company, there must have been at that time:
(a)
(b)
*capital shareholdings of less than 1% in it.(3) If the entity is a unit trust, there must have been at that time:
(a)
(b)
*capital unitholdings of less than 1% in it.149-115 Holdings of less than 1% in interposed company or unit trust
(1) This Subdivision also modifies how the head entity may determine under section 149-60 the
*ultimate owners who had *underlying interests in the asset at a particular time if, at that time:(a) the head entity was a company covered by paragraph 149-50(1)(a), (e) or (f) or a
(b) another entity (an interposed company or trust) was such a company or unit trust and met the condition in subsection (2) and the one in either subsection (3) or (4).
(2) The interposed company or trust must have been interposed between the head entity and
*ultimate owners who *indirectly had beneficial interests in the asset or in any *ordinary income that may be derived from the asset.(3) In the case of a company, there must have been:
(a)
(b)
*capital shareholdings of less than 1% in it.(4) In the case of a unit trust, there must have been:
(a)
(b)
*capital unitholdings of less than 1% in it.149-120 Notional single shareholder or unitholder of head entity
Notional single shareholder
(1) If the head entity is a company, it may make the determination on the basis that a single notional individual (the notional holder) had the right to receive, for his or her own benefit and directly:
(a) any *dividends it may pay in respect of each *dividend shareholding of less than 1% in the entity at that time; and
(b) any distributions of capital of the entity in respect of each *capital shareholding of less than 1% in the entity at that time.
(2) If the head entity makes the determination on the basis mentioned in subsection (1), it must also make it on the basis that the *ultimate owners who at that time had the right to receive for their own benefit (whether directly, or *indirectly through one or more interposed entities):
(a) any *dividends the entity may pay in respect of each *dividend shareholding of less than 1% in the entity at that time; and
(b) any distributions of capital of the entity in respect of each *capital shareholding of less than 1% in the entity at that time;
did not have that right.
Notional single unitholder
(3) If the head entity is a unit trust, it may make the determination on the basis that a single notional individual (the notional holder) had the right to receive, for his or her own benefit and directly:
(a) any income that the entity may distribute in respect of each *income unitholding of less than 1% in the entity at that time; and
(b) any distributions of capital of the entity in respect of each *capital unitholding of less than 1% in the entity at that time.
(4) If the head entity makes the determination on the basis mentioned in subsection (3), it must also make it on the basis that the *ultimate owners who at that time had the right to receive for their own benefit (whether directly, or *indirectly through one or more interposed entities):
(a) any income that the entity may distribute in respect of each *income unitholding of less than 1% in the entity at that time; and
(b) any distributions of capital of the entity in respect of each *capital unitholding of less than 1% in the entity at that time;
did not have that right.
149-125 Notional single shareholder or unitholder of interposed company or trust
Notional shareholder
(1) The entity may make the determination on the basis that, for each interposed company that is covered by paragraph 149-50(1)(a), (e) or (f), a different single notional individual (the notional holder) had the right to receive, for his or her own benefit and directly:
(a) any *dividends the interposed company may pay in respect of each *dividend shareholding of less than 1% in the interposed company at that time; and
(b) any distributions of capital of the interposed company in respect of each *capital shareholding of less than 1% in the interposed company at that time.
(2) If the head entity makes the determination on the basis mentioned in subsection (1), it must also make it on the basis that the *ultimate owners who at that time had the right to receive for their own benefit (whether directly, or *indirectly through one or more interposed entities):
(a) any *dividends the interposed company may pay in respect of each *dividend shareholding of less than 1% in the interposed company at that time; and
(b) any distributions of capital of the interposed company in respect of each *capital shareholding of less than 1% in the interposed company at that time;
did not have that right.
Notional unitholder
(3) The entity may make the determination on the basis that, for each interposed trust that is a *publicly traded unit trust, a different single notional individual (the notional holder) had the right to receive, for his or her own benefit and directly:
(a) any income that the interposed trust may distribute in respect of each *income unitholding of less than 1% in the interposed trust at that time; and
(b) any distributions of capital of the interposed trust in respect of each *capital unitholding of less than 1% in the interposed trust at that time.
(4) If the head entity makes the determination on the basis mentioned in subsection (3), it must also make it on the basis that the *ultimate owners who at that time had the right to receive for their own benefit (whether directly, or indirectly through one or more interposed entities):
(a) any income that the interposed trust may distribute in respect of each *income unitholding of less than 1% in the interposed trust at that time; and
(b) any distributions of capital of the interposed trust in respect of each *capital unitholding of less than 1% in the interposed trust at that time.
did not have that right.
149-130 Notional shareholder taken to have minimum rights to distributions
If:
is greater than:
the notional holder is taken to have the right to receive the lower percentage of the distributions of capital, dividends or other income at that time.
149-135 Income and capital unitholding of less than 1%
Meaning of income unitholding of less than 1%
(1) If all the units in a unit trust of which an entity is the registered holder at a particular time carry (between them) the right to receive less than 1% of any distribution of income of the trust, those units constitute an income unitholding of less than 1% in the trust at that time.
Meaning of capital unitholding of less than 1%
(2) If all the units in a unit trust of which an entity is the registered holder at a particular time carry (between them) the right to receive less than 1% of any distribution of capital of the trust, those units constitute a capital unitholding of less than 1% in the trust at that time.
When the rules in this Subdivision do not apply
149-140 If company or unit trust would not otherwise pass the continuity of ownership test
(1) This Subdivision does not apply for the purposes of a determination under section 149-55 if the Commissioner decides that it is reasonable to assume that at the end of the
*test day *majority underlying interests in the asset were not had by *ultimate owners who had *majority underlying interests in the asset at the end of the *starting day.(2) If the Commissioner so decides after the head entity has already made the determination on the basis of a rule in this Subdivision, the determination is taken never to have been made.
Note: The head entity may still have time to make a fresh determination, or the Commissioner may extend the time for making one: see subsection 149-55(1).
Subdivision 149-E—How to treat certain interposed funds, companies and government bodies
149-145 What this Subdivision is about
If the entity is a company covered by paragraph 149-50(1)(a), (e) or (f) or a publicly traded unit trust, this Subdivision has rules that make it easier for it to determine who had underlying interests in the asset.
The entity does not have to trace through complying superannuation funds, complying approved deposit funds, companies of certain kinds, or government bodies, that are interposed between the entity and the ultimate owners who have underlying interests in the asset.
Special tracing rules for certain companies and publicly traded unit trusts
149-150 When certain funds, companies or government bodies are taken to have rights to capital, dividends or other income
149-155 Limits on tracing through interposed fund or body
[This is the end of the Guide.]
Special tracing rules for certain companies and publicly traded unit trusts
149-150 When certain funds, companies or government bodies are taken to have rights to capital, dividends or other income
(1) If the entity (the head entity) is a company covered by paragraph 149-50(1)(a), (e) or (f) or a
*publicly traded unit trust, and the conditions in this section are met, this Subdivision modifies how it may determine under section 149-55 the *ultimate owners who had *underlying interests in the asset at a particular time.(2) An entity of any of these kinds (the interposed fund or body):
(a) a
(b) an *approved deposit fund;
(c) a
*mutual insurance company;(d) a
*mutual affiliate company;(e) a company whose
*constitution prevents it from making any distribution, whether in money, property or otherwise, to its members;(f) a company that is prescribed by the regulations;
(g) the Commonwealth, a State or a Territory;
(h) a municipal corporation
(i) a local governing body;
(j) the government of a foreign country, or of part of a foreign country;
must have been interposed at that time between the head entity and
*ultimate owners.(3) At that time, those
*ultimate owners must have had the right to receive for their own benefit, and *indirectly through the interposed fund or body (or through entities including it):(a) a percentage of any distributions of capital of the head entity; or
(b) a percentage of any
(4) If the interposed fund or body is a
*superannuation fund, it must have been a *complying superannuation fund, or *a foreign superannuation fund, at the end of the *test day to which the determination relates.(5) If the interposed fund or body is an
*approved deposit fund, it must have been a *complying approved deposit fund at the end of the *test day to which the determination relates.149-155 Limits on tracing through interposed fund or body
Interposed fund or body has more than 50 members or is a government body
(1) If:
(a) the interposed fund or body had more than 50 members at that time; or
(b) the interposed fund or body is covered by any of paragraphs 149-150(2)(g) to (j) (which describe certain Australian and foreign government bodies);
the head entity may make the determination on the basis that the interposed fund or body was at that time an individual who had the right to receive, for his or her own benefit, the percentage of distributions, *dividends or income mentioned in paragraph 149-150(3)(a) or (b).
If fund or special company has not more than 50 members
(2) Otherwise, the head entity may make the determination on the basis that each member of the interposed fund or body was at that time an individual who had a right to receive, for his or her own benefit, an equal proportion of the percentage of distributions, *dividends or income mentioned in paragraph 149-150(3)(a) or (b).
Persons who actually had the right are taken not to have had it
(3) If the head entity makes the determination on the basis mentioned in subsection (1) or (2), it must also make it on the basis that the *ultimate owners who at that time had the right mentioned in subsection 149-150(3) did not have that right (except as provided by subsection (2) of this section).
Subdivision 149-F—How to treat a "demutualised" public entity
149-165 Members treated as having underlying interests in assets until demutualisation
149-170 Effect of demutualisation of interposed company
149-165 Members treated as having underlying interests in assets until demutualisation
(1) This section modifies how the entity may determine under section 149-60 the
*ultimate owners who had *underlying interests in the asset at a particular time if the entity:(a) was:
(i) a
(ii) a
*mutual affiliate company;at the end of the
*starting day (as determined under subsection 149-60(6)); and(b) has since stopped being a company of either of those kinds, but has continued in existence as either a company covered by paragraph 149-50(1)(a), (e) or (f) or a
*publicly traded unit trust; and(c) when it stopped being an entity of either of those kinds (the stopping time), had more than 50 members.
(2) The entity may make the determination on the basis that an
*ultimate owner who:(a) immediately before the stopping time was a member of the entity; and
(b) immediately after the stopping time had an
had the interest at all times from and including the end of the
*starting day until immediately after the stopping time.149-170 Effect of demutualisation of interposed company
(1) This section modifies how the entity (the head entity) may determine under section 149-60 the
*ultimate owners who had *underlying interests in the asset at a particular time if another entity (the interposed company):(a) was:
(i) a
(ii) a
*mutual affiliate company;at the end of the
*starting day (as determined under subsection 149-60(6)) for the head entity; and(b) has since stopped being a company of either of those kinds, but has continued in existence as either a company covered by paragraph 149-50(1)(a), (e) or (f) or a
*publicly traded unit trust; and(c) when it stopped being an entity of either of those kinds (the stopping time), had more than 50 members.
(2) The head entity may make the determination on the basis that an
*ultimate owner who:(a) immediately before the stopping time was a member of the interposed company; and
(b) immediately after the stopping time had, through the interposed company, an
had the interest at all times from and including the end of the *starting day until immediately after the stopping time.
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