(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 | Column 2 | Column 3 |
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.