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INCOME TAX ASSESSMENT ACT 1997 - SECT 727.405

Ultimate stake of a particular percentage in a company

  (1)   This section sets out 3 tests of whether an entity has an ultimate stake of a particular percentage (the test percentage ) in a company.

Note:   In applying the tests, follow the rules in section   727 - 415.

Voting power

  (2)   The first test is that, after tracing, to the * ultimate owners who ultimately hold it, the direct and indirect ownership of all * shares in the company that carry the right to exercise voting power in the company, that ownership is held by the entity to the extent of the test percentage of that voting power.

Dividends

  (3)   The second test is that, after tracing, to the * ultimate owners who ultimately hold it, the direct and indirect ownership of all * shares in the company that carry the right to receive any dividends that the company may pay, that ownership is held by the entity to the extent of the test percentage of those dividends.

Capital distributions

  (4)   The third test is that, after tracing, to the * ultimate owners who ultimately hold it, the direct and indirect ownership of all * shares in the company that carry the right to receive any distribution of capital of the company, that ownership is held by the entity to the extent of the test percentage of the distribution.

Certain shares ignored

  (5)   In tracing the ownership of * shares in a company, ignore * shares whose * dividends can reasonably be regarded as being equivalent to the payment of interest on a loan having regard to:

  (a)   how the dividends are calculated; and

  (b)   the conditions applying to the payment of the dividends; and

  (c)   any other relevant matters.


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