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INCOME TAX (TRANSITIONAL PROVISIONS) ACT 1997 - SECT 701C.10

Additional membership rules where entities are interposed between the head company and a subsidiary member--case where an interposed entity is a foreign resident and the subsidiary member is a company

             (1)  This section describes, for the purposes of item 2, column 4 of the table in subsection 703-15(2) of the Income Tax Assessment Act 1997 , a set of requirements that must be met for an entity (the test entity ) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time ).

Note:          This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703-15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719-10(1)(b)(ii) of that Act (see subsection 719-2(3) of this Act).

Test entity must be company

             (2)  At the test time, the test entity must be a company.

At least one interposed entity must be a non-resident company or non-resident trust

             (3)  At the test time, at least one of the interposed entities must be:

                     (a)  a company (a non-resident company ) that is a foreign resident; or

                     (b)  a trust (a non-resident trust ) that does not meet the requirements in any item of the table in section 703-25 of the Income Tax Assessment Act 1997 .

The interposed entities must all be of a particular kind

             (4)  At the test time, each of the interposed entities must be:

                     (a)  a subsidiary member of the group; or

                     (b)  a non-resident company; or

                     (c)  a non-resident trust; or

                     (d)  an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non-resident company or a non-resident trust; or

                     (e)  a partnership, each of the partners in which is a non-resident company or a non-resident trust.

Test entity must be a subsidiary member on assumption that non-resident companies and non-resident trusts were subsidiary members

             (5)  At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non-resident company or non-resident trust were a subsidiary member of the group.

Additional requirement for consolidatable groups

             (6)  If the group is a consolidatable group, the test time must be before 1 July 2004.

Additional requirement for consolidated groups at formation

             (7)  If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004.

Additional requirement for consolidated groups after formation

             (8)  If:

                     (a)  the group is a consolidated group; and

                     (b)  the test time is after the group comes into existence; and

                     (c)  at the test time, one or more of the membership interests in the test entity are held by:

                              (i)  a non-resident company; or

                             (ii)  a non-resident trust; or

                            (iii)  an entity that holds the membership interests only as a nominee of one or more entities each of which is a non-resident company or a non-resident trust; or

                            (iv)  a partnership, each of the partners in which is a non-resident company or a non-resident trust;

then:

                     (d)  from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and

                     (e)  at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv).



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