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New International Tax Arrangements (Participation Exemption and Other Measures) Bill 2004
Schedule 1 CGT concession: active foreign companies

   

Income Tax Assessment Act 1997

1  Application

The amendments made by this Schedule apply in relation to a CGT event happening on or after 1 April 2004.

2  Section 102-30 (after table item 11)

Insert:

12

A company

The capital gain or capital loss a company makes from a CGT event that happened to a share in a company that is a foreign resident may be reduced.

Subdivision 768-G

 

3  Before Division 775

Insert:

Division 768 Exempt foreign income and gains

   

Table of Subdivisions

768-G   Reduction in capital gains and losses arising from CGT events in relation to non-portfolio interests in active foreign companies

Subdivision 768-G Reduction in capital gains and losses arising from CGT events in relation to non-portfolio interests in active foreign companies

Guide to Subdivision 768-G

768-500   What this Subdivision is about

If:

               (a)     a company has a capital gain or capital loss arising from a CGT event that happens in relation to a share in a foreign company; and

              (b)     the company holds a direct voting percentage of 10% or more in the foreign company for a certain period before the CGT event happens;

the gain or loss is reduced by a percentage that reflects the degree to which the assets of the foreign company are used in an active business.

Table of sections

Operative provisions

768-505    Reducing a capital gain or loss from certain CGT events in relation to non-portfolio interests

Active foreign business asset percentage

768-510    Active foreign business asset percentage

768-515    Choices to apply market value method or book value method

768-520    Market value method—choice made under subsection 768-515(1)

768-525    Book value method—choice made under subsection 768-515(2)

768-530    Active foreign business asset percentage—modifications for foreign life insurance companies and foreign general insurance companies

768-535    Modified rules for foreign wholly-owned groups

Types of assets of a foreign company

768-540    Active foreign business assets of a foreign company

768-545    Assets included in the total assets of a foreign company

Voting percentages in a company

768-550    Direct voting percentage in a company

768-555    Indirect voting percentage in a company

768-560    Total voting percentage in a company

Operative provisions

768-505   Reducing a capital gain or loss from certain CGT events in relation to non-portfolio interests

             (1)  The * capital gain or * capital loss a company (the holding company ) makes from a * CGT event that happened at a particular time (the time of the CGT event ) to a * share in a company (the foreign disposal company ) that is a foreign resident is reduced if:

                     (a)  the holding company held a * direct voting percentage of 10% or more in the foreign disposal company throughout a 12 month period that:

                              (i)  began no earlier than 24 months before the time of the CGT event; and

                             (ii)  ended no later than that time; and

                     (b)  the share is not :

                              (i)  an eligible finance share (within the meaning of Part X of the Income Tax Assessment Act 1936 ); or

                             (ii)  a widely distributed finance share (within the meaning of that Part); and

                     (c)  the CGT event is CGT event A1, B1, C2, E1, E2, G3, J1, K4, K6, K10 or K11.

             (2)  The gain or loss is reduced by the * active foreign business asset percentage (see sections 768-510, 768-530 and 768-535) of the foreign disposal company in relation to the holding company at the time of the CGT event.

Active foreign business asset percentage

768-510   Active foreign business asset percentage

             (1)  The active foreign business asset percentage of a company (the foreign company ) that is a foreign resident, in relation to the holding company mentioned in section 768-505, at the time of the CGT event mentioned in that section, is worked out in accordance with this section.

Market value method

             (2)  Work out that percentage under section 768-520 if:

                     (a)  the holding company has made a choice under subsection 768-515(1) in relation to the foreign company for that time; and

                     (b)  there is sufficient evidence of the * market value at that time of:

                              (i)  all * assets included in the total assets of the foreign company at that time; and

                             (ii)  all * active foreign business assets of the foreign company at that time.

Book value method

             (3)  Work out that percentage under section 768-525 if:

                     (a)  the holding company has made a choice under subsection 768-515(2) in relation to the foreign company for that time; and

                     (b)  there are * recognised company accounts of the foreign company for a period that ends no later than that time, but no more than 12 months before that time; and

                     (c)  if the foreign company was in existence before the start of the period mentioned in paragraph (b)—there are recognised company accounts of the foreign company for a period that ends at least 6 months, but no more than 18 months, before the end of the period mentioned in paragraph (b).

Default method

             (4)  Otherwise, that percentage is:

                     (a)  100% (if this section is being applied for the purposes of section 768-505 to reduce a * capital loss of the holding company); or

                     (b)  zero (in any other case).

768-515   Choices to apply market value method or book value method

Choice for market value method

             (1)  The holding company may choose to work out the * active foreign business asset percentage of the foreign company for the time of the CGT event under section 768-520.

Choice for book value method

             (2)  The holding company may choose to work out the * active foreign business asset percentage of the foreign company for the time of the CGT event under section 768-525.

Method of making choice

             (3)  The way an entity making a choice under subsection (1) or (2) prepares its * income tax return is sufficient evidence of the making of the choice.

Note:          If an entity does not make a choice under subsection (1) or (2), it will work out the active foreign business asset percentage of the foreign company in accordance with the default method in subsection 768-510(4).

768-520   Market value method—choice made under subsection 768-515(1)

             (1)  The active foreign business asset percentage of the foreign company in relation to the holding company,at the time of the CGT event, is worked out under this section in this way.

Method statement

Step 1.    Work out the * market value at that time of all * assets included in the total assets of the foreign company at that time.

Step 2.    Work out the * market value (see subsection (2)) at that time of all * active foreign business assets of the foreign company at that time.

Step 3.    Divide the result of step 2 by the result of step 1.

Step 4 .   Express the result of step 3 as a percentage, and round that percentage to the nearest whole percentage point (rounding a number ending in .5 upwards).

Step 5 .   The active foreign business asset percentage is:

               (a)     if the result of step 4 is less than 10%—zero; or

              (b)     if the result of step 4 is 10% or more, but less than 90%—that result; or

               (c)     if the result of step 4 is 90% or more—100%.

Note 1:       If the foreign company is a foreign life insurance company or a foreign general insurance company, the result of step 2 is modified under section 768-530.

Note 2:       If the foreign company is a member of a wholly-owned group, section 768-535 may modify the way in which this section operates.

             (2)  If, at the time of the CGT event:

                     (a)  an * active foreign business asset of the foreign company is a * share in another company (the subsidiary company ); and

                     (b)  the subsidiary company is a foreign resident;

then, in working out the * market value of all * active foreign business assets of the foreign company at that time for the purposes of step 2 of the method statement in subsection (1), treat the * market value of the share at that time according to the following table.

 

Market value of a share in subsidiary company

Item

If:

treat the market value of the share as:

1

(a) the foreign company has a * direct voting percentage of 10% or more in the subsidiary company at that time; and

(b) the holding company has a * total voting percentage of 10% or more in the subsidiary company at that time

the * share’s * market value at that time, multiplied by the * active foreign business asset percentage of the subsidiary company in relation to the holding company at that time

2

item 1 does not apply

zero

Note:          For the purposes of item 1 of the table, it is necessary to work out the active foreign business asset percentage of the subsidiary company before working out the active foreign business asset percentage of the foreign company.

768-525   Book value method—choice made under subsection 768-515(2)

             (1)  The active foreign business asset percentage of the foreign company in relation to the holding company,at the time of the CGT event, is worked out under this section in this way.

Method statement

Step 1.    Work out the foreign company’s average value of total assets at that time under subsection (2).

Step 2.    Work out the foreign company’s average value of active foreign business assets at that time under subsection (3).

Step 3.    Divide the result of step 2 by the result of step 1.

Step 4 .   Express the result of step 3 as a percentage, and round that percentage to the nearest whole percentage point (rounding a number ending in .5 upwards).

Step 5.    The active foreign business asset percentage is:

               (a)     if the result of step 4 is less than 10%—zero; or

              (b)     if the result of step 4 is 10% or more, but less than 90%—that result; or

               (c)     if the result of step 4 is 90% or more—100%.

Note:          If the foreign company is a member of a wholly-owned group, section 768-535 may modify the way in which this section operates.

             (2)  The foreign company’s average value of total assets at the time of the CGT event is worked out in this way.

Method statement

Step 1.    Work out the sum of the values (see subsection (5)) of every * asset included in the total assets of the foreign company at the end of the most recent period:

               (a)     that ends no later than that time, but no more than 12 months before that time; and

              (b)     for which the foreign company has * recognised company accounts.

Step 2.    Work out the sum of the values (see subsection (5)) of every * asset included in the total assets of the foreign company at the end of the most recent period:

               (a)     that ends at least 6 months, but no more than 18 months, before the end of the period mentioned in step 1; and

              (b)     for which the foreign company has * recognised company accounts.

                   Note:             See subsection (6) if the foreign company does not have recognised company accounts for a period mentioned in this step.

Step 3.    Work out the sum of the results of steps 1 and 2, and divide that sum by 2.

             (3)  The foreign company’s average value of active foreign business assets at that time is worked out in this way.

Method statement

Step 1.    Work out the sum of the values (see subsections (4) and (5)) of every * active foreign business asset of the foreign company at the end of the most recent period:

               (a)     that ends no later than that time, but no more than 12 months before that time; and

              (b)     for which the foreign company has * recognised company accounts.

Step 2.    Work out the sum of the values (see subsections (4) and (5)) of every * active foreign business asset of the foreign company at the end of the most recent period:

               (a)     that ends at least 6 months, but no more than 18 months, before the end of the period mentioned in step 1; and

              (b)     for which the foreign company has * recognised company accounts.

                   Note:             See subsection (6) if the foreign company does not have recognised company accounts for a period mentioned in this step.

Step 3.    Work out the sum of the results of steps 1 and 2, and divide that sum by 2.

Note:          If the foreign company is a foreign life insurance company or a foreign general insurance company, the results of steps 1 and 2 are modified under section 768-530.

             (4)  If an * active foreign business asset of the foreign company is a * share in another company (the subsidiary company ) that is a foreign resident, then, for the purposes of steps 1 and 2 of the method statement in subsection (3), treat the value of the share at a particular time according to the following table.

 

Value of a share in subsidiary company

Item

If:

treat the value of the share as:

1

(a) the foreign company has a * direct voting percentage of 10% or more in the subsidiary company at that time; and

(b) the holding company has a * total voting percentage of 10% or more in the subsidiary company at that time

the * share’s value (see subsection (5)) at that time, multiplied by the * active foreign business asset percentage of the subsidiary company in relation to the holding company at that time

2

item 1 does not apply

zero

Note:          For the purposes of item 1 of the table, it is necessary to work out the active foreign business asset percentage of the subsidiary company before working out the active foreign business asset percentage of the foreign company.

             (5)  For the purposes of this section, the value of an asset of a foreign company at the end of a period is taken to be:

                     (a)  the value of the asset as shown in the * recognised company accounts of the foreign company for that period; or

                     (b)  if the value of the asset is not shown in the recognised company accounts of the foreign company for that period—zero.

             (6)  The result of:

                     (a)  step 2 of the method statement in subsection (2); and

                     (b)  step 2 of the method statement in subsection (3);

is taken to be zero if the foreign company does not have * recognised company accounts for a period mentioned in those steps.

Note:          This will only be the case if the foreign company was not in existence before the start of the period mentioned in step 1 of those method statements (see paragraph 768-510(3)(c)).

768-530   Active foreign business asset percentage—modifications for foreign life insurance companies and foreign general insurance companies

             (1)  If the foreign company is a * foreign life insurance company or a * foreign general insurance company, work out its * active foreign business asset percentage according to section 768-510, but with the modifications set out in subsections (2) and (3).

             (2)  Treat a reference in the following provisions to a period as a reference to a * statutory accounting period of the foreign company:

                     (a)  paragraphs 768-510(3)(b) and (c);

                     (b)  section 768-525.

             (3)  Apply the modifications set out in the following table.

 

Modifications for foreign life insurance companies and foreign general insurance companies

Item

The result of this step:

is increased by the amount applicable under subsection (4) for this statutory accounting period:

1

step 2 of the method statement in subsection 768-520(1)

the most recent * statutory accounting period of the foreign company ending at or before the time mentioned in that step

2

step 1 of the method statement in subsection 768-525(3)

the * statutory accounting period mentioned in that step (as modified by subsection (2) of this section)

3

step 2 of the method statement in subsection 768-525(3)

the * statutory accounting period mentioned in that step (as modified by subsection (2) of this section)

             (4)  The amount applicable under this subsection for a * statutory accounting period of the foreign company is worked out using the following formula:

where:

active insurance amount means:

                     (a)  if the foreign company is a * foreign life insurance company—the untainted policy liabilities (within the meaning of subsection 446(2) of the Income Tax Assessment Act 1936 ) of the foreign company for the statutory accounting period; or

                     (b)  if the foreign company is a * foreign general insurance company—the active general insurance amount worked out under subsection (5) for the statutory accounting period.

total insurance assets means:

                     (a)  if the foreign company is a * foreign life insurance company—the total assets (within the meaning of subsection 446(2) of the Income Tax Assessment Act 1936 ) of the foreign company for the statutory accounting period; or

                     (b)  if the foreign company is a * foreign general insurance company—the total assets (within the meaning of subsection 446(4) of that Act) of the foreign company for the statutory accounting period.

value of non-active foreign business assets means:

                     (a)  for the purposes of item 1 of the table in subsection (3)—the difference between:

                              (i)  the result of step 1 of the method statement in subsection 768-520(1); and

                             (ii)  the result of step 2 of that method statement (apart from this section); or

                     (b)  for the purposes of item 2 of the table in subsection (3)—the difference between:

                              (i)  the result of step 1 of the method statement in subsection 768-525(2); and

                             (ii)  the result of step 1 of the method statement in subsection 768-525(3) (apart from this section); or

                     (c)  for the purposes of item 3 of the table in subsection (3)—the difference between:

                              (i)  the result of step 2 of the method statement in subsection 768-525(2); and

                             (ii)  the result of step 2 of the method statement in subsection 768-525(3) (apart from this section).

Active insurance amount for foreign general insurance company

             (5)  The active general insurance amount under this subsection for a * statutory accounting period of the foreign company is worked out using the following formula:

where:

net assets means the net assets (within the meaning of subsection 446(4) of the Income Tax Assessment Act 1936 ) of the foreign company for the statutory accounting period.

solvency amount means the solvency amount (within the meaning of subsection 446(4) of the Income Tax Assessment Act 1936 ) of the foreign company for the statutory accounting period.

tainted outstanding claims means the tainted outstanding claims (within the meaning of subsection 446(4) of the Income Tax Assessment Act 1936 ) of the foreign company for the statutory accounting period.

total general insurance assets means the total assets (within the meaning of subsection 446(4) of the Income Tax Assessment Act 1936 ) of the foreign company for the statutory accounting period.

768-535   Modified rules for foreign wholly-owned groups

             (1)  This section applies if:

                     (a)  for the purposes of section 768-505, it is necessary to work out the * active foreign business asset percentage of a company (the top foreign company ) in relation to the holding company mentioned in that section, at the time of the CGT event mentioned in that section; and

                     (b)  the top foreign company is not :

                              (i)  an AFI subsidiary (within the meaning of Part X of the Income Tax Assessment Act 1936 ); or

                             (ii)  a * foreign life insurance company; or

                            (iii)  a * foreign general insurance company; and

                     (c)  for the purposes of section 768-505, it is also necessary (apart from this section) to work out the active foreign business asset percentage at that time of 1 or more other companies in relation to the holding company, at that time, where:

                              (i)  the top foreign company and 1 or more of those other companies (the subsidiary foreign companies ) are members of a * wholly-owned group; and

                             (ii)  each of the subsidiary foreign companies is a * 100% subsidiary of the top foreign company.

             (2)  The holding company may choose to work out the * active foreign business asset percentage of the top foreign company in accordance with subsections (4) and (6).

             (3)  The way an entity making a choice under subsection (2) prepares its * income tax return is sufficient evidence of the making of the choice.

             (4)  If the holding company has made a choice under subsection (2), the provisions mentioned in subsection (5) operate, for the purposes of section 768-505 , as if each subsidiary foreign company were a part of the top foreign company, rather than a separate entity.

Note 1:       This subsection means that certain assets are not treated as active foreign business assets, or as assets included in the total assets, of any of the subsidiary foreign companies or of the top foreign company. For example:

(a)    a share owned by one of those companies in another of those companies; and

(b)    a debt owed by one of those companies to another of those companies.

Note 2:       If an asset (other than an asset mentioned in Note 1) is actually an active foreign business asset, or an asset included in the total assets, of a subsidiary foreign company, it is treated under this subsection as an active foreign business asset, or as an asset included in the total assets, of the top foreign company.

             (5)  For the purposes of subsection (4), the provisions are:

                     (a)  section  768-540 (active foreign business assets of a foreign company) ; and

                     (b)  section  768-545 (assets included in the total assets of a foreign company) .

             (6)  If the holding company has made a choice under subsection (2), then for the purposes of sections 768-510 and 768-525, treat the * recognised consolidated accounts of the top foreign company and all of the subsidiary foreign companies as the * recognised company accounts of the top foreign company.

Types of assets of a foreign company

768-540   Active foreign business assets of a foreign company

             (1)  An asset is, at a particular time, an active foreign business asset of a company (the foreign company ) that is a foreign resident if, at that time:

                     (a)  the asset is an * asset included in the total assets of the company; and

                     (b)  the asset satisfies any of these conditions:

                              (i)  the asset is used, or held ready for use, by the company in the course of carrying on a * business;

                             (ii)  the asset is goodwill;

                            (iii)  the asset is a * share; and

                     (c)  the asset is not a * CGT asset that has the * necessary connection with Australia, disregarding the operation of paragraph (b) of item 5 and paragraph (b) of item 6 of the table in section 136-25; and

                     (d)  the asset is not covered by subsection (2); and

                     (e)  if the foreign company is an AFI subsidiary (within the meaning of Part X of the Income Tax Assessment Act 1936 ) whose sole or principal business is financial intermediary business—the asset is not covered under subsection (4).

             (2)  An asset is covered by this subsection if it is:

                     (a)  a financial instrument (other than a * share or a trade debt); or

                     (b)  either:

                              (i)  an eligible finance share (within the meaning of Part X of the Income Tax Assessment Act 1936 ); or

                             (ii)  a widely distributed finance share (within the meaning of that Part); or

                     (c)  an interest in a trust or * partnership; or

                     (d)  a * life insurance policy; or

                     (e)  a right or option to acquire:

                              (i)  a financial instrument; or

                             (ii)  an interest in a company, trust or partnership; or

                            (iii)  a life insurance policy; or

                      (f)  cash or cash equivalent; or

                     (g)  an asset whose main use in the course of carrying on the * business mentioned in subparagraph (1)(b)(i) is to * derive interest, an * annuity, rent, * royalties or foreign exchange gains unless:

                              (i)  the asset is an intangible asset and has been substantially developed, altered or improved by the foreign company so that its * market value has been substantially enhanced; or

                             (ii)  its main use for deriving rent was only temporary.

             (3)  If, at the time mentioned in subsection (1), the foreign company is an AFI subsidiary (within the meaning of Part X of the Income Tax Assessment Act 1936 ) whose sole or principal business is financial intermediary business (within the meaning of that Part), subsection (2) operates as if:

                     (a)  paragraphs (2)(a) and (f) were omitted; and

                     (b)  paragraph (2)(g) did not contain a reference to interest, an * annuity or foreign exchange gains.

             (4)  The asset is covered under this subsection if:

                     (a)  all of these conditions are satisfied:

                              (i)  the asset is an asset mentioned in subparagraph 450(4)(b)(i) or (ii) of the Income Tax Assessment Act 1936 ;

                             (ii)  the asset was acquired from another entity;

                            (iii)  either of the conditions mentioned in subparagraph 450(6)(c)(i) and (ii) of the Income Tax Assessment Act 1936 were satisfied in relation to the other entity at the time of the acquisition; or

                     (b)  both of these conditions are satisfied:

                              (i)  the asset relates to a debt to which factoring income (within the meaning of Part X of the Income Tax Assessment Act 1936 ) of the foreign company relates;

                             (ii)  the condition in paragraph 450(8)(b) of the Income Tax Assessment Act 1936 is satisfied in relation to the debt.

768-545   Assets included in the total assets of a foreign company

             (1)  At a particular time, an asset is an asset included in the total assets of a company (the foreign company ) that is a foreign resident if:

                     (a)  the asset is a * CGT asset at that time; and

                     (b)  the foreign company owns the asset at that time; and

                     (c)  if at that time the foreign company is not an AFI subsidiary (within the meaning of Part X of the Income Tax Assessment Act 1936 ) whose sole or principal business is financial intermediary business (within the meaning of that Part)—the asset is not a foreign company derivative asset covered by subsection (2).

             (2)  An asset is a foreign company derivative asset covered by this subsection if:

                     (a)  the asset is an * arrangement covered by subsection (3), unless the regulations declare the asset not to be a foreign company derivative asset covered by this subsection; or

                     (b)  the regulations declare the asset to be a foreign company derivative asset covered by this subsection.

             (3)  An * arrangement is covered by this subsection if:

                     (a)  under the arrangement, a party to the arrangement must, or may be required to, provide at some future time consideration of a particular kind or kinds to someone; and

                     (b)  that future time is not less than the number of days, prescribed by regulations made for the purposes of paragraph 761D(1)(b) of the Corporations Act 2001 , after the day on which the arrangement is entered into; and

                     (c)  the amount of the consideration, or the value of the arrangement, is ultimately determined, derived from or varies by reference to (wholly or in part) the value or amount of something else (of any nature whatsoever and whether or not deliverable), including, for example, one or more of the following:

                              (i)  an asset;

                             (ii)  a rate (including an interest rate or exchange rate);

                            (iii)  an index;

                            (iv)  a commodity; and

                     (d)  subsection (4) does not apply in relation to the arrangement.

             (4)  An * arrangement under which one person has an obligation to buy, and another person has an obligation to sell, property is not an arrangement covered by subsection (3) merely because the arrangement provides for the consideration to be varied by reference to a general inflation index such as the Consumer Price Index.

Voting percentages in a company

768-550   Direct voting percentage in a company

             (1)  An entity’s direct voting percentage at a particular time in a company is:

                     (a)  if the entity has a voting interest (within the meaning of section 160AFB of the Income Tax Assessment Act 1936 ) in the foreign company at that time amounting to a percentage of the voting power (within the meaning of that section) of the company—that percentage; or

                     (b)  otherwise—zero.

             (2)  In applying section 160AFB of the Income Tax Assessment Act 1936 for the purposes of subsection (1) of this section, assume that:

                     (a)  the entity is a company; and

                     (b)  the entity is not the beneficial owner of a * share in the company if a trust or * partnership is interposed between the entity and the company.

768-555   Indirect voting percentage in a company

             (1)  An entity’s indirect voting percentage at a particular time in a company (the subsidiary company ) is worked out by multiplying:

                     (a)  the entity’s * direct voting percentage (if any) in another company (the intermediate company ) at that time;

by:

                     (b)  the sum of:

                              (i)  the intermediate company’s direct voting percentage (if any) in the subsidiary company at that time; and

                             (ii)  the intermediate company’s indirect voting percentage (if any) in the subsidiary company at that time (as worked out under one or more other applications of this section).

             (2)  If there is more than one intermediate company to which subsection (1) applies at that time, the entity’s indirect voting percentage is the sum of the percentages worked out under subsection (1) in relation to each of those intermediate companies.

768-560   Total voting percentage in a company

                   An entity’s total voting percentage at a particular time in a company is the sum of:

                     (a)  the entity’s * direct voting percentage in the company at that time; and

                     (b)  the entity’s * indirect voting percentage in the company at that time.

4  Subsection 960-60(1) (paragraph (a) in the cell at table item 4, column headed “with effect from the start of...”)

Omit “statutory accounting period (within the meaning of Part X of the Income Act Assessment Act 1936 )”, substitute “ * statutory accounting period”.

5  Section 960-65 (subparagraph (a)(i) in the cell at table item 4, column headed “the choice is a backdated startup choice if...”)

Omit “statutory accounting period (within the meaning of Part X of the Income Tax Assessment Act 1936 )”, substitute “ * statutory accounting period”.

6  Section 960-65 (subparagraph (b)(i) in the cell at table item 4, column headed “the choice is a backdated startup choice if...”)

Omit “(within the meaning of Part X of the Income Tax Assessment Act 1936 )”.

7  Subsection 960-70(3)

Omit “statutory accounting period (within the meaning of Part X of the Income Tax Assessment Act 1936 )”, substitute “ * statutory accounting period”.

8  Subsection 960-80(1) (paragraph (b) in the cell at table item 4, column headed “In this case...”)

Omit “statutory accounting period (within the meaning of Part X of the Income Tax Assessment Act 1936 )”, substitute “ * statutory accounting period”.

9  Subsection 960-90(1) (cell at table item 4, column headed “you may withdraw your choice with effect from immediately after the end of...”)

Omit “statutory accounting period (within the meaning of Part X of the Income Tax Assessment Act 1936 )”, substitute “ * statutory accounting period”.

10  Subsection 995-1(1)

Insert:

active foreign business asset of a company that is a foreign resident has the meaning given by section 768-540.

11  Subsection 995-1(1)

Insert:

active foreign business asset percentage of a company has the meaning given by section 768-510.

12  Subsection 995-1(1)

Insert:

asset included in the total assets of a company that is a foreign resident has the meaning given by section 768-545.

13  Subsection 995-1(1)

Insert:

direct voting percentage in a company has the meaning given by section 768-550.

14  Subsection 995-1(1)

Insert:

foreign general insurance company means a company that is a foreign resident, and whose sole or principal business is * insurance business.

15  Subsection 995-1(1)

Insert:

foreign life insurance company means a company that is a foreign resident, and whose sole or principal business is life insurance.

16  Subsection 995-1(1)

Insert:

indirect voting percentage in a company has the meaning given by section 768-555.

17  Subsection 995-1(1)

Insert:

recognised company accounts , for a period,of a company that is a foreign resident means:

                     (a)  accounts that are prepared in relation to the company for the period in accordance with standards covered by subsection 820-960(1C) or (1D); or

                     (b)  if there are no such accounts for the period—accounts that:

                              (i)  are prepared in relation to the company for the period in accordance with commercially accepted accounting principles; and

                             (ii)  give a true and fair view of the financial position of the company.

18  Subsection 995-1(1)

Insert:

recognised consolidated accounts , for a period, of 2 or more companies that are foreign residents means:

                     (a)  consolidated accounts that are prepared in relation to those companies for the period in accordance with standards covered by subsection 820-960(1C) or (1D); or

                     (b)  if there are no such accounts for the period—consolidated accounts that:

                              (i)  are prepared in relation to those companies for the period in accordance with commercially accepted accounting principles; and

                             (ii)  give a true and fair view of the financial position of the companies on a consolidated basis.

19  Subsection 995-1(1)

Insert:

statutory accounting period has the same meaning as in Part X of the Income Tax Assessment Act 1936 .

20  Subsection 995-1(1)

Insert:

total voting percentage in a company has the meaning given by section 768-560.