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New International Tax Arrangements (Participation Exemption and Other Measures) Bill 2004
Schedule 3 Tainted services income

Part 1 Amendments

Income Tax Assessment Act 1936

1  Paragraph 448(1)(a)

Repeal the paragraph, substitute:

                     (a)  income (other than premium income) from the provision of services by the company to an entity, if:

                              (i)  the entity was a Part X Australian resident at the time the income was derived; and

                             (ii)  the services were not provided in connection with a business carried on by the entity at that time at or through a permanent establishment of the entity in a listed or unlisted country;

2  Paragraph 448(1)(c)

Repeal the paragraph, substitute:

                     (c)  income consisting of life assurance premiums in respect of a life assurance policy if, at the time the policy was entered into, the owner of the policy was a Part X Australian resident;

3  Subparagraph 448(1)(d)(i)

Repeal the subparagraph, substitute:

                              (i)  any insured person was a Part X Australian resident, and the policy was not entered into in connection with a business carried on by the person at or through a permanent establishment of the person in a listed or unlisted country;

4  Paragraph 448(1)(e)

Repeal the paragraph, substitute:

                     (e)  income consisting of premiums in respect of reinsurance, if:

                              (i)  the insurer whose risks are directly covered by the reinsurance was a Part X Australian resident at the time the policy was entered into; and

                             (ii)  the policy was not entered into in connection with a business carried on by the insurer at that time at or through a permanent establishment of the insurer in a listed or unlisted country;

                      (f)  income consisting of premiums in respect of reinsurance, if:

                              (i)  the insurer whose risks are directly covered by the reinsurance was not a Part X Australian resident at the time the policy was entered into; and

                             (ii)  the policy was entered into in connection with a business carried on by the insurer at that time at or through a permanent establishment of the insurer in Australia;

                     (g)  income of the company covered by subsection (1A).

5  After subsection 448(1)

Insert:

          (1A)  Income of the company is covered by this subsection if:

                     (a)  it is income from the provision of services by the company to an entity under a scheme (within the meaning of the Income Tax Assessment Act 1997 ); and

                     (b)  the entity is an associate of the company; and

                     (c)  those services are received by another entity; and

                     (d)  the other entity satisfies either of these requirements:

                              (i)  the other entity was a Part X Australian resident at the time the income was derived, and the services were not received in connection with a business carried on by the other entity at that time at or through a permanent establishment of the other entity in a listed or unlisted country;

                             (ii)  the other entity was not a Part X Australian resident at the time the income was derived, and the services were received in connection with a business carried on by the other entity at that time at or through a permanent establishment of the other entity in Australia; and

                     (e)  the income would be tainted services income if:

                              (i)  this section did not include paragraph (1)(g) or this subsection; and

                             (ii)  the income were from the provision of those services by the company to the other entity; and

                      (f)  a reasonable person would conclude (having regard to all the circumstances) that the scheme was entered into or carried out for a purpose, other than an incidental purpose, of enabling entities satisfying the requirements of subparagraph (d)(i) or (ii) to receive those services.

6  Subsection 448(6A)

Repeal the subsection.

7  Subparagraph 450(6)(c)(i)

Repeal the subparagraph, substitute:

                              (i)  the entity was a Part X Australian resident, and the acquisition or disposal was not in connection with a business carried on by the entity at or through a permanent establishment of the entity in a listed or unlisted country;

8  Subparagraph 450(7)(d)(i)

Repeal the subparagraph, substitute:

                              (i)  the entity was a Part X Australian resident, and the acquisition or disposal was not in connection with a business carried on by the entity at or through a permanent establishment of the entity in a listed or unlisted country;

9  Subparagraph 450(8)(b)(i)

Repeal the subparagraph, substitute:

                              (i)  the entity was a Part X Australian resident, and the acquisition or disposal was not in connection with a business carried on by the entity at or through a permanent establishment of the entity in a listed or unlisted country;



 

Part 2 Application

10  Application

(1)       The amendments made by this Schedule apply in relation to statutory accounting periods beginning on or after 1 July 2004.

(2)       To avoid doubt, the statutory accounting periods mentioned in subitem (1) include years of income that are assumed to be statutory accounting periods for the purposes of section 23AH of the Income Tax Assessment Act 1936 .