Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1936 - SECT 440

    In determining, for the purposes of this Part, whether a company passes the active income test, the following provisions apply in relation to an asset of the company (other than trading stock):

  (a)   the effect of an asset revaluation is to be disregarded;

  (b)   subject to section   438, if:

  (i)   any consideration paid or payable by the company in respect of the acquisition of the asset; or

  (ii)   any consideration paid or payable to the company in respect of the disposal of the asset; or

  (iii)   any expenditure incurred by the company in making capital improvements to the asset; or

  (iv)   any other amount payable to or by the company that is relevant to determining the revenue, gains or losses concerned;

    is not equal to the amount (in this paragraph called the arm's length amount ) that the parties to the transaction concerned could have been reasonably expected to have paid if the parties had been acting at arm's length in relation to the transaction--the amount of the consideration or expenditure is to be taken to be equal to the arm's length amount.