Commonwealth Consolidated Acts Commonwealth Consolidated ActsConcessions relating to IMR financial arrangements
(1) The following consequences apply to an * IMR entity for an income year in relation to an * IMR financial arrangement if the requirements of subsection (3) or (5) are met in relation to the year:
(a) what would otherwise be the entity's assessable income for the year is * non - assessable non - exempt income of the entity, to the extent that it is attributable to a return or gain:
(i) from the arrangement (if the arrangement is a * derivative financial arrangement); or
(ii) from the entity disposing of, ceasing to own or otherwise realising the arrangement;
(b) an amount is not deductible by the entity for the year, to the extent that it is attributable to an outgoing or loss:
(i) from the arrangement (if the arrangement is a derivative financial arrangement); or
(ii) from the entity disposing of, ceasing to own or otherwise realising the arrangement;
(c) disregard a * capital gain or * capital loss that is from a * CGT event that happens in the year in relation to the arrangement.
Further concessions relating to permanent establishments
(2) Without limiting subsection (1), the following further consequences apply to an * IMR entity for an income year if the requirements of subsection (5) are met in relation to the year:
(a) income that relates to or arises under the * IMR financial arrangement, and that would otherwise be the entity's assessable income for the year, is * non - assessable non - exempt income of the entity, to the extent that the income:
(i) if the entity is resident in a country that has entered into an * international tax agreement with Australia containing a * business profits article--is treated as having a source in Australia because it is attributable to a permanent establishment (within the meaning of the relevant international tax agreement) of the entity in Australia; or
(ii) if subparagraph (i) does not apply--is treated as having a source in Australia because of subsection 815 - 230(1);
(b) an amount is not deductible by the entity for the year, to the extent that it is attributable to gaining income that is non - assessable non - exempt income of the entity because of paragraph (a);
(c) disregard a * capital gain or * capital loss that is from a * CGT event that relates to or arises under the IMR financial arrangement, and that happens in the year in relation to a * CGT asset that:
(i) is covered by item 3 of the table in section 855 - 15 in relation to the entity; or
(ii) is covered by item 4 of the table in section 855 - 15 in relation to the entity because it is an option or right to * acquire a CGT asset covered by item 3 of that table in relation to the entity.
Direct investment by IMR widely held entity
(3) The requirements of this subsection in relation to the year are that:
(a) during the whole of the year, the * IMR entity is an * IMR widely held entity; and
(b) during the whole of the year, the interest of the entity in the issuer of, or counterparty to, the * IMR financial arrangement does not pass the * non - portfolio interest test (see section 960 - 195); and
(c) none of the returns, gains or losses for the year from the arrangement are attributable to:
(i) if the entity is a resident of a country that has entered into an * international tax agreement with Australia containing a * permanent establishment article--a permanent establishment (within the meaning of the relevant international tax agreement) of the entity in Australia; or
(ii) otherwise--a * permanent establishment of the entity in Australia; and
(d) the IMR entity does not, during the year, carry on in Australia a trading business (within the meaning of section 102M of the Income Tax Assessment Act 1936 ) that relates (directly or indirectly) to the arrangement; and
(e) subsection 842 - 225(2) does not apply to the IMR financial arrangement.
(4) For the purposes of paragraph (3)(a), disregard any part of the year during which the entity did not exist.
Indirect investment through independent Australian fund manager
(5) The requirements of this subsection in relation to the year are that:
(a) the * IMR financial arrangement was made, on the * IMR entity's behalf, by an entity that is an * independent Australian fund manager for the IMR entity for the income year (see section 842 - 245); and
(b) if the issuer of, or counterparty to:
(i) the IMR financial arrangement referred to in paragraph (a), if it is a * financial arrangement; or
(ii) otherwise--the IMR financial arrangement to which that arrangement relates;
is an Australian resident, or a * resident trust for CGT purposes--during the whole of the year, the interest of the entity in the issuer or counterparty does not pass the * non - portfolio interest test (see section 960 - 195); and
(c) the IMR entity does not, during the year, carry on in Australia a trading business (within the meaning of section 102M of the Income Tax Assessment Act 1936 ) that relates (directly or indirectly) to the arrangement.
Withholding taxes etc.
(6) If what would otherwise be the * IMR entity's assessable income is * non - assessable non - exempt income of the entity because of subsection (1) or (2), for the purposes of determining an entity's liability to pay, in relation to that income:
(a) * withholding tax; or
(b) an amount that must be withheld under Division 12 in Schedule 1 to the Taxation Administration Act 1953 (even if the amount is not withheld);
assume that any * independent Australian fund manager for the IMR entity is not a * permanent establishment of the IMR entity.
(7) For the purposes of subparagraphs (2)(a)(i) and (3)(c)(i), an entity is taken to be a resident of a country that has entered into an * international tax agreement with Australia if the entity is such a resident within the meaning of that agreement.