Superannuation Legislation Amendment Act (No. 4) 1999

70B Part 8 associates of individuals

For the purposes of this Part, each of the following is a Part 8 associate of an individual (the primary entity), whether or not the primary entity is in the capacity of trustee:

(a) a relative of the primary entity;

(b) if the primary entity is a member of a superannuation fund with fewer than 5 members:

(i) each other member of the fund; and

(ii) if the fund is a single member self managed superannuation fund whose trustee is a company—each director of that company; and

(iii) if the fund is a single member self managed superannuation fund whose trustees are individuals—those individuals;

(c) a partner of the primary entity or a partnership in which the primary entity is a partner;

(d) if a partner of the primary entity is an individual—the spouse or a child of that individual;

(e) a trustee of a trust (in the capacity of trustee of that trust), where the primary entity controls the trust;

(f) a company that is sufficiently influenced by, or in which a majority voting interest is held by:

(i) the primary entity; or

(ii) another entity that is a Part 8 associate of the primary entity because of another paragraph of this section or because of another application of this paragraph; or

(iii) 2 or more entities covered by the preceding subparagraphs.

70C Part 8 associates of companies

For the purposes of this Part, each of the following is a Part 8 associate of a company (the primary entity), whether or not the primary entity is in the capacity of trustee:

(a) a partner of the primary entity or a partnership in which the primary entity is a partner;

(b) if a partner of the primary entity is an individual—the spouse or a child of that individual;

(c) a trustee of a trust (in the capacity of trustee of that trust), where the primary entity controls the trust;

(d) another entity (in this paragraph called the controlling entity) where the primary entity is sufficiently influenced by, or a majority voting interest in the primary entity is held by:

(i) the controlling entity; or

(ii) another entity that is a Part 8 associate of the controlling entity because of section 70B or 70D, another paragraph of this section or another application of this paragraph; or

(iii) 2 or more entities covered by the preceding subparagraphs;

(e) another company (in this paragraph called the controlled company) where the controlled company is sufficiently influenced by, or where a majority voting interest in the controlled company is held by:

(i) the primary entity; or

(ii) another entity that is a Part 8 associate of the primary entity because of another paragraph of this section or because of another application of this paragraph; or

(iii) 2 or more entities covered by the preceding subparagraphs;

(f) if a third entity is a Part 8 associate of the primary entity because of paragraph (d) of this subsection—an entity that is a Part 8 associate of that third entity because of section 70B or 70D or because of another paragraph of this section.

70D Part 8 associates of partnerships

For the purposes of this Part, each of the following is a Part 8 associate of a partnership (the primary entity):

(a) a partner in the partnership;

(b) if a partner in the partnership is an individual—any entity that is a Part 8 associate of that individual because of section 70B;

(c) if a partner in the partnership is a company—any entity that is a Part 8 associate of that company because of section 70C.

70E Meanings of terms used in sections 70B, 70C and 70D

Sufficient influence/majority voting interest

For the purposes of sections 70B, 70C and 70D:

(a) a company is sufficiently influenced by an entity or entities if the company, or a majority of its directors, is accustomed or under an obligation (whether formal or informal), or might reasonably be expected, to act in accordance with the directions, instructions or wishes of the entity or entities (whether those directions, instructions or wishes are, or might reasonably be expected to be, communicated directly or through interposed companies, partnerships or trusts); and

(b) an entity or entities hold a majority voting interest in a company if the entity or entities are in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the company.

Control of trust

(2) For the purposes of sections 70B, 70C and 70D, an entity controls a trust if:

(a) a group in relation to the entity has a fixed entitlement to more than 50% of the capital or income of the trust; or

(b) the trustee of the trust, or a majority of the trustees of the trust, is accustomed or under an obligation (whether formal or informal), or might reasonably be expected, to act in accordance with the directions, instructions or wishes of a group in relation to the entity (whether those directions, instructions or wishes are, or might reasonably be expected to be, communicated directly or through interposed companies, partnerships or trusts); or

(c) a group in relation to the entity is able to remove or appoint the trustee, or a majority of the trustees, of the trust.

Group in relation to an entity

For the purposes of subsection (2):

group, in relation to an entity, means:

(a) the entity acting alone; or

(b) a Part 8 associate of the entity acting alone; or

(c) the entity and one or more Part 8 associates of the entity acting together; or

(d) 2 or more Part 8 associates of the entity acting together.

Definitions

For the purposes of sections 70B, 70C and 70D:

company has the same meaning as in the Income Tax Assessment Act 1997.

partnership has the same meaning as in the Income Tax Assessment Act 1997.

relative, in relation to an individual, means the following:

(a) a parent, grandparent, brother, sister, uncle, aunt, nephew, niece, lineal descendant or adopted child of that individual or of his or her spouse;

(b) the spouse of that individual or of any other individual specified in paragraph (a).

71A Exceptions—pre-11 August 1999 investments and loans

If:

(a) at any time (the post-test time) after the test time, an asset of a superannuation fund consists of:

(i) a loan or an investment made before the test time, or made after the test time under a contract entered into before the test time; or

(ii) a share or unit in a unit trust, if the share, or the unit, as the case requires, was acquired before the test time or under a contract entered into before the test time (notwithstanding any payments on the share or unit made to the issuer of the share or unit after the test time and before 1 July 2009); and

(b) if the asset was an asset of the fund immediately before the test time—it was not an in-house asset of the fund; and

(c) if the asset was not an asset of the fund immediately before the test time—it would not have been an in-house asset if it had been an asset of the fund immediately before the test time; and

(d) apart from this Subdivision, the asset would be an in-house asset of the fund at the post-test time;

the asset is not an in-house asset of the fund at the post-test time.

Payments on partly paid shares and units after 30 June 2009

However, if:

(a) the post-test time is after 30 June 2009; and

(b) the asset consists of a share or a unit in a unit trust; and

(c) one or more payments on the share or unit to the issuer of the share or unit has been made since 30 June 2009;

then:

(d) the asset is an in-house asset of the fund at the post-test time; and

(e) subsection (3) applies to the share or unit.

Reduced value for the purposes of working out value of in-house assets

(3) For the purposes of working out the formula component Number of whole dollars in value of in-house assets of the fund under section 75 at the post-test time, the value of the share or unit at the post-test time is taken to be the number of whole dollars in the amount worked out as follows:

where:

excess amount means the total of the amounts that, as at the post-test time, had been paid after 30 June 2009 on the share or unit to the issuer of the share or unit.

market value of share or unit means the market value of the share or unit as at the post-test time.

total amount means the total of the amounts that, as at the post-test time had been paid (whether before or after 30 June 2009) on the share or unit to the issuer of the share or unit.

71B Exceptions—pre-11 August 1999 leases and lease arrangements

If:

(a) at any time (the post-test time) after the test time, an asset of a superannuation fund consists of an asset subject to a lease, or a lease arrangement, between the trustee of the fund and a related party of the fund; and

(b) the asset was subject to a lease or lease arrangement, or any uninterrupted sequence of leases and lease arrangements, between the trustee of the fund and a related party, throughout the period beginning immediately before the test time and ending at the post-test time; and

(c) apart from this section, the asset would be an in-house asset of the fund at the post-test time;

the asset is not an in-house asset of the fund at the post-test time.

For the purposes of subsection (1), if:

(a) before the test time, a lease or a lease arrangement enforceable by legal proceedings, in respect of an asset, was entered into between the trustee of a superannuation fund and a related party of the fund; and

(b) the lease or lease arrangement came into force after the test time;

the asset is taken to have been subject to a lease or a lease arrangement, between the trustee of the fund and that related party, immediately before the test time.

71C Exceptions—transition period

Investments and loans

If:

(a) at any time (the pre-1 July 2001 time) during the period after the test time but before 1 July 2001, an asset of a superannuation fund consists of a loan or an investment made during the transition period, other than under a contract entered into before the beginning of that period; and

(b) if the asset had been an asset of the fund immediately before the test time—the asset would not have been an in-house asset of the fund; and

(c) apart from this section, the asset would be an in-house asset of the fund at the pre-1 July 2001 time;

the asset is not an in-house asset of the fund at the pre-1 July 2001 time. For this purpose, a loan or an investment is not made during the transition period merely because a contract is entered into during that period for the purpose of gaining interest, income, profit or gain.

Leases and lease arrangements

If:

(a) at any time (the pre-1 July 2001 time) during the period after the test time but before 1 July 2001, an asset of a superannuation fund consists of an asset subject to a lease, or a lease arrangement, between the trustee of the fund and a related party of the fund; and

(b) 1 July 2001 time; andsection 71B does not apply to the asset at the pre-

(c) the asset became subject to a lease or lease arrangement between the trustee of the fund and a related party at a time (the transition time) during the transition period; and

(d) the asset was subject to a lease or a lease arrangement, or any uninterrupted sequence of leases and lease arrangements, between the trustee of the fund and a related party, throughout the period beginning at the transition time and ending at the pre-1 July 2001 time; and

(e) apart from this section, the asset would be an in-house asset of the fund at the post-test time;

the asset is not an in-house asset of the fund at the pre-1 July 2001 time.

71D Exception—reinvestments

If:

(a) at any time (the post-test time) after the test time, an asset of a superannuation fund consists of an investment (the post-test time investment) in an entity (the original entity) made during the period:

(i) beginning at the test time; and

(ii) ending at the end of 30 June 2009; and

(b) the post-test time investment is not covered by section 71A; and

(c) if the fund had made the post-test time investment immediately before the test time, it would not have been an in-house asset of the fund; and

(d) the sum of the purchase price of the post-test time investment and any previous investment to which this section applies does not, at the post-test time, exceed the sum of the following amounts:

(i) the sum of the amounts of all dividends or trust distributions received after the test time, but before the end of 30 June 2009, by the superannuation fund from the original entity, which were derived from an investment in the original entity made by the fund before the test time;

(ii) the sum of the amounts of all dividends or trust distributions received after the test time, but before the end of 30 June 2009, by the superannuation fund, which were derived from investments of dividends and trust distributions taken into account under subparagraph (i) or this subparagraph;

the asset is not an in-house asset of the fund at the post-test time.

71E Exception—certain geared investments

If:

(a) at any time (the post-test time) after the test time, an asset of a superannuation fund that has fewer than 5 members consists of an investment (the post-test time investment) in a unit trust or a company (the first entity) made during the period:

(i) beginning at the test time; and

(ii) ending at the end of 30 June 2009; and

(b) immediately before the test time, another asset (other than an in-house asset) of the superannuation fund consisted of an investment (the prior investment) in the first entity; and

(c) immediately before the test time, an amount (the principal) consisting of the principal of a loan was owed by the first entity to any entity other than the superannuation fund; and

(d) apart from this Subdivision, the post-test time investment would be an in-house asset of the fund at the post-test time; and

(e) the trustee of the fund makes a written election, within:

(i) the period of 12 months beginning on the day on which this section commenced; or

(ii) such later period as is prescribed by the regulations;

that section 71E is to apply to all post-test time investments of the fund in that entity;

then subsection (2) or (3), as the case requires, applies, and is taken always to have applied, to the post-test time investment.

Sum of purchase prices of post-test time investments does not exceed the principal—investment not an in-house asset

Note: Under subsection 103(2A), the trustee of the fund must keep the election, or a copy of it, for 10 years after it is made.

The post-test time investment is not an in-house asset of the fund at the post-test time if the sum of the following amounts does not exceed the amount of the principal:

(a) the purchase price of the post-test time investment;

(b) the purchase price of any previous post-test time investment in the first entity by the fund.

Sum of purchase prices of post-test time investments exceeds the principal—formula to be applied

If the sum of the following:

(a) the purchase price of the post-test time investment;

(b) the purchase price of any previous post-test time investment in the first entity by the fund;

exceeds the amount of the principal, then:

(c) the post-test time investment is an in-house asset of the fund at the post-test time; and

(d) if the post-test time investment is the first post-test time investment in respect of which the sum of the amounts referred to in paragraphs (a) and (b) exceeds the amount of the principal—subsection (4) applies to the investment.

Reduced value for the purposes of working out value of in-house assets

(4) For the purposes of working out the formula component Number of whole dollars in value of in-house assets of the fund under section 75 at the post-test time, the value of the post-test time investment at the post-test time is taken to be the number of whole dollars in the amount worked out as follows:

where:

excess amount means the amount of the excess under subsection (3).

market value of post-test time investment means the market value of the post-test time investment as at the post-test time.

purchase price of post-test time investment means the purchase price of the post-test time investment.

Effect of election

If the trustee of a fund makes an election under paragraph (1)(e) in respect of the post-test time investments of the fund in an entity, then:

(a) sections 71A and 71D do not apply, and are taken never to have applied, to any post-test time investment by the fund in that entity; and

(b) this section applies, and is taken always to have applied, to any post-test time investment of the fund in that entity.

Application of section to loans

Note: This means that if a fund makes an election, this section would apply to all investments in the entity after the test time and before 1 July 2009, and sections 71A and 71D would not apply to such investments.

A reference in this section to an investment in a trust or company is taken to include a reference to a loan to a trust or company. For this purpose, the purchase price of the loan is taken to be the principal of the loan at the time at which the loan was made.

71F Meaning of certain terms used in Subdivision D

In this Subdivision:

test time means the end of 11 August 1999.

transition period means the period:

(a) beginning at the test time; and

(b) ending on the day on which this section commenced.