Exclusion from attribution for telecommunications income of a CFC
2009 amendment allows use of the telecommunications income exclusion when a group has a common controlling interest in both a network operator and a CFC.
Section EX 20B of the Income Tax Act 2007
Subsection EX 20B(11) has been amended to broaden the exclusion of certain telecommunications income from an "attributable CFC amount".
The amendment, in broad terms, allows the exclusion to be used when a group of people has a common controlling interest - whether direct or indirect through a chain of companies - in both a network operator and a CFC.
As originally enacted, the exclusion applied only if the controlling interest in the CFC was held directly by persons with a controlling interest in the network operator, or held directly by the network operator itself.
The criterion used to determine that there is a controlling interest in a company is a voting interest of more than 50%. A person's voting interest in a company that is owned indirectly (through a chain of companies, for example) is able to be determined using the existing rules in subpart YC of the Income Tax 2007. As in section IC 3 of the Income Tax Act, on which the amendment is modelled, if a "market value circumstance" exists there must also be a market value interest of more than 50%.
The amendment applies for all income years beginning on or after 1 July 2009.