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HA 6: Corporate requirements
or “Rules for companies to qualify for special tax status”
You could also call this:

“Rules for who can own shares in a qualifying company and how shareholders are counted”

You can be a shareholder in a qualifying company if you are a person, a trustee of a trust, or another qualifying company. If you’re a trustee, all the dividends you get from the qualifying company in a year must be income for people who aren’t trustees or companies (except for qualifying companies). This rule doesn’t apply to dividends that aren’t cash, unless they’re taxable bonus issues.

If a qualifying company has 5 or fewer shareholders, there are special rules:

  1. If you’re closely related to another shareholder (like a parent or spouse), you’re treated as one shareholder. This continues even if one of you dies or your relationship ends.

  2. If a company owns shares, it’s treated as if its shareholders own those shares directly.

  3. If a trustee is a shareholder, they’re counted differently. The number of shareholders is either the group who signed up to be shareholders or the group who got income from the company’s dividends between the start of the 1991-92 income year and now, whichever is larger.

For rules about keeping the same shareholders in qualifying companies’ accounting records, you can look at section OA 8(3B).

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Next up: HA 7B: Grandparenting requirement

or “Qualifying companies must meet specific conditions from previous years”
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Part H Taxation of certain entities
Qualifying companies (QC)

HA 7Shareholding requirements

  1. A shareholder in a qualifying company must be 1 of the following:

  2. a natural person; or
    1. a trustee of a trust, but only if subsection (2) applies in relation to dividends derived by the trustee; or
      1. another qualifying company.

        1. For the purposes of subsection (1)(b), all dividends that the trustee of a trust derives from a qualifying company in an income year must be beneficiary income of 1 or more persons who are not trustees or companies other than qualifying companies. However, this subsection does not apply to non-cash dividends other than taxable bonus issues.

        2. When the shares in a qualifying company that has 5 or fewer shareholders are held by relatives, other companies, and trustees, the following special rules apply:

        3. if a shareholder in a qualifying company is connected within the first degree of relationship to another shareholder in the company by either blood relationship, marriage, civil union or de facto relationship, they are treated as a single shareholder, and this treatment continues while they remain a shareholder in the company despite any later death or dissolution:
          1. shares in a qualifying company that are held by another company are treated as held by the shareholders in that other company:
            1. if a shareholder in a qualifying company is a trustee, the shareholders are counted, without the trustee, as the larger of the following:
              1. the group who signed the election as shareholder; or
                1. the group who derived beneficiary income from dividends from the qualifying company in the period between the first day of the 1991–92 income year and the time of counting.

                2. For the application of shareholder continuity requirements to the memorandum accounts of qualifying companies, see section OA 8(3B) (Shareholder continuity requirements).

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                Notes
                • Section HA 7(1)(a): amended, on , by section 258 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                • Section HA 7(3)(a): amended, on , by section 75 of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                • Section HA 7(4) heading: added (with effect on 1 April 2008), on , by section 251(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                • Section HA 7(4): added (with effect on 1 April 2008), on , by section 251(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                • Section HA 7 list of defined terms memorandum account: inserted (with effect on 1 April 2008), on , by section 251(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).