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HM 11: Investment types
or “Types of investments an entity must hold”
You could also call this:

“Types of income a portfolio investment entity must mainly receive”

The entity must get at least 90% of its income from certain types of property. This income must be made up of specific types:

  • Dividends
  • Replacement payments
  • Income from financial arrangements
  • Income from land leases, but not if the tenant is connected to the entity
  • Insurance or compensation that replaces income from land leases
  • Money from selling certain types of property
  • Foreign investment fund income
  • Income attributed from a portfolio investment entity
  • Distributions from superannuation funds
  • Income from certain life insurance policies
  • Rebates on management fees

There are two important exceptions to these rules:

  1. Section HM 19B(1) can change these requirements.
  2. Section HM 19C(2) can change the rules about where the income comes from and how much can be from selling property.

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Next up: HM 13: Maximum shareholdings in investments

or “Limits on how much companies can own in other businesses”
Next

Part H Taxation of certain entities
Portfolio investment entities: Requirements

HM 12Income types

  1. Income derived by the entity, to the extent of 90% or more, must—

  2. be derived from property referred to in section HM 11; and
    1. consist of the following:
      1. a dividend:
        1. a replacement payment:
          1. an amount of income treated under subpart EW (Financial arrangements rules) as derived by the entity:
            1. an amount of income derived from a lease of land, but this subparagraph does not apply if the lessee under the lease is associated with the entity receiving the amount:
              1. insurance, indemnity, or compensation amounts replacing income that would be described in subparagraph (iv):
                1. an amount derived from the disposal of property referred to in section HM 11:
                  1. FIF income:
                    1. attributed PIE income:
                      1. a distribution from a superannuation fund:
                        1. an amount of income under section CW 4 (Annuities under life insurance policies) or CX 40 (Superannuation fund deriving amount from life insurance policy):
                          1. a rebate on a management fee.

                          2. Section HM 19B(1) overrides this section.

                          3. Section HM 19C(2) overrides subsection (1)(a) and (b)(v).

                          Compare
                          • s HL 10(2)
                          Notes
                          • Section HM 12: inserted, on (applying for the 2010–11 and later income years), by section 292(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                          • Section HM 12 heading: amended (with effect on 1 April 2010), on (applying for the 2010–11 and later income years), by section 59(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                          • Section HM 12(1) heading: inserted, on , by section 59(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                          • Section HM 12(1)(b)(ivb): inserted, on , by section 218 of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                          • Section HM 12(1)(b)(viii): amended (with effect on 1 April 2010), on (applying for the 2010–11 and later income years), by section 59(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                          • Section HM 12(1)(b)(ix): added (with effect on 1 April 2010), on (applying for the 2010–11 and later income years), by section 59(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                          • Section HM 12(1)(b)(ix): amended (with effect on 1 April 2012), on , by section 63 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                          • Section HM 12(1)(b)(x): inserted (with effect on 1 April 2012), on , by section 63 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                          • Section HM 12(2) heading: added, on , by section 59(4) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                          • Section HM 12(2): added, on , by section 59(4) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                          • Section HM 12(2): amended (with effect on 29 August 2011), on , by section 91 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                          • Section HM 12(3) heading: added, on (applying for the 2012–13 and later income years for a foreign investment variable-rate PIE and a notified foreign investor in the PIE), by section 59(5) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                          • Section HM 12(3): added, on (applying for the 2012–13 and later income years for a foreign investment variable-rate PIE and a notified foreign investor in the PIE), by section 59(5) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                          • Section HM 12 list of defined terms foreign investment variable-rate PIE: inserted (with effect on 29 August 2011), on , by section 87 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                          • Section HM 12 list of defined terms foreign investment zero-rate PIE: inserted (with effect on 29 August 2011), on , by section 87 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).