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EM 1: Australian non-attributing shares and attributing FDR method interests
or “Rules for taxing certain Australian shares and foreign investments”
You could also call this:

“This subpart applies to certain investors, funds, and life insurers”

This part of the law applies to you if you fall into certain categories. You might be included if you’re on a special list called schedule 29, but you can’t be a life insurer. It also applies if you’re a separate fund that’s part of a life insurer and holds investments for life insurance policies where the benefits are directly linked to how much the investments are worth.

You’re also covered if you’re a fund that’s similar to a specific type of investor class. The law also includes group investment funds, superannuation funds, or unit trusts where either 20 or more people have invested and no one person owns more than 20% of it, or if someone from the special list or a person who only gets charitable income has invested in it.

When figuring out if someone owns more than 20%, the law says that if two people are connected (or “associated”), they’re treated as one person who owns both their shares combined. But this only applies if their combined share is 5% or more. However, if one of these connected people is on the special list, then they’re not combined into one person.

Remember, these rules are part of the Income Tax Act 2007 and help determine how and when certain tax rules apply to different types of investors and funds.

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Next up: EM 3: What hedges does this subpart apply to?

or “Types of foreign currency agreements covered by this subpart”
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Part E Timing and quantifying rules
Hedging of currency movements in Australian non-attributing shares and attributing FDR method interests

EM 2Who does this subpart apply to?

  1. This subpart applies to a person if section EM 1 applies to the person, to the extent to which the person—

  2. is listed in schedule 29, part A or B (Portfolio investment entities: listed investors), but is not a life insurer:
    1. is a separate identifiable fund forming part of a life insurer that holds investment subject to life insurance policies under which benefits are directly linked to the value of the investments held in the fund:
      1. is a fund that is equivalent to an investor class described in section HM 22(1) (Exceptions for certain funds):
        1. is a group investment fund, superannuation fund, or unit trust in which—
          1. 20 or more people hold an investor interest, and each person who holds an investor interest has 20% or less of the total investor interests for the fund or trust:
            1. a person described in paragraph (a) or (b) (a listed person) or a person whose only income is charitable income (a charitable person) holds an investor interest, and each person who is not a listed person or a charitable person holds an investor interest of 20% or less of the total investor interests for the fund or trust.

            2. For the purposes of applying subsection (1)(d)(i) and (ii), if a person is associated with another person, they are treated as 1 person who holds their combined investor interests, if their combined investor interests total 5% or more of the total investor interests for the fund or trust. Subsection (3) overrides this subsection.

            3. Subsection (2) does not apply to make 2 associated people into 1 person, or to combine investor interests of 2 associated persons, if 1 of them is a listed person.

            Notes
            • Section EM 2: inserted, on , by section 49 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).