The ATO have released TR 2017/3 which provides guidance on the conditions where an equity distribution received by an Australian company from a foreign company can be treated as Non-Assessable Non-Exempt income under the participation tests contained in Subdiv 768-A of the ITAA 1997.
For the purposes of Subdiv 768-A, the Commissioners view is that the entity must be a registered member of the foreign company in which it has a participation interest at the start of the day the distribution is made, whether the company pays or credits the distribution.
In the case of a cancellation of interest and the foreign company makes a distribution, an entity can have a participation interest if the company is a registered member at the start of the day on which the distribution is made, paid or credited.
For off-market share buy-backs, the participation interest assessed will depend on the registered membership interest the entity holds at the start of the day on which it concludes the share buy-back contract with the foreign company.
Distributions in the form of a non-share dividend or a dividend are seen as being made on the day that the company pays or credits the distribution. However in the case of Deemed Dividends, the distributions are seen as being made on the day that the legislation deems the dividend to have been paid.