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ATO Issue Drafts Taxation Determination on Public Entity Exception for Indirect Control Test — Orbitax Tax News & Alerts

The Australian Taxation Office (ATO) has published draft Taxation Determination (TD) 2021/D4 for public comment. The taxation determination concerns the application of the public entity exception to the indirect control test. The deadline for comments is 12 November 2021.



1. For the purposes of determining 'control' within the meaning of section 328-125 of the Income Tax Assessment Act 1997, where an entity (the first entity) controls another entity (the second entity), and the second entity directly or indirectly controls a third entity, the first entity is taken to control the third entity.

2. However, the 'indirect control test' within the meaning of subsection 328-125(7) does not apply if a public entity is interposed between the first entity and the third entity. In these circumstances, the first entity will not control the third entity merely because of its interest in the interposed public entity.

3. As per subsection 328-125(8), a 'public entity' is:

(a) a company shares in which (except shares that carry the right to a fixed rate of dividend) are listed for quotation in the official list of an approved stock exchange;

(b) a publicly traded unit trust

(c) a mutual insurance company;

(d) a mutual affiliate company;

(e) a company (other than one covered by paragraph (a)) all the shares in which are owned by one or more of the following:

  • a company covered by paragraph (a);
  • a publicly traded unit trust;
  • a mutual insurance company;
  • a mutual affiliate company.

4. The mere presence of an interposed public entity does not result in a control chain being broken. If a public entity is interposed in an ownership structure, the first entity may still control the third entity through direct control.