Section 425 — Income Tax Assessment Act 1936: Sometimes-exempt income etc.

(1) Where an amount is not included in the eligible CFC’s notional assessable income for a statutory accounting period (being the eligible period or an earlier period) in relation to the eligible taxpayer because: (a) the eligible CFC passes the active income test for the period in relation to the eligible taxpayer; or (b) subsection 385 (4) applies; then the amount is sometimes-exempt income of the eligible CFC for the period in relation to the eligible taxpayer. (2) Where an amount would, disregarding section 431, only be a notional allowable deduction of the eligible CFC for a statutory accounting period (being the eligible period or an earlier period) in relation to the eligible taxpayer if the eligible CFC’s sometimes-exempt income for the period in relation to the eligible taxpayer were instead notional assessable income, then the amount is a sometimes-exempt deduction of the eligible CFC for the period in relation to the eligible taxpayer. (3) Where the eligible CFC’s sometimes-exempt deductions for a statutory accounting period (being the eligible period or an earlier period) in relation to the eligible taxpayer exceed its sometimes-exempt income for the period in relation to the taxpayer, the excess is a (sometimes-exempt income) loss of the eligible CFC for the period in relation to the eligible taxpayer. (4) Where an eligible CFC’s sometimes-exempt income for a statutory accounting period (being the eligible period or an earlier period) in relation to the eligible taxpayer exceeds its sometimes-exempt deductions for the period in relation to the taxpayer, the excess is a (sometimes-exempt income) gain of the eligible CFC for the period in relation to the eligible taxpayer.