Section HA 7 — Income Tax Act 2007: Shareholding requirements

HA 7 Shareholding requirements Natural persons, certain trustees, and qualifying companies (1) A shareholder in a qualifying company must be 1 of the following: (a) a natural person other than a trustee; or (b) a trustee of a trust, but only if subsection (2) applies in relation to dividends derived by the trustee; or (c) another qualifying company. Dividends derived by trustees (2) For the purposes of subsection (1)(b), all dividends that the trustee of a trust derives from a qualifying company in an income year must be beneficiary income of 1 or more persons who are not trustees or companies other than qualifying companies. However, this subsection does not apply to non-cash dividends other than taxable bonus issues. Special shareholding rules (3) When the shares in a qualifying company that has 5 or fewer shareholders are held by relatives, other companies, and trustees, the following special rules apply: (a) if a shareholder in a qualifying company is connected within the first degree of relationship to another shareholder in the company by either blood relationship, marriage, civil union or de facto relationship, or adoption, they are treated as a single shareholder, and this treatment continues while they remain a shareholder in the company despite any later death or dissolution: (b) shares in a qualifying company that are held by another company are treated as held by the shareholders in that other company: (c) if a shareholder in a qualifying company is a trustee, the shareholders are counted, without the trustee, as the larger of the following: (i) the group who signed the election as shareholder; or (ii) the group who derived beneficiary income from dividends from the qualifying company in the period between the first day of the 1991–92 income year and the time of counting. Shareholder continuity requirements (4) For the application of shareholder continuity requirements to the memorandum accounts of qualifying companies, see section OA 8(3B) (Shareholder continuity requirements). Defined in this Act: beneficiary income , company , dividend , income year , memorandum account , non-cash dividend , qualifying company , relative , share , shareholder , taxable bonus issue , trustee , Compare: 2004 No 35 s OB 3(1)(c), (3) Section HA 7(4) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 251(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section HA 7(4): added (with effect on 1 April 2008), on 6 October 2009, by section 251(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section HA 7 list of defined terms memorandum account : inserted (with effect on 1 April 2008), on 6 October 2009, by section 251(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).