Income Tax Act 2007 section 741

Application of section 742 (partial exemption)

Section 741 sets out the conditions that must be met before a partial exemption from the transfer of assets abroad rules can apply, specifically where an arrangement originally qualified for exemption but was later tainted by additional associated operations.

• The partial exemption may apply where an individual is taxable under the transfer of assets abroad provisions because later associated operations caused the arrangement to fail the genuine commercial transaction test
• There must have been at least one earlier tax year (after the original transfer) in which the individual was not taxable because the arrangement did satisfy the commercial transaction test at that point
• The income giving rise to the current tax liability must be partly attributable to the original qualifying transactions and partly to the later tainting associated operations
• A tax year counts as "exempt" only if it is one of those earlier non-taxable years and no prior year existed in which the individual was already taxable under these provisions by reference to the same transactions

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