Section 195 | Substance based income exclusion

(1)The substance based income exclusion for a period for a territory is calculated by taking the following steps—

Step 1Determine the payroll carve-out amount for that period for each standard member of the group in that territory.

Step 2Determine the tangible asset carve-out amount for that period for each standard member of the group in that territory.

Step 3Add together the amounts determined at steps 1 and 2.

(2)Repealed^F1

(3)Repealed^F2

(4)The payroll carve-out amount for a member is 5% of the eligible payroll costs incurred by the member in the period.

(5)The tangible asset carve-out amount for a member is 5% of the eligible tangible asset amount of the member in the period.

(6)Section 196 sets out how to calculate the eligible payroll costs of a member.

(7)Section 197 sets out how to calculate the eligible tangible asset amount of a member.

(7A)Section 197A sets out the treatment of operating leases.^F3

(8)Section 198 supplements the rules in sections 196 and 197 in relation to a member that is a permanent establishment.^F4

(9)Section 198ZA supplements the rules in sections 196 and 197 in relation to a member that is a flow-through entity.^F4