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1996-97

Contents

1............ Short title............................................................................................

2............ Commencement..................................................................................

3............ Schedule(s).........................................................................................

4............ Amendment of income tax assessments.............................................

Schedule 1—Denial of certain capital losses                                                          

Part 1—Specific past rollover scheme amendment                                             

Income Tax Assessment Act 1936                                                                             

Part 2—General on-going rollover etc. scheme amendments                          

Income Tax Assessment Act 1936                                                                             

Schedule 2—Concessional tracing rules for company loss etc. provisions                  

Part 1—Family trust tracing concession for company loss etc. provisions

Division 1—Amendment of the Income Tax Assessment Act 1936                  

Division 2—Amendment of the Income Tax Assessment Act 1997                  

Division 3—Application of amendments                                                               

Part 2—Trust loss amendments related to Part 1 amendments                    

Income Tax Assessment Act 1936                                                                           

Part 3—Non-fixed trust tracing concession for company loss etc. provisions                

Division 1—Amendment of the Income Tax Assessment Act 1936                  

Division 2—Amendment of the Income Tax Assessment Act 1997                  

Division 3—Application of amendments                                                               

Schedule 3—Fringe benefits tax                                                                                  

Part 1—Amendment of the Fringe Benefits Tax Assessment Act 1986   

Part 2—Amendment of the Income Tax Assessment Act 1936                  

Part 3—Amendment of the Income Tax Assessment Act 1997                  

Part 4—Application                                                                                                       

Schedule 4—Temporary importation of goods                                                     

Sales Tax Assessment Act 1992                                                                               

Schedule 5—Payments of tax by small companies                                            

Income Tax Assessment Act 1936                                                                           

Schedule 6—Dividend imputation and RSAs                                                        

Income Tax Assessment Act 1936                                                                           

Schedule 7—Deductible expenditure and CGT cost bases                          

Income Tax Assessment Act 1936                                                                           

Schedule 8—Passive income of insurance companies                                     

Income Tax Assessment Act 1936                                                                           

Schedule 9—Average calculated liabilities of life assurance companies

Income Tax Assessment Act 1936                                                                           

Schedule 10—Depreciation                                                                                             

Income Tax Assessment Act 1936                                                                          

 



This Bill originated in the House of Representatives; and, having this day passed, is now ready for presentation to the Senate for its concurrence.

                              I. C. HARRIS

           Clerk of the House of Representatives

House of Representatives

1 December 1997

 

A Bill for an Act to amend the Income Tax Assessment Act 1936, and for related purposes

The Parliament of Australia enacts:

1   Short title

                   This Act may be cited as the Taxation Laws Amendment Act (No. 6) 1997 .

2   Commencement

             (1)  Subject to subsection (2), this Act commences on the day on which it receives the Royal Assent.

             (2)  If the Taxation Laws Amendment (Trust Loss and Other Deductions) Act 1997 has not commenced when this Act receives the Royal Assent, Schedule 2 commences immediately after that Act commences.

3   Schedule(s )

                   Subject to section 2, each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

4   Amendment of income tax assessments

                   Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section for the purposes of giving effect to this Act.



 

Income Tax Assessment Act 1936

1  After section 160ZP

Insert:

160ZPA   Denial of duplicated capital loss where section 160ZZO rollover relief

Operative provision—first case

             (1)  If a company has incurred or incurs any eligible rollover losses and paragraphs (2)(a) and (b) do not apply:

                     (a)  if:

                              (i)  any of the eligible rollover losses was incurred in the 1995-96 year of income or an earlier year of income; and

                             (ii)  the company incurred a net capital loss in the 1995-96 year of income; and

                            (iii)  there are one or more unused amounts for that year of income in respect of the eligible rollover losses;

                            the net capital loss is reduced by the sum of the unused amounts; and

                     (b)  if:

                              (i)  any of the eligible rollover losses was incurred or is incurred in the 1996-97 year of income or any later year of income; and

                             (ii)  assuming section 160ZZO had not applied to the rollover disposal mentioned in paragraph (3)(a), the eligible rollover loss would have been a lesser amount or there would have been no eligible rollover loss;

                            the eligible rollover loss is reduced so that it equals the lesser amount, or is reduced to nil, as the case requires.

Note:          The expressions eligible rollover loss , net capital loss and unused amount are defined in subsections (3), (7) and (5) respectively.

Operative provision—second case

             (2)  If:

                     (a)  a company has incurred any eligible rollover losses in the 1996-97 year of income or an earlier year of income; and

                     (b)  the company furnished its return for the 1996-97 year of income before 3 pm, by legal time in the Australian Capital Territory, on 29 April 1997;

the following apply:

                     (c)  if:

                              (i)  the company incurred a net capital loss in the 1995-96 year of income; and

                             (ii)  there are one or more unused amounts for that year of income in respect of the eligible rollover losses; and

                            (iii)  if, in the company’s return for the 1996-97 year of income, Step 4 in subsection 160ZC(1) was applied in working out whether a net capital gain accrued to the company in respect of that year of income—there is some of the net capital loss incurred in the 1995-96 year of income that has not been applied in accordance with Step 4;

                            then, for the purpose of any application of Step 4 in working out whether a net capital gain accrued to the company in respect of the 1997-98 or any later year of income, the net capital loss incurred in the 1995-96 year of income, or so much of the net capital loss as was not applied as mentioned in subparagraph (iii), is reduced by the sum of the unused amounts; and

                     (d)  if the company incurred a net capital loss in the 1996-97 year of income and any of the eligible rollover losses was also incurred in that year of income—the net capital loss is reduced by the unused amount, for that year of income, in respect of the eligible rollover losses incurred in that year of income.

Eligible rollover loss

             (3)  A capital loss incurred by a company (the loss company ) in a year of income in respect of the disposal (the loss disposal ) of an asset is an eligible rollover loss if:

                     (a)  the loss company acquired the asset from another company (the transferor ) and section 160ZZO applied to the disposal (the rollover disposal ) constituting the acquisition by the loss company; and

                     (b)  if section 160ZZO had not applied to the rollover disposal, there would have been no capital loss or a smaller capital loss; and

                     (c)  when the rollover disposal took place, the loss company:

                              (i)  had an interest (see subsection (6)) either directly, or indirectly through successive interests in interposed companies, in the transferor; or

                             (ii)  was owed a debt by the transferor or had a right to acquire an interest in the transferor; or

                            (iii)  had an interest either directly, or indirectly through successive interests in interposed companies, in a company, partnership or trust to which the transferor owed a debt or that had a right to acquire an interest in the transferor; and

                     (d)  the loss company:

                              (i)  acquired the interest mentioned in subparagraph (c)(i) or (iii) or the right mentioned in subparagraph (c)(ii); or

                             (ii)  began to be owed the debt mentioned in subparagraph (c)(ii);

                            after 19 September 1985; and

                     (e)  immediately after the rollover disposal, the market value of the interest, right or debt was less than its reduced cost base or what would be its reduced cost base if the interest, right or debt were an asset to whose disposal this Part applied; and

                      (f)  the rollover disposal took place before 3 pm, by legal time in the Australian Capital Territory, on 29 April 1997.

Exclusion for small businesses and manufacturing business assets

             (4)  However, a capital loss is not an eligible rollover loss if:

                     (a)  the requirement in subsection 160ZZPP(4) (which relates to the net value of the transferee’s assets etc.) would be satisfied at the time of the loss disposal, assuming the loss company were the taxpayer mentioned in that section; or

                     (b)  the asset is plant, machinery, or a building, used in a manufacturing business:

                              (i)  by the transferor immediately before the rollover disposal; and

                             (ii)  by the loss company for a period of at least 12 months that commences immediately after the rollover disposal.

Unused amount of all eligible rollover losses incurred in a particular year of income

             (5)  The unused amount , for a year of income (the test year ), of all of the eligible rollover losses incurred by a company in a particular year of income (being the test year or an earlier year of income) is:

                     (a)  if the company did not incur a net capital loss in the test year—nil; or

                     (b)  if the test year is the one in which the company incurred the eligible rollover losses, and the company incurred a net capital loss in that year of income—the amount by which:

                              (i)  the net capital loss;

                            exceeds:

                             (ii)  the amount that would be the net capital loss assuming section 160ZZO had not applied to any of the rollover disposals concerned or, if there would be no net capital loss on that assumption, nil; or

                     (c)  if the test year is after the one in which the company incurred the eligible rollover losses, and the company incurred a net capital loss in the test year—the amount worked out by reducing the unused amount, for the previous year of income, of the eligible rollover losses by the amount calculated using the formula:

Note 1:       If the test year is eg 2 years after the year of income in which the eligible rollover losses were incurred, it will be necessary first to apply subsection (5) to work out the unused amount for the year in which the losses were incurred, then to work out the unused amount for the next year of income and finally to work out the unused amount for the test year. This will involve applying more than one of the paragraphs in the subsection.

Note 2:       The operative provisions (subsections (1) and (2)) refer to the sum of the unused amounts, for eg 1995-96, in relation to eligible rollover losses. To work out the sum, it is first necessary to apply subsection (5) separately to the eligible rollover losses incurred in each year of income in order to work out, for 1995-96, the unused amount of each, and then to add together all of the unused amounts.

Interest

             (6)  In this section:

interest means a share in a company or an interest in the income or capital of a partnership or trust.

Net capital loss

             (7)  For the purposes of this section, a company’s net capital loss is worked out after applying section 160ZP if:

                     (a)  the agreement mentioned in that section was made; and

                     (b)  the gain year mentioned in that section ended;

before 3 pm, by legal time in the Australian Capital Territory, on 29 April 1997. Otherwise it is worked out before applying section 160ZP.

160ZP transfer amount

             (8)  For the purposes of this section, if a company’s net capital loss for a year of income is worked out in accordance with subsection (7) after applying section 160ZP, the company has a 160ZP transfer amount for the year of income equal to the sum of the amounts by which its net capital loss for the year of income is deemed to be reduced under subsection 160ZP(7).



 

Income Tax Assessment Act 1936

2  Subsection 177A (1)

Insert:

capital loss has the same meaning as in Part IIIA.

3  After paragraph 177C(1)(b)

Insert:

              ; or (ba)  a capital loss being incurred by the taxpayer during a year of income where the whole or a part of that capital loss would not have been, or might reasonably be expected not to have been, incurred by the taxpayer during the year of income if the scheme had not been entered into or carried out;

4  At the end of subsection 177C(1)

Add:

             ; and (e)  in a case to which paragraph (ba) applies—the amount of the whole of the capital loss or of the part of the capital loss, as the case may be, referred to in that paragraph.

5  Subparagraph 177C(2)(a)(i)

After “Act”, insert “other than section 160ZP or 160ZZO”.

6  At the end of subsection 177C(2)

Add:

               ; or (c)  a capital loss being incurred by the taxpayer during a year of income the whole or part of which would not have been, or might reasonably be expected not to have been, incurred by the taxpayer during the year of income if the scheme had not been entered into or carried out where:

                              (i)  the incurring of the capital loss by the taxpayer is attributable to the making of a declaration, election or selection, the giving of a notice or the exercise of an option by any person, being a declaration, election, selection, notice or option expressly provided for by this Act other than section 160ZP or 160ZZO; and

                             (ii)  the scheme was not entered into or carried out by any person for the purpose of creating any circumstance or state of affairs the existence of which is necessary to enable the declaration, election, selection, notice or option to be made, given or exercised, as the case may be.

7  After subsection 177C(2)

Insert:

          (2A)  A reference in this Part to the obtaining by a taxpayer of a tax benefit in connection with a scheme is to be read as not including a reference to:

                     (a)  the assessable income of the taxpayer of a year of income not including an amount that would have been included, or might reasonably be expected to have been included, in the assessable income of the taxpayer of that year of income if the scheme had not been entered into or carried out where:

                              (i)  the non-inclusion of the amount in the assessable income of the taxpayer is attributable to the making of an agreement under section 160ZP or an election under section 160ZZO; and

                             (ii)  the scheme consisted solely of the making of the agreement or election; or

                     (b)  a capital loss being incurred by the taxpayer during a year of income the whole or part of which would not have been, or might reasonably be expected not to have been, incurred by the taxpayer during the year of income if the scheme had not been entered into or carried out where:

                              (i)  the incurring of the capital loss by the taxpayer is attributable to the making of an agreement under section 160ZP or an election under section 160ZZO; and

                             (ii)  the scheme consisted solely of the making of the agreement or election.

8  Subsection 177C(3)

Repeal the subsection, substitute:

             (3)  For the purposes of subparagraph (2)(a)(i), (b)(i) or (c)(i) or (2A)(a)(i) or (b)(i):

                     (a)  the non-inclusion of an amount in the assessable income of a taxpayer; or

                     (b)  the allowance of a deduction to a taxpayer; or

                     (c)  the incurring of a capital loss by a taxpayer;

is deemed to be attributable to the making of a declaration, election, agreement or selection, the giving of a notice or the exercise of an option where, if the declaration, election, agreement, selection, notice or option had not been made, given or exercised, as the case may be;

                     (d)  the amount would have been included in that assessable income; or

                     (e)  the deduction would not have been allowable; or

                      (f)  the capital loss would not have been incurred.

9  After paragraph 177F(1)(b)

Insert:

               ; or (c)  in the case of a tax benefit that is referable to a capital loss or a part of a capital loss being incurred by the taxpayer during a year of income—determine that the whole or a part of the capital loss or of the part of the capital loss, as the case may be, was not incurred by the taxpayer during that year of income;

10  Subsection 177F(2B)

After “under”, insert “paragraph (1)(c) or”.

11  Subsection 177F(2C)

After “and”, insert “, in the case of a determination under subsection (2A),”.

12  Subsection 177F(2G)

After “under”, insert “paragraph (1)(c) or”.

13  After paragraph 177F(3)(b)

Insert:

               ; or (c)  if, in the opinion of the Commissioner:

                              (i)  a capital loss would have been incurred by the relevant taxpayer during a year of income if the scheme had not been entered into or carried out, being a capital loss that was not incurred or would not, but for this subsection, be incurred, as the case may be, by the relevant taxpayer during that year of income; and

                             (ii)  it is fair and reasonable that the capital loss or a part of that capital loss should be incurred by the relevant taxpayer during that year of income;

                            determine that the capital loss or the part, as the case may be, should be incurred by the relevant taxpayer during that year of income;

14  Application

The amendments made by this Part apply in relation to schemes entered into after 3 pm, by legal time in the Australian Capital Territory, on 29 April 1997.



 

Division 1—Amendment of the Income Tax Assessment Act 1936

1  Paragraph 50H(7)(a)

Repeal the paragraph, substitute:

                     (a)  a person has a shareholding interest in a company if:

                              (i)  the person is the beneficial owner of, or of an interest in, any shares in the company; or

                             (ii)  the person is the trustee of a family trust (within the meaning of section 272-75 of Schedule 2F) who is the owner of, or of an interest in, any shares in the company; and

2  After subsection 50K(1)

Insert:

          (1A)  If the trustee of a family trust (within the meaning of section 272-75 of Schedule 2F) owns shares in a company, the trustee is taken to be the beneficial owner of the shares.

3  After section 50K

Insert:

50KA   Special provision relating to capacity in which family trust beneficially owns shares

                   For the purposes of sections 50D and 50H, if:

                     (a)  the trustee of a family trust (within the meaning of section 272-75 of Schedule 2F) is taken by subsection 50K(1A), or by that subsection and subsection 50J(6), to be the beneficial owner of shares; and

                     (b)  the trustee is a company;

the trustee is taken to be a natural person.

4  After section 50N

Insert:

50P   Information about family trusts with interests in company

Notice about family trust

             (1)  The Commissioner may give a company a notice in accordance with section 50Q if the requirements of subsections (2) to (5) of this section are met.

First requirement

             (2)  In its return of income for a year of income:

                     (a)  the company must not have calculated its taxable income in accordance with section 50C; or

                     (b)  the company must have calculated its taxable income in accordance with that section and in doing so must have taken into account an amount, by reason of subsection 50D(2), in ascertaining the eligible notional loss of the company.

Second requirement

             (3)  The Commissioner must be satisfied that:

                     (a)  if paragraph (2)(a) applies—the company was not required to calculate its taxable income in accordance with section 50C but it would have been if one or more trusts had not been family trusts (see subsection (6)); or

                     (b)  if paragraph (2)(b) applies—the company was required to calculate its taxable income in accordance with section 50C and in doing so was entitled to take into account the amount by reason of subsection 50D(2), but it would not have been so entitled unless one or more trusts had been family trusts (see subsection (6)).

Third requirement

             (4)  When the Commissioner gives the notice, for at least one of the family trusts:

                     (a)  a trustee of the trust must be a non-resident; or

                     (b)  the central management and control of the trust must be outside Australia.

Fourth requirement

             (5)  The Commissioner must give the notice before the later of:

                     (a)  5 years after the year of income to which the return relates; and

                     (b)  the end of the period during which the company is required by section 262A to retain records in relation to that year of income.

Family trust

             (6)  The expression family trust has the same meaning as in section 272-75 of Schedule 2F.

50Q   Notice where requirements of section 50P are met

Information required

             (1)  The notice that the Commissioner may give if the requirements of subsections 50P(2) to (5) are met must require the company to give the Commissioner specified information about conferrals of present entitlements to, and distributions (within the meaning of Subdivision 272-B of Schedule 2F) of, income and capital, since the start of the income year to which the return relates, by all of the family trusts meeting the requirements of paragraph 50P(4)(a) or (b).

Company knowledge

             (2)  The information need not be within the knowledge of the company at the time the notice is given.

Period for giving information

             (3)  The notice must specify a period within which the company is to give the information. The period must not end earlier than 21 days after the day on which the Commissioner gives the notice.

Consequence of not giving the information

             (4)  If the company does not give the information within the period or within such further period as the Commissioner allows:

                     (a)  if paragraph 50P(2)(a) applies—the company is required, and is taken always to have been required, to calculate its taxable income of the year of income in accordance with section 50C; or

                     (b)  if paragraph 50P(2)(b) applies—the company is not entitled, and is taken never to have been entitled, to take into account the amount by reason of subsection 50D(2).

             (5)  If, because of paragraph (4)(a), the company is required to calculate its taxable income for the year of income in accordance with section 50C, that section is to be applied as if it required the year of income to be divided into such relevant periods as would result in the highest possible taxable income for the year of income.

No offences or penalties

             (6)  To avoid doubt, subsections (4) and (5) do not cause the company to commit any offence or be liable to any penalty under Part VII for not calculating its taxable income in accordance with section 50C, or for taking into account the amount by reason of subsection 50D(2), in the company’s return.

5  Subsections 63A(2), (4) and (6)

Omit “and 63C”, substitute “, 63C and 63CB”.

6  After subsection 63A(6)

Insert:

          (6A)  For the purposes of subsection (2) or (4), if a family trust (within the meaning of section 272-75 of Schedule 2F) owns a share in a company, the trustee is taken to own the share beneficially.

7  Subsection 63A(8)

Omit “and 63C”, substitute “, 63C and 63CB”.

8  After subsection 63A(9)

Insert:

          (9A)  For the purposes of applying subsection (9) to the whole or a fraction of a dividend or of a distribution of capital that a person who is the trustee of a family trust (within the meaning of section 272-75 of Schedule 2F) would receive or would have received in the event of a payment as mentioned in that subsection, the requirement in that subsection that the person would do so or have done so otherwise than as a trustee is to be disregarded.

          (9B)  For the purpose of paragraph (4)(b) or (c) or (8)(b) or (c), if the trustee of a family trust (within the meaning of section 272-75 of Schedule 2F) has a right to receive, directly or (as a result of applying subsection (9) in accordance with subsection (9A)) indirectly, the whole or part of a dividend or of a distribution of capital, the trustee is taken:

                     (a)  to have that right for his or her own benefit; and

                     (b)  if the trustee is a company—not to be a company.

9  Paragraph 63B(5)(a)

Repeal the paragraph, substitute:

                     (a)  a person has a shareholding interest in a company if:

                              (i)  the person is the beneficial owner of, or of an interest in, any shares in the company; or

                             (ii)  the person is the trustee of a family trust (within the meaning of section 272-75 of Schedule 2F) who is the owner of, or of an interest in, any shares in the company; and

10  After section 63C

Insert:

63CA   Information about family trusts with interests in company

Notice about family trust

             (1)  The Commissioner may give a company a notice in accordance with section 63CB if the requirements of subsections (2) to (4) of this section are met.

First requirement

             (2)  In its return of income for a year of income, the company must have deducted an amount in respect of a debt incurred in the year of income or an earlier year of income, where it was allowed to do so but would not have been unless one or more trusts had been family trusts (see subsection (5)).

Second requirement

             (3)  When the Commissioner gives the notice, for at least one of the family trusts:

                     (a)  a trustee of the trust must be a non-resident; or

                     (b)  the central management and control of the trust must be outside Australia.

Third requirement

             (4)  The Commissioner must give the notice before the later of:

                     (a)  5 years after the year of income to which the return relates; and

                     (b)  the end of the period during which the company is required by section 262A to retain records in relation to that year of income.

Family trust

             (5)  The expression family trust has the same meaning as in section 272-75 of Schedule 2F.

63CB   Notice where requirements of section 63CA are met

Information required

             (1)  The notice that the Commissioner may give if the requirements of subsections 63CA(2) to (4) are met must require the company to give the Commissioner specified information about conferrals of present entitlements to, and distributions (within the meaning of Subdivision 272-B of Schedule 2F) of, income and capital, since:

                     (a)  if the debt was incurred in an earlier year of income—the start of the day on which the debt was incurred; or

                     (b)  if the debt was incurred in the year of income—the start of the year of income;

by all of the family trusts meeting the requirements of paragraph 63CA(3)(a) or (b).

Company knowledge

             (2)  The information need not be within the knowledge of the company at the time the notice is given.

Period for giving information

             (3)  The notice must specify a period within which the company is to give the information. The period must not end earlier than 21 days after the day on which the Commissioner gives the notice.

Consequence of not giving the information

             (4)  If the company does not give the information within the period or within such further period as the Commissioner allows, the company is not entitled, and is taken never to have been entitled, to deduct the amount in respect of the debt.

No offences or penalties

             (5)  To avoid doubt, subsection (4) does not cause the company to commit any offence or be liable to any penalty under Part VII for deducting the amount in respect of the debt in the company’s return.

Division 2—Amendment of the Income Tax Assessment Act 1997

11  After section 165-205

Insert:

165-207   Trustee of family trust treated as beneficial owner

             (1)  For the purposes of a primary test, the trustee of a * family trust who owns * shares in a company is taken to own the shares beneficially.

             (2)  For the purposes of an alternative test, the trustee of a * family trust who has the right to receive (whether directly, or indirectly through one or more interposed entities) a percentage of a dividend or a distribution of capital is taken:

                     (a)  to have the right to receive the percentage for the trustee’s own benefit; and

                     (b)  if the trustee is a company—not to be a company.

12  Subsection 166-165(1)

Repeal the subsection, substitute:

             (1)  The rules in these provisions also apply for the purposes of an ownership test in this Subdivision:

•    section 165-175 (which is about how an ownership test can be satisfied by a single person);

•    section 165-185 (which treats some * shares as never having carried rights);

•    section 165-190 (which treats some * shares as always having carried rights);

•    section 165-195 (which disregards redeemable * shares);

•    section 165-200 (which is about how other rules do not affect how * shares or rights are counted);

•    section 165-205 (which deals with deaths of beneficial owners);

•    subsection 165-207(2) (which treats the trustee of a * family trust as a beneficial owner of some rights).

13  Subsection 175-65(1)

Repeal the subsection, substitute:

             (1)  A person has a shareholding interest in the company if the person is:

                     (a)  the beneficial owner; or

                     (b)  the trustee of a * family trust who is the owner;

of:

                     (c)  * shares in the company; or

                     (d)  an interest in * shares in the company.

14  After Division 175

Insert:

Division 180 Information about family trusts with interests in companies

Table of Subdivisions

             Guide to Division 180

180-A    Information relevant to Division 165

180-B    Information relevant to Division 175

Guide to Division 180

180-1   What this Division is about

If a company would only avoid the tax consequences of Division 165 or 175 because of interests held by a non-resident family trust, the Commissioner may require the company to give certain information about the non-resident family trust. If it is not given, the company does not avoid the tax consequences of that Division.

Subdivision 180A Information relevant to Division 165

Table of sections

180-5....... Information about family trusts with interests in companies

180-10..... Notice where requirements of section 180-5 are met

180-5   Information about family trusts with interests in companies

Notice about company

             (1)  The Commissioner may give a company a notice in accordance with section 180-10 if the requirements of this section are met.

Tax detriment under Division 165

             (2)  In its return of income for an income year:

                     (a)  the company must have deducted a tax loss from a loss year where it would not be allowed to deduct the tax loss if it did not meet the condition in section 165-12; or

                     (b)  the company must not have calculated its taxable income and tax loss for the income year under Subdivision 165-B where it would have been required to calculate its taxable income and tax loss under that Subdivision if it did not satisfy the requirements of paragraph 165-35(a).

Role of family trust

             (3)  The Commissioner must be satisfied that the company meets the condition in section 165-12, or satisfies the requirements of paragraph 165-30(a), but it would not do so unless one or more trusts were * family trusts.

Non-resident trust

             (4)  When the Commissioner gives the notice, for at least one of the * family trusts:

                     (a)  a trustee of the trust must be a non-resident; or

                     (b)  the central management and control of the trust must be outside Australia.

When notice must be given

             (5)  The Commissioner must give the notice before the later of:

                     (a)  5 years after the income year to which the return relates; and

                     (b)  the end of the period during which the company is required by section 262A of the Income Tax Assessment Act 1936 to retain records in relation to that income year.

180-10   Notice where requirements of section 180-5 are met

Information required

             (1)  The notice that the Commissioner may give if the requirements of section 180-5 are met must require the company to give the Commissioner specified information about conferrals of present entitlements to, and distributions (within the meaning of Subdivision 272-B of Schedule 2F to the Income Tax Assessment Act 1936 ) of, income and capital, since the start of:

                     (a)  the loss year mentioned in paragraph 180-5(2)(a); or

                     (b)  the income year mentioned in paragraph 180-5(2)(b);

as the case requires, by all of the * family trusts meeting the requirements of paragraph 180-5(4)(a) or (b).

Company knowledge

             (2)  The information need not be within the knowledge of the company at the time the notice is given.

Period for giving information

             (3)  The notice must specify a period within which the company is to give the information. The period must not end earlier than 21 days after the day on which the Commissioner gives the notice.

Consequence of not giving the information

             (4)  If the company does not give the information within the period or within such further period as the Commissioner allows:

                     (a)  if paragraph 180-5(2)(a) applies—the company is not entitled, and is taken never to have been entitled, to deduct the tax loss; or

                     (b)  if paragraph 180-5(2)(b) applies—the company is required, and taken always to have been required, to calculate its taxable income and tax loss for the income year under Subdivision 165-B.

             (5)  If, because of paragraph (4)(b), the company is required to calculate under Subdivision 165-B its taxable income and tax loss for the income year concerned, that Subdivision is to be applied as if it required the income year to be divided into such periods as would result in the highest possible taxable income for the income year.

No offences or penalties

             (6)  To avoid doubt, subsections (4) and (5) do not cause the company to commit any offence or be liable to any penalty under Part VII of the Income Tax Assessment Act 1936 for deducting the tax loss, or for not calculating its taxable income and tax loss under Subdivision 165-B, in the company’s return.

Subdivision 180-B Information relevant to Division 175

Table of sections

180-15..... Information about family trusts with interests in companies

180-20..... Notice where requirements of section 180-15 are met

180-15   Information about family trusts with interests in companies

Notice about company

             (1)  The Commissioner may give a company a notice in accordance with section 180-20 if the requirements of this section are met.

Tax detriment under Division 175

             (2)  The Commissioner:

                     (a)  must have been prevented by subsection 175-10(2) or 175-15(2) from disallowing, as a deduction for an income year, the whole or part of a tax loss from a loss year; or

                     (b)  must have been prevented by subsection 175-20(2), 175-25(2) or 175-30(4) from disallowing a deduction for an income year.

Role of family trust

             (3)  A * family trust must have been one of the continuing shareholders mentioned in subsection 175-10(2), 175-20(2) or 175-25(2), or the person who had the shareholding interest mentioned in subsection 175-15(2) or 175-30(4).

Non-resident trust

             (4)  When the Commissioner gives the notice:

                     (a)  a trustee of the * family trust must be a non-resident; or

                     (b)  the central management and control of the family trust must be outside Australia.

When notice must be given

             (5)  The Commissioner must give the notice before the later of:

                     (a)  5 years after the income year mentioned in subsection (2); and

                     (b)  the end of the period during which the company is required by section 262A of the Income Tax Assessment Act 1936 to retain records in relation to that income year.

180-20   Notice where requirements of section 180-15 are met

Information required

             (1)  The notice that the Commissioner may give if the requirements of section 180-15 are met must require the company to give the Commissioner specified information about conferrals of present entitlements to, and distributions (within the meaning of Subdivision 272-B of Schedule 2F to the Income Tax Assessment Act 1936 ) of, income and capital by the * family trust since the start of:

                     (a)  the loss year mentioned in paragraph 180-15(2)(a); or

                     (b)  the income year mentioned in paragraph 180-15(2)(b);

as the case requires.

Company knowledge

             (2)  The information need not be within the knowledge of the company at the time the notice is given.

Period for giving information

             (3)  The notice must specify a period within which the company is to give the information. The period must not end earlier than 21 days after the day on which the Commissioner gives the notice.

Consequence of not giving the information

             (4)  If the company does not give the information within the period or within such further period as the Commissioner allows, subsection 175-10(2), 175-15(2), 175-20(2), 175-25(2) or 175-30(4) does not prevent the Commissioner from disallowing the deduction.

No offences or penalties

             (5)  To avoid doubt, subsection (4) does not cause the company to commit any offence or be liable to any penalty under Part VII of the Income Tax Assessment Act 1936 for claiming the deduction in the company’s return.

15  Subsection 995-1(1)

Insert:

family trust has the same meaning as in section 272-75 of Schedule 2F to the Income Tax Assessment Act 1936 .

Division 3—Application of amendments

16  Application

(1)        The amendments made by items 1 to 4 apply in relation to the 1996-97 year of income.

(2)        The amendments made by items 5 to 10 apply to amounts in respect of debts incurred in the 1996-97 year of income or any later year of income.

(3)        The amendments made by items 11 and 12 apply:

                     (a)  so far as the amendments affect Subdivision 165-A or 166-A of the Income Tax Assessment Act 1997— where the loss year mentioned in that Subdivision is the 1996-97 income year or any later income year; and

                     (b)  so far as the amendments affect Subdivision 165-B or 166-B of the Income Tax Assessment Act 1997— where the income year mentioned in that Subdivision is the 1997-98 income year or any later income year.

(4)        The amendments made by items 13 and 14 apply to:

                     (a)  tax losses incurred in the 1996-97 income year or any later income year; and

                     (b)  deductions (other than for tax losses) allowable in the 1997-98 income year or any later income year.



 

Income Tax Assessment Act 1936

17  At the end of subsection 271-60(3) of Schedule 2F

Add:

             ; and (c)  any company to which subsection (5) applies; and

                     (d)  any person who is a director of such a company when the determination is made.

Note:       The heading to subsection 271-60(3) of Schedule 2F is altered by omitting “ paragraph (2)(b) ” and substituting “ subsection (2) ”.

18  Subsection 271-60(4) of Schedule 2F

Omit “held an interest in relation to the trust as mentioned in subsection 272-30(2)”, substitute “been a family trust”.

19  At the end of section 271-60 of Schedule 2F

Add:

Company mentioned in paragraph (3)(c)

             (5)  This subsection applies to a company if, in its return of income for the income year in which the determination is made or an earlier income year:

                     (a)  the company deducted an amount in respect of a debt, where it was allowed to do so but would not have been if the family trust had not been a family trust; or

                     (b)  the company deducted a tax loss (within the meaning of the Income Tax Assessment Act 1997 ) where, because of Subdivision 165-A of that Act, it would not be allowed to do so if the family trust had not been a family trust; or

                     (c)  the company did not calculate its taxable income in accordance with section 50C where it was not required to do so but would have been if the family trust had not been a family trust; or

                     (d)  the company calculated its taxable income in accordance with section 50C and took into account an amount, by reason of subsection 50D(2), in ascertaining the eligible notional loss of the company under section 50D, where it was required to calculate its taxable income in accordance with section 50C and entitled to take the amount into account but would not have been so entitled if the family trust had not been a family trust; or

                     (e)  the company did not calculate its taxable income and tax loss under Subdivision 165-B of the Income Tax Assessment Act 1997 but would have been required to do so if the family trust had not been a family trust.

20  Application

The amendments made by this Part apply to the making of determinations under section 271-60 of Schedule 2F to the Income Tax Assessment Act 1936 after the commencement of this Part, in relation to tax under section 271-15 of that Schedule that:

                     (a)  has become due and payable before the commencement of this Part; or

                     (b)  becomes due and payable after the commencement of this Part.



 

Division 1—Amendment of the Income Tax Assessment Act 1936

21  Subsection 50H(1)

After “Subject to this section”, insert “and section 50HA”.

22  After subsection 50H(1)

Insert:

          (1A)  If:

                     (a)  the taxable income of a company is required by subsection 50C(1) to be calculated in accordance with section 50C; and

                     (b)  the company satisfies the requirements of subsections 50HA(2) and (4);

then:

                     (c)  for the purpose of applying section 50C to calculate the taxable income, subsection (1) of this section applies as if paragraphs (a), (b) and (c) were omitted and the paragraphs set out in subsection (1B) were substituted; and

                     (d)  in the substituted paragraphs, the expressions control a non-fixed trust , directly or indirectly , excepted trust , fixed entitlement , group , more than a 50% stake and non-fixed trust have the same meanings as in Schedule 2F.

          (1B)  For the purposes of paragraph (1A)(c), the substituted paragraphs are as follows:

                     (a)  immediately after the relevant time, the persons having fixed entitlements to shares of the income or shares of the capital of:

                              (i)  if the company satisfied the requirements of paragraph 50HA(2)(a)—the company; or

                             (ii)  if the company satisfied the requirements of paragraph 50HA(2)(b)—the holding entity mentioned in that paragraph;

                            or the percentages of those shares, were different from immediately before the relevant time;

                     (b)  immediately after the relevant time, there were no individuals who had more than a 50% stake in either the income or capital of a non-fixed trust (other than an excepted trust) that held directly or indirectly a fixed entitlement to a share of the income or capital of the company at any time during the year of income who, immediately before the relevant time, had more than a 50% stake in the income or capital, respectively, of the non-fixed trust;

                     (c)  at the relevant time, a group began to control a non-fixed trust (other than an excepted trust) that held directly or indirectly a fixed entitlement to a share of the income or capital of the company at any time during the year of income.

23  After section 50H

Insert:

50HA   Continuity of ownership tests inapplicable if company satisfies non-fixed trust ownership test

             (1)  Paragraphs 50H(1)(a), (b) and (c) do not apply if the company satisfies the conditions in this section.

First condition

             (2)  At all times during the year of income:

                     (a)  non-fixed trusts (see subsection (6)), other than family trusts (see subsection (6)), must have held fixed entitlements (see subsection (6)) to a 50% or greater share of the income or a 50% or greater share of the capital of the company; or

                     (b)  both:

                              (i)  a fixed trust (see subsection (6)) or a company (which trust or company is the holding entity ) must have held, directly or indirectly (see subsection (6)), all of the fixed entitlements to income and capital of the company; and

                             (ii)  non-fixed trusts, other than family trusts, must have held fixed entitlements to a 50% or greater share of the income or a 50% or greater share of the capital of the holding entity.

Second condition

             (3)  The persons holding fixed entitlements to shares of the income, and the persons holding fixed entitlements to shares of the capital, of:

                     (a)  in a paragraph (2)(a) case—the company; or

                     (b)  in a paragraph (2)(b) case—the holding entity;

at the beginning of the year of income must have held those entitlements to those shares at all times during the year of income.

Third condition

             (4)  At the beginning of the year of income:

                     (a)  individuals must not have had (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the income of the company; or

                     (b)  individuals must not have had (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the capital of the company.

Fourth condition

             (5)  It must be the case that, for each non-fixed trust (other than an excepted trust as defined in subsection (6)) that, at any time in the year of income, held directly or indirectly a fixed entitlement to a share of the income or capital of the company, section 267-60 of Schedule 2F does not require the non-fixed trust to work out its net income and loss for the income year under Division 268 of Schedule 2F.

Meaning of expressions

             (6)  The expressions directly or indirectly , excepted trust , family trust , fixed entitlement, fixed trust and non-fixed trust have the same meanings as in Schedule 2F.

50HB   Information about non-fixed trusts with interests in company

Notice about non-resident non-fixed trust

             (1)  The Commissioner may give the company a notice in accordance with section 50HC if the requirements of subsections (2) to (5) of this section are met.

First requirement

             (2)  In its return of income for the year of income, the company must not have calculated its taxable income and loss for the year of income under section 50C where it would be required to calculate its taxable income and loss under that section unless it met the conditions in section 50HA.

Second requirement

             (3)  In order to determine whether it meets the conditions in that section, the Commissioner must need information about a non-fixed trust mentioned in subsection 50HA(5).

Third requirement

             (4)  When the Commissioner gives the notice:

                     (a)  a trustee of the non-fixed trust must be a non-resident; or

                     (b)  the central management and control of the non-fixed trust must be outside Australia.

Fourth requirement

             (5)  The Commissioner must give the notice before the later of:

                     (a)  5 years after the year of income; and

                     (b)  the end of the period during which the company is required by section 262A to retain records in relation to that year of income.

50HC   Notices where requirements of section 50HB are met

Information required

             (1)  The notice that the Commissioner may give if the requirements of subsections 50HB(2) to (5) are met must require the company to give the Commissioner specified information that is relevant in determining whether the requirements of subsection 50HA(5) are satisfied in relation to the non-fixed trust mentioned in subsections 50HB(3) and (4).

Company knowledge

             (2)  The information need not be within the knowledge of the company at the time the notice is given.

Period for giving information

             (3)  The notice must specify a period within which the company is to give the information. The period must not end earlier than 21 days after the day on which the Commissioner gives the notice.

Consequence of not giving the information

             (4)  If the company does not give the information within the period or within such further period as the Commissioner allows, the company is taken not to meet, and never to have met, the conditions in section 50HA.

Application of section 50C

             (5)  If, because of subsection (4), the company is required to calculate its taxable income and loss for the year of income in accordance with section 50C, that section is to be applied as if it required the year of income to be divided into such relevant periods as would result in the highest possible taxable income for the year of income.

No offences or penalties

             (6)  To avoid doubt, subsections (4) and (5) do not cause the company to commit any offence or be liable to any penalty under Part VII for not calculating its taxable income and loss in accordance with section 50C in its return.

24  Subsection 63A(2)

Before “63B”, insert “63AA,”.

25  Subsection 63A(4)

Before “63B”, insert “63AA,”.

26  Subsection 63A(6)

Before “63B”, insert “63AB,”.

27  Subsection 63A(8)

Before “63B”, insert “63AB,”.

28  After section 63A

Insert:

63AA   Section 63A inapplicable to earlier year debts if company satisfies non-fixed trust ownership test

             (1)  Section 63A does not prevent an amount in respect of a debt incurred in an earlier year of income being an allowable deduction in the year of income if the company satisfies the conditions in this section.

First condition

             (2)  At all times during:

                     (a)  the part (the eligible earlier year period ) of the earlier year of income occurring after the beginning of the day on which the debt was incurred; and

                     (b)  during the year of income;

either:

                     (c)  non-fixed trusts (see subsection (6)), other than family trusts (see subsection (6)), must have held fixed entitlements (see subsection (6)) to a 50% or greater share of the income or a 50% or greater share of the capital of the company; or

                     (d)  both:

                              (i)  a fixed trust (see subsection (6)) or a company (which trust or company is the holding entity ) must have held, directly or indirectly (see subsection (6)), all of the fixed entitlements to income and capital of the company; and

                             (ii)  non-fixed trusts, other than family trusts, must have held fixed entitlements to a 50% or greater share of the income or a 50% or greater share of the capital of the holding entity.

Second condition

             (3)  The persons holding fixed entitlements to shares of the income, and the persons holding fixed entitlements to shares of the capital, of:

                     (a)  in a paragraph (2)(c) case—the company; or

                     (b)  in a paragraph (2)(d) case—the holding entity;

at the beginning of the eligible earlier year period must have held those entitlements to those shares at all times during the eligible earlier year period and the year of income.

Third condition

             (4)  At the beginning of the eligible earlier year period:

                     (a)  individuals must not have had (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the income of the company; or

                     (b)  individuals must not have had (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the capital of the company.

Fourth condition

             (5)  It must be the case that, for each non-fixed trust (other than an excepted trust as defined in subsection (6)) that, at any time in the eligible earlier year period or the year of income, held directly or indirectly a fixed entitlement to a share of the income or capital of the company, section 267-25 of Schedule 2F would not have prevented the non-fixed trust from deducting the amount in respect of the debt if it, rather than the company, would otherwise be entitled to deduct the amount.

Meaning of expressions

             (6)  The expressions directly or indirectly , excepted trust , family trust , fixed entitlement , fixed trust and non-fixed trust have the same meanings as in Schedule 2F.

63AB   Section 63A inapplicable to current year debts if company satisfies non-fixed trust ownership test

             (1)  Section 63A does not prevent an amount in respect of a debt incurred in the year of income being an allowable deduction if the company satisfies the conditions in this section.

First condition

             (2)  At all times during the year of income:

                     (a)  non-fixed trusts (see subsection (6)), other than family trusts (see subsection (6)), must have held fixed entitlements (see subsection (6)) to a 50% or greater share of the income or a 50% or greater share of the capital of the company; or

                     (b)  both:

                              (i)  a fixed trust (see subsection (6)) or a company (which trust or company is the holding entity ) must have held, directly or indirectly (see subsection (6)), all of the fixed entitlements to income and capital of the company; and

                             (ii)  non-fixed trusts, other than family trusts, must have held fixed entitlements to a 50% or greater share of the income or a 50% or greater share of the capital of the holding entity.

Second condition

             (3)  The persons holding fixed entitlements to shares of the income, and the persons holding fixed entitlements to shares of the capital, of:

                     (a)  in a paragraph (2)(a) case—the company; or

                     (b)  in a paragraph (2)(b) case—the holding entity;

at the beginning of the year of income must have held those entitlements to those shares at all times during the year of income.

Third condition

             (4)  At the beginning of the year of income:

                     (a)  individuals must not have had (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the income of the company; or

                     (b)  individuals must not have had (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the capital of the company.

Fourth condition

             (5)  It must be the case that, for each non-fixed trust (other than an excepted trust as defined in subsection (6)) that, at any time in the year of income, held directly or indirectly a fixed entitlement to a share of the income or capital of the company, section 267-65 of Schedule 2F would not have prevented the non-fixed trust from deducting the amount in respect of the debt if it, rather than the company, would otherwise be entitled to deduct the amount.

Meaning of expressions

             (6)  The expressions directly or indirectly , excepted trust , family trust , fixed entitlement , fixed trust and non-fixed trust have the same meanings as in Schedule 2F.

63AC   Information about non-fixed trusts with interests in company

Notice about non-resident non-fixed trust

             (1)  The Commissioner may give the company a notice in accordance with section 63AD if the requirements of subsections (2) to (5) of this section are met.

First requirement

             (2)  In its return of income for the year of income, the company must have deducted an amount in respect of a debt where it would not be allowed to deduct the amount unless it met the conditions in section 63AA or 63AB.

Second requirement

             (3)  In order to determine whether it meets the conditions in that section, the Commissioner must need information about a non-fixed trust mentioned in subsection 63AA(5) or 63AB(5).

Third requirement

             (4)  When the Commissioner gives the notice:

                     (a)  a trustee of the non-fixed trust must be a non-resident; or

                     (b)  the central management and control of the non-fixed trust must be outside Australia.

Fourth requirement

             (5)  The Commissioner must give the notice before the later of:

                     (a)  5 years after the year of income; and

                     (b)  the end of the period during which the company is required by section 262A to retain records in relation to that year of income.

63AD   Notices where requirements of section 63AC are met

Information required

             (1)  The notice that the Commissioner may give if the requirements of subsections 63AC(2) to (5) are met must require the company to give the Commissioner specified information that is relevant in determining whether the requirements of subsection 63AA(5) or 63AB(5) are satisfied in relation to the non-fixed trust mentioned in subsections 63AC(3) and (4).

Company knowledge

             (2)  The information need not be within the knowledge of the company at the time the notice is given.

Period for giving information

             (3)  The notice must specify a period within which the company is to give the information. The period must not end earlier than 21 days after the day on which the Commissioner gives the notice.

Consequence of not giving the information

             (4)  If the company does not give the information within the period or within such further period as the Commissioner allows, the company is taken not to meet, and never to have met, the conditions in section 63AA or 63AB.

No offences or penalties

             (5)  To avoid doubt, subsection (4) does not cause the company to commit any offence or be liable to any penalty under Part VII for deducting the amount in respect of the debt in its return.

Division 2—Amendment of the Income Tax Assessment Act 1997

29  After paragraph 165-10(a)

Insert:

Note:       See section 165-215 for a special alternative to these conditions.

30  After paragraph 165-35(a)

Insert:

Note:       See section 165-220 for a special alternative to the condition in this paragraph.

31  At the end of section 165-45

Add:

Note:          See section 165-235 for a special alternative to this section.

32  After Subdivision 165-E

Insert:

Subdivision 165-F Special provisions relating to ownership by non-fixed trusts

Table of sections

165-215... Special alternative to change of ownership test for Subdivision 165-A

165-220... Special alternative to change of ownership test for Subdivision 165-B

165-225... Information about non-fixed trusts with interests in company

165-230... Notices where requirements of section 165-225 are met

165-235... Special way of dividing the income year under Subdivision 165-B

165-240... Meaning of expressions

165-215   Special alternative to change of ownership test for Subdivision 165-A

             (1)  If the company does not meet the conditions in section 165-12, it is nevertheless taken to meet the conditions if it meets the conditions in this section.

First condition

             (2)  At all times during the loss year and the income year:

                     (a)  non-fixed trusts (see section 165-240), other than * family trusts, must have held fixed entitlements (see section 165-240) to a 50% or greater share of the income or a 50% or greater share of the capital of the company; or

                     (b)  both:

                              (i)  a fixed trust (see section 165-240), or a company (which trust or company is the holding entity ) must have held, directly or indirectly (see section 165-240), all of the fixed entitlements to income and capital of the company; and

                             (ii)  non-fixed trusts, other than * family trusts, must have held fixed entitlements to a 50% or greater share of the income or a 50% or greater share of the capital of the holding entity.

Second condition

             (3)  The persons holding fixed entitlements to shares of the income, and the persons holding fixed entitlements to shares of the capital, of:

                     (a)  in a paragraph (2)(a) case—the company; or

                     (b)  in a paragraph (2)(b) case—the holding entity;

at the beginning of the loss year must have held those entitlements to those shares at all times during the loss year and the income year.

Third condition

             (4)  At the beginning of the loss year:

                     (a)  individuals must not have had (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the income of the company; or

                     (b)  individuals must not have had (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the capital of the company.

Fourth condition

             (5)  It must be the case that, for each non-fixed trust (other than an excepted trust as defined in section 165-240) that, at any time in the loss year or the income year, held directly or indirectly a fixed entitlement to a share of the income or capital of the company, section 267-20 of Schedule 2F to the Income Tax Assessment Act 1936 would not have prevented the non-fixed trust from deducting the tax loss concerned if it, rather than the company, had incurred the tax loss.

165-220   Special alternative to change of ownership test for Subdivision 165-B

             (1)  If the company does not meet the condition in paragraph 165-35(a), it is nevertheless taken to meet the condition if it meets the conditions in this section.

First condition

             (2)  At all times during the income year:

                     (a)  non-fixed trusts (see section 165-240), other than * family trusts, must have held fixed entitlements (see section 165-240) to a 50% or greater share of the income or a 50% or greater share of the capital of the trust; or

                     (b)  both:

                              (i)  a fixed trust (see section 165-240) or a company (which trust or company is the holding entity ) must have held, directly or indirectly (see section 165-240), all of the fixed entitlements to income and capital of the company; and

                             (ii)  non-fixed trusts, other than * family trusts, must have held fixed entitlements to a 50% or greater share of the income or a 50% or greater share of the capital of the holding entity.

Second condition

             (3)  The persons holding fixed entitlements to shares of the income, and the persons holding fixed entitlements to shares of the capital, of:

                     (a)  in a paragraph (2)(a) case—the company; or

                     (b)  in a paragraph (2)(b) case—the holding entity;

at the beginning of the income year must have held those entitlements to those shares at all times during the income year.

Third condition

             (4)  At the beginning of the income year:

                     (a)  individuals must not have had (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the income of the company; or

                     (b)  individuals must not have had (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the capital of the company.

Fourth condition

             (5)  It must be the case that, for each non-fixed trust (other than an excepted trust as defined in section 165-240) that, at any time in the income year, held directly or indirectly a fixed entitlement to a share of the income or capital of the company, section 267-60 of Schedule 2F to the Income Tax Assessment Act 1936 does not require the non-fixed trust to work out its net income and tax loss for the income year under Division 268.

165-225   Information about non-fixed trusts with interests in company

Notice about non-resident non-fixed trust

             (1)  The Commissioner may give the company a notice in accordance with section 165-230 if the requirements of subsections (2) to (5) of this section are met.

Tax detriment under Division 165

             (2)  In its return of income for the income year, the company:

                     (a)  must have deducted a tax loss from a loss year; or

                     (b)  must not have calculated its taxable income and tax loss for the income year under Subdivision 165-B;

where it would not be allowed to deduct the tax loss, or would be required to calculate its taxable income and tax loss under Subdivision 165-B, unless it met the conditions in section 165-215 or 165-220.

Information about non-fixed trust

             (3)  In order to determine whether it meets the conditions in that section, the Commissioner must need information about a non-fixed trust mentioned in subsection 165-215(5) or 165-220(5).

Non-resident trust

             (4)  When the Commissioner gives the notice:

                     (a)  a trustee of the non-fixed trust must be a non-resident; or

                     (b)  the central management and control of the non-fixed trust must be outside Australia.

When notice must be given

             (5)  The Commissioner must give the notice before the later of:

                     (a)  5 years after the income year; and

                     (b)  the end of the period during which the company is required by section 262A of the Income Tax Assessment Act 1936 to retain records in relation to that income year.

165-230   Notices where requirements of section 165-225 are met

Information required

             (1)  The notice that the Commissioner may give if the requirements of subsections 165-225(2) to (5) are met must require the company to give the Commissioner specified information that is relevant in determining whether the requirements of subsection 165-215(5) or 165-220(5) are satisfied in relation to the non-fixed trust mentioned in subsections 165-225(3) and (4).

Company knowledge

             (2)  The information need not be within the knowledge of the company at the time the notice is given.

Period for giving information

             (3)  The notice must specify a period within which the company is to give the information. The period must not end earlier than 21 days after the day on which the Commissioner gives the notice.

Consequence of not giving the information

             (4)  If the company does not give the information within the period or within such further period as the Commissioner allows, the company is taken not to meet, and never to have met, the conditions in section 165-215 or 165-220.

Application of Subdivision 165-B

             (5)  If, because of subsection (4), the company is required to work out under Subdivision 165-B its taxable income and tax loss for the income year, that Subdivision is to be applied as if it required the income year to be divided into such periods as would result in the highest possible taxable income for the income year.

No offences or penalties

             (6)  To avoid doubt, subsections (4) and (5) do not cause the company to commit any offence or be liable to any penalty under Part VII of the Income Tax Assessment Act 1936 for deducting the loss, or for not working out its taxable income and tax loss under Subdivision 165-B, in its return.

165-235   Special way of dividing the income year under Subdivision 165-B

                   If:

                     (a)  the company’s taxable income and tax loss for the income year are required to be calculated under Subdivision 165-B; and

                     (b)  the company meets the requirements of subsections 165-220(2) and (4);

section 165-45 is replaced by the following section:

165-45   First, divide the income year into periods

             (1)  Divide the income year into periods as follows.

             (2)  The first period starts at the start of the income year. Each later period starts immediately after the end of the previous period.

             (3)  The last period ends at the end of the income year. Each period (except the last) ends at the earliest of:

                     (a)  the latest time that would result in the persons holding fixed entitlements (as defined in Schedule 2F to the Income Tax Assessment Act 1936 ) to shares of the income or shares of the capital of:

                              (i)  if the company meets the requirements of paragraph 165-220(2)(a)—the company; or

                             (ii)  if the company meets the requirements of paragraph 165-220(2)(b)—the holding entity mentioned in that paragraph;

                            and the percentages of the shares that they hold, remaining the same during the whole of the period; and

                     (b)  the times that, for all of the non-fixed trusts (as defined in Schedule 2F to the Income Tax Assessment Act 1936 ), other than excepted trusts (as defined in that Schedule), holding directly or indirectly (as defined in that Schedule) a fixed entitlement to a share of the income or capital of the company at any time during the income year, are the latest times that would result in individuals having more than a 50% stake (as defined in that Schedule) in their income or capital; and

                     (c)  the earliest time in the period when a group (as defined in Schedule 2F to the Income Tax Assessment Act 1936 ) begins to control a non-fixed trust (as defined in that Schedule), other than an excepted trust (as defined in that Schedule), that holds directly or indirectly a fixed entitlement to a share of the income or capital of the company at any time during the income year.

165-240   Meaning of expressions

                   The expressions control a non-fixed trust , directly or indirectly , excepted trust , fixed entitlement , fixed trust , group , more than a 50% stake and non-fixed trust have the same meanings as in Schedule 2F to the Income Tax Assessment Act 1936 .

Division 3—Application of amendments

33  Application

(1)        The amendments made by items 21 to 23 apply for the 1996-97 year of income.

(2)        The amendments by items 24 to 28 apply to debts incurred in the 1996-97 year of income or any later year of income.

(3)        The amendments made by items 29 and 32 (so far as the amendments made by those items affect Subdivision 165-A of the Income Tax Assessment Act 1997 ) apply where the loss year mentioned in that Subdivision is the 1996-97 income year or any later income year.

(4)        The amendments made by items 30 to 32 (so far as the amendments made by those items affect Subdivision 165-B of the Income Tax Assessment Act 1997 ) apply where the income year mentioned in that Subdivision is the 1997-98 income year or any later income year.



 

1  After section 58G

Insert:

58GA   Exempt benefits—small business car parking

Exemption

             (1)  A car parking benefit provided in an FBT year in respect of the employment of an employee is an exempt benefit if:

                     (a)  the car is not parked at a commercial parking station; and

                     (b)  the employer of the employee is not a public company (see subsection (3)), or a subsidiary of a public company (see subsection (3)), in relation to the day on which the benefit is provided; and

                     (c)  the employer is not a government body; and

                     (d)  the sum of the employer’s ordinary income and statutory income for the year of income ending most recently before the start of the FBT year is less than $10 million.

New employers

             (2)  However, if the employer:

                     (a)  in the case of a tax-exempt employer (see subsection (3))—did not start to carry out operations or activities; or

                     (b)  in any other case—did not start to carry out business operations;

until after the start of the year of income mentioned in paragraph (1)(d), then:

                     (c)  paragraph (1)(d) does not apply; and

                     (d)  the employer must make a reasonable estimate of the amount that would be the sum of the employer’s ordinary income and statutory income for the year of income (the business start-up year ) in which the employer did start those operations or activities, or those business operations; and

                     (e)  that estimate is to be made on the assumption that the employer had started the operations or activities, or the business operations, at the start of the business start-up year; and

                      (f)  the benefit is an exempt benefit only if that estimate is less than $10 million.

Definitions

             (3)  In this section:

ordinary income has the same meaning as in the Income Tax Assessment Act 1997 .

public company means a company covered by paragraph 103A(2)(a) of the Income Tax Assessment Act 1936 , but reading the reference in that paragraph to the last day of the year of income as a reference to the day on which the benefit is provided.

statutory income has the same meaning as in the Income Tax Assessment Act 1997 .

subsidiary of a public company means a subsidiary of a public company within the meaning of subsection 103A(4) of the Income Tax Assessment Act 1936 , but reading:

                     (a)  a reference in section 103A of that Act to a year of income as a reference to the day on which the benefit is provided; and

                     (b)  a reference in that section to a public company as a reference to a public company within the meaning of this section.

tax-exempt employer means an employer all of whose income is wholly exempt from income tax.

2  Subsection 58Z(1)

Repeal the subsection, substitute:

             (1)  Any benefit arising from taxi travel by an employee is an exempt benefit if the travel is a single taxi trip beginning or ending at the employee’s place of work.

3  After section 115A

Insert:

115B   Penalty tax for making unreasonable estimate of income

                   If:

                     (a)  under subsection 58GA(2), an employer makes an estimate of an amount; and

                     (b)  the amount of the estimate is less than $10 million; and

                     (c)  the estimate is not a reasonable estimate;

then:

                     (d)  the Commissioner may make a reasonable estimate of that amount (taking into account the assumption in paragraph 58GA(2)(e)); and

                     (e)  if the amount of that reasonable estimate is $10 million or more—the employer is liable to pay, by way of penalty, additional tax equal to double the amount of the tax payable in respect of the benefit.

4  Subsection 136(1) (at the end of paragraphs (c) and (e) of the definition of fringe benefit )

Add “or”.

5  Subsection 136(1) (paragraph (e) of the definition of fringe benefit )

After “arrangement”, insert “covered by paragraph (a) of the definition of arrangement ”.

6  Subsection 136(1) (after paragraph (e) of the definition of fringe benefit )

Insert:

                    (ea)  a person other than the employer or an associate of the employer, if the employer or an associate of the employer:

                              (i)  participates in or facilitates the provision or receipt of the benefit; or

                             (ii)  participates in, facilitates or promotes a scheme or plan involving the provision of the benefit;

                            and the employer or associate knows, or ought reasonably to know, that the employer or associate is doing so;

7  Subsection 136(1) (at the end of paragraphs (f) to (m) (inclusive) of the definition of fringe benefit )

Add “or”.



 

8  Section 51AGB

Repeal the section.

9  Division 4A of Part III

Repeal the Division.

10  Subsection 262A(4AK)

Repeal the subsection.



 

11  Section 12-5 (list entry relating to car parking)

Repeal the entry, substitute:

car parking

 

employee’s car parking expenses, no deduction for ............

51AGA



 

12  Application

(1)        The amendments made by items 1, 2 and 3 apply to assessments of the fringe benefits taxable amount of an employer of the FBT year beginning on 1 April 1997 and of all later years.

(2)        The amendments made by items 4, 5 and 6 apply to assessments of the fringe benefits taxable amount of an employer of the FBT year beginning on 1 April 1998 and of all later years.

(3)        The repeals made by items 9, 10 and 11 apply in relation to expenditure to the extent to which it is incurred in respect of the provision of car parking facilities for a car on a day on or after 1 July 1997.



 

   

Sales Tax Assessment Act 1992

1  After section 9A

Insert:

9B   Goods temporarily imported: affects meaning of Australian-used goods

             (1)  This section applies if:

                     (a)  Australian-used goods that were the subject of a dealing covered by section 51A have been exported; and

                     (b)  the goods are later imported.

             (2)  In applying the sales tax law at or after the time of the importation, the goods are not taken to be Australian-used goods only because of an AOU of the goods that happened before they were exported as mentioned in paragraph (1)(a).

2  At the end of Part 3

Add:

Division 5 Tax not payable on certain dealings

51A   Goods brought into Australia on a temporary basis

             (1)  Tax is not payable on a dealing that is a local entry of goods if:

                     (a)  subsection 162(1) of the Customs Act 1901 applies to the goods; and

                     (b)  a Collector has been given a security or an undertaking, to the satisfaction of the Collector, for the payment of an amount equal to the sales tax that would otherwise have been payable for the dealing; and

                     (c)  the Collector has granted permission under that subsection to take delivery of the goods; and

                     (d)  the applicable provisions of regulations made under section 162 of that Act are complied with.

             (2)  A security or an undertaking given under paragraph (1)(b) in respect of a dealing with goods may be enforced according to its tenor if:

                     (a)  the goods have been dealt with in a manner that is not in compliance with subsection (1); or

                     (b)  the goods are exported, otherwise than in accordance with subregulation 124(3) of the Customs Regulations; or

                     (c)  the goods are not exported within the time provided under subsection 162(3) of the Customs Act 1901 .

A security must be returned to the person who gave it, and an undertaking may not be enforced, if the goods are exported and none of the above paragraphs apply.

             (3)  Tax is not payable on a dealing that is a local entry of goods if:

                     (a)  subsection 162A(1) of the Customs Act 1901 applies to the goods; and

                     (b)  the Chief Executive Officer of Customs has accepted a security or an undertaking for the payment of an amount equal to the sales tax that would otherwise have been payable for the dealing; and

                     (c)  a Collector has granted permission under subsection 162A(2) of that Act to take delivery of the goods.

             (4)  A security or an undertaking given under paragraph (3)(b) in respect of a dealing with goods may be enforced according to its tenor if:

                     (a)  the goods are dealt with in a manner inconsistent with subregulation 125B(1) of the Customs Regulations without the consent of the Chief Executive Officer of Customs; or

                     (b)  paragraph 162A(5)(a) or (b) of the Customs Act 1901 applies to the goods.

A security must be returned to the person who gave it, and an undertaking may not be enforced, if the goods are exported and neither of the above paragraphs apply.

             (5)  Tax is not payable on a dealing that is a local entry of goods if the goods are specified in an instrument in force under subregulation 125A(2) of the Customs Regulations unless the goods are dealt with in a manner inconsistent with subregulation 125B(2) of the Customs Regulations.

             (6)  In this section:

Collector means a Collector for the purposes of the Customs Act 1901 .

3  Schedule 1, Table 2 (cell at table row dealing with LE14, column [2])

Repeal the cell, substitute:

the goods are delivered to a person who has given a security or undertaking under section 51A for the payment of an amount equal to the sales tax that would otherwise have been payable for the dealing

4  Application

The amendments made by this Schedule apply to dealings after 7.30 pm, by legal time in the Australian Capital Territory, on 13 May 1997.



 

   

Income Tax Assessment Act 1936

1  Section 221AZH (paragraph (a) of the definition of final instalment )

Repeal the paragraph, substitute:

                     (a)  for a small taxpayer—the second instalment specified in Table 1 in subsection 221AZK(2) or the single instalment specified in subsection 221AZK(3A) (as the case requires);

2  Section 221AZH (definition of large taxpayer )

After “of section”, insert “221AZKA or”.

3  Section 221AZH (definition of medium taxpayer )

Omit “to section”, substitute “to sections 221AZKA and”

4  Section 221AZH (definition of medium taxpayer )

After “section 221AZK”, insert “or because of section 221AZKA”.

5  Section 221AZH

Insert:

reckoning day means:

                     (a)  where:

                              (i)  the current year is the 1997-98 year of income or a later year of income; and

                             (ii)  on or before the first day of month 9, the taxpayer has not lodged an estimate of the likely tax for the current year or a return for the previous year;

                            the earlier of the day on which the taxpayer first lodges a return for the previous year and the 15th day of month 9; or

                     (b)  in any other case—the first day of month 9.

6  Section 221AZH (definition of small taxpayer )

After “means”, insert “, subject to section 221AZKA,”.

7  Subsection 221AZK(2)

Omit “An instalment taxpayer”, substitute “Subject to subsection (3A), an instalment taxpayer”.

8  Subsection 221AZK(2) (heading to second column of table)

Omit “ first day of month 9 ”, substitute “ reckoning day ”.

9  Subsection 221AZK(2) (heading to third column of table)

Omit “ due on first day of ”, substitute “ due on ”.

10  Subsection 221AZK(2) (table row relating to small companies)

Repeal the row, substitute:

 

Small

less than $8,000

15th day of month 18

100% of likely tax for current year

 

 

15th day of month 21

assessed tax for current year, less previous instalment for current year

11  Subsection 221AZK(2) (table rows relating to medium and large companies)

Before “month” (wherever occurring), insert “1st day of”.

12  Paragraph 221AZK(3)(a)

Repeal the paragraph, substitute:

                     (a)  a taxpayer is classified as small, medium or large according to the taxpayer’s likely tax for the current year, calculated at the end of the reckoning day;

Note:       Sections 221AZKA and 221AZMA can change a taxpayer’s classification.

13  After subsection 221AZK(3)

Insert:

          (3A)  A small taxpayer whose assessed tax for the current year is more than $300,000 must pay an instalment on the first day of month 18 equal to 100% of the assessed tax for the current year.

14  Section 221AZKA

Omit “first day of month 9” (wherever occurring), substitute “reckoning day”.

15  Subsection 221AZKA(1)

Omit “first day of month 11”, substitute “end of 2 months after that day”.

16  Application

(1)        The amendments made by items 2, 3, 4 and 6 have the same application as they would have had if they had been included in Division 1C of Part VI of the Income Tax Assessment Act 1936 as originally inserted by section 54 of the Taxation Laws Amendment Act (No. 2) 1993 .

(2)        The amendments made by the remaining items of this Schedule apply for the 1996-97 year of income and all later years of income.



 

   

Income Tax Assessment Act 1936

1  Section 160APA

Insert:

standard component has the same meaning as in Division 8 of Part III.

2  After paragraph 160APHB(1)(b)

Insert:

                    (ba)  how much of the company tax assessed to a life assurance company for a year of income is attributable to the standard component;

                    (bb)  how much of an amount of a reduction or increase in the company tax of a life assurance company for a year of income is attributable to the standard component;

3  After paragraph 160APHB(2)(b)

Insert:

Note:       The general fund component is made up of the standard component and the RSA component.

4  Section 160APVA

Omit “General fund” (wherever occurring), substitute “Standard”.

5  Section 160APVA

Omit “general fund” (wherever occurring), substitute “standard”.

6  Subsection 160APVBA(2)

Omit “General fund” (wherever occurring), substitute “Standard”.

7  Subsection 160APVBA(2)

Omit “general fund”, substitute “standard”.

8  Subsection 160APVBB(2)

Omit “General fund” (wherever occurring), substitute “Standard”.

9  Subsection 160APVBB(2)

Omit “general fund”, substitute “standard”.

10  Section 160APVC

Omit “General fund” (wherever occurring), substitute “Standard”.

11  Section 160APVC

Omit “general fund” (wherever occurring), substitute “standard”.

12  Section 160APVD

Omit “General fund” (wherever occurring), substitute “Standard”.

13  Section 160APVD

Omit “general fund” (wherever occurring), substitute “standard”.

14  At the end of subsections 160APVH(2) and (5)

Add:

                   ; (c)  the assumption that the reference to standard component in the provision concerned were a reference to general fund component.

15  Section 160AQCCA

Omit “General fund” (wherever occurring), substitute “Standard”.

16  Section 160AQCCA

Omit “general fund” (wherever occurring), substitute “standard”.

17  Section 160AQCD

Omit “General fund” (wherever occurring), substitute “Standard”.

18  Section 160AQCD

Omit “general fund” (wherever occurring), substitute “standard”.

19  Section 160AQCE

Omit “General fund” (wherever occurring), substitute “Standard”.

20  Section 160AQCE

Omit “general fund” (wherever occurring), substitute “standard”.

21  Subsection 160AQCJ(2)

Omit “General fund” (wherever occurring), substitute “Standard”.

22  Subsection 160AQCJ(2)

Omit “general fund”, substitute “standard”.

23  Subsection 160AQCK(2)

Omit “General fund” (wherever occurring), substitute “Standard”.

24  Subsection 160AQCK(2)

Omit “general fund”, substitute “standard”.

25  Subsection 160AQCL(2)

Omit “General fund” (wherever occurring), substitute “Standard”.

26  Subsection 160AQCL(2)

Omit “general fund”, substitute “standard”.

27  At the end of subsections 160AQCN(2) and (2AB)

Add:

                   ; (c)  the assumption that the reference to standard component in the provision concerned were a reference to general fund component.

28  Application

The amendments made by this Schedule apply to any franking credits or franking debits arising after 29 October 1997.



 

   

Income Tax Assessment Act 1936

1  At the end of subsection 160AY(3)

Add:

The indexed cost base and the cost base are also adjusted to take account of certain deductions and balancing adjustments (see sections 160ZJA and 160ZJB).

2  Section 160AZA (table item dealing with cost base)

After “160ZH”, insert “, 160ZJA”.

3  Section 160AZA (table item dealing with indexed cost base)

After “160ZJ”, insert “, 160ZJB”.

4  At the end of subsection 160ZH(1)

Add:

Note:          Section 160ZJA affects the meaning of the amount of any consideration or the amount of any expenditure.

5  At the end of subsection 160ZH(2)

Add:

Note:          Section 160ZJB affects the meaning of the amount of any consideration or the amount of any expenditure.

6  At the end of subsection 160ZH(3)

Add:

Note:          Section 160ZK affects the meaning of the reduced amount of any consideration, the reduced amount of incidental costs, or the reduced amount of any expenditure.

7  After section 160ZJ

Insert:

160ZJA   Reduction of amounts for purposes of cost base

             (1)  A reference in subsection 160ZH(1) to the amount of any consideration or the amount of any expenditure, in respect of an asset (other than the taxpayer’s interest in a partnership asset of a partnership in which the taxpayer is a partner) is a reference to the sum of:

                     (a)  the amount of the consideration or the amount of the expenditure, as the case may be, (as worked out under section 160ZH) reduced by any part of the consideration or of the expenditure that has been allowed or is allowable as a deduction to the taxpayer in respect of any year of income; and

                     (b)  any amount that is included in the assessable income of the taxpayer of any year of income by virtue of a provision of this Act other than this Part the effect of which is to reverse a deduction covered by paragraph (a).

             (2)  The reference in paragraph (1)(b) to an amount that is included in the assessable income of a taxpayer includes a reference to an amount:

                     (a)  that is taken by subsection 60(1A) of this Act to be so included for the asset for the purposes of subsection 60(1); or

                     (b)  that is treated as being deducted for depreciation of another asset under section 42-285 or 42-290 of the Income Tax Assessment Act 1997 .

             (3)  A reference in subsection 160ZH(1) to the amount of any consideration or the amount of any expenditure, in respect of an asset (the taxpayer’s asset ), being a taxpayer’s interest in a partnership asset of a partnership in which the taxpayer is a partner, is a reference to the sum of:

                     (a)  the amount of the consideration or the amount of the expenditure, as the case may be, (as worked out under section 160ZH) reduced by any part of the consideration or of the expenditure that has been allowed or is allowable as a deduction to the partnership or the taxpayer in respect of any year of income; and

                     (b)  any amount that is included in the assessable income of the partnership or of the taxpayer of any year of income by virtue of a provision of this Act other than this Part the effect of which is to reverse a deduction covered by paragraph (a).

             (4)  The reference in paragraph (3)(b) to an amount that is included in the assessable income of the partnership or the taxpayer includes a reference to an amount:

                     (a)  that is taken by subsection 60(1A) of this Act to be so included for the asset for the purposes of subsection 60(1); or

                     (b)  that is treated as being deducted for depreciation of another asset under section 42-285 or 42-290 of the Income Tax Assessment Act 1997 .

160ZJB   Reduction of amounts for purposes of indexed cost base

             (1)  A reference in subsection 160ZH(2) to the indexed amount of any consideration or the indexed amount of any expenditure, in respect of an asset (other than the taxpayer’s interest in a partnership asset of a partnership in which the taxpayer is a partner) is a reference to the sum of:

                     (a)  the indexed amount of the consideration or the indexed amount of the expenditure (as worked out under sections 160ZH and 160ZJ), as the case may be, reduced by any part of the consideration or of the expenditure that has been allowed or is allowable as a deduction to the taxpayer in respect of any year of income; and

                     (b)  any amount that is included in the assessable income of the taxpayer of any year of income by virtue of a provision of this Act other than this Part the effect of which is to reverse a deduction covered by paragraph (a).

             (2)  The reference in paragraph (1)(b) to an amount that is included in the assessable income of a taxpayer includes a reference to an amount:

                     (a)  that is taken by subsection 60(1A) of this Act to be so included for the asset for the purposes of subsection 60(1); or

                     (b)  that is treated as being deducted for depreciation of another asset under section 42-285 or 42-290 of the Income Tax Assessment Act 1997 .

             (3)  A reference in subsection 160ZH(2) to the indexed amount of any consideration or the indexed amount of any expenditure, in respect of an asset (the taxpayer’s asset ), being a taxpayer’s interest in a partnership asset of a partnership in which the taxpayer is a partner, is a reference to the sum of:

                     (a)  the indexed amount of the consideration or the indexed amount of the expenditure (as worked out under sections 160ZH and 160ZJ), as the case may be, reduced by any part of the consideration or of the expenditure that has been allowed or is allowable as a deduction to the partnership or the taxpayer in respect of any year of income; and

                     (b)  any amount that is included in the assessable income of the partnership or of the taxpayer of any year of income by virtue of a provision of this Act other than this Part the effect of which is to reverse a deduction covered by paragraph (a).

             (4)  The reference in paragraph (3)(b) to an amount that is included in the assessable income of the partnership or the taxpayer includes a reference to an amount:

                     (a)  that is taken by subsection 60(1A) of this Act to be so included for the asset for the purposes of subsection 60(1); or

                     (b)  that is treated as being deducted for depreciation of another asset under section 42-285 or 42-290 of the Income Tax Assessment Act 1997 .

8  Application

(1)        The amendments made by this Schedule apply to assets acquired after 7.30 pm, by legal time in the Australian Capital Territory, on 13 May 1997.

(2)        However, the amendments made by this Schedule do not apply to expenditure incurred before 1 July 1999 in respect of an asset (the deemed asset ) where:

                     (a)  the deemed asset is taken to be a separate asset from another asset (the underlying asset ) for the purposes of this Part under section 160P; and

                     (b)  the underlying asset is land or a building that was acquired by the taxpayer at or before 7.30 pm, by legal time in the Australian Capital Territory, on 13 May 1997; and

                     (c)  the deemed asset is acquired by the taxpayer after 7.30 pm, by legal time in the Australian Capital Territory, on 13 May 1997 but before 1 July 1999.



 

   

Income Tax Assessment Act 1936

1  Subsections 446(2) to (5)

Repeal the subsections, substitute:

             (2)  Despite anything in subsection (1), the passive income of a life assurance company of a statutory accounting period is calculated using the formula:

where:

adjusted passive income means the amount that, apart from this subsection, would be the passive income of the company of the statutory accounting period.

total assets means the average of the total assets of the company for the statutory accounting period.

untainted average calculated liabilities means so much of the total average calculated liabilities of the company for the statutory accounting period as is referable to life assurance policies that do not give rise to tainted services income of the company of any statutory accounting period.

             (3)  In subsection (2):

total average calculated liabilities has the same meaning as in Division 8 of Part III.

             (4)  Despite anything in subsection (1), the passive income of a general insurance company of a statutory accounting period is worked out using the formula:

where:

adjusted passive income means the amount that, apart from this subsection, would be the passive income of the company of the statutory accounting period.

net assets means the excess at the end of the statutory accounting period of the total assets of the company over the total liabilities of the company.

outstanding claims means the amount that the company would, at the end of the statutory accounting period, based on proper and reasonable estimates, need to set aside and invest in order to meet liabilities of the company that have arisen or will arise:

                     (a)  under general insurance policies (including reinsurance policies, but not including life assurance policies); and

                     (b)  in respect of events that occurred during or before the period.

solvency amount is the amount worked out under subsection (5).

tainted outstanding claims means so much of the outstanding claims of the company at the end of the statutory accounting period as is referable to general insurance policies that give rise to tainted services income of the company of any statutory accounting period.

total assets means the total assets of the company at the end of the statutory accounting period.

             (5)  In subsection (4):

solvency amount is the amount worked out using the formula:

where:

maximum event retention means the amount that, at the end of the statutory accounting period, the company has determined is the maximum that would be payable to the owners of policies as a result of the happening of any one event. The amount must be worked out on the basis of a reasonable and proper estimate.

minimum solvency means the greater of:

                     (a)  20% of the company’s premium income (within the meaning of the Insurance Act 1973 ) during the statutory accounting period; and

                     (b)  15% of the company’s outstanding claims as at the end of the statutory accounting period.

outstanding claims means the amount that the company would, at the end of the statutory accounting period, based on proper and reasonable estimates, need to set aside and invest in order to meet liabilities of the company that have arisen or will arise:

                     (a)  under general insurance policies (including reinsurance policies, but not including life assurance policies); and

                     (b)  in respect of events that occurred during or before the period.

tainted outstanding claims means so much of the outstanding claims of the company at the end of the statutory accounting period as is referable to general insurance policies that give rise to tainted services income of the company of any statutory accounting period.

2  Application

The amendments made by this Schedule apply in calculating passive income that is derived on or after 1 July 1997.



 

   

Income Tax Assessment Act 1936

1  Subsection 110(1)

Insert:

significant event , in relation to any of the insurance funds maintained by a life assurance company, means any happening or circumstance that causes an abnormal change in the amount of the company’s liabilities in respect of policies included in the fund concerned.

2  Subsection 112A(1)

Omit all the words after “formula”, substitute:

where:

average calculated liabilities (all resident policies) means the average calculated liabilities of the company for the year of income for policies of all categories (other than eligible non-resident policies) included in the fund.

average calculated liabilities (exempt policies) means the average calculated liabilities of the company for the year of income for exempt policies (other than eligible non-resident policies) included in the fund.

3  Subsection 112A(3)

Repeal the subsection, substitute:

             (3)  Subsection (2) does not apply in relation to a fund if less than one-third of the average calculated liabilities of the company for the year of income for policies of all categories (other than eligible non-resident policies) included in the fund relates to Australian policies.

4  Subsection 112C(2)

Omit all the words after “exempt from tax:”, substitute:

where:

average calculated liabilities (all policies) means the average calculated liabilities of the company for the year of income for policies of all categories that:

                     (a)  are included in the fund; and

                     (b)  were issued in the course of carrying on the PE business.

average calculated liabilities (eligible non-resident policies) means the average calculated liabilities of the company for the year of income for eligible non-resident policies that:

                     (a)  are included in the fund; and

                     (b)  were issued in the course of carrying on the PE business.

5  Subsection 114(1)

Omit all the words before paragraph (a), substitute:

                   If an actuarial valuation of liabilities of a life assurance company is made as at a particular time, the company’s calculated liabilities at that time are:

6  Subsection 114(2)

Repeal the subsection, substitute:

             (2)  If:

                     (a)  it is necessary to work out a life assurance company’s calculated liabilities as at a particular time (the relevant time ); and

                     (b)  no actuarial valuation of liabilities of the company as at the relevant time is made;

the calculated liabilities at that time are the amount worked out by using the formula:

where:

current value of assets means the value of all the company’s assets at the relevant time.

previous actuarial valuation of liabilities means the last actuarial valuation of liabilities of the company made before the relevant time.

previous value of assets means the value of all the company’s assets when the last actuarial valuation of liabilities of the company before the relevant time was made.

7  After section 114

Insert:

114A   Average calculated liabilities for category of policies

             (1)  The average calculated liabilities of a life assurance company for a category of policies for a year of income is worked out under this section.

             (2)  First, divide the year of income into periods as follows:

                     (a)  the first period starts at the start of the year of income;

                     (b)  each later period starts immediately after the last day of the previous period;

                     (c)  each period (except the last) ends immediately before the first day on which a significant event occurs in relation to the insurance fund in which policies of the category are included;

                     (d)  the last period ends at the end of the year of income.

             (3)  Second, the average calculated liabilities of the company for the category of policies for each period is the amount worked out by using the formula:

where:

calculated liabilities (end of period) means the calculated liabilities of the company for the category of policies at the end of the period.

calculated liabilities (start of period) means the calculated liabilities of the company for the category of policies:

                     (a)  if the period is the first period—at the start of the period; or

                     (b)  otherwise—on the day after the occurrence of the significant event that caused the immediately preceding period to end.

days in period means the number of days in the period.

days in year of income means the number of days in the year of income.

             (4)  Third, the average calculated liabilities of the company for the category of policies for the year of income is the sum of the amounts of the average calculated liabilities of the company for the category of policies for all the periods into which the year of income is divided.

114B   Total average calculated liabilities

                   The total average calculated liabilities of a life assurance company for a year of income is the sum of the average calculated liabilities of the company for each category of policies for the year of income.

8  Subsection 116CB(2)

Omit all the words after “formula:”, substitute:

where:

average calculated liabilities (all non-exempt resident policies) means the average calculated liabilities of the company for the year of income for policies of all categories (other than exempt policies or eligible non-resident policies) included in the fund in which the asset was included immediately before disposal.

average calculated liabilities (category of policies) means the average calculated liabilities of the company for the year of income for policies of the category concerned that are included in the fund in which the asset was included immediately before disposal.

core amount means the core amount.

9  Subsection 116CE(5)

Omit all the words after “formula:”, substitute:

where:

average calculated liabilities (all non-exempt resident policies) means the average calculated liabilities of the company for the year of income for policies of all categories (other than exempt policies or eligible non-resident policies) included in the fund.

average calculated liabilities (category of policies) means the average calculated liabilities of the company for the year of income for policies of the category concerned that are included in the fund.

income means the amount of the assessable income to be allocated.

10  Application

(1)        The amendments made by this Schedule apply to a life assurance company in respect of the first year of income starting on or after 29 April 1997 and all later years of income.

(2)        The amendments made by this Schedule also apply to a life assurance company in respect of the year of income that immediately preceded the first year of income referred to in subsection (1) if, and only if:

                     (a)  that immediately preceding year of income ended on or after 29 April 1997; and

                     (b)  a significant event in relation to any of the insurance funds maintained by the company occurred during the part of that year of income occurring on and after that date.



 

   

Income Tax Assessment Act 1936

1  At the end of section 61

Add:

             (2)  This section has effect subject to section 61A.

2  After section 61

Insert:

61A  Tax exempt entities that become taxable

Entities to which section applies

             (1)  If:

                     (a)  at a particular time, all of the income of a taxpayer is wholly exempt from income tax; and

                     (b)  immediately after that time, the taxpayer’s income becomes to any extent assessable income;

then:

                     (c)  the taxpayer is a transition taxpayer ; and

                     (d)  the time when the taxpayer’s income becomes to that extent assessable is the transition time ; and

                     (e)  the year of income in which the transition time occurs is the transition year for the taxpayer.

Deduction for depreciation

             (2)  A deduction allowable to the transition taxpayer for any period after the transition time for depreciation under this Subdivision in respect of a unit of property that was owned by the transition taxpayer at the transition time is to be worked out in accordance with subsections (3) to (9).

Ownership of unit

             (3)  If the unit was acquired by the transition taxpayer from an exempt government entity:

                     (a)  assume that the transition taxpayer acquired the unit at the time when it was acquired or constructed by the entity; or

                     (b)  where the unit had, before its acquisition by the transition taxpayer, been successively owned by 2 or more exempt government entities—assume that the transition taxpayer acquired the unit at the time when it was acquired or constructed by the first of those entities that owned the unit.

Cost of the unit

             (4)  If the unit was acquired by the transition taxpayer from an exempt government entity, assume that the cost of the unit to the transition taxpayer is:

                     (a)  subject to paragraph (b)—the amount that was the cost of the unit to the other entity; or

                     (b)  where the unit had, before its acquisition by the transition taxpayer, been successively owned by 2 or more exempt government entities—the amount that was the cost of the unit to the first of those entities that owned the unit.

Effective life of unit

             (5)  Assume that the effective life of the unit is the period that would have been calculated to be its effective life at the time:

                     (a)  if subsection (3) does not apply—when the unit was acquired or constructed by the transition taxpayer; or

                     (b)  if subsection (3) applies—when the unit is assumed under that subsection to have been acquired by the transition taxpayer.

Elections under section 54A

             (6)  For the purpose of calculating the assumed effective life of the unit under subsection (5), if the transition taxpayer could have made an election under subsection 54A(1) at a particular time during the period for which the transition taxpayer owned, or is to be assumed to have owned, the unit, assume that the transition taxpayer made the election at that time.

Use of unit for producing assessable income

             (7)  Assume that the unit had, at all times during the period beginning when it was acquired or constructed, or is assumed to have been acquired, by the transition taxpayer and ending immediately before the transition time, been used wholly for the purpose of producing assessable income by the transition taxpayer, and assume that deductions for depreciation in respect of the unit had been allowed to the transition taxpayer during that period.

Method of depreciation

             (8)  Assume that the method of depreciation selected by the transition taxpayer in relation to the unit in:

                     (a)  the transition year; or

                     (b)  if the transition taxpayer does not claim depreciation for the transition year—the first year of income after the transition year in which the transition taxpayer claims depreciation;

was also used in each year of income before the transition year by the transition taxpayer.

Application of other sections in calculating depreciation rates

             (9)  In calculating the rate of depreciation in relation to the unit in each year of income before the transition year:

                     (a)  if section 57AG of this Act as in force at any time before its repeal had applied in respect of that year of income—that section is to be taken into account; and

                     (b)  if section 57AL of this Act as in force at any time before its repeal had applied in respect of that year of income—that section is to be disregarded.

Balancing adjustments on disposal

           (10)  If the transition taxpayer disposes of a unit of property that was owned by the transition taxpayer at the transition time, subsections (11) and (12) apply but subsections 59(1) and (2) do not apply.

Including an amount in assessable income

           (11)  If the consideration receivable in respect of the disposal exceeds the unit’s depreciated value, the transition taxpayer’s assessable income is to include the lesser of:

                     (a)  the sum of the amounts that have been allowed or are allowable as deductions for depreciation of the unit; and

                     (b)  the amount by which that consideration exceeds the unit’s depreciated value.

Deducting an amount

           (12)  If the consideration receivable in respect of the disposal is less than the unit’s notional depreciated value, an amount worked out by using the following formula is an allowable deduction to the transition taxpayer:

where:

actual deductions means the sum of the amounts that have been allowed or are allowable to the transition taxpayer as deductions for depreciation of the unit.

difference means the difference between the consideration receivable in respect of the disposal of the unit and the unit’s notional depreciated value.

notional deductions means the sum of:

                     (a)  the amounts in respect of which deductions for depreciation are assumed under subsection (7) to have been allowed to the transition taxpayer in respect of the unit; and

Note:       Subsections (3) to (6), (8) and (9) have effect for the purpose of determining the amounts referred to in paragraph (a) (for example, section 57AG as previously in force at any time is to be taken into account in calculating the rate of depreciation at that time).

                     (b)  if there was any period after the transition time in which the unit was used, or installed ready for use, but was not used wholly for the purpose of producing assessable income—the further amounts in respect of which deductions for depreciation could have been allowed to the transition taxpayer in respect of the unit if it had been used wholly for the purpose of producing assessable income during that period.

Note:          If neither subsection (11) nor (12) applies in respect of the unit, no amount is to be included in the transition taxpayer’s assessable income, and no deduction is allowable to the transition taxpayer, as a result of the disposal.

Definitions

           (13)  In this section:

consideration receivable in respect of the disposal of a unit of property has the same meaning as in section 59.

depreciated value of a unit of property is:

                     (a)  if the unit was acquired by the transition taxpayer from a person other than an exempt government entity or was constructed by the transition taxpayer—its cost to the transition taxpayer; or

                     (b)  if the unit was acquired by the transition taxpayer from an exempt government entity—the amount assumed under subsection (4) to be its cost to the transition taxpayer;

less the sum of the amounts in respect of which deductions for depreciation have been allowed or are allowable to the transition taxpayer in respect of the unit.

exempt government entity means:

                     (a)  the Commonwealth, a State or a Territory; or

                     (b)  an STB, within the meaning of Division 1AB, that is exempt from tax under that Division; or

                     (c)  any municipal corporation or other local governing body, or any public authority, to which paragraph 23(d) applies.

method of depreciation means the way of working out the depreciation allowable under this Act in respect of a unit of property set out in paragraph 56(1)(a) or (b).

notional depreciated value of a unit of property is:

                     (a)  if the unit was acquired by the transition taxpayer from a person other than an exempt government entity or was constructed by the transition taxpayer—its cost to the transition taxpayer; or

                     (b)  if the unit was acquired by the transition taxpayer from an exempt government entity—the amount assumed under subsection (4) to be its cost to the transition taxpayer;

less the sum of:

                     (c)  the amounts in respect of which deductions for depreciation are assumed under subsection (7) to have been allowed to the transition taxpayer in respect of the unit; and

Note:       Subsections (3) to (6), (8) and (9) have effect for the purpose of determining the amounts referred to in paragraph (c) (for example, section 57AG as previously in force at any time is to be taken into account in calculating the rate of depreciation at that time).

                     (d)  the amounts in respect of which deductions for depreciation have been allowed or are allowable to the transition taxpayer in respect of the unit; and

                     (e)  if there was any period after the transition time in which the unit was used, or installed ready for use, but was not used wholly for the purpose of producing assessable income—the further amounts in respect of which deductions for depreciation could have been allowed to the transition taxpayer in respect of the unit if it had been used wholly for the purpose of producing assessable income during that period.

3  Application

The amendments made by this Schedule are taken to have applied where the transition time was earlier than 3 July 1995 but not earlier than the start of the year of income in which 1 July 1988 occurred.

4  Saving

Section 61A of the Income Tax Assessment Act 1936 does not apply to a transition taxpayer referred to in that section to the extent (if any) that, under a private ruling made before 14 May 1997 under Part IVAA of the Taxation Administration Act 1953 , the Commissioner of Taxation has ruled that the Income Tax Assessment Act 1936 applies to the transition taxpayer in a different way from the way in which it would apply under that section.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(207/97)