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TAXATION LAWS AMENDMENT BILL (NO. 4) 1993

Order of the day read for the further consideration of the bill in

committee of the whole.

In the committee

Consideration resumed of postponed clause 2--

Document: Senator Watson, by leave, tabled the following document:

Taxation Laws Amendment Bill (No. 4) 1993--Government amendments--Copy

of letter from the Clerk of the Senate to Senator Watson, dated 23

March 1994.

Debate resumed.

On the motion of the Minister for Industry, Technology and Regional

Development (Senator Cook) the following request for an amendment was

agreed to:

That the House of Representatives be requested to make the following

amendment:

Clause 2, page 2, at end of clause, add the following subclauses:

"(5) Subsection 70B(1) is taken to have commenced immediately after

the commencement of section 16 of the Taxation Laws Amendment

(Superannuation) Act 1989.

"(6) Subsection 70C(1) is taken to have commenced immediately after

the commencement of section 11 of the Taxation Laws Amendment Act (No.

5) 1989.

"(7) Subsection 70G(1) is taken to have commenced immediately after

section 12 of the Taxation Laws Amendment Act (No. 5) 1989.

"(8) Subsection 70Q(1) is taken to have commenced immediately after

the commencement of section 24 of the Taxation Laws Amendment

(Superannuation) Act 1989.

"(9) Subsections 70B(2), 70C(2) and 70Q(2) are taken to have commenced

immediately after the commencement of the Taxation Laws Amendment

(Foreign Income) Act 1990.

"(10) Section 94 is taken to have commenced immediately after the

commencement of section 17 of the Taxation Laws Amendment

(Superannuation) Act 1989.".

Clause 2 agreed to, subject to a request for an amendment.

Postponed clause 48--

On the motion of Senator Cook the following request for an amendment was

agreed to:

That the House of Representatives be requested to make the following

amendment:

Clause 48, page 19, lines 11 to 15, omit the clause, substitute the

following clause:

Application of amendments

"48.(1) The amendments made by sections 42, 46 and 47 apply for the

1994-95 year of income and all later years of income.

"(2) The amendments made by sections 43, 44 and 45 apply for the

1995-96 year of income and all later years of income.".

Clause 48 agreed to, subject to a request for an amendment.

On the motion of Senator Cook the following requests for amendments,

taken together by leave, were agreed to:

That the House of Representatives be requested to make the following

amendments:

After Division 10, page 33, insert the following Division:

"Division 10A--Life assurance companies and registered

organizations

Object of Division

"70A. The object of this Division is to clarify the deductions

allowable to life assurance companies and registered organizations.

Deductions to be allowable for expenditure incurred in gaining

superannuation premiums

"70B.(1) Section 111A of the Principal Act is amended by adding at the

end the following subsection:

"(1A) For the purposes of the application of this section to

assessments in respect of income of the year of income in which 1 July

1988 occurred and to assessments in respect of income of any later

year of income that is derived before the end of the 1989-90 year of

income, the reference in subsection (1) to superannuation premiums

does not include a reference to premiums that are:

(a) received in respect of a superannuation policy issued by a life

assurance company in the course of a business carried on by it

at or through a permanent establishment of the company in a

foreign country; or

(b) exempt from tax under paragraph 23(r).'.

"(2) Section 111A of the Principal Act is amended:

(a) by omitting subsection (2);

(b) by adding at the end the following subsection:

"(3) For the purposes of the application of this section to

assessments in respect of income of the 1990-91 year of income or to

assessments in respect of income of any later year of income, the

reference in subsection (1) to superannuation premiums does not

include a reference to premiums that are:

(a) received in respect of eligible non-resident policies; or

(b) exempt from tax under section 23AH; or

(c) exempt from tax under paragraph 23(r).'.

"(3) Section 111A of the Principal Act is amended by adding at the end

the following subsection:

"(4) This section does not apply, and is taken not to have applied, to

superannuation premiums received on or after 1 January 1994.'.

Deductions to be allowable for expenditure incurred in gaining the

investment component of certain premiums

"70C.(1) Section 111AA of the Principal Act is amended by inserting

after subsection (1) the following subsection:

"(1A) The reference in subsection (1) to premiums received in respect

of life assurance policies does not include a reference to premiums

that are received on or after 1 January 1990 and before the end of the

1989-90 year of income and:

(a) are so received in respect of a life assurance policy issued by

a life assurance company in the course of a business carried on

by it at or through a permanent establishment of the company in

a foreign country; or

(b) are exempt from tax under paragraph 23(r).'.

"(2) Section 111AA of the Principal Act is amended:

(a) by omitting from paragraph (1)(c) "amounts; or' and substituting

"amounts.';

(b) by omitting paragraphs (1)(d) and (e);

(c) by inserting after subsection (1A) the following subsection:

"(1B) For the purposes of the application of this section to

assessments in respect of income of the 1990-91 year of income or to

assessments in respect of income of later years of income, the

reference in subsection (1) to premiums received in respect of life

assurance policies does not include a reference to premiums that

are:

(a) received in respect of eligible non-resident policies; or

(b) exempt from tax under section 23AH; or

(c) exempt from tax under paragraph 23(r).'.

"(3) Section 111AA of the Principal Act is amended by adding at the

end the following subsection:

"(4) This section does not apply, and is taken not to have applied, to

premiums received on or after 1 January 1994.'.

"(4) If, in relation to a particular life assurance company:

(a) as a result of an amendment made by this section, the premiums

to which section 111AA of the Principal Act as amended by this

section applies in respect of a year of income differ from the

premiums to which that section would have applied in respect of

that year of income if the amendment had not been made; and

(b) the company obtained a certificate under section 111AA of the

Principal Act in relation to that year of income;

section 111AA of the Principal Act as amended by this section is taken

not to have applied to premiums received by the company in that year of

income unless:

(c) after the commencement of this subsection the company furnishes

an amended return in respect of that year of income; and

(d) after that commencement but before the amended return is

furnished (or within such further period as the Commissioner

allows) the company obtains a further certificate under section

111AA of the Principal Act as amended by this section with

respect to the operation of that section in relation to that

year of income.

Repeal of sections 111A and 111AA

"70D. Sections 111A and 111AA of the Principal Act are repealed.

Insertion of new sections

"70E. Before section 111B of the Principal Act the following sections

are inserted:

Reinsurance recoveries and refunds of premiums not assessable income

"111AB.(1) If:

(a) a life assurance company has entered into a contract of

reinsurance in respect of the whole or any part of a life

assurance policy; and

(b) a premium paid or payable by the company under the contract of

reinsurance is not an allowable deduction to the company because

of paragraph 112BA(1)(c);

the company's assessable income does not include:

(c) any amount received or recovered by it under the contract of

reinsurance in respect of its liability under the life assurance

policy, or the part of that policy, that was reinsured; or

(d) any amount received or recovered by it that is a refund, or in

the nature of a refund, of the premium.

"(2) This section applies to assessments in respect of income of the

year of income in which 1 July 1988 occurred and to assessments in

respect of income of all later years of income.

Deductions to be allowable for expenditure incurred in obtaining

superannuation premiums

"111AC.(1) Subject to this section, the expenses mentioned in

subsection (2) that are incurred by a life assurance company in the

year of income in connection with the obtaining of superannuation

premiums are allowable deductions.

"(2) The expenses to which subsection (1) applies are:

(a) salaries, wages, bonuses, commissions, allowances, or similar

benefits, in respect of the sale, renewal or continuation of

superannuation policies; and

(b) expenditure in recruiting or training people in the selling of

superannuation policies; and

(c) salaries, wages, allowances or similar benefits paid or payable

to employees of the company to the extent to which the benefits

relate to the provision of administrative, technical or other

assistance or support to people who sell superannuation

policies; and

(d) expenditure in developing, or engaging in research in connection

with, superannuation policies; and

(e) any other losses or outgoings to the extent to which they are

incurred in preparing, selling or issuing superannuation

policies or collecting superannuation premiums.

"(3) If:

(a) a provision of this Act (other than this section or section 51

or 111AD) allows a deduction from a taxpayer's assessable income

in respect of a loss, outgoing or expenditure; and

(b) the provision extends to a taxpayer that is a life assurance

company;

the provision has effect in determining the deductions allowable to a

life assurance company as if any reference in the provision to

assessable income included a reference to superannuation premiums.

"(4) Expenses incurred by a life assurance company that are of a

capital nature (other than expenses in respect of which a deduction is

allowable because of subsection (3)) are not allowable deductions

under this section.

"(5) Expenses incurred by a life assurance company in the general

management of the business of the company within the meaning of

section 113 or 113A are not allowable deductions under this section.

"(6) If, assuming that:

(a) the Taxation Laws Amendment Act (No. 4) 1993 had not been

enacted; and

(b) this Act provided that a life assurance company's assessable

income included the superannuation premiums received by the

company;

a deduction would not have been allowed to a life assurance company in

respect of a loss, outgoing or expenditure or a part of a loss, outgoing

or expenditure, then, a deduction is not allowable to the company in

respect of the loss, outgoing or expenditure or the part of the loss,

outgoing or expenditure, as the case may be, under this section or under

another provision of this Act as it has effect because of this section.

"(7) A reference in this section to a deduction in respect of a loss,

outgoing or expenditure includes a reference to a deduction based on,

or calculated by reference to, all or a portion of the loss, outgoing

or expenditure.

"(8) In this section:

"superannuation premiums" does not include:

(a) premiums received in respect of eligible non-resident policies;

or

(b) premiums exempt from tax under section 23AH; or

(c) premiums exempt from tax under paragraph 23(r).

"(9) This section applies to expenses incurred, or to deductions in

respect of a loss, outgoing or expenditure incurred, on or after 1

January 1994.

Deductions to be allowable for expenditure incurred in obtaining the

investment component of certain premiums

"111AD.(1) In this section:

"relevant life assurance premiums" means premiums received in respect of

life assurance policies other than:

(a) superannuation premiums; or

(b) premiums received in respect of exempt policies; or

(c) specified roll-over amounts; or

(d) premiums received in respect of eligible non-resident policies;

or

(e) premiums exempt from tax under section 23AH; or

(f) premiums exempt from tax under paragraph 23(r);

"relevant life assurance policy" means a life assurance policy in

respect of which premiums received are relevant life assurance premiums.

"(2) Subject to this section, the expenses mentioned in subsection (3)

that are incurred by a life assurance company in the year of income in

connection with the obtaining of relevant life assurance premiums, to

the extent to which the expenses relate to the investment component of

those premiums, are allowable deductions.

"(3) The expenses to which subsection (2) applies are:

(a) salaries, wages, bonuses, commissions, allowances, or similar

benefits, in respect of the sale, renewal or continuation of

relevant life assurance policies; and

(b) expenditure in recruiting or training people in the selling of

relevant life assurance policies; and

(c) salaries, wages, allowances or similar benefits paid or payable

to employees of the company to the extent to which the benefits

relate to the provision of administrative, technical or other

assistance or support to people who sell relevant life assurance

policies; and

(d) expenditure in developing, or engaging in research in connection

with, relevant life assurance policies; and

(e) any other losses or outgoings to the extent to which they are

incurred in preparing, selling or issuing relevant life

assurance policies or collecting relevant life assurance

premiums.

"(4) If:

(a) a provision of this Act (other than this section or section 51

or 111AC) allows a deduction from a taxpayer's assessable income

in respect of a loss, outgoing or expenditure; and

(b) the provision extends to a taxpayer that is a life assurance

company;

the provision has effect in determining the deductions allowable to a

life assurance company as if any reference in the provision to

assessable income included a reference to the investment component of

relevant life assurance premiums.

"(5) Expenses incurred by a life assurance company that are of a

capital nature (other than expenses in respect of which a deduction is

allowable because of subsection (4)) are not allowable deductions

under this section.

"(6) Expenses incurred by a life assurance company in the general

management of the business of the company within the meaning of

section 113 or 113A are not allowable deductions under this section.

"(7) If, assuming that:

(a) the Taxation Laws Amendment Act (No. 4) 1993 had not been

enacted; and

(b) this Act provided that a life assurance company's assessable

income included the investment component of relevant life

assurance premiums received by the company;

a deduction would not have been allowed to a life assurance company in

respect of a loss, outgoing or expenditure or a part of a loss, outgoing

or expenditure, then, a deduction is not allowable to the company in

respect of the loss, outgoing or expenditure or the part of the loss,

outgoing or expenditure, as the case may be, under this section or under

another provision of this Act as it has effect because of this section.

"(8) This section does not apply to premiums derived by a life

assurance company in a year of income unless the company obtains a

certificate by an authorised actuary, in the approved form, with

respect to the operation of this section in relation to that year of

income, before the date of lodgment of the return of income of the

company of the year of income or within such further time as the

Commissioner allows.

"(9) A reference in this section to a deduction in respect of a loss,

outgoing or expenditure includes a reference to a deduction based on,

or calculated by reference to, all or a portion of the loss, outgoing

or expenditure.

"(10) This section applies to expenses incurred, or to deductions in

respect of a loss, outgoing or expenditure incurred, on or after 1

January 1994.'.

Reduction in deductions that are not exclusively related to producing

assessable income

"70F.(1) Section 111C of the Principal Act is amended:

(a) by omitting from paragraph (1)(a) "51 or 113' and substituting

"51, 111AC (other than subsection (3)), 111AD (other than

subsection (4)) or 113';

(b) by omitting from subsection (2) all the words from and including

"where:' to the end of the subsection;

(c) by adding at the end the following subsection:

"(4) In this section:

"Deduction" means the amount of the deduction concerned;

"Assessable income", in relation to a life assurance company

includes:

(a) superannuation premiums to which section 111AC applies that

are received by the company; and

(b) the investment component of relevant life assurance premiums

to which section 111AD applies that are received by the

company;

"Total income" means the total of all the amounts that would be

assessable income of the company apart from any exempting

provision.'.

"(2) The amendment made by paragraph (1)(a) applies in apportioning

deductions in respect of a loss, outgoing or expenditure (including a

deduction based on, or calculated by reference to, all or a portion of

a loss, outgoing or expenditure) incurred on or after 1 January 1994.

"(3) The amendments made by paragraphs (1)(b) and (c) apply in respect

of premiums received on or after 1 January 1994.

Deductions not allowable for expenditure incurred in gaining certain

premium income

"70G.(1) Section 112 of the Principal Act is amended by inserting in

subparagraph (1)(a)(i) "to which section 111A applies" after

"premiums".

"(2) The amendment made by subsection (1) applies to expenditure

incurred on or after 1 January 1990.

Repeal of section and substitution of new section

"70H. Section 112 of the Principal Act is repealed and the following

section is substituted:

Deductions not allowable for expenditure incurred in gaining certain

premium income

"112.(1) A deduction is not allowable to a life assurance company in

respect of expenditure incurred exclusively in gaining:

(a) premiums that are excluded from assessable income by section 111

other than:

(i) superannuation premiums to which section 111AC applies; or

(ii) the investment component of relevant life assurance

premiums to which section 111AD applies; or

(b) the risk component of any such relevant life assurance premiums.

"(2) This section applies to expenditure incurred on or after 1

January 1994.'.

Insertion of new section

"70J. After section 112A of the Principal Act the following section is

inserted:

Deductions not allowable for benefits or reinsurance premiums

"112BA.(1) Despite any other provision of this Act, a deduction is not

allowable to a life assurance company in respect of:

(a) a benefit paid or payable under a life assurance policy; or

(b) the inclusion of an amount in the company's reserves for the

purpose of meeting any future liability (including a contingent

liability) of the company to pay benefits to which paragraph (a)

would apply; or

(c) a premium paid or payable by the company in respect of the

reinsurance of the whole or any part of a life assurance policy;

or

(d) an amount paid or payable to, or to an associate of, the holder

of a life assurance policy in settlement of a dispute as to the

liability of the company under the policy.

"(2) A reference in subsection (1) to a benefit paid or payable under

a life assurance policy:

(a) includes a reference to an amount paid or payable:

(i) in respect of a claim under the policy; or

(ii) as consideration for, in connection with, or as a

consequence of, the surrender, cancellation, forfeiture,

termination or disposal of the policy or any rights under

the policy; or

(iii) in respect of a bonus under the policy; or

(iv) in respect of an annuity under the policy; or

(v) that is a refund, or is in the nature of a refund, of a

premium that, under section 111, is not included in the

company's assessable income; but

(b) does not include any interest payable under section 57 of the

Insurance Contracts Act 1984.

"(3) To remove any doubt, it is declared that a supplementary benefit

(known as a rider benefit) that is paid or payable in respect of a

non-life assurance risk (including an accident and disability risk, a

sickness risk and a trauma risk) and in respect of which the premiums

received by the life assurance company that issued the relevant life

assurance policy are included in the company's assessable income is

not a benefit paid or payable under a life assurance policy for the

purposes of subsection (1).

"(4) In this section:

"associate" has the same meaning as in subsection 26AAB(14).

"(5) This section applies to assessments in respect of income of the

year of income in which 1 July 1988 occurred and to assessments in

respect of income of all later years of income.'.

Expenses of general management relating to producing assessable income

"70K.(1) Section 113 of the Principal Act is amended by adding at the

end the following subsection:

"(5) In this section:

"assessable income", in relation to a life insurance company, includes:

(a) superannuation premiums to which section 111AC applies that are

received by the company; and

(b) the investment component of relevant life assurance premiums to

which section 111AD applies that are received by the company.'.

"(2) The amendment made by subsection (1) applies to expenditure

incurred on or after 1 January 1994.

Insertion of new section

"70L. After section 113 of the Principal Act the following section is

inserted:

Expenses of general management incurred in obtaining certain premiums

"113A.(1) If:

(a) expenditure is incurred by a life assurance company in the year

of income in the general management of the company's business;

and

(b) the expenditure is not an allowable deduction under section 113

because of paragraph 113(3)(b);

the expenditure is an allowable deduction to the extent to which it was

incurred in gaining or producing:

(c) superannuation premiums to which section 111AC applies; or

(d) the investment component of relevant life insurance premiums to

which section 111AD applies.

"(2) If, assuming that:

(a) the Taxation Laws Amendment Act (No. 4) 1993 had not been

enacted; and

(b) this Act provided that a life assurance company's assessable

income included the superannuation premiums and the investment

component of relevant life assurance premiums received by the

company;

a deduction would not have been allowed to a life assurance company in

respect of a loss, outgoing or expenditure or a part of a loss, outgoing

or expenditure, then, a deduction is not allowable to the company in

respect of the loss, outgoing or expenditure or the part of the loss,

outgoing or expenditure, as the case may be, under this section.

"(3) For the purposes of this section, expenditure of a capital nature

is taken not to be expenditure incurred in the general management of

the business of the company.

"(4) A reference in this section to a deduction in respect of a loss,

outgoing or expenditure includes a reference to a deduction based on,

or calculated by reference to, all or a portion of the loss, outgoing

or expenditure.

"(5) In this section:

"relevant life assurance premiums" means premiums received in respect of

life assurance policies other than:

(a) superannuation premiums; or

(b) premiums received in respect of exempt policies; or

(c) specified roll-over amounts; or

(d) premiums received in respect of eligible non-resident policies;

or

(e) premiums exempt from tax under section 23AH; or

(f) premiums exempt from tax under paragraph 23(r).

"(6) This section applies to expenses incurred, or to deductions in

respect of a loss, outgoing or expenditure incurred, on or after 1

January 1994.'.

Apportionment of current year deductions between classes

"70M.(1) Section 116CF of the Principal Act is amended:

(a) by omitting from subsections (4), (5) and (6) "subsection

111A(1)' and substituting "section 111AC'; and

(b) by omitting from subsections (4), (6) and (7) "section 111AA'

and substituting "section 111AD'.

"(2) Subsections 116CF(4), (5), (6) and (7) of the Principal Act as

amended by subsection (1) of this section apply in relation to

premiums received by a life assurance company on or after 1 January

1994.

Insertion of new section

"70N. After section 116GD of the Principal Act the following section

is inserted:

Reinsurance recoveries and refunds of premiums not assessable income

"116GE.(1) If:

(a) a registered organization has entered into a contract of

reinsurance in respect of the whole or any part of a life

assurance policy; and

(b) a premium paid or payable by the organization under the contract

of reinsurance is not an allowable deduction to the organization

because of paragraph 116HAD(1)(c);

the organization's assessable income does not include:

(c) any amount received or recovered by it under the contract of

reinsurance in respect of its liability under the life assurance

policy, or the part of that policy, that was reinsured; or

(d) any amount received or recovered by it that is a refund, or in

the nature of a refund, of the premium.

"(2) This section applies to assessments in respect of income of the

year of income in which 1 July 1988 occurred and to assessments in

respect of income of all later years of income.'.

Deductions allowable from assessable income of registered organizations

"70P.(1) Section 116H of the Principal Act is amended:

(a) by inserting after paragraph (a) the following paragraph:

"(aa) any deductions that, apart from this section, would be

allowable to the organization in relation to the year of

income under section 116HAB or 116HAC; and';

(b) by adding at the end the following subsection:

"(2) In paragraph (1)(b):

"assessable income", in relation to a registered organization:

(a) includes superannuation premiums to which section 116HAB

applies that are received on or after 1 January 1994 by the

organization;and

(b) includes the investment component of relevant life assurance

premiums to which section 116HAC applies that are received

on or after 1 July 1994 by the organization.'.

"(2) The amendment made by paragraph (1)(a) applies to deductions in

respect of a loss, outgoing or expenditure (including a deduction

based on, or calculated by reference to, all or a portion of a loss,

outgoing or expenditure) incurred:

(a) in respect of deductions under section 116HAB--on or after 1

January 1994; or

(b) in respect of deductions under section 116HAC--on or after 1

July 1994.

Deductions to be allowable for expenditure incurred in gaining

superannuation premiums

"70Q.(1) Section 116HA of the Principal Act is amended by adding at

the end the following subsection:

"(2) For the purposes of the application of this section to

assessments in respect of income of the year of income in which 1 July

1988 occurred and to assessments in respect of income of any later

year of income that is derived before the end of the 1989-90 year of

income, if:

(a) a registered organization receives premiums (the "foreign

premiums") in respect of a superannuation policy issued by it in

the course of a business carried on by it at or through a

permanent establishment of the organization in a foreign

country; and

(b) the organization's assessable income does not include the income

from the investment of the foreign premiums;

then the reference in subsection (1) to superannuation premiums does not

include a reference to the foreign premiums.'.

"(2) Section 116HA of the Principal Act is amended by adding at the

end the following subsection:

"(3) For the purposes of the application of this section to

assessments in respect of income of the 1990-91 year of income or to

assessmentsin respect of income of any later year of income, the

reference in subsection (1) to superannuation premiums does not

include a reference to premiums that are exempt from tax under section

23AH.'.

"(3) Section 116HA of the Principal Act is amended by adding at the

end the following subsection:

"(4) This section does not apply to premiums received on or after 1

January 1994.'.

Repeal of sections 116HA and 116HAA

"70R. Sections 116HA and 116HAA of the Principal Act are repealed.

Insertion of new sections

"70S. Before section 116HB of the Principal Act the following sections

are inserted:

Deductions to be allowable for expenditure incurred in obtaining

superannuation premiums

"116HAB.(1) Subject to this section, the expenses mentioned in

subsection (2) that are incurred by a registered organization in the

year of income in connection with the obtaining of superannuation

premiums are allowable deductions.

"(2) The expenses to which subsection (1) applies are:

(a) salaries, wages, bonuses, commissions, allowances, or similar

benefits, in respect of the sale, renewal or continuation of

superannuation policies; and

(b) expenditure in recruiting or training people in the selling of

superannuation policies; and

(c) salaries, wages, allowances or similar benefits paid or payable

to employees of the organization to the extent to which the

benefits relate to the provision of administrative, technical or

other assistance or support to people who sell superannuation

policies; and

(d) expenditure in developing, or engaging in research in connection

with, superannuation policies; and

(e) any other losses or outgoings to the extent to which they are

incurred in preparing, selling or issuing superannuation

policies or collecting superannuation premiums; and

(f) expenses in the general management of the organization's

business to the extent to which the expenses are incurred in

gaining or producing superannuation premiums.

"(3) If:

(a) a provision of this Act (other than this section or section 51,

116H or 116HAC) allows a deduction from a taxpayer's assessable

income in respect of a loss, outgoing or expenditure; and

(b) the provision extends to a taxpayer that is a registered

organization;

the provision has effect in determining the deductions allowable to a

registered organization as if any reference in the provision to

assessable income included a reference to superannuation premiums.

"(4) Expenses incurred by a registered organization (other than

expenses in respect of which a deduction is allowable because of

subsection (3)) that are of a capital nature are not allowable

deductions under this section.

"(5) If, assuming that:

(a) the Taxation Laws Amendment Act (No. 4) 1993 had not been

enacted; and

(b) this Act provided that a registered organization's assessable

income included the superannuation premiums received by the

organization;

a deduction would not have been allowed to a registered organization in

respect of a loss, outgoing or expenditure or a part of a loss, outgoing

or expenditure, then, a deduction is not allowable to the organization

in respect of the loss, outgoing or expenditure or the part of the loss,

outgoing or expenditure, as the case may be, under this section or under

another provision of this Act as it has effect because of this section.

"(6) A reference in this section to a deduction in respect of a loss,

outgoing or expenditure includes a reference to a deduction based on,

or calculated by reference to, all or a portion of the loss, outgoing

or expenditure.

"(7) In this section:

"superannuation premiums" do not include premiums that are exempt from

tax under section 23AH.

"(8) This section applies to expenses incurred, or to deductions in

respect of a loss, outgoing or expenditure incurred, on or after 1

January 1994.

Deductions to be allowable for expenditure incurred in obtaining the

investment component of certain premiums

"116HAC.(1) In this section:

"authorised actuary", in relation to a registered organization, means a

Fellow or an Accredited Member of the Institute of Actuaries of

Australia;

"relevant life assurance premiums" means premiums received in respect of

life assurance policies other than:

(a) superannuation premiums; or

(b) premiums received in respect of eligible policies; or

(c) specified roll-over amounts; or

(d) premiums exempt from tax under section 23AH;

"relevant life assurance policy" means a life assurance policy in

respect of which premiums received are relevant life assurance premiums.

"(2) Subject to this section, the expenses mentioned in subsection (3)

incurred by a registered organization in the year of income in

connection with the obtaining of relevant life assurance premiums, to

the extent to which the expenses relate to the investment component of

those premiums, are allowable deductions.

"(3) The expenses to which subsection (2) applies are:

(a) salaries, wages, bonuses, commissions, allowances, or similar

benefits, in respect of the sale, renewal or continuation of

relevant life assurance policies; and

(b) expenditure in recruiting or training people in the selling of

relevant life assurance policies; and

(c) salaries, wages, allowances or similar benefits paid or payable

to employees of the organization to the extent to which the

benefits relate to the provision of administrative, technical or

other assistance or support to people who sell relevant life

assurance policies; and

(d) expenditure in developing, or engaging in research in connection

with, relevant life assurance policies; and

(e) any other losses or outgoings to the extent to which they are

incurred in preparing, selling or issuing relevant life

assurance policies or collecting relevant life assurance

premiums; and

(f) expenses in the general management of the organization's

business to the extent to which the expenses are incurred in

gaining or producing relevant life assurance premiums.

"(4) If:

(a) a provision of this Act (other than this section or section 51,

116H or 116HAB) allows a deduction from a taxpayer's assessable

income in respect of a loss, outgoing or expenditure; and

(b) the provision extends to a taxpayer that is a registered

organization;

the provision has effect in determining the deductions allowable to a

registered organization as if any reference in the provision to

assessable income included a reference to the investment component of

relevant life assurance premiums.

"(5) Expenses incurred by a registered organization (other than

expenses in respect of which a deduction is allowable because of

subsection (4)) that are of a capital nature are not allowable

deductions under this section.

"(6) If, assuming that:

(a) the Taxation Laws Amendment Act (No. 4) 1993 had not been

enacted; and

(b) this Act provided that a registered organization's assessable

income included the investment component of relevant life

assurance premiums received by the organization;

a deduction would not have been allowed to a registered organization in

respect of a loss, outgoing or expenditure or a part of a loss, outgoing

or expenditure, then, a deduction is not allowable to the organization

in respect of the loss, outgoing or expenditure or the part of the loss,

outgoing or expenditure, as the case may be, under this section or under

another provision of this Act as it has effect because of this section.

"(7) This section does not apply to premiums derived by a registered

organization in a year of income unless the organization obtains a

certificate by an authorised actuary, in the approved form, with

respect to the operation of this section, before the date of lodgment

of the return of income of the organization of the year of income or

within such further time as the Commissioner allows.

"(8) A reference in this section to a deduction in respect of a loss,

outgoing or expenditure includes a reference to a deduction based on,

or calculated by reference to, all or a portion of the loss, outgoing

or expenditure.

"(9) This section applies to expenses incurred, or to deductions in

respect of a loss, outgoing or expenditure incurred, on or after 1

July 1994.

Deductions not allowable for benefits or reinsurance premiums

"116HAD.(1) Despite any other provision of this Act, a deduction is

not allowable to a registered organization in respect of:

(a) a benefit paid or payable under a life assurance policy; or

(b) the inclusion of an amount in the organization's reserves for

the purpose of meeting any future liability (including a

contingent liability) of the organization to pay benefits to

which paragraph (a) would apply; or

(c) a premium paid or payable by the organization in respect of the

reinsurance of the whole or any part of a life assurance policy;

or

(d) an amount paid or payable to, or to an associate of, the holder

of a life insurance policy in settlement of a dispute as to the

liability of the organization under the policy.

"(2) A reference in subsection (1) to a benefit paid or payable under

a life assurance policy includes a reference to an amount paid or

payable:

(a) in respect of a claim under the policy; or

(b) as consideration for, in connection with, or as a consequenceof,

the surrender, cancellation, forfeiture, termination or disposal

of the policy or any rights under the policy; or

(c) in respect of a bonus under the policy; or

(d) in respect of an annuity under the policy; or

(e) that is a refund, or is in the nature of a refund, of a premium

that is not included in the organization's assessable income.

"(3) To remove any doubt, it is declared that a supplementary benefit

(known as a rider benefit) that is paid or payable in respect of a

non-life assurance risk (including an accident and disability risk, a

sickness risk and a trauma risk) and in respect of which the premiums

received by the registered organization that issued the relevant life

assurance policy are included in the organization's assessable income

is not a benefit paid or payable under a life assurance policy for the

purposes of subsection (1).

"(4) If a registered organization makes a late payment in respect of

an amount that the organization is liable to pay under, or in relation

to, a life assurance policy, any interest paid or payable by the

organization because of the late payment is not a benefit paid or

payable under the policy for the purposes of subsection (1).

"(5) In this section:

"associate" has the same meaning as in subsection 26AAB(14).

"(6) This section applies to assessments in respect of income of the

year of income in which 1 July 1988 occurred and to assessments in

respect of income of all later years of income.'.

Period allowed for furnishing amended returns without incurring penalty

"70T.(1) If:

(a) a taxpayer furnished a return of income before the commencement

of this section; and

(b) the return included a claim for a deduction under Division 8 or

8A of the Principal Act; and

(c) when the return was made it was reasonably arguable that the

deduction was allowable under that Division; and

(d) that deduction is taken by the Principal Act as amended by this

Division not to have been allowable; and

(e) within 6 months (or such further period as the Commissioner

allows) after the day on which this Act received the Royal

Assent the taxpayer furnishes an amended return that does not

include a claim for the deduction;

no penalty is payable by the taxpayer because of the claim for the

deduction but the Income Tax (Interest on Underpayments) Act 1986

applies in respect of any underpayment of tax as a result of any

increase in tax that is payable because the deduction is not allowable.

"(2) The question whether a matter was reasonably arguable as

mentioned in paragraph (1)(c) is to be determined in the same way as

the question would be determined under section 222C of the Income Tax

Assessment Act 1936 if that section were applicable.".

At end of bill, page 40, add the following Part:

"PART 5--AMENDMENT OF THE TAXATION LAWS

AMENDMENT (SUPERANNUATION) ACT 1989

Principal Act

"92. In this Part, "Principal Act' means the Taxation Laws Amendment

(Superannuation) Act 1989.

Object of Part

"93. This Part makes an amendment that is consequential on the

amendments made by Division 10A of Part 3.

Amendment of section 17 of the Principal Act

"94.(1) Section 17 of the Principal Act is amended by omitting

subsection (2) of the section 112 that was inserted in the Income Tax

Assessment Act 1936 by section 17 of the Principal Act and

substituting the following subsection:

"(2) This section does not apply to superannuation premiums to which

section 111A applies.'.

"(2) To remove any doubt, it is declared that, for all purposes

(including the purposes of section 65 of the Taxation Laws Amendment

(Superannuation) Act 1989), the section that was inserted in the

Income Tax Assessment Act 1936 by section 17 of the Principal Act is

taken to have been that section as amended by subsection (1) of this

section.

"(3) This section does not affect the operation of paragraph 12(b) of

the Taxation Laws Amendment Act (No. 5) 1989 and, to remove any doubt,

it is declared that the subsection 112(2) of the Income Tax Assessment

Act 1936 that was omitted by that paragraph is taken to have been that

subsection as amended by subsection (1) of this section.".

Title agreed to.

Bill to be reported with amendments and requests for amendments.

The Deputy President (Senator Crichton-Browne) resumed the Chair and the

Temporary Chairman of Committees (Senator Zakharov) reported

accordingly.

Senator Cook moved--That the report from the committee be adopted.

Senator Watson moved the following amendment:

At end of motion, add ", and the Senate declares that its agreement,

on the motion of the Government, to make requests to the House of

Representatives for amendments of the bill does not indicate that the

Senate considers that requests are appropriate or that the Senate has

formed a conclusive view on the application of section 53 or 55 of the

Constitution to the bill".

Question--That the amendment be agreed to--put and passed.

Reference to committee: Senator Coulter moved the following amendment:

At end of motion, add "and that the following matter be referred to

the Standing Committee on Legal and Constitutional Affairs for inquiry

and report on or before the last day of May 1994:

The application and interpretation of the third paragraph of section

53 of the Constitution in relation to bills dealing with taxation".

Debate ensued.

Question--That the amendment be agreed to--put and passed.

Main question, as amended, put and passed.