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TAXATION LAWS AMENDMENT BILL (NO. 3) 1997

The order of the day having been read for the further consideration in detail of the Bill—

Schedule 1—

Debate resumed on the Schedule and on the amendments moved together by Mr Miles (Parliamentary Secretary (Cabinet) to the Prime Minister), viz.:

Amendment—

Item 3, page 13 (line 28), omit "1990-91", substitute "1992-93".

new Parts and new items—

Page 26 (after line 22), at the end of the Schedule, add:

Part 2—Amendment of the Terminations Payments Tax (Assessment and Collection) Act 1997

44 Subsection 7(2)

 After "invalidity payment", insert "or CGT exempt component".

Part 3—Application

45 Application

 The amendments made by this Schedule apply to disposals of assets on or after 1 July 1997.

Question—That the amendments be agreed to—put and passed.

Schedule, as amended, agreed to.

Schedule 2, by leave, taken as a whole—

Mr S. F. Smith moved the following amendment: Page 27 (lines 4-32), omit item 1, substitute:

1 Paragraph 23(pa)

  Omit subparagraphs (ia), (ib) and (ic), substitute:

  those rights to mine were acquired by the person before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 and the person was a bona fide prospector, that is to say—

Debate continued.

Amendment negatived.

Mr S. F. Smith moved the following amendment: Page 27 (lines 4-32), omit item 1, substitute:


1 Paragraph 23(pa)

  Omit subparagraphs (ia), (ib) and (ic), substitute:

  (ia) those rights to mine were acquired by the person before 7.30 pm, by legal time in the Australian Capital Territory on 20 August 1996; and

  (ib) the income was derived prior to 20 August 2001; and

  (ic) the person on or before 20 August 1996 was a bona fide prospector, that is to say—

Debate continued.

Question—That the amendment be agreed to—put.

The House divided (the Second Deputy Speaker, Mr Jenkins, in the Chair)—

AYES, 43

Mr AlbaneseMr L. D. T. FergusonMr LathamMr Price
Mr BeddallMr M. J. FergusonDr LawrenceMr Quick
Mr BevisMr FitzgibbonMr LeeMr Rocher
Mr BreretonMr E. L. Grace*Mr McClellandMr Sawford*
Mr BrownMr GriffinMr McMullanMr Sercombe*
Mr CreanMs HansonMr MartinMr S. F. Smith
Mrs CrosioMr HattonMr MelhamMr Tanner
Mr DargavelMr HoldingMr A. A. MorrisDr Theophanous
Ms EllisMr HollisMr P. F. MorrisMr K. J. Thomson
Mr G. J. EvansMr JonesMr O[quot ]ConnorMr Willis
Mr M. J. EvansMr KerrMr O[quot ]Keefe

NOES, 78

Mr AbbottMr R. D. C. EvansMr LloydMr Sinclair
Mr AndersonMr FaheyMr McArthur*Mr Slipper
Mr K. J. AndrewsMr FilingMr McDougallMr A. C. Smith
Mr AnthonyMr ForrestMr McLachlanMr W. L. Smith
Mr BarresiMs GambaroMr MilesDr Southcott
Mr BartlettMrs GashMr MooreMrs Sullivan
Mr BillsonMr GeorgiouMrs MoylanMr Taylor
Mrs BishopMrs E. J. GraceMr MutchMr A. P. Thomson
Mr BradfordMr HardgraveMr NairnMr Truss
Mr BroadbentMr HawkerMr NehlMr Tuckey
Mr BroughMr Hicks*Dr NelsonMr M. A. J. Vaile
Mr CadmanMr HockeyMr NevilleMrs D. S. Vale
Mr E. H. CameronMs JeanesMr NugentMr Wakelin
Mr R. A. CameronMr JullMr PyneMrs West
Mr CausleyMr KatterMr RandallMr Williams
Mr CharlesMrs D. M. KellyMr ReidDr Wooldridge
Mr CobbMiss J. M. KellyMr ReithMs Worth*
Mrs DraperDr KempMr RonaldsonMr Zammit
Mrs ElsonMr LiebermanMr Ruddock
Mr EntschMr LindsayMr Scott

* Tellers


And so it was negatived.

Mr S. F. Smith moved the following amendment: Page 27 (lines 12 and 13), omit ", and at the time the income was derived,".

Debate continued.

Amendment negatived.

On the motion of Mr Miles the following amendment was made, after debate:

Page 27 (after line 32), at the end of the Schedule, add:

Income Tax Assessment Act 1997

2 Subsection 330-60(1)

 Omit "If you are a *genuine prospector, your *ordinary income (for the 1997-98 income year or a later income year)", substitute "Your *ordinary income".

3 Subsection 330-60(1)

After "income tax", insert:

  if:

  (d) you acquired those rights before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; and

  (e) you *derive the *ordinary income before 20 August 2001; and

  (f) you were a *genuine prospector on or before 20 August 1996, and you are one when you derive the ordinary income.

4 After subsection 330-60(1)

 Insert:

 (1A) If you *derived the *ordinary income under a contract for the sale, transfer or assignment of the rights entered into after 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996, the exemption applies only to:

  (a) so much of the ordinary income as you would have derived if those rights had been sold for their market value at that time;

  reduced by:

  (b) any amounts you incurred before that time that you have deducted or can deduct for an earlier income year under Division 10 of Part III of the Income Tax Assessment Act 1936 in respect of expenditure on exploration or prospecting (within the meaning of section 122J or 122JF of that Act) in that area.

5 Subsection 330-60(2)

 Omit "The exemption", substitute "If subsection (1A) does not apply, the exemption".


6 Paragraph 330-60(2)(b)

 Omit "section 122J", substitute "Division 10 of Part III".

7 Paragraph 330-60(2)(b)

 Omit "that section", substitute "section 122J or 122JF of that Act".

Schedule, as amended, agreed to.

Schedules 3 to 10, by leave, taken together, and agreed to, after debate.

Remainder of Bill, by leave, taken as whole—

On the motion of Mr Miles, by leave, the following amendments were made together, after debate:

Schedule 11—

New items—

Page 61 (before line 4), before item 1, insert:

1A Subsection 73B(1) (definition of residual feedstock expenditure)

 After "income" (first occurring), insert "in relation to related research and development activities".

1B Subsection 73B(1) (paragraph (a) of the definition of residual feedstock expenditure)

 After "income", insert "in relation to those activities".

1C Subsection 73B(1) (paragraph (b) of the definition of residual feedstock expenditure)

 After "income", insert "in relation to those activities".

1D Subsection 73B(4H) (table)

 Omit "Annual deduction percentage", substitute "Percentage".

1E Subsection 73B(12B) (formula)

 Omit "past".

1F Subsection 73B(12B) (definition of undeducted past expenditure)

 Repeal the definition, substitute:

  undeducted expenditure means so much of the core technology expenditure incurred by the company during the current year or previous years of income in relation to the relevant core technology under contracts entered into at or after the time referred to in subsection (12) as has not been allowed as a deduction from the company[quot ]s assessable income of any of those previous years of income.

1G Subsection 73B(12B) (paragraph (b) of the definition of current year core technology adjustment amount)

 Omit "73B(27)(c)", substitute "73B(27C)(c)".


1H Subsection 73B(14B)

 After "income" (first occurring), insert "in relation to related research and development activities".

1J After subsection 73B(24A)

 Insert:

 (24B) Where:

  (a) a deduction has been allowed or is allowable to an eligible company under subsection (15AA) in respect of expenditure incurred in the acquisition or construction of a unit of post[hyphen]23 July 1996 pilot plant; and

  (b) during a year of income, the unit of post[hyphen]23 July 1996 pilot plant is disposed of, lost or destroyed; and

  (c) the company had used the unit of post[hyphen]23 July 1996 pilot plant before it was disposed of, lost or destroyed exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities; and

  (d) no deduction has been allowed or is allowable to the company under section 54 in respect of the unit of post[hyphen]23 July 1996 pilot plant;

  then:

  (e) in a case where the consideration receivable in respect of the disposal, loss or destruction is less than the written[hyphen]down value of the unit of post[hyphen]23 July 1996 pilot plant:

   (i) if the aggregate research and development amount in relation to the company in relation to the year of income is greater than $20,000—the amount ascertained by multiplying the amount by which that written[hyphen]down value exceeds that consideration receivable by 1.25; or

   (ii) if the aggregate research and development amount in relation to the company in relation to the year of income is less than or equal to $20,000—the amount by which that written[hyphen]down value exceeds that consideration receivable;

   is allowable as a deduction from the assessable income of the company of the year of income; or

  (f) in a case where the consideration receivable in respect of the disposal, loss or destruction is greater than the written[hyphen]down value of the unit of post[hyphen]23 July 1996 pilot plant—so much of the excess as does not exceed the difference between the cost of the unit of post[hyphen]23 July 1996 pilot plant and the written[hyphen]down value of the unit of post[hyphen]23 July 1996 pilot plant shall be included in the assessable income of the
company of the year of income.

Amendments—

Item 3, page 61 (line 21), omit "1 and", substitute "1A to".

Schedule 14—

Item 17, page 73 (lines 3 to 14), omit the item, substitute:

17 Application

(1) The amendments made by this Part apply to the 1996-97 year of income.

(2) However, the amendments made by items 5 to 15 have effect only in respect of acts, omissions or events happening after 26 March 1997.

Item 25, page 75 (line 1) to page 77 (line 8), omit sections 160JA and 160JB, substitute:

160JA Interpretative provisions for Divisions 3A, 3B, 3C, 3CA, 3CB, 3CC, 3CD and 3D

  In Divisions 3A, 3B, 3C, 3CA, 3CB, 3CC, 3CD and 3D, unless the contrary intention appears:

  100% subsidiary has the meaning given by section 975-505 of the Income Tax Assessment Act 1997.

  abnormal trading has the meaning given by Subdivision 960[hyphen]H of the Income Tax Assessment Act 1997.

approved deposit fund has the meaning given by section 10 of the Superannuation Industry (Supervision) Act 1993.

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

capital shareholding of less than 1% has the meaning given by section 160ZNSQ.

  complying approved deposit fund means a complying approved deposit fund within the meaning of section 47 of the Superannuation Industry (Supervision) Act 1993.

complying superannuation fund means a complying superannuation fund within the meaning of section 45 of the Superannuation Industry (Supervision) Act 1993.

  constitution of a company has the same meaning as in the Income Tax Assessment Act 1997.

dividend has the meaning given by subsections 6(1), (4) and (5) and section 94L.

dividend shareholding of less than 1% has the meaning given by section 160ZNSQ.

entity has the meaning given by section 960-100 of the Income Tax Assessment Act 1997.

  
head company has the meaning given by section 160ZNSM.

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

  interposed company has the meaning given by section 160ZNSN.

  listed public company has the same meaning as in the Income Tax Assessment Act 1997.

  member of a company includes a shareholder or stockholder.

more than a 50% stake has the meaning given by section 160ZNC.

  more than 50% of the company[quot ]s capital distributions has the meaning given by section 160ZNJ.

more than 50% of the company[quot ]s dividends has the meaning given by section 160ZNI.

  more than 50% of the listed public company[quot ]s capital distributions has the meaning given by section 160ZNSJ.

  more than 50% of the listed public company[quot ]s dividends has the meaning given by section 160ZNSI.

more than 50% of the voting power has the meaning given by section 160ZNH.

  more than 50% of the voting power in the listed public company has the meaning given by section 160ZNSH.

  notional net capital gain has the meaning given by subsection 160ZNF(1).

notional net capital loss has the meaning given by subsection 160ZNF(2).

  notional shareholder has the meaning given by section 160ZNSO.

ownership test period has the meaning given by section 160ZNC.

ownership test time has the meaning given by section 160ZNSG.

  part of a substantial shareholding has the meaning given by section 166-245 of the Income Tax Assessment Act 1997.

public company means a company that is a public company as defined by section 103A for the year of income.

redeemable shares has the same meaning as in the Income Tax Assessment Act 1997.

  same business test has the meaning given by Division 3C.

  same business test period has the meaning given by sections 160ZNB, 160ZND and 160ZNE and subsection 160ZNSB(5).

shareholding interest has the meaning given by section 175-65 of the Income Tax Assessment Act 1997.

special company has the same meaning as in the Income Tax Assessment Act 1997.


substantial continuity of ownership has the meaning given by section 160ZNSG.

  substantial shareholding: see part of a substantial shareholding.

  superannuation fund has the meaning given by section 10 of the Superannuation Industry (Supervision) Act 1993.

  test period has the meaning given by section 160ZNSB.

  test time has the meaning given by sections 160ZNB, 160ZND, 160ZNE and 160ZNSB.

  voting share in a company means:

  (a) if the company is a body corporate—a voting share as defined by section 9 of the Corporations Law; and

  (b) otherwise—a share that would be a voting share as defined by that section if the company were a body corporate.

  voting shareholding of less than 1% has the meaning given by section 160ZNSQ.

Item 32, page 78 (line 12), omit "and 3C", substitute ", 3C, 3CB, 3CC and 3CD".

Item 32, page 86 (line 20), omit "constituent document", substitute "constitution".

Item 32, page 86 (line 33), omit "constituent document", substitute "constitution".

Item 32, page 88 (after line 19), after Division 3C, insert:

Division 3CA—Net capital gain or net capital loss of listed public company or its 100% subsidiary for year of income in which ownership or control of the company changed

Guide to Division 3CA

160ZNSA What this Division is about

This Division modifies the way in which the rules in Division 3A apply to a listed public company (and also its 100% subsidiaries). It makes it easier for the company to comply with those rules.

If the company has maintained the same owners as between certain points of time, it does not need to prove it has maintained the same owners throughout the periods in between.

The tests for finding out whether the company has maintained the same owners are set out in Divisions 3CB, 3CC and 3CD.

16
Table of sections

   160ZNSB How Division 3A applies to a listed public company

   160ZNSC How to work out the net capital gain or net capital loss

   160ZNSD How Division 3A applies to 100% subsidiary of a listed public company

   160ZNSE Companies can choose that this Division is not to apply to them

160ZNSB How Division 3A applies to a listed public company

 (1) This Division modifies the way Division 3A applies to a company that is a listed public company at all times during the year of income (the test period).

  Note 1: Division 3A is about when a company must calculate its net capital gain or net capital loss for the year of income in a special way.

  Note 2: This Division also modifies how Division 3A applies to a 100% subsidiary of a listed public company: see section 160ZNSD.

Note 3: A company can choose that this Division is not to apply to it: see section 160ZNSE.

  No abnormal trading

 (2) If there is no abnormal trading in shares in the listed public company during the test period, it is taken to have met the condition in paragraph 160ZNB(1)(a) (which is about there being persons having more than a 50% stake in it during the whole of the year of income).

  Abnormal trading, but substantial continuity of ownership

 (3) If there is abnormal trading, but there is substantial continuity of ownership of the company as between the start of the test period and the time of each abnormal trading, the company is also taken to have met the condition in paragraph 160ZNB(1)(a).

  Note: See section 160ZNSG to work out whether there is substantial continuity of ownership.

  Abnormal trading without substantial continuity of ownership

 (4) If there is abnormal trading, and there is no substantial continuity of ownership of the company as between the start of the test period and the time of the abnormal trading, the company is taken to have failed to meet the condition in paragraph 160ZNB(1)(a).

  Satisfies the same business test

 (5) However, if the company satisfies the same business test for the rest of the year of income (the same business test period) after the first abnormal trading covered by subsection (4), it is taken to have satisfied the condition in paragraph 160ZNB(1)(b) (which is about the company carrying on the same business).

  Note: For the same business test: see Division 3C.


 (6) Apply the same business test to the business that the company carried on immediately before the time of the first abnormal trading (the test time) covered by subsection (4).

160ZNSC How to work out the net capital gain or net capital loss

 (1) If the listed public company must calculate its net capital gain or net capital loss for the year of income under Division 3A, then, in dividing the year of income into periods, apply subsection (2) instead of subsection 160ZNE(3).

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

  (a) the earliest time when there is an abnormal trading in shares in the listed public company (except one covered by subsection (3)); or

  (b) the earliest time when a person begins to control, or becomes able to control, the voting power in the listed public company (whether directly, or indirectly through one or more interposed entities) for the purpose, or for purposes including the purpose, of:

   (i) getting some benefit or advantage to do with how this Act applies; or

   (ii) getting such a benefit or advantage for someone else.

 (3) In working out when a period ends, disregard an abnormal trading if there is substantial continuity of ownership of the company as between the start of the period and the time of the abnormal trading.

  Note: See section 160ZNSG to work out whether there is substantial continuity of ownership.

160ZNSD How Division 3A applies to 100% subsidiary of a listed public company

 (1) This Division also modifies the way Division 3A applies to a company that is not a listed public company, but only if the conditions in subsections (2) and (3) are met.

  Note: Division 3A is about when a company must calculate its net capital gain or net capital loss for the year of income in a special way.

 (2) The company (the subsidiary) must be a 100% subsidiary of another company (the holding company) at all times during the subsidiary[quot ]s year of income.

 (3) Also, the holding company must be a listed public company at all times during that year of income.

 (4) If the conditions are met, then, for the purposes of applying Division 3A to the subsidiary, this Division applies to the subsidiary as if:

  (a) the subsidiary were itself a listed public company at all times during the year of income; and

 
 (b) an abnormal trading in shares in the holding company during the year of income were an abnormal trading in shares in the subsidiary.

  (Divisions 3CB, 3CC and 3CD apply to the subsidiary in the same way and for the same purpose).

160ZNSE Companies can choose that this Division is not to apply to them

 (1) The listed public company or subsidiary can choose that Division 3A is to apply to it for the year of income without the modifications made by this Division.

 (2) The company must choose on or before the day it lodges its return under section 161, 162 or 163 for the year of income, or before a later day if the Commissioner allows.

Division 3CB—Tests for finding out whether the listed public company has maintained the same owners

Guide to Division 3CB

160ZNSF What this Division is about

This Division has the tests to work out whether a listed public company has maintained the same owners as between different times.

Divisions 3CC and 3CD have rules that make it easier for the company to satisfy these ownership tests.

  Note: The rules in this Division also apply to a company that is a 100% subsidiary of a listed public company: see section 160ZNSD.

16 Table of sections

18Substantial continuity of ownership

   160ZNSG Substantial continuity of ownership

18The ownership tests

   160ZNSH Who has more than 50% of the voting power in the listed public company at a particular time

   160ZNSI Who has rights to more than 50% of the listed public company[quot ]s dividends at a particular time

160ZNSJ Who has rights to more than 50% of the listed public company[quot ]s capital distributions at a particular time

18Rules affecting the operation of the ownership tests

   160ZNSK Rules in Division 3B apply


Substantial continuity of ownership

160ZNSG Substantial continuity of ownership

 (1) There is substantial continuity of ownership of the listed public company as between the start of the test period and another time in the test period if (and only if) the conditions in this section are met.

  Voting power

 (2) There must be persons (none of them companies) who had more than 50% of the voting power in the listed public company at the start of the test period. Also, those persons must have had more than 50% of the voting power in the listed public company immediately after the other time in the test period.

  Note: To work out who had more than 50% of the voting power: see section 160ZNSH.

  Rights to dividends

 (3) There must be persons (none of them companies) who had rights to more than 50% of the listed public company[quot ]s dividends at the start of the test period. Also, those persons must have had rights to more than 50% of the listed public company[quot ]s dividends immediately after the other time in the test period.

  Note: To work out who had rights to more than 50% of the listed public company[quot ]s dividends: see section 160ZNSI.

  Rights to capital distributions

 (4) There must be persons (none of them companies) who had rights to more than 50% of the listed public company[quot ]s capital distributions at the start of the test period. Also, those persons must have had rights to more than 50% of the listed public company[quot ]s capital distributions immediately after the other time in the test period.

  Note: To work out who had rights to more than 50% of the listed public company[quot ]s capital distributions: see section 160ZNSJ.

  When to apply the test

 (5) To work out whether a condition in this section was satisfied at a time (the ownership test time), apply the ownership test for that condition.

The ownership tests

160ZNSH Who has more than 50% of the voting power in the listed public company at a particular time

  If it is the case, or it is reasonable to assume, that there are persons (none of them companies) who, at the ownership test time, between them control, or are able to control, the voting power in the listed public company (whether directly, or indirectly through one or more interposed entities), those persons have more than 50% of the voting power in the listed public company at that time.


160ZNSI Who has rights to more than 50% of the listed public company[quot ]s dividends at a particular time

  If it is the case, or it is reasonable to assume, that there are persons (none of them companies) who, at the ownership test time, have between them the right to receive for their own benefit (whether directly, or indirectly through one or more interposed entities), more than 50% of any dividends that the listed public company may pay, those persons have rights to more than 50% of the listed public company[quot ]s dividends at that time.

160ZNSJ Who has rights to more than 50% of the listed public company[quot ]s capital distributions at a particular time

  If it is the case, or it is reasonable to assume, that there are persons (none of them companies) who, at the ownership test time, have between them the right to receive for their own benefit (whether directly, or indirectly through one or more interposed entities), more than 50% of any distribution of capital of the listed public company, those persons have rights to more than 50% of the listed public company[quot ]s capital distributions at that time.

Rules affecting the operation of the ownership tests

160ZNSK Rules in Division 3B apply

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

  (a) 160ZNL (which is about how an ownership test can be satisfied by a single person);

  (b) 160ZNN (which treats some shares as never having carried rights);

 (c) 160ZNO (which treats some shares as always having carried rights);

  (d) 160ZNP (which disregards redeemable shares);

  (e) 160ZNQ (which is about how other rules do not affect how shares or rights are counted);

  (f) 160ZNR (which deals with deaths of beneficial owners).

 (2) The rule in section 160ZNM (which is about arrangements affecting beneficial ownership of shares) also applies for the purposes of an ownership test in this Division as if the reference to a particular time during the ownership test period were a reference to the ownership test time.

Division 3CC—How to treat shareholdings of less than 1%


Guide to Division 3CC

160ZNSL What this Division is about

This Division has rules that make it easier for the listed public company to satisfy the ownership tests in Division 3CB.

All shareholdings of less than 1% in the company are treated as if they were held by a single notional entity. This means that the company does not have to trace through to the persons who beneficially own those shares.

A similar rule applies if another listed public company is interposed between the company and those persons. All shareholdings of less than 1% in the interposed company are treated as if they were held by a different single notional entity. This means that the company does not have to trace through the interposed company to the persons who beneficially own those shares in the interposed company.

  Note 1: The rules in this Division also apply to a company that is a 100% subsidiary of a listed public company: see section 160ZNSD.

Note 2: The rules in this Division do not apply if they would hide a failure by the company to maintain the same owners: see sections 160ZNSR and 160ZNSS.

16 Table of sections

18Special tracing rules for listed public companies

   160ZNSM Shareholdings of less than 1% in the listed public company

160ZNSN Shareholdings of less than 1% in an interposed listed public company

160ZNSO Notional shareholder

160ZNSP Notional shareholder taken to have minimum voting control, dividend rights and capital rights

160ZNSQ Voting, dividend and capital shareholding of less than 1%

18When the rules in this Division do not apply

   160ZNSR Limit on listed public company splitting its shares into different classes

160ZNSS If listed public company would not have otherwise passed the ownership tests

Special tracing rules for listed public companies

160ZNSM Shareholdings of less than 1% in the listed public company

  This Division modifies how the ownership tests are applied to the listed public company (the head company) if the company has:

  (a) voting shareholdings of less than 1%; or


 (b) dividend shareholdings of less than 1%; or

 (c) capital shareholdings of less than 1%.

  Note: For the ownership tests: see sections 160ZNSH, 160ZNSI and 160ZNSJ.

160ZNSN Shareholdings of less than 1% in an interposed listed public company

 (1) This Division also modifies how the ownership tests are applied to the head company if another listed public company (the interposed company) meets the conditions in subsections (2) and (3).

  Note: For the ownership tests: see sections 160ZNSH, 160ZNSI and 160ZNSJ.

 (2) The interposed company must be interposed between the head company and persons (none of them companies) who:

  (a) control (or are able to control) voting power in the head company indirectly through the interposed company; or

 (b) have the right to receive, for their own benefit and indirectly through the interposed company, any dividends the head company may pay; or

 (c) have the right to receive, for their own benefit and indirectly through the interposed company, any distributions of capital of the head company.

 (3) The interposed company must have:

  (a) voting shareholdings of less than 1%; or

 (b) dividend shareholdings of less than 1%; or

 (c) capital shareholdings of less than 1%.

160ZNSO Notional shareholder

  Notional shareholder of the head company

 (1) The ownership tests in sections 160ZNSH, 160ZNSI and 160ZNSJ are applied to the head company as if, at the ownership test time, a single notional entity (the notional shareholder):

  (a) directly controlled the voting power in the head company that is carried by each voting shareholding of less than 1% in the company at that time; and

 (b) had the right to receive, for its own benefit and directly:

   (i) any dividends the head company may pay in respect of each dividend shareholding of less than 1% in the company at that time; and

 (ii) any distributions of capital of the head company in respect of each capital shareholding of less than 1% in the company at that time; and

  (c) were a person (other than a company).

  
Notional shareholder of the interposed company

 (2) The tests are also applied to the head company as if, at the ownership test time, for each interposed company, a different single notional entity (the notional shareholder):

  (a) directly controlled the voting power in the interposed company that is carried by each voting shareholding of less than 1% in the interposed company at that time; and

 (b) had the right to receive, for its own benefit and directly:

   (i) any dividends the interposed company may pay in respect of each dividend shareholding of less than 1% in the interposed company at that time; and

 (ii) any distributions of capital of the interposed company in respect of each capital shareholding of less than 1% in the interposed company at that time; and

  (c) were a person (other than a company).

  Persons who actually control or have rights are taken not to

 (3) The tests are also applied to the head company as if, at the ownership test time:

  (a) the persons (other than companies) who control (or are able to control) the voting power in the head company or interposed company (whether directly, or indirectly through one or more interposed entities) that is carried by each voting shareholding of less than 1% in the company had not had that control; and

 (b) the persons (other than companies) who have the right to receive for their own benefit (whether directly, or indirectly through one or more interposed entities):

   (i) any dividends that the head company or interposed company may pay in respect of each dividend shareholding of less than 1% in the company; and

 (ii) any distributions of capital of the head company or interposed company in respect of each capital shareholding of less than 1% in the company;

   had not had that right.

160ZNSP Notional shareholder taken to have minimum voting control, dividend rights and capital rights

  Minimum control of voting power

 (1) If the ownership test time is after the start of the test period and:

  (a) the voting power in the head company or interposed company that the notional shareholder controls at that time;

  is greater than:

 
 (b) the voting power in the company that the notional shareholder controlled at the start of that period;

  the notional shareholder is taken to control voting power in the company at that time only to the extent that it controlled it at the start of that period.

  Minimum percentage of rights to dividends and capital

 (2) If the ownership test time is after the start of the test period and:

  (a) the percentage of the dividends or distributions of capital of the head company or interposed company that the notional shareholder has the right to receive at that time;

  is greater than:

  (b) the percentage (the lower percentage) of the dividends or distributions of capital of the company that the notional shareholder had the right to receive at the start of that period;

  the notional shareholder is taken to have the right to receive the lower percentage of the dividends or distributions of capital at that time.

160ZNSQ Voting, dividend and capital shareholding of less than 1%

  Meaning of voting shareholding of less than 1%

 (1) If all the shares in the head company or interposed company of which an entity is the registered holder at the ownership test time carry (between them) less than 1% of the voting power in the company, those shares (except shares that are part of a substantial shareholding) constitute a voting shareholding of less than 1% in the company at that time.

  Meaning of dividend shareholding of less than 1%

 (2) If all the shares in the head company or interposed company of which an entity is the registered holder at the ownership test time carry (between them) the right to receive less than 1% of any dividends that the company may pay, those shares (except shares that are part of a substantial shareholding) constitute a dividend shareholding of less than 1% in the company at that time.

  Meaning of capital shareholding of less than 1%

 (3) If all the shares in the head company or interposed company of which an entity is the registered holder at the ownership test time carry (between them) the right to receive less than 1% of any distribution of capital of the company, those shares (except shares that are part of a substantial shareholding) constitute a capital shareholding of less than 1% in the company at that time.


When the rules in this Division do not apply

160ZNSR Limit on listed public company splitting its shares into different classes

  This Division does not apply unless, at the ownership test time, all the voting shares in the head company carry (between them):

  (a) the right to receive more than 75% of any dividends the head company may pay; and

 (b) the right to receive more than 75% of any distributions of capital of the head company.

160ZNSS If listed public company would not have otherwise passed the ownership tests

  This Division does not apply for the purposes of section 160ZNSB if the Commissioner considers it reasonable to assume that the head company would not meet the conditions in that section if it were not for the rules in this Division.

  Note: The conditions in section 160ZNSB require the listed public company to maintain the same owners at each ownership test time during the test period.

Division 3CD—How to treat interposed superannuation funds, approved deposit funds and special companies

Guide to Division 3CD

160ZNST What this Division is about

This Division has rules that make it easier for the listed public company to satisfy the ownership tests in Division 3CB.

The company does not have to trace through any complying superannuation funds, complying approved deposit funds or special companies that are interposed between the company and persons who control any of the voting power in the company or have rights to its dividends or capital.

  Note: The rules in this Division also apply to a company that is a 100% subsidiary of a listed public company: see section 160ZNSD.

16 Table of sections

18Special tracing rules for listed public companies

   160ZNSU When fund or special company is taken to control voting power

160ZNSV When fund or special company is taken to have rights to dividends and capital


Special tracing rules for listed public companies

160ZNSU When fund or special company is taken to control voting power

  Modification of application of ownership test about voting power

 (1) This section modifies how the ownership test in section 160ZNSH (about control of voting) is applied to the listed public company if:

  (a) a superannuation fund, approved deposit fund or special company is interposed, at the ownership test time, between persons (none of them companies) and the listed public company; and

 (b) at the ownership test time, those persons control (or are able to control) any of the voting power in the listed public company indirectly through the fund or special company (or through entities including it); and

 (c) the fund or special company is a complying superannuation fund, complying approved deposit fund or special company at all times during the year of income of the listed public company in which the ownership test time occurs.

  If fund or special company has more than 50 members

 (2) If the fund or special company has more than 50 members, the test is applied as if, at the ownership test time, the fund or special company were a person (other than a company) who controlled the voting power in the listed public company that those persons control (or are able to control).

  If fund or special company has 50 members or less

 (3) However, if the fund or special company has 50 members or less, the test is applied as if, at the ownership test time, each member were a person (other than a company) who controlled an equal proportion of the voting power in the listed public company that those persons control (or are able to control).

  Persons who actually control are taken not to control

 (4) The test is applied as if, at the ownership test time, the voting power in the listed public company that those persons control (or are able to control) were not controlled by them (except as provided by subsection (3)).

160ZNSV When fund or special company is taken to have rights to dividends and capital

  Modification of application of ownership test about dividend rights and capital rights

 (1) This section modifies how the ownership test in section 160ZNSI (about dividend rights) or 160ZNSJ (about capital rights) is applied to the listed public company if:

 
 (a) a superannuation fund, approved deposit fund or special company is interposed, at the ownership test time, between persons (none of them companies) and the listed public company; and

 (b) at the ownership test time, those persons have the right to receive for their own benefit, and indirectly through the fund or special company (or through entities including it):

   (i) a percentage of any dividends that the listed public company may pay; or

 (ii) a percentage of any distributions of capital of the listed public company; and

  (c) the fund or special company is a complying superannuation fund, complying approved deposit fund or special company at all times during the year of income of the listed public company in which the ownership test time occurs.

  If fund or special company has more than 50 members

 (2) If the fund or special company has more than 50 members, the test is applied as if, at the ownership test time, the fund or special company were a person (other than a company) who had the right to receive, for the person[quot ]s own benefit, that percentage of those dividends or distributions of capital of the listed public company.

  If fund or special company has 50 members or less

 (3) However, if the fund or special company has 50 members or less, the test is applied as if, at the ownership test time, each member were a person (other than a company) who had the right to receive, for the person[quot ]s own benefit, an equal proportion of those dividends or distributions of capital.

  Persons who actually control are taken not to have it

 (4) The test is applied as if, at the ownership test time, the persons (other than companies) who have the right to receive that percentage of those dividends or distributions of capital did not have that right (except as provided by subsection (3)).

Item 32, page 91 (line 13), omit "gain", substitute "loss".

Item 32, page 92 (lines 19 to 30), omit Division 3E.

Item 37, page 94 (line 14), omit "gain" (first occurring), substitute "loss".

Item 40, page 94 (lines 27 and 28), omit "Division 3B of Part IIIA (other than subsections 160ZNH(1), 160ZNI(1) and 160ZNJ(1))", substitute "sections 160ZNM to 160ZNR (inclusive)".

New Parts and new items—

At the end of Schedule 14, page 96 (after line 9), add:


Part 4—Income Tax Assessment Act 1997 (revenue losses)

43 After subsection 165-60(2)

 Insert:

 (2A) So much of any amount included in the company[quot ]s assessable income under section 97 or 98A as is a capital gain that forms part of a net capital gain is not attributed to a period.

44 After subsection 165-60(6)

 Insert:

 (6A) A net capital gain is not attributed to a period.

45 Subsection 165-60(7)

 Repeal the subsection, substitute:

 (7) Full year amounts are amounts referred to in paragraphs (2)(a) and (b), so far as they are not reasonably attributable to a period, but do not include any part of a capital gain that forms part of a net capital gain. Full year amounts are brought in at a later stage of the process of calculating the company[quot ]s taxable income for the income year.

46 At the end of subsection 165-65(3)

 Add "and any net capital gain that accrued to the company in respect of the income year".

47 At the end of subsection 165-70(3)

 Add:

  ; and (f) any net capital gain that accrued to the company in respect of the income year.

48 Section 170-25

 Repeal the section, substitute:

170-25 Tax treatment of consideration for transferred tax loss

 (1) If the *loss company receives any consideration from the *income company for the amount of the *tax loss:

  (a) so much of the consideration as, in the opinion of the Commissioner, is given for the amount of the *tax loss is neither assessable income nor exempt income of the *loss company; and

 (b) a capital gain does not accrue to the *loss company because of the receipt of the consideration.

 (2) If the *income company gives any consideration to the *loss company for the amount of the *tax loss:

  (a) the *income company cannot deduct the amount or value of the consideration; and


 (b) the *income company does not incur a capital loss because of the giving of the consideration.

49 Section 175-10 (heading)

 Repeal the heading, substitute:

175-10 First case: income or capital gain injected into company because of available tax loss

50 Subsection 175-10(1)

 Omit "some or all of which (the injected income) it would not have derived", substitute ", or a capital gain accrued to the company, some or all of which (the injected amount) would not have been derived, or would not have accrued,".

51 Subsection 175-10(2)

 Omit "derivation of the *injected income", substitute "derivation or accrual of the *injected amount".

52 Section 175-20 (heading)

 Repeal the heading, substitute:

175-20 Income or capital gain injected into company because of available deductions

53 Subsection 175-20(1)

 Repeal the subsection (other than the note), substitute:

 (1) The Commissioner may disallow deductions of a company (or parts of them) for an income year if:

  (a) the company has *derived assessable income, or a capital gain accrued to the company, some or all of which (the injected amount) would not have been derived, or would not have accrued, if the company did not have those deductions; and

 (b) the income was derived, or the capital gain accrued, in that income year.

  The disallowed deductions and parts of deductions may exceed the *injected amount.

54 Subsection 175-20(2)

 Omit "*injected income", substitute "*injected amount".

55 Subsection 175-20(3)

 Omit "*injected income", substitute "*injected amount".

56 Section 175-30 (heading)

 Repeal the heading, substitute:


175-30 Someone else obtains a tax benefit because of a deduction, income or capital gain available to company

57 Paragraph 175-30(2)(b)

 Repeal the paragraph, substitute:

  (b) the scheme would not have been entered into or carried out if some or all (the available amount) of the assessable income that the company derived or of a capital gain that accrued to the company:

   (i) before it incurred the losses, outgoings or expenditure that the deductions were for; and

 (ii) in the same income year as it incurred them;

   had not been derived or had not accrued, as the case may be.

58 Subsection 175-30(2)

 Omit "the amount of the available income", substitute "the available amount".

59 Subsection 995-1(1) (after the definition of in existence)

 Insert:

  injected amount has the meaning given by sections 175-10 and 175-20.

60 Subsection 995-1(1) (definition of injected income)

 Repeal the definition.

Part 5—Income Tax (Consequential Amendments) Act 1997

61 Schedule 1 (items 236 and 237)

 Repeal the items.

62 Schedule 1 (items 241 and 242)

 Repeal the items.

63 Schedule 1 (item 248)

 Repeal the item, substitute:

248 Subsection 170(13)

 Repeal the subsection, substitute:

 (13) The Commissioner may amend an assessment within 6 years after the day when the tax became due and payable under it, if the amendment is to give effect to any of these provisions:

  (a) sections 165-180 to 165-205 and Division 175 of the Income Tax Assessment Act 1997;

 (b) sections 63B, 105AAA, 160ZND and 160ZNM to 160ZNR (inclusive), and Division 3D of Part IIIA, of this Act;

  
(including any of those provisions as applied by any other provision of that Act or this Act).

64 Application

 The items in Schedule 1 to the Income Tax (Consequential Amendments) Act 1997 that are repealed by items 61 and 62 of this Schedule are taken never to have had any effect.

New schedule—

After Schedule 14, after page 96, insert:

Schedule 14A—Deductions for gifts

Part 1—Amendment of the Income Tax Assessment Act 1936

1 Subsection 78(3) (before the index entry relating to Academies—professional)

 Insert:

AAP Mawson[quot ]s Huts Foundation Limited(4)[hyphen]Table 6, item 6.2.23

2 Subsection 78(3) (after the index entry relating to Art galleries)

 Insert:

Australia Foundation for Culture and the Humanities Ltd.(4)[hyphen]Table 12, item 12.2.2

3 Subsection 78(3) (after the index entry relating to Australian Ireland Fund)

 Insert:

Australian National Korean War Memorial Trust Fund(4)[hyphen]Table 5, item 5.2.10

4 Subsection 78(4) (at the end of Table 5)

 Add:

5.2.10Australian National Korean War Memorial Trust Fundthe gift must be made after 1 September 1996 and before 2 September 1998

5 Subsection 78(4) (at the end of Table 6)

 Add:

6.2.23AAP Mawson[quot ]s Huts Foundation Limitedthe gift must be made after 17 March 1997


6 Subsection 78(4) (at the end of Table 12)

 Add:

12.2.2Australia Foundation for Culture and the Humanities Ltd.the gift must be made after 8 November 1996

Part 2—Amendment of the Income Tax Assessment Act 1997

7 Subsection 30[hyphen]50(2) (at the end of the table)

 Add:

5.2.6Australian National Korean War Memorial Trust Fundthe gift must be made before 2 September 1998

8 Subsection 30[hyphen]55(2) (at the end of the table)

 Add:

6.2.23AAP Mawson[quot ]s Huts Foundation Limitedthe gift must be made after 17 March 1997

9 Subsection 30[hyphen]100(2) (at the end of the table)

 Add:

12.2.2Australia Foundation for Culture and the Humanities Ltd.the gift must be made after 8 November 1996

10 Subsection 30[hyphen]315(2) (before table item 1)

 Add:

1AAAP Mawson[quot ]s Huts Foundation Limiteditem 6.2.23

11 Subsection 30[hyphen]315(2) (after table item 9)

 Insert:

9AAustralia Foundation for Culture and the Humanities Ltd.item 12.2.2

12 Subsection 30[hyphen]315(2) (after table item 23)

 Insert:

23AAustralian National Korean War Memorial Trust Funditem 5.2.6


13 Application

 The amendments made by this Part apply to assessments for the 1997/98 income year and later income years.

New items—

At the end of Schedule 15, page 98 (after line 1), add:

Taxation Laws Amendment Act (No. 2) 1997

8 Schedule 1 (item 9)

 Repeal the item, substitute:

9 Subsection 160ZP(7)

 Omit "where" (first occurring), substitute "subsection (7AAA) applies if".

Taxation Laws Amendment (Private Health Insurance Incentives) Act 1997

9 Schedule 3 (before item 1)

 Insert:

Income Tax Assessment Act 1936

On the motion of Mr Miles, by leave, the following amendments were made together:

Clause 2—

Page 2 (after line 11), after subclause (6), insert:

 (6A) Part 4 of Schedule 14 commences, or is taken to have commenced, on 1 July 1997, immediately after the commencement of the Income Tax Assessment Act 1997.

 (6B) Part 5 of Schedule 14 commences, or is taken to have commenced, on 1 July 1997, immediately after the commencement of the Income Tax (Consequential Amendments) Act 1997.

Page 2 (before line 12), before subclause (7), insert:

 (6C) Part 2 of Schedule 14A commences at the later of:

  (a) the start of the day on which this Act receives the Royal Assent; and

 (b) immediately after the commencement of Schedule 1 to the Tax Law Improvement Act 1997.

Page 2 (after line 26), at the end of the clause, add:

 (12) Item 8 of Schedule 15 is taken to have commenced immediately after the commencement of item 9 of Schedule 1 to the Taxation Laws Amendment Act (No. 2) 1997.

 (13) Item 9 of Schedule 15 is taken to have commenced immediately after the commencement of item 1 of Schedule 3 to the Taxation Laws Amendment (Private Health Insurance Incentives) Act 1997.

Remainder of Bill, as amended, agreed to.


Bill, as amended, agreed to.

Consideration in detail concluded.

On the motion of Mr Miles, by leave, the Bill was read a third time.