Commonwealth of Australia Bills
[Index]
[Search]
[Download]
[Related Items]
[Help]
This is a Bill, not an Act. For current law, see the Acts databases.
TAX LAWS AMENDMENT (2005 MEASURES NO. 5) BILL 2005
2004-2005
The Parliament of the
Commonwealth of Australia
HOUSE OF REPRESENTATIVES
Presented and read a first time
Tax Laws Amendment (2005 Measures
No. 5) Bill 2005
No. , 2005
(Treasury)
A Bill for an Act to amend the law relating to
taxation, and for related purposes
i Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
Contents
1
Short title.......................................................................................1
2
Commencement .............................................................................1
3
Schedule(s)....................................................................................2
Schedule 1--Modifications to exemption for foreign earnings
3
Income Tax Assessment Act 1936
3
Schedule 2--Tax offset for Australian production expenditure
on television series
6
Income Tax Assessment Act 1997
6
Schedule 3--Consolidation
9
Part 1--Bad debts
9
Division 1--MEC groups
9
Income Tax Assessment Act 1997
9
Division 2--Deducting debt/equity swap loss
13
Income Tax Assessment Act 1997
13
Division 3--Consequential amendments
14
Financial Corporations (Transfer of Assets and Liabilities) Act 1993
14
Income Tax Assessment Act 1936
15
Income Tax Assessment Act 1997
16
Income Tax (Transitional Provisions) Act 1997
17
Part 2--Making and revoking certain choices
18
Income Tax (Transitional Provisions) Act 1997
18
Part 3--Application
20
Schedule 4--Thin capitalisation
21
Income Tax (Transitional Provisions) Act 1997
21
Schedule 5--Forestry managed investments
23
Income Tax Assessment Act 1936
23
Schedule 6--Debt and equity interests
24
Part 1--Related party at call etc. loans
24
Income Tax Assessment Act 1997
24
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 ii
Part 2--Technical amendments taken to have commenced on
1 July 2001
31
Income Tax Assessment Act 1936
31
Income Tax Assessment Act 1997
31
New Business Tax System (Debt and Equity) Act 2001
32
Part 3--Other technical amendments
34
Income Tax Assessment Act 1997
34
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 1
A Bill for an Act to amend the law relating to
1
taxation, and for related purposes
2
The Parliament of Australia enacts:
3
1 Short title
4
This Act may be cited as the Tax Laws Amendment (2005
5
Measures No. 5) Act 2005.
6
2 Commencement
7
(1) Each provision of this Act specified in column 1 of the table
8
commences, or is taken to have commenced, in accordance with
9
column 2 of the table. Any other statement in column 2 has effect
10
according to its terms.
11
12
2 Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
Commencement information
Column 1
Column 2
Column 3
Provision(s)
Commencement
Date/Details
1. Sections 1 to 3
and anything in
this Act not
elsewhere covered
by this table
The day on which this Act receives the
Royal Assent.
2. Schedules 1 to
5
The day on which this Act receives the
Royal Assent.
3. Schedule 6,
items 1 to 5
1 July 2005.
1 July 2005
4. Schedule 6,
item 6
Immediately after the commencement of the
New Business Tax System (Debt and Equity)
Act 2001.
1 July 2001
5. Schedule 6,
items 7 to 13
1 July 2005.
1 July 2005
6. Schedule 6,
Part 2
Immediately after the commencement of the
New Business Tax System (Debt and Equity)
Act 2001.
1 July 2001
7. Schedule 6,
Part 3
The day on which this Act receives the
Royal Assent.
Note:
This table relates only to the provisions of this Act as originally
1
passed by the Parliament and assented to. It will not be expanded to
2
deal with provisions inserted in this Act after assent.
3
(2) Column 3 of the table contains additional information that is not
4
part of this Act. Information in this column may be added to or
5
edited in any published version of this Act.
6
3 Schedule(s)
7
Each Act that is specified in a Schedule to this Act is amended or
8
repealed as set out in the applicable items in the Schedule
9
concerned, and any other item in a Schedule to this Act has effect
10
according to its terms.
11
Modifications to exemption for foreign earnings Schedule 1
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 3
1
Schedule 1--Modifications to exemption for
2
foreign earnings
3
4
Income Tax Assessment Act 1936
5
1 After subsection 23AG(1)
6
Insert:
7
(1A) A person is taken, for the purposes of subsection (1), to have been
8
engaged in foreign service for a continuous period of 91 days if:
9
(a) the person died at a time when he or she was engaged in
10
foreign service for a continuous period of less than 91 days;
11
and
12
(b) he or she would have otherwise continued to be engaged in
13
the foreign service; and
14
(c) his or her continuous period of engagement in the foreign
15
service would have otherwise been a period of at least 91
16
days.
17
2 After subsection 23AG(2)
18
Insert:
19
(2A) Subsection (2) does not apply in relation to foreign earnings to the
20
extent that the person derived them from foreign service in Iraq
21
after 31 December 2002 but before 1 May 2004.
22
3 Subsections 23AG(6A) to (6E)
23
Repeal the subsections, substitute:
24
(6A) 2 or more periods in which a person has been engaged in foreign
25
service are together taken to constitute a continuous period of
26
foreign service until:
27
(a) the end of the last of the 2 or more periods; or
28
(b) a time (if any), since the start of the first of the 2 or more
29
periods, when the person's total period of absence exceeds
1
/
6
30
of the person's total period of foreign service;
31
whichever happens sooner.
32
Example: Kate is engaged in foreign service for 20 days, is absent for 2 days and
33
is then engaged in foreign service for 10 days. These 2 periods of
34
Schedule 1 Modifications to exemption for foreign earnings
4 Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
foreign service constitute a continuous period of foreign service,
1
because the total period of absence is never more than
1
/
10
of the total
2
period of foreign service.
3
Kate is then absent for 5 days before commencing a further period of
4
foreign service. No matter how long the further period lasts, it can
5
never constitute a continuous period of foreign service with the first 2
6
periods of foreign service, because on the fourth day of the second
7
absence the total period of absence is
1
/
5
of the total period of foreign
8
service.
9
(6B) In subsection (6A):
10
total period of absence, in relation to a particular time, means the
11
number of days, in the period starting at the start of the first of the
12
2 or more periods and ending at that time, for which the person was
13
not engaged in foreign service.
14
total period of foreign service, in relation to a particular time,
15
means the number of days, in the period starting at the start of the
16
first of the 2 or more periods and ending at that time, for which the
17
person was engaged in foreign service.
18
4 Subsection 23AG(6J)
19
Repeal the subsection.
20
5 Application
21
(1)
The amendment made by item 1 is taken to have applied in relation to
22
deaths that occurred on or after 1 July 2004.
23
(2)
The amendment made by item 2 is taken to have applied to assessments
24
for the 2002-03 year of income and each subsequent year of income.
25
(3)
The amendments made by items 3 and 4 apply in relation to foreign
26
service performed on or after the day on which this Act received the
27
Royal Assent.
28
(4)
If, immediately before the day on which this Act received the Royal
29
Assent (the commencement day):
30
(a) a person had an absentee credit balance within the meaning
31
of subsection 23AG(6A) of the Income Tax Assessment Act
32
1936; or
33
(b) would have had such a balance if that subsection allowed for
34
an absentee credit balance to be a part of a day;
35
Modifications to exemption for foreign earnings Schedule 1
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 5
on the commencement day the person's total period of foreign service,
1
under subsections 23AG(6A) and (6B) of that Act as amended by this
2
Act, is increased by a number of days equivalent to:
3
(c) if, immediately before the commencement day, the person
4
was engaged in foreign service--the number of days, before
5
that day, in that continuous period of foreign service; or
6
(d) if paragraph (c) does not apply--the number of days in the
7
last continuous period of foreign service in which the person
8
was engaged before that day.
9
Schedule 2 Tax offset for Australian production expenditure on television series
6 Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
1
Schedule 2--Tax offset for Australian
2
production expenditure on television
3
series
4
5
Income Tax Assessment Act 1997
6
1 Subparagraph 376-15(1)(d)(ii)
7
Omit "; and", substitute "; or".
8
2 At the end of paragraph 376-15(1)(d)
9
Add:
10
(iii) a
*
television series that is not covered by
11
subparagraph (i) or (ii); and
12
3 Subparagraph 376-15(1)(e)(i)
13
Repeal the subparagraph, substitute:
14
(i) if the film is covered by subparagraph (d)(i) or (ii)--a
15
documentary; or
16
4 Subparagraph 376-15(1)(e)(v)
17
Repeal the subparagraph, substitute:
18
(v) if the film is covered by subparagraph (d)(i) or (ii)--a
19
film forming part of a drama program series that is, or is
20
intended to be, of a continuing nature; or
21
5 After paragraph 376-15(1)(e)
22
Insert:
23
(ea) if the film is a
*
television series that is not covered by
24
subparagraph (d)(i) or (ii):
25
(i) for a television series that is predominantly a digital
26
animation or other animation--the
*
making of the
27
television series (other than a pilot episode, if any, or
28
activities mentioned in paragraph 376-25(3)(a)) takes
29
place within a period of not longer than 36 months; or
30
(ii) otherwise--all principal photography for the television
31
series (other than a pilot episode, if any) takes place
32
within a period of not longer than 12 months; and
33
Tax offset for Australian production expenditure on television series Schedule 2
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 7
(eb) if the film is a
*
television series that is not covered by
1
subparagraph (d)(i) or (ii)--the amount worked out for the
2
film under subsection (3) is at least $1 million; and
3
6 At the end of section 376-15
4
Add:
5
(3) For the purposes of paragraph (1)(eb), the amount for a film is
6
worked out by using the formula:
7
Total QAPE
Duration of film in hours
8
where:
9
duration of film in hours means the total length of the film,
10
measured in hours.
11
total QAPE means the total of the company's
*
qualifying
12
Australian production expenditure on the film (worked out using
13
Subdivision 376-C).
14
7 After section 376-15
15
Insert:
16
376-17 Television series
17
(1) A television series is a
*
film made up of 2 or more episodes that:
18
(a) are produced wholly or principally for exhibition to the
19
public on television under a single title; and
20
(b) contain a common theme or themes; and
21
(c) contain dramatic elements that form a narrative structure; and
22
(d) meet the requirement in subsection (2).
23
Note:
A documentary can be a television series.
24
(2) The requirement is that all of the episodes must be produced
25
wholly or principally for exhibition together, for a national market
26
or national markets.
27
(3) To avoid doubt, and without limiting paragraph (1)(c), a
*
film
28
satisfies the requirement in that paragraph if:
29
Schedule 2 Tax offset for Australian production expenditure on television series
8 Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
(a) the sole or dominant purpose of the film is to depict actual
1
events, people or situations; and
2
(b) the film depicts those events, people or situations in a
3
dramatic or entertaining way, with a heavy emphasis on
4
dramatic impact or entertainment value.
5
(4) A pilot episode to a television series is taken to be a part of the
6
television series.
7
8 Subsection 376-25(5)
8
Omit "section 376-35", substitute "subsection 376-35(1)".
9
9 Subsection 376-25(6) (note)
10
Omit "section 376-35", substitute "subsection 376-35(1)".
11
10 Section 376-35
12
Before "Despite", add "(1)".
13
11 At the end of section 376-35
14
Add:
15
(2) Despite sections 376-25 and 376-30, the expenditure of a company
16
is not production expenditure of the company on a
*
film if:
17
(a) the film is a
*
television series that is not covered by
18
subparagraph 376-15(1)(d)(i) or (ii); and
19
(b) the expenditure is reasonably attributable to the production of
20
a pilot episode to the television series; and
21
(c) the expenditure, apart from this subsection, would be
22
production expenditure that was not
*
qualifying Australian
23
production expenditure.
24
12 Subsection 995-1(1)
25
Insert:
26
television series has the meaning given by section 376-17.
27
13 Application
28
The amendments made by this Schedule apply to production
29
expenditure incurred on and after 1 July 2004.
30
Consolidation Schedule 3
Bad debts Part 1
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 9
1
Schedule 3--Consolidation
2
Part 1--Bad debts
3
Division 1--MEC groups
4
Income Tax Assessment Act 1997
5
1 After Subdivision 719-H
6
Insert:
7
Subdivision 719-I--Bad debts
8
Guide to Subdivision 719-I
9
719-450 What this Subdivision is about
10
The head company of a MEC group is taken to meet the conditions
11
in section 165-123 (about maintaining the same ownership in an
12
ownership test period to be able to deduct a bad debt) if and only if
13
the top company for the group at the start of the period meets those
14
conditions for the period.
15
Table of sections
16
Maintaining the same ownership to be able to deduct bad debt
17
719-455 Special test for deducting a bad debt because a company maintains the same
18
owners
19
719-460 Assumptions about nothing happening to affect direct and indirect
20
ownership of the test company
21
719-465 Assumptions about the test company failing to meet the conditions in
22
section 165-123
23
Schedule 3 Consolidation
Part 1 Bad debts
10 Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
Maintaining the same ownership to be able to deduct bad debt
1
719-455 Special test for deducting a bad debt because a company
2
maintains the same owners
3
(1) This section has effect for the purposes of working out whether the
4
*
head company of a
*
MEC group:
5
(a) can deduct a debt it writes off as bad; or
6
(b) could have deducted a debt as described in subsection
7
709-215(2).
8
Note:
Whether the head company of the MEC group could have deducted a
9
debt as described in subsection 709-215(2) is relevant under
10
Subdivision 709-D to:
11
(a)
the question whether the head company can deduct the debt it
12
writes off as bad, or the swap loss it makes in extinguishing the
13
debt as part of a debt/equity swap, after the debt was owed to an
14
entity while the entity was not a member of the MEC group; and
15
(b)
the question whether an entity that was owed the debt after it was
16
owed to the head company can deduct the amount of the debt the
17
entity writes off as bad or the swap loss the entity makes in
18
extinguishing the debt as part of a debt/equity swap.
19
(2) The
*
head company is taken to meet the conditions in
20
section 165-123 (about the company maintaining the same owners)
21
for the
*
ownership test period if and only if the company (the test
22
company) that was the
*
top company for the
*
MEC group at the
23
start of the same period would have met those conditions for that
24
period on the assumptions in the following sections (if applicable):
25
(a) section 719-460 (which is about assuming that nothing
26
happened in relation to certain things that would affect
27
whether the test company would meet those conditions);
28
(b) section 719-465 (which is about assuming that the test
29
company would have failed to meet those conditions in
30
certain circumstances).
31
Note 1:
Even though subsection (2) of this section raises the issue whether the
32
test company meets the conditions in section 165-123, that is
33
determined by reference to:
34
(a)
the ownership test period for the head company of the MEC
35
group; and
36
(b)
the debt owed to the head company.
37
Note 2:
If this section is applying for the purposes of working out whether the
38
head company could have deducted a debt as described in subsection
39
Consolidation Schedule 3
Bad debts Part 1
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 11
709-215(2), section 709-215 affects what is the ownership test period
1
for the purposes of section 165-123 as it applies for those purposes.
2
Head company's failure to meet conditions in section 165-123
3
(3) The
*
head company is taken to fail to meet a condition in
4
section 165-123 only at:
5
(a) the first time the test company would have failed to meet the
6
condition on the relevant assumptions mentioned in
7
subsection (2); or
8
(b) the
*
test time described in section 166-40 for the test
9
company, if:
10
(i) Division 166 is relevant to working out whether the test
11
company met the conditions in section 165-123 on the
12
relevant assumption mentioned in paragraph (2)(a); and
13
(ii) the test company is not assumed under section 719-465
14
to fail to meet the condition before the test time.
15
Note 1:
If the head company is taken to fail to meet a condition in
16
section 165-123, the head company will not be able to deduct the debt
17
unless that company meets the condition in section 165-126 by
18
satisfying the same business test. That test applies to the head
19
company (and not the test company).
20
Note 2:
Section 719-285 may affect whether the head company satisfies the
21
same business test if there has been a change in the identity of the
22
head company of the group during the ownership test period.
23
Same business test for head company under Division 166
24
(4) If section 166-40 directly affects whether the
*
head company can
25
deduct the debt, the subsection of that section that requires the
26
*
same business test be applied to a particular
*
business operates as
27
if it required that test to be applied to the business the head
28
company carried on just before the time described in subsection (3)
29
of this section.
30
Note:
Section 166-40 has an indirect effect on whether the head company
31
can deduct the debt so far as that section affects whether the test
32
company meets the conditions in section 165-123 and therefore
33
whether the head company is taken to meet those conditions.
34
Schedule 3 Consolidation
Part 1 Bad debts
12 Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
719-460 Assumptions about nothing happening to affect direct and
1
indirect ownership of the test company
2
(1) This section sets out an assumption that must be made whenever
3
there is a change in the identity of the
*
top company for the
*
MEC
4
group during the
*
ownership test period.
5
(2) Assume that after the change nothing happens in relation to
6
*
membership interests or voting power in the following entities that
7
would affect whether the test company would meet the conditions
8
in section 165-123:
9
(a) the company that was the
*
top company for the
*
MEC group
10
before the change;
11
(b) an entity (if any) that at the time of the change was
12
interposed between:
13
(i) the company that was the top company for the MEC
14
group before the change; and
15
(ii) the company that became the top company for the MEC
16
group as part of the change.
17
719-465 Assumptions about the test company failing to meet the
18
conditions in section 165-123
19
(1) Assume that the test company fails to meet the conditions in
20
section 165-123 at the time an event described in subsection (2),
21
(3) or (4) happens after the start of the
*
ownership test period in
22
relation to:
23
(a) the
*
MEC group; or
24
(b) the
*
potential MEC group whose membership was the same
25
as the membership of the MEC group.
26
Note:
If the test company is assumed to fail to meet the conditions in
27
section 165-123, the head company of the MEC group is taken (under
28
section 719-455) to have failed to meet those conditions.
29
(2) One event is the
*
potential MEC group ceasing to exist.
30
(3) Another event is something happening that meets these conditions:
31
(a) the thing happens at a time in relation to
*
membership
32
interests in one or more of these entities:
33
(i) a company that was just before that time a
*
member of
34
the
*
MEC group and an
*
eligible tier-1 company of the
35
*
top company for the MEC group;
36
Consolidation Schedule 3
Bad debts Part 1
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 13
(ii) an entity interposed between a company described in
1
subparagraph (i) and the company that was the top
2
company for the group just before that time;
3
(b) the thing does not cause the
*
potential MEC group to cease to
4
exist but does cause a change in the identity of the top
5
company for the potential MEC group.
6
(4) Another event is the
*
MEC group ceasing to exist because there
7
ceases to be a
*
provisional head company of the group.
8
Other causes of failure to meet conditions in section 165-123
9
(5) To avoid doubt, this section does not limit the circumstances in
10
which the test company would have failed to meet the conditions in
11
section 165-123.
12
Division 2--Deducting debt/equity swap loss
13
Income Tax Assessment Act 1997
14
2 At the end of subsection 709-205(1)
15
Add:
16
Note:
This Subdivision affects similarly whether an entity that is or has been
17
a member of a consolidated group and extinguishes a debt as part of a
18
debt/equity swap may deduct a loss resulting from the swap. See
19
section 709-220.
20
3 At the end of Subdivision 709-D
21
Add:
22
Extension of Subdivision to debt/equity swap loss
23
709-220 Limit on deduction of swap loss
24
Object
25
(1) The object of this section is to limit the circumstances in which an
26
entity can deduct a swap loss (as defined in section 63E of the
27
Income Tax Assessment Act 1936) resulting from a debt/equity
28
swap (as defined in that section) to circumstances similar to those
29
in which this Subdivision lets an entity deduct a debt it writes off
30
as bad.
31
Schedule 3 Consolidation
Part 1 Bad debts
14 Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
Modified operation of sections 709-205, 709-210 and 709-215
1
(2) Sections 709-205, 709-210 and 709-215 (except subsection
2
709-215(2)) apply in relation to the extinction (however described)
3
of a debt as part of a debt/equity swap in the same way as they
4
apply in relation to the writing off of a debt as bad.
5
(3) Subsection 709-215(1):
6
(a) applies in relation to a swap loss from a debt/equity swap in
7
the same way as it applies in relation to a debt, or part of a
8
debt; and
9
(b) applies as if paragraph 709-215(1)(a) referred to subsection
10
63E(3) of the Income Tax Assessment Act 1936 instead of
11
sections 8-1 and 25-35.
12
(4) This section has effect despite subsection 63E(5) of the Income Tax
13
Assessment Act 1936.
14
Division 3--Consequential amendments
15
Financial Corporations (Transfer of Assets and Liabilities)
16
Act 1993
17
4 Subsection 22(2)
18
Omit "and 175-C", substitute ", 175-C, 709-D and 719-I".
19
5 Paragraph 22(3)(d)
20
Omit "Subdivision 165-C or 175-C, or both,", substitute "any one or
21
more of Subdivisions 165-C, 175-C, 709-D and 719-I".
22
6 Subsection 22(3)
23
Omit "neither Subdivision 165-C nor 175-C of that Act", substitute
24
"none of those Subdivisions".
25
7 Subsection 22(3) (at the end of the note)
26
Add:
27
Subdivision 709-D of that Act is about the conditions that must be met
28
for an entity to deduct a bad debt that has for a period been owed to a
29
member of a consolidated group and has for another period been owed
30
to an entity that was not a member of that group for the period.
31
Consolidation Schedule 3
Bad debts Part 1
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 15
Subdivision 719-I of that Act is about the conditions that must be met
1
for an entity to deduct a bad debt that has for a period been owed to a
2
member of a MEC group.
3
Income Tax Assessment Act 1936
4
8 Paragraph 427(b)
5
Omit "and 175-A", substitute ", 175-A, 709-D and 719-I".
6
9 Subsection 266-35(1) in Schedule 2F (note)
7
Repeal the note, substitute:
8
Note:
Subdivisions 709-D and 719-I of the Income Tax Assessment Act 1997
9
also affect when a trust that used to be a member of a consolidated
10
group or MEC group may deduct a debt that used to be owed to a
11
member of the group and that the trust writes off as bad.
12
10 Subsection 266-85(3) in Schedule 2F (note)
13
Repeal the note, substitute:
14
Note:
Subdivisions 709-D and 719-I of the Income Tax Assessment Act 1997
15
also affect when a trust that used to be a member of a consolidated
16
group or MEC group may deduct a debt that used to be owed to a
17
member of the group and that the trust writes off as bad.
18
11 Subsection 266-120(1) in Schedule 2F (note)
19
Repeal the note, substitute:
20
Note:
Subdivisions 709-D and 719-I of the Income Tax Assessment Act 1997
21
also affect when a trust that used to be a member of a consolidated
22
group or MEC group may deduct a debt that used to be owed to a
23
member of the group and that the trust writes off as bad.
24
12 Subsection 266-160(2) in Schedule 2F (note)
25
Repeal the note, substitute:
26
Note:
Subdivisions 709-D and 719-I of the Income Tax Assessment Act 1997
27
also affect when a trust that used to be a member of a consolidated
28
group or MEC group may deduct a debt that used to be owed to a
29
member of the group and that the trust writes off as bad.
30
13 Subsection 267-25(1) in Schedule 2F (note)
31
Repeal the note, substitute:
32
Note:
Subdivisions 709-D and 719-I of the Income Tax Assessment Act 1997
33
also affect when a trust that used to be a member of a consolidated
34
Schedule 3 Consolidation
Part 1 Bad debts
16 Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
group or MEC group may deduct a debt that used to be owed to a
1
member of the group and that the trust writes off as bad.
2
14 Subsection 267-65(1) in Schedule 2F (note)
3
Repeal the note, substitute:
4
Note:
Subdivisions 709-D and 719-I of the Income Tax Assessment Act 1997
5
also affect when a trust that used to be a member of a consolidated
6
group or MEC group may deduct a debt that used to be owed to a
7
member of the group and that the trust writes off as bad.
8
15 Paragraph 271-60(5)(a) in Schedule 2F
9
After "165-C", insert ", 709-D or 719-I".
10
Income Tax Assessment Act 1997
11
16 Section 12-5 (table item headed "bad debts")
12
Omit:
13
debt/equity swaps ............................................................. 63E, 63F
deduction of a debt that used to be owed to a member of
a consolidated group by an entity that used to be a
member of the group...................................................
Subdivision 709-D
substitute:
14
debt/equity swaps ............................................................. 63E, 63F, 709-220
deduction of a debt that used to be owed to a member of
a consolidated group or MEC group by an entity that
used to be a member of the group ................................
Subdivisions 709-D
and 719-I
17 Subsection 25-35(5) (table item 6)
15
Repeal the item, substitute:
16
6
An entity that used to be a member of a
consolidated group or MEC group can
deduct a bad debt that used to be owed to
a member of the group only if certain
conditions are met
Subdivisions 709-D
and 719-I
18 Subsection 165-120(1) (note 3)
17
Repeal the note, substitute:
18
Note 3:
Subdivisions 709-D and 719-I modify how this Subdivision operates
19
in relation to a company that used to be a member of a consolidated
20
group or MEC group and that writes off as bad a debt that used to be
21
owed to a member of the group.
22
Consolidation Schedule 3
Bad debts Part 1
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 17
19 Subparagraph 709-215(2)(c)(ii)
1
Repeal the subparagraph, substitute:
2
(ii) section 63G of the Income Tax Assessment Act 1936;
3
(iii) section 267-65 in Schedule 2F to that Act.
4
Income Tax (Transitional Provisions) Act 1997
5
20 At the end of Division 719
6
Add:
7
Subdivision 719-I--Bad debts
8
Table of sections
9
719-450 Application of Subdivision 719-I of the Income Tax Assessment Act 1997
10
719-450 Application of Subdivision 719-I of the Income Tax
11
Assessment Act 1997
12
Subdivision 719-I of the Income Tax Assessment Act 1997 applies
13
on and after 1 July 2002.
14
Schedule 3 Consolidation
Part 2 Making and revoking certain choices
18 Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
1
Part 2--Making and revoking certain choices
2
Income Tax (Transitional Provisions) Act 1997
3
21 Paragraph 701-5(2)(b)
4
Omit "2004", substitute "2005".
5
22 Paragraph 701-5(4)(a)
6
Omit "2004", substitute "2005".
7
23 Paragraph 707-145(a)
8
Omit "2005", substitute "2006".
9
24 Paragraph 707-325(5)(b)
10
Omit "2004", substitute "2005".
11
25 Subsection 707-325(6)
12
Omit "2004", substitute "2005".
13
26 Subparagraph 707-327(5)(a)(ii)
14
Omit "2004", substitute "2005".
15
27 Paragraph 707-327(5)(b)
16
Omit "2004", substitute "2005".
17
28 Subparagraph 707-328A(4)(a)(ii)
18
Omit "2004", substitute "2005".
19
29 Paragraph 707-328A(4)(b)
20
Omit "2004", substitute "2005".
21
30 Paragraph 707-350(5)(b)
22
Omit "2004", substitute "2005".
23
31 Subsection 707-350(6)
24
Omit "2004", substitute "2005".
25
Consolidation Schedule 3
Making and revoking certain choices Part 2
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 19
32 Section 719-310
1
Omit "2005", substitute "2006".
2
Schedule 3 Consolidation
Part 3 Application
20 Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
1
Part 3--Application
2
33 Application
3
The amendments made by this Schedule apply on and after 1 July 2002.
4
Thin capitalisation Schedule 4
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 21
1
Schedule 4--Thin capitalisation
2
3
Income Tax (Transitional Provisions) Act 1997
4
1 At the end of Division 820
5
Add:
6
820-45 Transitional provision--accounting standards and
7
prudential standards
8
(1) This section applies to 3 consecutive income years of an entity
9
beginning on or after 1 January 2005.
10
(2) Subject to subsection (3), the entity may choose, for any or all of
11
those income years, to use the accounting standards in force under
12
the Corporations Act 2001 immediately before 1 January 2005
13
(rather than the current accounting standards) for the purpose of
14
calculating amounts applicable to the entity under Division 820 of
15
the Income Tax Assessment Act 1997.
16
Note 1:
Making the choice for an income year does not require the entity to
17
maintain a full set of accounts based on those old accounting
18
standards.
19
Note 2:
The choice is only for the purposes of calculating amounts for the
20
purposes of the thin capitalisation regime.
21
(3) If the entity makes a choice under subsection (2) for an income
22
year but an associate entity of that entity does not, the entity may,
23
in working out its associate entity excess amount so far as it relates
24
to that associate entity at a time in that year, use either the
25
accounting standards in force under the Corporations Act 2001
26
immediately before 1 January 2005 or the current accounting
27
standards.
28
(4) If an ADI makes a choice under subsection (2) for an income year,
29
the ADI must also choose to use for that year the prudential
30
standards in force under the Banking Act 1959 immediately before
31
1 January 2005 (rather than the current prudential standards) for
32
the purpose of calculating amounts applicable to the ADI under
33
Division 820 of the Income Tax Assessment Act 1997.
34
Schedule 4 Thin capitalisation
22 Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
Note 1:
Making the choice for an income year does not require the entity to
1
maintain capital adequacy calculations based on those old prudential
2
standards.
3
Note 2:
The choice is only for the purposes of calculating amounts for the
4
purposes of the thin capitalisation regime.
5
(5) For an income year for which an entity does not make a choice
6
under subsection (2), the current accounting standards will be used
7
for the purpose of calculating amounts applicable to the entity
8
under Division 820 of the Income Tax Assessment Act 1997.
9
(6) For an income year for which an ADI does not make a choice
10
under subsection (2), the current prudential standards will be used
11
for the purpose of calculating amounts applicable to the ADI under
12
Division 820 of the Income Tax Assessment Act 1997.
13
Forestry managed investments Schedule 5
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 23
1
Schedule 5--Forestry managed investments
2
3
Income Tax Assessment Act 1936
4
1 Paragraph 82KZMG(2)(a)
5
Omit "30 June 2006", substitute "30 June 2008".
6
Schedule 6 Debt and equity interests
Part 1 Related party at call etc. loans
24 Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
1
Schedule 6--Debt and equity interests
2
Part 1--Related party at call etc. loans
3
Income Tax Assessment Act 1997
4
1 At the end of subsection 164-10(1)
5
Add:
6
; or (c) a
*
debt interest in the company changes at a particular time
7
(the change time) to an
*
equity interest in the company
8
because of subsection 974-110(1) or (2); or
9
(d) the following conditions are satisfied in relation to an interest
10
in the company:
11
(i) immediately before subsection 974-75(4) ceases to have
12
effect, the interest is taken to be a debt interest in the
13
company because of that subsection;
14
(ii) the interest is an equity interest in the company at the
15
time (the change time) that is immediately after that
16
cessation;
17
(iii) subsection 974-75(6) does not apply to the interest in
18
relation to the income year that includes the change
19
time; or
20
(e) the following conditions are satisfied in relation to an interest
21
in the company:
22
(i) subsection 974-75(6) applies to the interest in relation to
23
a particular income year;
24
(ii) that subsection does not apply to the interest in relation
25
to the next income year;
26
(iii) the interest is an equity interest in the company at the
27
time (the change time) that is the start of that next
28
income year.
29
2 Subsection 164-15(2)
30
Repeal the subsection, substitute:
31
(2) If paragraph 164-10(1)(c), (d) or (e) applies in relation to a
32
particular interest in the company, there is a credit to the
33
Debt and equity interests Schedule 6
Related party at call etc. loans Part 1
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 25
*
non-share capital account at the change time referred to in that
1
paragraph of an amount equal to:
2
Share capital
Amount received -
- Amount returned
account credit
3
where:
4
amount received is the market value, when it was provided, of the
5
consideration the company received for the issue of the interest.
6
amount returned is so much of the amount received as has been
7
returned to a holder of the interest before the change time.
8
share capital account credit is the amount of any credit made to
9
the company's share capital account in respect of the issue of the
10
interest.
11
3 At the end of section 164-15
12
Add:
13
(5) To avoid doubt, if:
14
(a) it appears that a credit to the company's
*
non-share capital
15
account has arisen under this section because an interest in
16
the company appears to be, or have become, an
*
equity
17
interest at a time in a particular income year; and
18
(b) because subsection 974-75(6) or 974-110(1A) is
19
subsequently found to apply in relation to the interest and
20
that income year, the interest was not in fact, or did not in
21
fact become, an equity interest at that time;
22
the credit referred to in paragraph (a) is taken never to have arisen.
23
4 Subsection 164-20(3)
24
Repeal the subsection, substitute:
25
(3) If:
26
(a) an
*
equity interest in the company changes at a particular
27
time (the change time) to a
*
debt interest in the company
28
because of subsection 974-110(1) or (2); or
29
(b) an equity interest in the company changes to a debt interest in
30
the company, with effect from a time (the change time) that
31
is the start of a particular income year, because of subsection
32
974-110(1A); or
33
Schedule 6 Debt and equity interests
Part 1 Related party at call etc. loans
26 Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
(c) the following conditions are satisfied in relation to an interest
1
in the company:
2
(i) subsection 974-75(6) does not apply to the interest in
3
relation to a particular income year;
4
(ii) the interest is an equity interest in the company at the
5
end of that income year;
6
(iii) subsection 974-75(6) applies to the interest from the
7
time (the change time) that is the start of the next
8
income year;
9
there is, or is taken to have been, a debit to the
*
non-share capital
10
account at the change time equal to:
11
Credits in relation to
Debits in relation to
-
the interest
the interest
12
where:
13
credits in relation to the interest is the sum of all the credits that
14
have been made to the
*
non-share capital account in relation to the
15
interest before the change time.
16
debits in relation to the interest is the sum of all the debits that
17
have been made to the
*
non-share capital account in relation to the
18
interest before the change time.
19
5 At the end of section 164-20
20
Add:
21
(4) To avoid doubt, if:
22
(a) it appears that a debit to the company's
*
non-share capital
23
account has arisen because an interest in the company
24
appears to be, or have become, a
*
debt interest at a time in a
25
particular income year; and
26
(b) because subsection 974-75(6) or 974-110(1A) is
27
subsequently found not to apply in relation to the interest and
28
that income year, the interest was not in fact, or did not in
29
fact become, a debt interest at that time;
30
the debit referred to in paragraph (a) is taken never to have arisen.
31
6 Paragraph 974-75(4)(c)
32
Repeal the paragraph, substitute:
33
(c) either:
34
Debt and equity interests Schedule 6
Related party at call etc. loans Part 1
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 27
(i) the loan is repayable on demand made by the connected
1
entity, and repayment is required immediately on the
2
making of the demand, or is required at the end of a
3
particular period after the demand is made (being a
4
period that is not longer than is reasonably necessary to
5
arrange repayment); or
6
(ii) the loan is repayable on the death of the connected
7
entity (if the connected entity is an individual); and
8
7 At the end of subsection 974-75(4)
9
Add:
10
Note:
If this subsection ceases to have effect in relation to an interest that is,
11
according to the other provisions of this Division, an equity interest
12
immediately after the cessation, an adjustment to the company's
13
non-share capital account will occur at that time (see subsection
14
164-15(2)).
15
8 At the end of section 974-75
16
Add:
17
Further exception for certain related party at call loans
18
(6) In applying this Division in relation to a particular
*
scheme and a
19
particular income year (which may be the income year in which the
20
scheme is entered into or a later income year), the scheme is taken
21
not to give rise to an equity interest in a company, and instead to
22
give rise to a debt interest in the company, if:
23
(a) the scheme takes the form of a loan to the company that
24
satisfies paragraphs (4)(a), (b) and (c); and
25
(b) the company's annual turnover (worked out at the end of the
26
income year) is less than $20,000,000.
27
Note:
If this subsection does not apply in relation to the previous income
28
year or the next income year, and the scheme gives rise to an equity
29
interest according to the other provisions of this Division, an
30
adjustment to the company's non-share capital account will occur at
31
the end of the previous income year or the start of the next income
32
year (see subsections 164-15(2) and 164-20(3)).
33
(7) For the purpose of paragraph (6)(b), the question whether a
34
company's annual turnover (worked out at the end of an income
35
year) is less than $20,000,000 is to be determined in accordance
36
with subsection 188-10(2) of the
*
GST Act, as if that amount of
37
Schedule 6 Debt and equity interests
Part 1 Related party at call etc. loans
28 Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
$20,000,000 were a turnover threshold for the purposes of that
1
subsection of the GST Act.
2
9 Subsection 974-110(1) (heading)
3
Repeal the heading, substitute:
4
Change to existing scheme--general rule
5
10 After paragraph 974-110(1)(c)
6
Insert:
7
and (d) subsection (1A) does not apply to the change;
8
11 After subsection 974-110(1)
9
Insert:
10
Change to existing scheme--special rule for changing a related
11
party at call etc. loan to a private company from equity to debt
12
(1A) If:
13
(a) a
*
scheme takes the form of a loan that satisfies paragraphs
14
974-75(4)(a), (b) and (c); and
15
(b) the scheme gives rise to an
*
equity interest (disregarding the
16
effect this subsection has on the characterisation of the
17
interest because of the change referred to in paragraph (c) of
18
this subsection); and
19
(c) the scheme is subsequently changed; and
20
(d) the change occurs in the period starting immediately after the
21
end of a particular income year (the year of effect) and
22
ending at the end of the earlier of the following days:
23
(i) the due date for lodgment of the company's return of
24
income for the year of effect;
25
(ii) the date of lodgment of the company's return of income
26
for the year of effect; and
27
(e) the scheme, as it exists immediately after the change, would
28
give rise to a
*
debt interest in the company if the interest
29
came into existence when the change occurred; and
30
(f) the company is a
*
private company in relation to the year of
31
effect; and
32
(g) subsection 974-75(6) does not apply in relation to the loan
33
and the year of effect; and
34
Debt and equity interests Schedule 6
Related party at call etc. loans Part 1
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 29
(h) the company elects that this subsection is to apply to the
1
change;
2
this Division applies as if the scheme, as it exists immediately after
3
the change, had come into existence at the start of the year of
4
effect, and as if no other change of a kind referred to in
5
subsection (1) had occurred in relation to the interest in the period
6
commencing at the start of the year of effect and ending when the
7
first-mentioned change was made.
8
Note 1:
This will mean that:
9
(a)
the characterisation of the interest will change, with effect back
10
to the start of the year of effect; and
11
(b)
that characterisation will not be affected by other changes that
12
occurred after the start of the year of effect and before the change
13
to which this subsection applies.
14
Note 2:
This section can apply to an interest a number of times so that, for
15
example, an interest that is an equity interest when issued may change
16
to debt because of one subsequent change and then back to equity
17
because of a later change.
18
Note 3:
An adjustment to the company's non-share capital account will be
19
taken to have occurred at the start of the year of effect (see subsection
20
164-20(3)).
21
(1B) An election for the purposes of paragraph (1A)(h):
22
(a) must be in writing; and
23
(b) can only be made in the period referred to in
24
paragraph (1A)(d); and
25
(c) cannot be revoked.
26
12 Subsection 974-110(3)
27
Omit "and (2)(c)", substitute ", (1A)(e) and (2)(c)".
28
13 Application of amendments
29
(1)
The amendments made by the items in this Part, other than item 6,
30
apply to:
31
(a) schemes entered into on or after 1 July 2005; and
32
(b) schemes entered into before 1 July 2005, in so far as they
33
continue to exist on and after 1 July 2005.
34
(2)
The amendment made by item 6 applies in accordance with item 118 of
35
Schedule 1 to the New Business Tax System (Debt and Equity) Act
36
Schedule 6 Debt and equity interests
Part 1 Related party at call etc. loans
30 Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
2001, as though the amendment were one of the debt and equity test
1
amendments within the meaning of item 118 of that Schedule.
2
Debt and equity interests Schedule 6
Technical amendments taken to have commenced on 1 July 2001 Part 2
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 31
1
Part 2--Technical amendments taken to have
2
commenced on 1 July 2001
3
Income Tax Assessment Act 1936
4
14 Subsection 160AOA(2)
5
Omit "paragraphs (aaa) and (da)", substitute "paragraph (aaa)".
6
15 Subsection 160APAAAB(6)
7
Omit "paragraph (c)", substitute "paragraph (d)".
8
Income Tax Assessment Act 1997
9
16 Paragraph 104-35(5)(c)
10
After "
*
equity interests", insert "or non-equity shares (within the
11
meaning of the Income Tax Assessment Act 1936)".
12
17 Paragraph 104-35(5)(e)
13
After "equity interests", insert ", non-equity shares (within the meaning
14
of the Income Tax Assessment Act 1936)".
15
18 Paragraph 104-155(5)(c)
16
After "
*
equity interests", insert "or non-equity shares (within the
17
meaning of the Income Tax Assessment Act 1936)".
18
19 Paragraph 104-155(5)(e)
19
After "equity interests", insert ", non-equity shares (within the meaning
20
of the Income Tax Assessment Act 1936)".
21
20 Section 109-10 (table item 2, column headed "In these
22
circumstances:")
23
After "
*
equity interests", insert "or non-equity shares (within the
24
meaning of the Income Tax Assessment Act 1936)".
25
21 Section 109-10 (table item 2, column headed "You acquire
26
the asset at this time:")
27
After "equity interests", insert "or non-equity shares".
28
Schedule 6 Debt and equity interests
Part 2 Technical amendments taken to have commenced on 1 July 2001
32 Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
22 At the end of section 974-75
1
Add:
2
(5) If, while subsection (4) applies to a
*
financing arrangement, a
3
circumstance occurs that would otherwise have attracted the
4
operation of subsection 974-110(1) or (2) in relation to the
5
arrangement:
6
(a) that subsection of section 974-110 does not apply to change
7
the result that subsection (4) of this section produces in
8
relation to the arrangement; but
9
(b) for the purpose of applying this Division in relation to the
10
arrangement after subsection (4) of this section has ceased to
11
have effect, that subsection of section 974-110 is taken to
12
have produced the result that it would have produced if
13
subsection (4) of this section had not applied to the
14
arrangement.
15
23 Subsection 974-105(1) (example)
16
Omit "section 974-20", substitute "section 974-70".
17
24 Subsections 974-110(1) and (2) (note 3)
18
Omit "164-20(4)", substitute "164-20(3)".
19
25 Application of amendments made by items 14 to 24
20
The amendments made by items 14 to 24 apply in accordance with
21
item 118 of Schedule 1 to the New Business Tax System (Debt and
22
Equity) Act 2001, as though those amendments were debt and equity
23
test amendments within the meaning of item 118 of that Schedule.
24
New Business Tax System (Debt and Equity) Act 2001
25
26 Subitem 118(2) of Schedule 1
26
Omit "any election made under".
27
27 Subitem 118(9) of Schedule 1
28
Repeal the subitem, substitute:
29
(9)
If paragraph (6)(a) applies to an interest:
30
(a) paragraph 164-10(1)(b) of the Income Tax Assessment Act
31
1997 applies to the interest as if the second reference in that
32
Debt and equity interests Schedule 6
Technical amendments taken to have commenced on 1 July 2001 Part 2
Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005 33
paragraph to "1 July 2001" were instead a reference to
1
"1 July 2004"; and
2
(b) section 164-15 of the Income Tax Assessment Act 1997
3
applies to the interest as if the following references were
4
instead references to "1 July 2004":
5
(i) the first reference in subsection 164-15(3) to "1 July
6
2001";
7
(ii) the reference in subsection 164-15(3) to "that day";
8
(iii) the references in paragraph 164-15(3)(b) and subsection
9
164-15(4) to "1 July 2001".
10
Schedule 6 Debt and equity interests
Part 3 Other technical amendments
34 Tax Laws Amendment (2005 Measures No. 5) Bill 2005 No. , 2005
1
Part 3--Other technical amendments
2
Income Tax Assessment Act 1997
3
28 Paragraph 104-35(5)(c)
4
Omit "non-equity shares (within the meaning of the Income Tax
5
Assessment Act 1936)", substitute "
*
non-equity shares".
6
29 Paragraph 104-35(5)(e)
7
Omit "(within the meaning of the Income Tax Assessment Act 1936)".
8
30 Paragraph 104-155(5)(c)
9
Omit "non-equity shares (within the meaning of the Income Tax
10
Assessment Act 1936)", substitute "
*
non-equity shares".
11
31 Paragraph 104-155(5)(e)
12
Omit "(within the meaning of the Income Tax Assessment Act 1936)".
13
32 Section 109-10 (table item 2, column headed "In these
14
circumstances:")
15
Omit "non-equity shares (within the meaning of the Income Tax
16
Assessment Act 1936)", substitute "
*
non-equity shares".
17