TAX LAWS AMENDMENT (2008 MEASURES NO. 5) BILL 2008

i Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008

Contents

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

Commencement .................................................................................. 1

Schedule(s) ......................................................................................... 1

Schedule 1--Goods and services tax and real property

A New Tax System (Goods and Services Tax) Act 1999

Schedule 2--Thin capitalisation and inte rnational financial

reporting standards

Income Tax Assessment Act 1997

Schedule 3--Interest withholding tax and state government

bonds

Income Tax Assessment Act 1936

Schedule 4--Fringe benefits tax

Part 1--Main amendments

Fringe Benefits Tax Assessment Act 1986

Part 2--Technical amendments

Fringe Benefits Tax Assessment Act 1986

Schedule 5--Eligible investment business rules

Income Tax Assessment Act 1936

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 1

A Bill for an Act to amend the law relating to

taxation, and for related purposes

The Parliament of Australia enacts:

1 Short title

This Act may be cited as the Tax Laws Amendment (2008

Measures No. 5) Act 2008.

2 Commence ment

This Act commences on the day on which it receives the Royal

Assent.

3 Schedule(s)

Each Act that is specified in a Schedule to this Act is amended or

repealed as set out in the applicable items in the Schedule

Goods and services tax and real property Schedule 1

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 3

Schedule 1

Goods and services tax and real

property

A New Tax System (Goods and Services Tax) Act 1999

1 After subsection 75-5(1A)

Insert:

(1B) A supply that you make to your

associate is taken for the purposes

of subsection (1) to be a sale to your associate whether or not the

supply is for

consideration.

2 At the end of subsection 75-5(3)

Add:

; or (e) it is a supply in relation to which all of the following apply:

(i) you acquired the interest, unit or lease from an entity as,

or as part of, a

supply of a going concern to you that

was

GST-free under Subdivision 38-J;

(ii) the entity was

registered or

required to be registered,

at the time of the acquisition;

(iii) the entity had acquired the entire interest, unit or lease

through a taxable supply on which the GST was worked

out without applying the margin scheme; or

(f) it is a supply in relation to which all of the following apply:

(i) you acquired the interest, unit or lease from an entity as,

or as part of, a supply to you that was GST-free under

Subdivision 38-O;

(ii) the entity was registered or required to be registered, at

the time of the acquisition;

(iii) the entity had acquired the entire interest, unit or lease

through a taxable supply on which the GST was worked

out without applying the margin scheme; or

(g) it is a supply in relation to which all of the following apply:

(i) you acquired the interest, unit or lease from an entity

who was your

associate, and who was registered or

required to be registered, at the time of the acquisition;

Schedule 1 Goods and services tax and real p roperty

4 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008

(ii) the acquisition from your associate was without

consideration;

(iii) the supply by your associate was not a taxable supply;

(iv) your associate made the supply in the course or

furtherance of an

enterprise that your associate

carried

on;

(v) your associate had acquired the entire interest, unit or

lease through a taxable supply on which the GST was

worked out without applying the margin scheme.

3 After subsection 75-5(3)

Insert:

(3A) Subparagraphs (3)(g)(iii) and (iv) do not apply if the acquisition

from your

associate was not by means of a supply by your

associate.

4 After subsection 75-11(4)

Insert:

Margin for supply of real property acquired as a GST-free going

concern or as GST-free farm land

(5) If:

(a) you acquired the interest, unit or lease in question from an

entity as, or as part of:

(i) a

supply of a going concern to you that was

GST-free

under Subdivision 38-J; or

(ii) a supply to you that was GST-free under

Subdivision 38-O; and

(b) the entity was

registered or

required to be registered, at the

time of the acquisition; and

the margin for the supply you make is the amount by which the

consideration for the supply exceeds:

(d) if that entity had acquired the interest, unit or lease before

1 July 2000 and on that day was registered or required to be

registered:

Goods and services tax and real property Schedule 1

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 5

(i) if you choose to apply an

approved valuation to work

out the margin for the supply--an approved valuation of

the interest, unit or lease as at 1 July 2000; or

(ii) if subparagraph (i) does not apply--the

GST inclusive

market value of the interest, unit or lease as at 1 July

2000; or

(e) if that entity had acquired the interest, unit or lease on or after

1 July 2000 and had been registered or required to be

registered at the time of the acquisition:

(i) if the entity's acquisition was for consideration and you

choose to apply an approved valuation to work out the

margin for the supply--an approved valuation of the

interest, unit or lease as at the day on which the entity

had acquired it; or

(ii) if the entity's acquisition was for consideration and

subparagraph (i) does not apply--that consideration; or

(iii) if the entity's acquisition was without consideration--

the GST inclusive market value of the interest, unit or

lease as at the time of the acquisition; or

(f) if that entity had not been registered or required to be

registered at the time of the entity's acquisition of the

interest, unit or lease (and paragraph (d) does not apply):

(i) if you choose to apply an approved valuation to work

out the margin for the supply--an approved valuation of

the interest, unit or lease as at the first day on which the

entity was registered or required to be registered; or

(ii) if subparagraph (i) does not apply--the GST inclusive

market value of the interest, unit or lease as at that day.

Margin for supply of real property acquired from associate

(6) If:

(a) you acquired the interest, unit or lease in question from an

entity who was your

associate, and who was

registered or

required to be registered, at the time of the acquisition; and

(b) the acquisition from your associate was without

consideration; and

taxable supply; and

(d) your associate made the supply in the course or furtherance

of an

enterprise that your associate

carried on; and

Schedule 1 Goods and services tax and real p roperty

6 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008

(e) none of subsections (1) to (5) applies;

the margin for the supply you make is the amount by which the

consideration for the supply exceeds:

(f) if your associate had acquired the interest, unit or lease

before 1 July 2000 and on that day was registered or required

to be registered:

(i) if you choose to apply an

approved valuation to work

out the margin for the supply--an approved valuation of

the interest, unit or lease as at 1 July 2000; or

(ii) if subparagraph (i) does not apply--the

GST inclusive

market value of the interest, unit or lease as at 1 July

2000; or

(g) if your associate had acquired the interest, unit or lease on or

after 1 July 2000 and had been registered or required to be

registered at the time of the acquisition:

(i) if your associate's acquisition was for consideration and

you choose to apply an approved valuation to work out

the margin for the supply--an approved valuation of the

interest, unit or lease as at the day on which your

associate had acquired it; or

(ii) if your associate's acquisition was for consideration and

subparagraph (i) does not apply--that consideration; or

(iii) if your associate's acquisition was without

consideration--the GST inclusive market value of the

interest, unit or lease at the time of the acquis ition; or

(h) if your associate had not been registered or required to be

registered at the time of your associate's acquisition of the

interest, unit or lease (and paragraph (f) does not apply):

(i) if you choose to apply an approved valuation to work

out the margin for the supply--an approved valuation of

the interest, unit or lease as at the first day on which the

entity was registered or required to be registered; or

(ii) if subparagraph (i) does not apply--the GST inclusive

market value of the interest, unit or lease as at that day.

(6A) Paragraphs (6)(c) and (d) do not apply if the acquisition from your

associate was not by means of a supply by your associate.

(6B) To avoid doubt, you cannot be taken, for the purposes of

paragraph (5)(f) or (6)(h), to be

registered or

required to be

registered on a day earlier than 1 July 2000.

Goods and services tax and real property Schedule 1

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 7

5 Subsection 75-11(7) (heading)

Repeal the heading.

6 Subsection 75-11(8)

Omit "Subsection (7)", substitute "Subsection (6) or (7)".

7 Subsection 75-11(8)

Omit "subsection (7)", substitute "that subsection".

8 Section 75-13

After "for the supply", insert "(whether or not the supply was for

consideration)".

9 After section 75-15

Insert:

75-16 Margins for supplies of real property acquired through

several acquisitions

(1) If:

(a) you make a

taxable supply of

real property under the

margin scheme; and

(b) the interest, unit or lease in question is one that you acquired

through 2 or more acquisitions (partial acquisitions); and

in relation to such a partial acquisition, or would so apply if

the partial acquisition had been an acquisition of the whole of

the interest, unit or lease:

(i) section 75-10;

(ii) subsection 75-11(1), (2), (2A), (2B), (3), (4), (5), (6) or

(7);

the margin provision applies, in working out the margin for the

supply you make, only to the extent that the supply is connected to

the partial acquisition.

(2) The application of a margin provision in relation to one of the

partial acquisitions does not prevent that margin provision or a

different margin provision applying in relation to another of the

partial acquisitions.

Schedule 1 Goods and services tax and real p roperty

8 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008

10 At the end of section 75-22

Add:

(3) You have an increasing adjustment if:

(a) you make a

taxable supply of

real property under the

margin scheme; and

(b) an acquisition that you made of part of the interest, unit or

lease in question was made through a supply that was

ineligible for the margin scheme because of paragraph

75-5(3)(e), (f) or (g); and

entitled to an input tax credit for its acquisition.

(4) You have an increasing adjustment if:

(a) you make a

taxable supply of

real property under the

margin scheme; and

(b) the acquisition that you made of the interest, unit or lease in

question:

(i) was made through a supply that was

GST-free under

Subdivision 38-J or Subdivision 38-O; or

(ii) was made through a supply (other than a taxable supply)

from your

associate without

consideration and in the

course or furtherance of an

enterprise that your

associate

carried on; or

(iii) was made from your associate but not by means of a

supply from your associate; and

(i) acquired part of the interest, unit or lease through a

supply that would have been

ineligible for the margin

scheme if it had been a supply of the whole of the

interest, unit or lease; and

(ii) had been entitled to an input tax credit for its

acquisition; and

(iii) was

registered or

required to be registered, at the time

of your acquisition of the interest, unit or lease.

(5) The amount of the

increasing adjustment under subsection (3) or

(4) is an amount equal to

of:

(a) if you choose to apply an

approved valuation to work out the

amount--an approved valuation of the part of the interest,

Goods and services tax and real property Schedule 1

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 9

unit or lease referred to in paragraph (3)(b) or

subparagraph (4)(c)(i) as at the day on which the entity had

acquired it; or

(b) otherwise--the

consideration for the entity's acquisition of

that part of the interest, unit or lease.

11 At the end of section 165-5

Add:

Creating circumstances or states of affairs

(3) A

GST benefit that the avoider gets or got from a

scheme is not

taken, for the purposes of paragraph (1)(b), to be attributable to a

choice, election, application or agreement of a kind referred to in

that paragraph if:

(a) the scheme, or part of the scheme, was entered into or carried

out for the sole or dominant purpose of creating a

circumstance or state of affairs; and

(b) the existence of the circumstance or state of affairs is

necessary to enable the choice, election, application or

agreement to be made.

12 Section 195-1 (definition of margin)

Omit "and 75-11", substitute ", 75-11 and 75-16".

13 Application

(1)

The amendments made by items 1 to 10 and 12 of this Schedule apply

in relation to supplies that are supplies of things that the supplier

acquired through a new supply to the supplier.

(2)

Division 75 of the A New Tax System (Goods and Services Tax) Act

1999 as in force immediately before the commencement of this

Schedule continues to apply in relation to supplies that are not supplies

of things that the supplier acquired through a new supply to the

supplier.

(3)

The amendment made by item 11 of this Schedule applies in relation to

choices, elections, applications and agreements made on or after the

commencement of this Schedule.

(4)

In this item:

Schedule 1 Goods and services tax and real p roperty

10 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008

new supply means a supply that:

(a) is made on or after the commencement of this Schedule; and

(b) is not made:

(i) under a written agreement entered into before that

commencement; or

(ii) pursuant to a right or option granted before that

commencement;

that specifies in writing the consideration, or a way of

working out the consideration, for the supply.

Thin capitalisation and international financial reporting standards Schedule 2

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 11

Schedule 2

Thin capitalisation and

international financial reporting

standards

Income Tax Assessment Act 1997

1 At the end of subsection 820-680(1)

Add:

Note:

This requirement to comply with the accounting standards is modified

in certain cases (see sections 820-682, 820-683 and 820-684).

2 At the end of subsection 820-680(1A)

Add:

Note:

This application of the accounting standards is modified in certain

cases (see sections 820-682 and 820-683).

3 Subsection 820-680(2) (note)

Repeal the note, substitute:

Note 1:

The entity must also keep records in accordance with section 820-985

about the revaluation, unless the exception in subsection (2A) of this

section applies.

Note 2:

This subsection also applies to some revaluations that are not allowed

by the accounting standards (see subsection 820-684(5)).

4 At the end of subsection 820-680(2B)

Add:

Note:

This subsection also applies to some revaluations that are not allowed

by the accounting standards (see subsection 820-684(5)).

5 After section 820-680

Insert:

Schedule 2 Thin cap italisation and international financial reporting standards

12 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008

820-682 Recognition of assets and liabilities--modifying application

of accounting standards

Deferred tax assets and deferred tax liabilities

(1) Despite subsections 820-680(1) and (1A), an entity must not

recognise:

(a) a deferred tax liability (within the meaning of the

accounting

standards) as a liability for the purposes of this Division; or

(b) a deferred tax asset (within the meaning of the accounting

standards) as an asset for the purposes of this Division.

Note:

Subsections 820-680(1) and (1A) require compliance with accounting

standards.

Surpluses and deficits in defined benefit superannuation plans

(2) Despite subsections 820-680(1) and (1A), an entity must not

recognise an amount relating to a defined benefit plan (within the

meaning of the

accounting standards) as:

(a) a liability for the purposes of this Division; or

(b) an asset for the purposes of this Division.

Note:

Subsections 820-680(1) and (1A) require compliance with accounting

standards.

Not applicable to ADIs

(3) This section does not apply in relation to an entity for a period if,

for the period, the entity is an

outward investing entity (ADI) or

inward investing entity (ADI).

Not applicable to records about Australian permanent

establishments

(4) This section does not apply for the purposes of section 820-960.

Thin capitalisation and international financial reporting standards Schedule 2

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 13

820-683 Recognition of internally generated intangible items--

modifying application of accounting standards

Accounting standards prevent recognition of some items

(1) Subsection (2) applies in relation to an item, other than internally

generated goodwill (within the meaning of

accounting standard

AASB 138), if:

(a) the item cannot be recognised under that standard as an

internally generated intangible asset (within the meaning of

that standard) because that standard determines that the cost

of the item cannot be distinguished from the cost of

developing the entity's business as a whole; and

(b) the item would otherwise meet criteria under that standard for

recognition as such an asset.

Note 1:

As a general rule, an entity must comply with the accounting

standards when recognising its assets for the purposes of this Division

(see subsections 820-680(1) and (1A)).

Note 2:

This section does not apply to ADIs (see subsection (6)).

Entity may choose to recognise the item as an intangible asset

(2) Despite subsections 820-680(1) and (1A), the entity may choose to

recognise the item as such an asset for a period for the purposes of

this Division (other than section 820-960).

Note:

Section 820-960 is about records for Australian permanent

establishments.

(3) A choice under subsection (2):

(a) must be in writing and may cover more than one item; and

(b) must be made before the due day for lodging the entity's

income tax return for the income year that is, or that

includes, the period; and

item, for the period and each later period.

(4) The entity may, in writing, revoke a choice under subsection (2).

The revocation has effect:

(a) for each period in the income year for which the entity is next

required to lodge an

income tax return; and

(b) for each later period.

Schedule 2 Thin cap italisation and international financial reporting standards

14 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008

(5) When:

(a) recognising an item as an asset under this section; and

(b) calculating the value of the asset (including revaluing the

asset);

the entity must, to the maximum extent possible, comply with the

accounting standards as if the recognition were allowed by those

standards. This subsection has effect subject to section 820-684.

Note:

Section 820-684 will allow the entity to revalue the asset even if

accounting standard AASB 138 would prevent this because of the

absence of an active market.

Choice not available to ADIs

(6) An entity cannot make a choice under subsection (2) for a period

if, for the period, the entity is an

outward investing entity (ADI) or

inward investing entity (ADI).

820-684 Valuation of intangible assets if no active market--

modifying application of accounting standards

Accounting standards prevent revaluation of some assets

(1) Subsection (2) applies if complying with

accounting standard

AASB 138 would prevent an entity from revaluing an intangible

asset (within the meaning of that standard) because of the absence

of an active market (within the meaning of that standard).

Note 1:

As a general rule, an entity must comply with the accounting

standards when revaluing its assets for the purposes of this Division

(see subsection 820-680(1)).

Note 2:

This section does not apply to ADIs (see subsection (7)).

Entity may choose to revalue the asset

(2) Despite subsection 820-680(1), the entity may choose to revalue

the asset for a period for the purposes of this Division (other than

section 820-960).

Note:

Section 820-960 is about records for Australian permanent

establishments.

(3) A choice under subsection (2):

(a) must be in writing and may cover more than one asset; and

Thin capitalisation and international financial reporting standards Schedule 2

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 15

(b) must be made before the due day for lodging the entity's

income tax return for the income year that is, or that

includes, the period; and

item, for the period and each later period.

(4) The entity may, in writing, revoke a choice under subsection (2).

The revocation has effect:

(a) for each period in the income year for which the entity is next

required to lodge an

income tax return; and

(b) for each later period.

Requirements for such revaluations

(5) Subsections 820-680(2) and (2B) apply in relation to a revaluation

under subsection (2) in a corresponding way to the way they apply

in relation to a revaluation mentioned in paragraph 820-680(1)(a).

Note 1:

Subsections 820-680(2) and (2B) set out requirements and other

matters in relation to revaluations under subsection 820-680(1).

Note 2:

The entity must also keep records in accordance with section 820-985

about the revaluation.

(6) When revaluing an asset under subsection (2), the entity must, to

the maximum extent possible, comply with the

accounting

standards as if the revaluation were allowed by those standards.

Choice not available to ADIs

(7) An entity cannot make a choice under subsection (2) for a period

if, for the period, the entity is an

outward investing entity (ADI) or

inward investing entity (ADI).

6 Section 820-690

After "

accounting standards", insert "and this Subdivision".

7 Subsection 820-985(1)

After "820-680(2A))", insert "or 820-684(2)".

8 At the end of subsection 820-985(3)

Add:

Schedule 2 Thin cap italisation and international financial reporting standards

16 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008

This subsection extends to subsection 820-680(2B) as it applies

because of subsection 820-684(5).

Note:

Section 820-684 allows some revaluations that are not allowed by the

accounting standards.

9 Application

The amendments made by this Schedule apply to assessments for each

income year starting on or after the commencement of this Schedule.

Interest withholding tax and state government bonds Schedule 3

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 17

Schedule 3

Interest withholding tax and state

government bonds

Income Tax Assessment Act 1936

1 After subsection 128F(5A)

Insert:

(5B) Subsection (5A) does not apply to a bond issued in Australia by a

central borrowing authority of a State or Territory. In this

subsection bond includes debenture stock and notes.

Note:

The heading to subsection (5A) is altered by omitting "No exemption for central" and

substituting "Central".

2 Application

The amendment made by this Schedule applies to interest paid on or

after the commencement of this Schedule.

Schedule 4 Fringe benefits tax

Part 1 Main amendments

18 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008

Schedule 4

Fringe benefits tax

Part 1

Main amendments

Fringe Benefits Tax Assessment Act 1986

1 Subsection 19(1) (paragraph (e) of the definition of ND)

After "applies", insert "and paragraph (i) does not apply".

2 Subsection 19(1) (paragraph (f) of the definition of ND)

After "applies", insert "and paragraph (i) does not apply".

3 Subsection 19(1) (at the end of subparagraph (g)(ii) of the

definition of ND)

Add "and".

4 Subsection 19(1) (after subparagraph (g)(ii) of the definition

of ND)

Insert:

(iia) paragraph (i) does not apply;

5 Subsection 19(1) (at the end of subparagraph (h)(ii) of the

definition of ND)

Add "and".

6 Subsection 19(1) (after subparagraph (h)(ii) of the definition

of ND)

Insert:

(iia) paragraph (i) does not apply;

7 At the end of subsection 19(1)

Add:

; or (i) if, under subsection 138(3), the loan fringe benefit is deemed

to have been provided to the recipient only--the amount

calculated in accordance with subsection (5).

8 At the end of section 19

Fringe benefits tax Schedule 4

Main amendments Part 1

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 19

Add:

(5) For the purposes of paragraph (1)(i) (which applies to a loan fringe

benefit that, under subsection 138(3), is deemed to have been

provided to an employee only), the amount is calculated in

accordance with the formula:

Unadjusted ND

Employee's percentage of interest

where:

employee's percentage of interest:

(a) is the percentage of the interest held by the employee, during

a period (in this subsection called the holding period) in the

year of tax, in the asset or other thing that:

(i) is purchased or paid for using all or part of the loan to

which the loan fringe benefit relates; and

(ii) is applied or used for the purpose of producing

assessable income of the employee; and

(b) does not include the percentage of the interest held in that

asset or other thing by the employee's associate or associates

during the holding period.

unadjusted ND is the amount that would be ascertained as

representing the component ND in the formula in subsection (1) if

paragraph (1)(i) did not apply in relation to the loan fringe benefit.

9 Application

(1)

The amendments made by items 1 to 8 apply to a loan benefit that is

provided after 7.30 pm, by legal time in the Australian Capital

Territory, on 13 May 2008 (the commencing time).

(2)

However, those amendments do not apply to a loan benefit that is

provided after the commencing time and before 1 April 2009 if the loan

was entered into before the commencing time.

10 Subsection 24(1)

Omit "the taxable value, but for this subsection and Division 14, of the

expense payment fringe benefit in relation to the year of tax shall be

reduced by:", substitute:

Schedule 4 Fringe benefits tax

Part 1 Main amendments

20 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008

the taxable value, but for Division 14, of the expense payment

fringe benefit in relation to the year of tax is the amount calculated

in accordance with the formula:

where:

TV is the amount that, but for this subsection and Division 14,

would be the taxable value of the expense payment fringe benefit

in relation to the year of tax; and

ND is:

11 Paragraph 24(1)(g)

After "applies", insert "and paragraph (l) does not apply".

12 Paragraph 24(1)(h)

After "applies", insert "and paragraph (l) does not apply".

13 At the end of subparagraph 24(1)(j)(ii)

Add "and".

14 After subparagraph 24(1)(j)(ii)

Insert:

(iia) paragraph (l) does not apply;

15 At the end of subparagraph 24(1)(k)(ii)

Add "and".

16 After subparagraph 24(1)(k)(ii)

Insert:

(iia) paragraph (l) does not apply;

17 At the end of subsection 24(1)

Add:

; or (l) if, under subsection 138(3), the expense payment fringe

benefit is deemed to have been provided to the recipient

only--the amount calculated in accordance with

subsection (9).

Fringe benefits tax Schedule 4

Main amendments Part 1

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 21

18 Paragraph 24(7)(b)

Omit "the amount (in this subsection called the reducing amount) by

which the taxable value, but for subsection (1) and Division 14, of the

fringe benefit is reduced under", substitute "representing the component

ND in the formula in".

19 Subparagraph 24(7)(b)(i)

Omit "the reducing amount", substitute "representing that component".

20 Subparagraph 24(7)(b)(ii)

Omit "the reducing amount", substitute "representing that component".

21 Subsection 24(7)

Omit "the reducing amount had", substitute "the amount represented by

that component had".

22 At the end of section 24

Add:

(9) For the purposes of paragraph (1)(l) (which applies to an expense

payment fringe benefit that, under subsection 138(3), is deemed to

have been provided to an employee only), the amount is calculated

in accordance with the formula:

Unadjusted ND

Employee's percentage of interest

where:

employee's percentage of interest:

(a) is the percentage of the interest held by the employee, during

a period (in this subsection called the holding period) in the

year of tax, in the asset or other thing that:

(i) relates to the matter in respect of which the expense

payment fringe benefit is provided; and

(ii) is applied or used for the purpose of producing

assessable income of the employee; and

(b) does not include the percentage of the interest held in that

asset or other thing by the employee's associate or associates

during the holding period.

unadjusted ND is the amount that would be ascertained as

representing the component ND in the formula in subsection (1) if

Schedule 4 Fringe benefits tax

Part 1 Main amendments

22 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008

paragraph (1)(l) did not apply in relation to the expense payment

fringe benefit.

23 Application

(1)

The amendments made by items 10 to 22 apply to an expense payment

benefit that is provided after 7.30 pm, by legal time in the Australian

Capital Territory, on 13 May 2008 (the commencing time).

(2)

However, those amendments do not apply to an expense payment

benefit that is provided to an employee after the commencing time and

before 1 April 2009 if:

(a) the benefit is provided:

(i) because the employee agreed to receive the benefit in

return for a reduction in the employee's salary or wages

that would not have happened apart from the agreement;

(ii) as part of the employee's remuneration package, in

circumstances where is it reasonable to conclude that

the employee's salary or wages would be greater if the

benefit were not made part of that package; and

(b) the agreement was made, or the remuneration package was

agreed to, before the commencing time.

24 Subsection 44(1) (paragraph (f) of the definition of ND)

After "applies", insert "and paragraph (k) does not apply".

25 Subsection 44(1) (paragraph (g) of the definition of ND)

After "applies", insert "and paragraph (k) does not apply".

26 Subsection 44(1) (at the end of subparagraph (h)(ii) of the

definition of ND)

Add "and".

27 Subsection 44(1) (after subparagraph (h)(ii) of the

definition of ND)

Insert:

(iia) paragraph (k) does not apply;

Fringe benefits tax Schedule 4

Main amendments Part 1

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 23

28 Subsection 44(1) (at the end of subparagraph (j)(ii) of the

definition of ND)

Add "and".

29 Subsection 44(1) (after subparagraph (j)(ii) of the

definition of ND)

Insert:

(iia) paragraph (k) does not apply;

30 At the end of subsection 44(1)

Add:

; or (k) if, under subsection 138(3), the property fringe benefit is

deemed to have been provided to the recipient only--the

amount calculated in accordance with subsection (5).

31 At the end of section 44

Add:

(5) For the purposes of paragraph (1)(k) (which applies to a property

fringe benefit that, under subsection 138(3), is deemed to have

been provided to an employee only), the amount is calculated in

accordance with the formula:

Unadjusted ND

Employee's percentage of interest

where:

employee's percentage of interest:

(a) is the percentage of the interest held by the employee, during

a period (in this subsection called the holding period) in the

year of tax, in the asset or other thing that:

(i) is the property to which the property fringe benefit

relates; and

(ii) is applied or used for the purpose of producing

assessable income of the employee; and

(b) does not include the percentage of the interest held in that

asset or other thing by the employee's associate or associates

during the holding period.

unadjusted ND is the amount that would be ascertained as

representing the component ND in the formula in subsection (1) if

Schedule 4 Fringe benefits tax

Part 1 Main amendments

24 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008

paragraph (1)(k) did not apply in relation to the property fringe

benefit.

32 Application

(1)

The amendments made by items 24 to 31 apply to a property benefit

that is provided after 7.30 pm, by legal time in the Australian Capital

Territory, on 13 May 2008 (the commencing time).

(2)

However, those amendments do not apply to a property benefit that is

provided to an employee after the commencing time and before 1 April

2009 if:

(a) the benefit is provided:

(i) because the employee agreed to receive the benefit in

return for a reduction in the employee's salary or wages

that would not have happened apart from the agreement;

(ii) as part of the employee's remuneration package, in

circumstances where is it reasonable to conclude that

the employee's salary or wages would be greater if the

benefit were not made part of that package; and

(b) the agreement was made, or the remuneration package was

agreed to, before the commencing time.

33 Subsection 52(1) (paragraph (f) of the definition of ND)

After "applies", insert "and paragraph (k) does not apply".

34 Subsection 52(1) (paragraph (g) of the definition of ND)

After "applies", insert "and paragraph (k) does not apply".

35 Subsection 52(1) (at the end of subparagraph (h)(ii) of the

definition of ND)

Add "and".

36 Subsection 52(1) (after subparagraph (h)(ii) of the

definition of ND)

Insert:

(iia) paragraph (k) does not apply;

Fringe benefits tax Schedule 4

Main amendments Part 1

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 25

37 Subsection 52(1) (at the end of subparagraph (j)(ii) of the

definition of ND)

Add "and".

38 Subsection 52(1) (after subparagraph (j)(ii) of the

definition of ND)

Insert:

(iia) paragraph (k) does not apply;

39 At the end of subsection 52(1)

Add:

; or (k) if, under subsection 138(3), the residual fringe benefit is

deemed to have been provided to the recipient only--the

amount calculated in accordance with subsection (5).

40 At the end of section 52

Add:

(5) For the purposes of paragraph (1)(k) (which applies to a residual

fringe benefit that, under subsection 138(3), is deemed to have

been provided to an employee only), the amount is calculated in

accordance with the formula:

Unadjusted ND

Employee's percentage of interest

where:

employee's percentage of interest:

(a) is the percentage of the interest held by the employee, during

a period (in this subsection called the holding period) in the

year of tax, in the asset or other thing:

(i) to which the residual fringe benefit relates; and

(ii) that is applied or used for the purpose of producing

assessable income of the employee; and

(b) does not include the percentage of the interest held in that

asset or other thing by the employee's associate or associates

during the holding period.

unadjusted ND is the amount that would be ascertained as

representing the component ND in the formula in subsection (1) if

paragraph (1)(k) did not apply in relation to the residual fringe

benefit.

Schedule 4 Fringe benefits tax

Part 1 Main amendments

26 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008

41 Application

(1)

The amendments made by items 33 to 40 apply to a benefit that is

provided after 7.30 pm, by legal time in the Australian Capital

Territory, on 13 May 2008 (the commencing time).

(2)

However, those amendments do not apply to a benefit that is provided

to an employee after the commencing time and before 1 April 2009 if:

(a) the benefit is provided:

(i) because the employee agreed to receive the benefit in

return for a reduction in the employee's salary or wages

that would not have happened apart from the agreement;

(ii) as part of the employee's remuneration package, in

circumstances where is it reasonable to conclude that

the employee's salary or wages would be greater if the

benefit were not made part of that package; and

(b) the agreement was made, or the remuneration package was

agreed to, before the commencing time.

Fringe benefits tax Schedule 4

Technical amend ments Part 2

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 27

Part 2

Technical amendments

Fringe Benefits Tax Assessment Act 1986

42 At the end of paragraphs 19(1)(a), (b), (ba) and (c)

Add "and".

43 At the end of sub-subparagraph 19(1)(d)(i)(A)

Add "and".

44 Subsection 19(1) (at the end of paragraph (e) of the

definition of ND)

Add "or".

45 Subsection 19(1) (at the end of subparagraph (f)(ii) of the

definition of ND)

Add "or".

46 At the end of sub-subparagraph 19(3)(b)(ii)(A)

Add "and".

47 At the end of paragraphs 24(1)(a), (b) and (ba)

Add "and".

48 At the end of sub-subparagraphs 24(1)(c)(ia)(A) and (C)

Add "or".

49 At the end of subparagraph 24(1)(c)(ii)

Add "and".

50 At the end of paragraph 24(1)(d)

Add "and".

51 At the end of subparagraphs 24(1)(e)(i), (ia), (ii) and (iii)

Add "or".

52 At the end of paragraph 24(1)(e)

Schedule 4 Fringe benefits tax

Part 2 Technical amend ments

28 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008

Add "and".

53 At the end of sub-subparagraph 24(1)(f)(i)(A)

Add "and".

54 At the end of paragraph 24(1)(g)

Add "or".

55 At the end of sub-subparagraph 24(1)(h)(ii)(B)

Add "or".

56 At the end of sub-subparagraph 24(1)(j)(v)(B)

Add "or".

57 At the end of sub-subparagraph 24(7)(b)(ii)(A)

Add "and".

58 At the end of paragraphs 44(1)(a), (b) and (ba)

Add "and".

59 At the end of subparagraphs 44(1)(c)(i) and (ia)

Add "or".

60 At the end of paragraphs 44(1)(c) and (d)

Add "and".

61 At the end of sub-subparagraph 44(1)(e)(i)(A)

Add "and".

62 Subsection 44(1) (at the end of paragraph (f) of the

definition of ND)

Add "or".

63 Subsection 44(1) (at the end of subparagraph (g)(ii) of the

definition of ND)

Add "or".

64 At the end of sub-subparagraph 44(3)(b)(ii)(A)

Fringe benefits tax Schedule 4

Technical amend ments Part 2

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 29

Add "and".

65 At the end of paragraphs 52(1)(a), (b) and (ba)

Add "and".

66 At the end of subparagraphs 52(1)(c)(i) and (ia)

Add "or".

67 At the end of paragraphs 52(1)(c) and (d)

Add "and".

68 At the end of sub-subparagraph 52(1)(e)(i)(A)

Add "and".

69 Subsection 52(1) (at the end of paragraph (f) of the

definition of ND)

Add "or".

70 Subsection 52(1) (at the end of subparagraph (g)(ii) of the

definition of ND)

Add "or".

71 At the end of sub-subparagraph 52(3)(b)(ii)(A)

Add "and".

72 Paragraph 152A(2)(b)

Omit "subparagraph 24(1)(b)(iii)", substitute "paragraph 24(1)(b)".

73 Paragraph 152A(3)(b)

Omit "subparagraph 44(1)(b)(i)", substitute "paragraph 44(1)(b)".

74 Paragraph 152A(4)(b)

Omit "subparagraph 52(1)(b)(i)", substitute "paragraph 52(1)(b)".

75 Subsection 152A(9) (definition of gross deduction)

Omit "subparagraph 24(1)(b)(iii), 44(1)(b)(i) or 52(1)(b)(i)", substitute

"paragraph 24(1)(b), 44(1)(b) or 52(1)(b)".

Schedule 5 Elig ible investment business rules

30 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008

Schedule 5

Eligible investment business

rules

Income Tax Assessment Act 1936

1 Section 102M

Insert:

arrangement has the same meaning as in the Income Tax

Assessment Act 1997.

2 Section 102M (definition of eligible investment business)

Omit "either or both of", substitute "one or more of".

3 Section 102M (subparagraph (b)(iii) of the definition of

eligible investment business)

After "company", insert ", including shares in a foreign hybrid company

(as defined in the Income Tax Assessment Act 1997)".

4 Section 102M (at the end of the definition of eligible

investment business)

Add:

; or (c) investing or trading in financial instruments (not covered by

paragraph (b)) that arise under financial arrangements, other

than arrangements excepted by section 102MA.

5 Section 102M

Insert:

excluded rent means rent worked out by reference to the profits or

receipts of an entity that uses any of the relevant land under an

arrangement that is designed to result in the transfer of all, or

substantially all, of what would otherwise be the profits of the

entity to another party to the arrangement.

6 Section 102M

Insert:

Eligible investment business rules Schedule 5

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 31

financial arrangement has the same meaning as in the Income Tax

Assessment Act 1997.

7 Section 102M (at the end of the definition of land)

Add "and fixtures on land".

8 After section 102M

Insert:

102MA Arrange ments not covered

(1) For the purposes of paragraph (c) of the definition of eligible

investment business in section 102M, the excepted arrangements

are those specified in this section.

Note:

This section does not affect an arrangement that satisfies paragraph (a)

or (b) of that definition.

Leasing or property arrangement

(2) A right or obligation arising under:

(a) an arrangement to which Division 42A (about leases of

luxury cars) in Schedule 2E applies; or

(b) an arrangement to which Division 240 of the Income Tax

Assessment Act 1997 (about arrangements treated as a sale

and loan) applies; or

exist by subsection 250-155(1) of the Income Tax Assessment

Act 1997; or

(d) an arrangement that, in substance or effect, depends on the

use of a specific asset that is:

(i) real property; or

(ii) goods or a personal chattel (other than money or a

money equivalent); or

(iii) intellectual property;

and gives a right to control the use of the asset; or

(e) an arrangement that is a licence to use:

(i) real property; or

(ii) goods or a personal chattel (other than money or a

money equivalent); or

(iii) intellectual property.

Schedule 5 Elig ible investment business rules

32 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008

Interest in partnership or trust estate

(3) A right carried by an interest in a partnership or a trust estate, or an

obligation that corresponds to such a right, if:

(a) there is only one class of interest in the partnership or trust

estate; or

(b) the interest is an equity interest in the partnership or trust

estate; or

estate is managed by a funds manager or custodian, or a

responsible entity (as defined in the Corporations Act 2001)

of a registered scheme (as so defined).

General insurance policies

(4) A right or obligation under a general insurance policy.

Guarantees and indemnities

(5) A right or obligation under a guarantee or indemnity unless:

(a) the financial arrangement is one where:

(i) its value changes in response to changes in a specified

variable or variables (such as an interest rate, foreign

exchange rate, credit rating, index or commodity or

financial instrument price); and

(ii) there is no requirement for a net investment, or there is

such a requirement but the net investment is smaller

than would be required for other types of financial

arrangement that would be expected to have a similar

response to changes in market factors; or

(b) the guarantee or indemnity is given or entered into in relation

to a financial arrangement.

Superannuation and pension income

(6) A right to receive, or an obligation to provide, a financial benefit

(as defined in the Income Tax Assessment Act 1997) if the right or

obligation arises from a person's membership of a superannuation

or pension scheme.

Eligible investment business rules Schedule 5

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 33

Retirement village arrangements

(7) A right or obligation arising under:

(a) a contract that gives rise to a right to occupy residential

premises in a retirement village (as defined in the A New Tax

System (Goods and Services Tax) Act 1999); or

(b) a contract under which a resident of such a retirement village

is provided with general or personal services in the retirement

village.

102MB Investing in land

Moveable property

(1) For the purposes of this Division, investments in moveable

property, being property that is:

(a) incidental to and relevant to the renting of land; and

(b) customarily supplied or provided in connection with the

renting of land; and

are taken to be investments in land.

Safe harbour rule

(2) For the purposes of this Division, an entity's investments in land

are taken to be for the purpose, or primarily for the purpose, of

deriving rent during a year of income if:

(a) each of those investments is for purposes (other than the

purpose of trading) that include a purpose of deriving rent;

and

(b) at least 75% of the gross revenue from those investments for

the year of income consists of rent (except excluded rent);

and

for the year of income is:

(i) excluded rent; or

(ii) from the carrying on of a business that is not incidental

and relevant to the renting of the land.

(3) In working out the gross revenue referred to in paragraph (2)(b),

payments for the provision of services that:

Schedule 5 Elig ible investment business rules

34 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008

(a) are incidental to and relevant to the renting of land; and

(b) are ancillary to the ownership and use of the land;

are taken to be rent derived from the land.

Example: Payments as reimbursement for expenses incurred by the lessor in

providing security services for a shopping centre would be covered by

this subsection.

(4) In working out the gross revenue referred to in subsection (2),

disregard any capital gains and capital losses from a CGT event

arising from a disposal or other realisation of ownership of land.

Meaning of entity

(5) In this section:

entity has the same meaning as in the Income Tax Assessment Act

1997.

102MC When trading business not carried on

A trustee of a unit trust that would, apart from this section, carry on

a trading business at a time during a year of income is taken for the

purposes of this Division not to carry on a trading business at a

time during that year if, for that year, not more than 2% of the

gross revenue of the trustee (as trustee of the unit trust) was income

from things other than eligible investment business (except from

the carrying on of a business that is not incidental and relevant to

the eligible investment business).

9 Application

The amendments made by this Schedule apply to assessments for the

income year (the application year) in which this Act receives the Royal

Assent and later income years.

10 Transitional

(1)

Subsections 102MB(2), (3) and (4), and section 102MC, of the Income

Tax Assessment Act 1936 do not apply to a unit trust for the application

year if the trustee of the trust chooses that those provisions are not to

apply.

Eligible investment business rules Schedule 5

Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 35

(2)

A choice the trustee can make under subitem (1) must be made by the

day the trustee lodges the trustee's return of income for the application

year.

(3)

The way the trustee prepares the trustee's return of income for the

application year is sufficient evidence of the making of the choice.

Example: A unit trust that would cease to be a public trading trust because of the

safe harbour rule could make a choice under this provision so that it is

taxed as a public trading trust for the application year.

Commonwealth of Australia Bills

TAX LAWS AMENDMENT (2008 MEASURES NO. 5) BILL 2008