TAX LAWS AMENDMENT (2010 MEASURES NO. 1) BILL 2010

i Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Contents

1 Short

title

...........................................................................................

2 Commencement

.................................................................................

3 Schedule(s)

........................................................................................

Amendment of assessments ............................................................... 4

Schedule 1--Approved superannuation clearing house

Part 1--Main amendments

Retirement Savings Accounts Act 1997

Superannuation Guarantee (Administration) Act 1992

Superannuation Industry (Supervision) Act 1993

Part 2--Amendments conditional on the Tax Laws

Amendment (Confidentiality of Taxpayer

Information) Act 2010

Income Tax Assessment Act 1936

Taxation Administration Act 1953

Part 3--Application provision

Schedule 2--Forestry managed investment schemes

Income Tax Assessment Act 1936

Income Tax Assessment Act 1997

Taxation Administration Act 1953

Schedule 3--Managed investment trusts

Income Tax Assessment Act 1936

Income Tax Assessment Act 1997

Income Tax (Transitional Provisions) Act 1997

Taxation Administration Act 1953

Schedule 4--25% entrepreneurs' tax offset

Income Tax Assessment Act 1997

Schedule 5--Consolidation

Part 1--Use of the tax cost setting amount

Division 1--Main amendments

Income Tax Assessment Act 1997

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 ii

Division 2--Foreign currency gains and losses

Income Tax Assessment Act 1997

Division 3--Application and transitional provisions

Part 2--Group restructures

Income Tax Assessment Act 1997

Part 3--Pre-CGT proportions

Income Tax Assessment Act 1997

Part 4--No double counting of amounts in ACA

Income Tax Assessment Act 1997

Part 5--Pre-joining time roll-overs

Income Tax Assessment Act 1997

Income Tax (Transitional Provisions) Act 1997

Part 6--Phasing out over-depreciation adjustments

Division 1--Joining times between 8 May 2007 and 30 June 2009

Income Tax Assessment Act 1997

Division 2--Repeal of section 705-50 with effect from 1 July 2009

Income Tax Assessment Act 1997

Income Tax (Transitional Provisions) Act 1997

Part 7--Leaving time liabilities

Division 1--Timing

Income Tax Assessment Act 1997

Division 2--Adjustment of step 4 amount

Income Tax Assessment Act 1997

Part 8--Accounting principles

Income Tax Assessment Act 1997

Part 9--Inherited deductions

Income Tax Assessment Act 1997

Part 10--General insurance companies

Income Tax Assessment Act 1997

Part 11--Retained cost base assets

iii Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Division 1--Cash management trusts

Income Tax Assessment Act 1997

Division 2--Rights to future income assets

Income Tax Assessment Act 1997

Division 3--Application provision

Part 12--Removal of CGT event L7

Income Tax Assessment Act 1997

Income Tax (Transitional Provisions) Act 1997

Part 13--Reduction in tax cost setting amount that exceeds

market value of certain retained cost base assets

Income Tax Assessment Act 1997

Part 14--Blackhole expenditure for MEC Groups

Income Tax Assessment Act 1997

Part 15--Transitional concession for SAPs

New Business Tax System (Consolidation and Other Measures) Act

2003

Part 16--Loss multiplication rules for widely held companies

Income Tax Assessment Act 1997

Part 17--CGT straddles

Income Tax Assessment Act 1997

Part 18--Choice to consolidate

Income Tax Assessment Act 1997

Income Tax (Transitional Provisions) Act 1997

101

Taxation Administration Act 1953

102

Part 19--Life insurance companies

103

Division 1--Amendments applying before the introduction of first

home saver accounts

103

Income Tax Assessment Act 1997

103

Division 2--Amendments applying from the introduction of first

home savers accounts

104

Income Tax Assessment Act 1997

104

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 iv

Part 20--Non-membership equity interests

105

Income Tax Assessment Act 1997

105

Schedule 6--Miscellaneous amendments

110

Part 1--CGT main residence exemption for replacement

dwelling

110

Income Tax Assessment Act 1997

110

Part 2--Small business retirement exemption

113

Division 1--Main amendment

113

Income Tax Assessment Act 1997

113

Division 2--Related amendments

113

Income Tax Assessment Act 1997

113

Part 3--Waiver connected with proceeds of crime proceedings

115

Taxation Administration Act 1953

115

Part 4--Amendments relating to higher education

118

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

118

Fringe Benefits Tax Assessment Act 1986

118

Income Tax Assessment Act 1936

118

Income Tax Assessment Act 1997

118

Taxation Administration Act 1953

119

Taxation (Interest on Overpayments and Early Payments) Act 1983

120

Part 5--PAYG withholding from delayed payments for

termination of employment

122

Division 1--Main amendments

122

Taxation Administration Act 1953

122

Division 2--Related amendments

123

Child Support (Registration and Collection) Act 1988

123

Income Tax Assessment Act 1936

123

Income Tax Assessment Act 1997

124

Part 6--Administrative penalties for false or misleading

statements

125

Division 1--Main amendments

125

v Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Taxation Administration Act 1953

125

Division 2--Consequential amendments

131

Product Grants and Benefits Administration Act 2000

131

Superannuation Industry (Supervision) Act 1993

131

Division 3--Application provision

131

Division 4--Amendments with contingent commencement

132

Taxation Administration Act 1953

132

Part 7--Offsets against superannuation guarantee charge

133

Tax Laws Amendment (2008 Measures No. 2) Act 2008

133

Part 8--Status of certain superannuation funds

134

Income Tax Assessment Act 1936

134

Part 9--Technical corrections

135

A New Tax System (Luxury Car Tax) Act 1999

135

Taxation Administration Act 1953

135

Tax Laws Amendment (2009 Measures No. 4) Act 2009

135

Part 10--Repeal of redundant material

136

Income Tax Assessment Act 1936

136

Income Tax Assessment Act 1997

136

Taxation Administration Act 1953

136

Part 11--Other minor changes

137

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

137

Income Tax Assessment Act 1936

137

Income Tax Assessment Act 1997

138

Income Tax (Transitional Provisions) Act 1997

144

Taxation Administration Act 1953

145

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 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 (2010

Measures No. 1) Act 2010.

2 Commencement

(1) Each provision of this Act specified in column 1 of the table

commences, or is taken to have commenced, in accordance with

column 2 of the table. Any other statement in column 2 has effect

according to its terms.

2 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Commencement information

Column 1

Column 2

Column 3

Provision(s)

Commencement

Date/Details

1. Sections 1 to 4

and anything in

this Act not

elsewhere covered

by this table

The day this Act receives the Royal Assent.

2. Schedule 1,

Part 1

1 July 2010.

1 July 2010

3. Schedule 1,

item 7

1 July 2010.

However, if item 32 of Schedule 2 to the Tax

Laws Amendment (Confidentiality of

Taxpayer Information) Act 2010 commences

on or before 1 July 2010, the provision(s) do

not commence at all.

4. Schedule 1,

item 8

The later of:

(a) the start of 1 July 2010; and

(b) immediately after the commencement of

item 1 of Schedule 1 to the Tax Laws

Amendment (Confidentiality of Taxpayer

Information) Act 2010.

However, the provision(s) do not commence

at all if the event mentioned in paragraph (b)

does not occur.

5. Schedule 1,

Part 3

1 July 2010.

1 July 2010

6. Schedule 2

The day after this Act receives the Royal

Assent.

7. Schedules 3

and 4

The day this Act receives the Royal Assent.

8. Schedule 5,

Parts 1 to 5

The day this Act receives the Royal Assent.

9. Schedule 5,

Part 6, Division 1

The day this Act receives the Royal Assent.

10. Schedule 5,

Part 6, Division 2

Immediately after the commencement of the

provision(s) covered by table item 9.

11. Schedule 5,

Parts 7 to 18

The day this Act receives the Royal Assent.

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 3

Commencement information

Column 1

Column 2

Column 3

Provision(s)

Commencement

Date/Details

12. Schedule 5,

Part 19,

Division 1

The day this Act receives the Royal Assent.

13. Schedule 5,

Part 19,

Division 2

Immediately after the commencement of the

provision(s) covered by table item 12.

14. Schedule 5,

Part 20

The day this Act receives the Royal Assent.

15. Schedule 6,

Parts 1 to 5

The day this Act receives the Royal Assent.

16. Schedule 6,

Part 6,

Divisions 1 to 3

The day after this Act receives the Royal

Assent.

17. Schedule 6,

Part 6, Division 4

The later of:

(a) the start of the day after this Act receives

the Royal Assent; and

(b) immediately after the commencement of

item 23 of Schedule 1 to the Tax Agent

Services (Transitional Provisions and

Consequential Amendments) Act 2009.

18. Schedule 6,

Part 7

Immediately after the commencement of

Schedule 2 to the Tax Laws Amendment

(2008 Measures No. 2) Act 2008.

24 June 2008

19. Schedule 6,

Part 8

1 July 2006.

1 July 2006

20. Schedule 6,

items 109 to 111

The day this Act receives the Royal Assent.

21. Schedule 6,

item 112

Immediately after the time specified in the

Tax Laws Amendment (2009 Measures

No. 4) Act 2009 for the commencement of

item 132 of Schedule 5 to that Act.

18 September

2009

22. Schedule 6,

item 113

Immediately after the time specified in the

Tax Laws Amendment (2009 Measures

No. 4) Act 2009 for the commencement of

item 133 of Schedule 5 to that Act.

18 September

2009

23. Schedule 6,

The day this Act receives the Royal Assent.

4 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Commencement information

Column 1

Column 2

Column 3

Provision(s)

Commencement

Date/Details

Parts 10 and 11

Note:

This table relates only to the provisions of this Act as originally

passed by both Houses of the Parliament and assented to. It will not be

expanded to deal with provisions inserted in this Act after assent.

(2) Column 3 of the table contains additional information that is not

part of this Act. Information in this column may be added to or

edited in any published version of this Act.

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

concerned, and any other item in a Schedule to this Act has effect

according to its terms.

4 Amendment of assessments

(1) Section 170 of the Income Tax Assessment Act 1936 does not

prevent the amendment of an assessment if:

(a) the assessment was made before the commencement of

Schedule 2 to this Act; and

(b) the amendment is made for the purpose of giving effect to

item 1 or 2 of that Schedule; and

income year in which the relevant CGT event happened.

(2) Section 170 of the Income Tax Assessment Act 1936 does not

prevent the amendment of an assessment if:

(a) the assessment was made before the commencement of this

section; and

(b) the amendment is made within 2 years after that

commencement; and

Schedule 5 to this Act.

Approved superannuation clearing house Schedule 1

Main amendments Part 1

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 5

Schedule 1--Approved superannuation

clearing house

Part 1--Main amendments

Retirement Savings Accounts Act 1997

1 After subsection 183(2)

Insert:

(2A) Subsection (2) does not apply if:

(a) the employer pays to an approved clearing house (within the

meaning of the Superannuation Guarantee (Administration)

Act 1992) the amount of the deduction before the end of

period mentioned in that subsection; and

(b) the approved clearing house accepts the payment.

Superannuation Guarantee (Administration) Act 1992

2 Subsection 6(1)

Insert:

approved clearing house has the meaning given by subsection

79A(3).

3 After section 23A

Insert:

23B Contributions through an approved clearing house

For the purposes of sections 23 and 23A:

(a) treat an employer that, at a particular time, pays an amount to

an approved clearing house for the benefit of an employee as

having made a contribution of the same amount to a

complying superannuation fund or an RSA for the benefit of

the employee at that time, if the approved clearing house

accepts the payment; and

Schedule 1 Approved superannuation clearing house

Part 1 Main amendments

6 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(b) disregard any contribution that the approved clearing house

makes to a complying superannuation fund or an RSA as a

result of the payment.

4 After subsection 32C(2A)

Insert:

Contributions through an approved clearing house

(2B) A contribution to a fund by an employer for the benefit of an

employee is made in compliance with the choice of fund

requirements if:

(a) section 79A (which is about a contribution through an

approved clearing house) applies to the contribution; and

(b) the employee gives the employer written notice to the effect

that the employee wants a fund to be a chosen fund for the

employee in accordance with Division 4 of Part 3A

(Choosing a fund); and

Note:

Under section 32G (Limit on funds that may be chosen), the fund

chosen by the employee must be an eligible choice fund and must

be a fund to which the employer can make contributions.

mentioned in section 79A the information that the employee

included in the written notice, and any other prescribed

information:

(i) within 21 days after the employee gives the notice to the

employer; and

(ii) before or at the time the contribution is made; and

(d) the approved clearing house accepts the information.

5 After section 79

Insert:

79A Approved clearing house

(1) This section applies if:

(a) an employer pays an amount to an approved clearing house

for the benefit of an employee; and

(b) as a result, the approved clearing house makes a contribution

to an RSA, a superannuation fund or a superannuation

scheme for the benefit of the employee.

Approved superannuation clearing house Schedule 1

Main amendments Part 1

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 7

(2) To avoid doubt, the approved clearing house makes the

contribution to the RSA, superannuation fund or superannuation

scheme on behalf of the employer, as the employer's agent.

(3)

Approved clearing house means a body specified in the

regulations for the purposes of this subsection.

Superannuation Industry (Supervision) Act 1993

6 After subsection 64(2)

Insert:

(2A) Subsection (2) does not apply if:

(a) the employer pays to an approved clearing house (within the

meaning of the Superannuation Guarantee (Administration)

Act 1992) the amount of the deduction before the end of the

period mentioned in that subsection; and

(b) the approved clearing house accepts the payment.

Schedule 1 Approved superannuation clearing house

Part 2 Amendments conditional on the Tax Laws Amendment (Confidentiality of

Taxpayer Information) Act 2010

8 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Part 2--Amendments conditional on the Tax Laws

Amendment (Confidentiality of Taxpayer

Information) Act 2010

Income Tax Assessment Act 1936

7 After paragraph 16(4)(hba)

Insert:

(hbb) an approved clearing house (within the meaning of the

Superannuation Guarantee (Administration) Act 1992), for

the purposes of that body performing its functions in relation

to superannuation contributions; or

Taxation Administration Act 1953

8 Subsection 355-65(3) in Schedule 1 (at the end of the table)

Add:

an approved clearing house

(within the meaning of the

Superannuation Guarantee

(Administration) Act 1992)

is for the purposes of that body

performing its functions in relation to

superannuation contributions.

Schedule 2 Forestry managed investment schemes

10 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Schedule 2--Forestry managed investment

schemes

Income Tax Assessment Act 1936

1 After subsection 82KZMGA(1)

Insert:

(1A) Paragraph (1)(b) does not apply to a CGT event if:

(a) the CGT event happens because of circumstances outside the

taxpayer's control; and

Example: The interest is compulsorily acquired.

(b) when the taxpayer acquired the interest, the taxpayer could

not reasonably have foreseen the CGT event happening.

Income Tax Assessment Act 1997

2 After subsection 394-10(5)

Insert:

(5A) Paragraph (5)(b) does not apply to a

CGT event if:

(a) the CGT event happens because of circumstances outside

your control; and

Example: The forestry interest is compulsorily acquired.

(b) when you acquired the

forestry interest, you could not

reasonably have foreseen the CGT event happening.

Taxation Administration Act 1953

3 After subsection 290-50(2) in Schedule 1

Insert:

(2A) For the purposes of subsection (2), disregard:

(a) subsection 82KZMGA(1A) of the Income Tax Assessment

Act 1936; and

(b) subsection 394-10(5A) of the Income Tax Assessment Act

1997.

Forestry managed investment schemes Schedule 2

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 11

Note 1:

Those 2 subsections relate to forestry managed investment schemes.

Note 2:

The effect of this subsection is that a scheme will have been

implemented in a way that is materially different from that described

in a product ruling if the tax outcome for participants in the scheme is

the same as that described in the ruling only because of the operation

of the subsections mentioned in paragraphs (a) and (b).

4 Application provision

The amendments made by this Schedule apply to CGT events that

happen on or after 1 July 2007.

Schedule 3 Managed investment trusts

12 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Schedule 3--Managed investment trusts

Income Tax Assessment Act 1936

1 Subsection 95(1) (at the end of the note to the definition of

net income)

Add "to this Act or Division 275 of the Income Tax Assessment Act

1997".

Income Tax Assessment Act 1997

2 Section 10-5 (after table item headed "lotteries")

Insert:

managed investment trusts

gains etc. from carried interests ........................................ 275-200(2)

3 Section 12-5 (after table item headed "losses")

Insert:

managed investment trusts

losses from carried interests .............................................. 275-200(4)

4 After Part 3-10

Insert:

Part 3-25--Particular kinds of trusts

Division 275--Australian managed investment trusts

Table of Subdivisions

Guide to Division 275

275-A Extended concept of managed investment trust for the

purposes of this Division

275-B Choice for capital treatment of managed investment trust

gains and losses

275-C Carried interests in managed investment trusts

Managed investment trusts Schedule 3

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 13

Guide to Division 275

275-1 What this Division is about

The trustee of certain Australian managed investment trusts may

make a choice that certain assets of the trust be dealt with under

CGT rules. If the trustee does not make such a choice, those assets

will be treated as revenue assets (see Subdivision 275-B).

Gains and profits from carried interests held in entities that are or

were Australian managed investment trusts are included in the

assessable income of the holder of the interests. The holder is

entitled to a deduction from losses from such interests (see

Subdivision 275-C).

Subdivision 275-A--Extended concept of managed investment

trust for the purposes of this Division

Table of sections

275-5

Trust operated or managed by a financial services licensee etc.

275-10

Managed investment schemes that are not subject to requirement to be

operated by financial services licensee

275-15

Every member of trust is a managed investment trust

275-20

No fund payment made in relation to the income year

275-25

Trust held by small group not to be treated as managed investment trust

275-30

Temporary circumstances outside the control of the trustee

275-35

Application of subsections 102L(15) and 102T(16)

275-5 Trust operated or managed by a financial services licensee etc.

(1) For the purposes of this Division, treat a trust in the same way as a

managed investment trust in relation to an income year if:

(a) the condition in item 1 of the table in subsection 12-400(1) in

Schedule 1 to the Taxation Administration Act 1953 is

satisfied in relation to the income year; and

(b) the trust is operated or managed by:

(i) a financial services licensee (as defined by section 761A

of the Corporations Act 2001) holding an Australian

financial services licence whose licence covers it

providing financial services (as defined by section 766A

Schedule 3 Managed investment trusts

14 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

of that Act) to wholesale clients (as defined by

section 761G of that Act); or

(ii) an authorised representative (as defined by

section 761A of that Act) of such a financial services

licensee; and

subsections of this section.

(2) The trust is covered by this subsection if every

member of the

trust satisfies at least one of the following requirements:

(a) the member is a

managed investment trust (whether or not

through the operation of this Subdivision) in relation to the

income year;

(b) the member is an entity covered by paragraph 12-400(2)(a) or

(b) in Schedule 1 to the Taxation Administration Act 1953.

(3) The trust is covered by this subsection if

members of the trust that

are entities covered by a paragraph of subsection 12-400(2) in

Schedule 1 to the Taxation Administration Act 1953:

(a) hold, or have the right to

acquire, interests representing 75%

or more of the value of the interests in the trust; or

(b) have the control of, or the ability to control, 75% or more of

the rights attaching to

membership interests in the trust; or

income that the trustee may make.

(4) The trust is covered by this subsection if the trust has at least 50

members. In determining the number of members of the trust,

apply these rules:

(a) if an entity that is not a trust holds interests in the trust

indirectly, through a

chain of trusts:

(i) treat the entity as a member of the trust; and

(ii) do not treat a trust in the chain of trusts as a member of

the trust;

(b) treat the following entities as together being one member of

the trust:

(i) an individual that is a member of the trust;

(ii) each of his or her relatives that are members of the trust;

Managed investment trusts Schedule 3

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 15

(iii) each entity that is a member of the trust in the capacity

of nominee of an individual mentioned in

subparagraph (i) or (ii);

the trust:

(i) a member of the trust that is not an individual;

(ii) each entity that is a member of the trust in the capacity

of nominee of the member mentioned in

subparagraph (i);

(d) do not treat as a member of the trust any of the following:

(i) an object of the trust;

(ii) an individual (other than an individual who became a

member of the trust because a financial product or a

financial service was provided to, or acquired by, the

individual as a wholesale client (as defined by

section 761G of the Corporations Act 2001)).

(5) The trust is covered by this subsection if:

(a) the trust is created during the income year; or

(b) the trust ceases to exist during the income year, and was a

managed investment trust (whether or not through the

operation of this Subdivision, but disregarding paragraph (a))

in relation to the previous income year.

(6) A requirement in paragraph (1)(b) or (2)(b) or subsection (3) or (4)

is satisfied if, and only if, it is satisfied:

(a) at the time the trustee of the trust makes the first

fund

payment in relation to the income year; or

(b) if the trustee does not make such a payment in relation to the

income year--at both the start and the end of the income

year.

275-10 Managed investment schemes that are not subject to

requirement to be operated by financial services licensee

(1) For the purposes of this Division, treat an entity in the same way as

managed investment trust in relation to an income year if:

(a) the entity would be a managed investment trust in relation to

the income year if item 2 of the table in subsection 12-400(1)

in Schedule 1 to the Taxation Administration Act 1953 were

disregarded; and

Schedule 3 Managed investment trusts

16 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(b) the entity is a managed investment scheme (as defined by

section 9 of the Corporations Act 2001); and

a financial services licensee (as defined by section 761A of

that Act) but for any of the following:

(i) subsection 5A(4) of that Act (about the Crown not being

bound by Chapter 6CA or 7 of that Act);

(ii) any instrument issued by ASIC under that Act that has

effect in relation to the entity and operation of the

scheme.

(2) A requirement in paragraph (1)(b) or (c) is satisfied if, and only if,

it is satisfied:

(a) at the time the trustee of the trust makes the first

fund

payment in relation to the income year; or

(b) if the trustee does not make such a payment in relation to the

income year--at both the start and the end of the income

year.

275-15 Every member of trust is a managed investment trust

(1) For the purposes of this Division, treat a trust in the same way as a

managed investment trust in relation to an income year if:

(a) the condition in item 1 of the table in subsection 12-400(1) in

Schedule 1 to the Taxation Administration Act 1953 is

satisfied; and

(b)

every

member of the trust is a managed investment trust

(whether or not through the operation of this Subdivision) in

relation to the income year.

(2) A requirement in paragraph (1)(a) is satisfied if, and only if, it is

satisfied:

(a) at the time the trustee of the trust makes the first

fund

payment in relation to the income year; or

(b) if the trustee does not make such a payment in relation to the

income year--at both the start and the end of the income

year.

Managed investment trusts Schedule 3

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 17

275-20 No fund payment made in relation to the income year

For the purposes of this Division, treat a trust in the same way as a

managed investment trust in relation to an income year if:

(a) the trustee of the trust does not make a

fund payment in

relation to the income year; and

(b) the trust would be a managed investment trust (whether or

not through the operation of this Subdivision) if the trustee of

the trust had made the first fund payment in relation to the

income year on the first day of the income year; and

not through the operation of this Subdivision) if the trustee of

the trust had made the first fund payment in relation to the

income year on the last day of the income year.

275-25 Trust held by small group not to be treated as managed

investment trust

For the purposes of this Division, despite sections 275-5, 275-10,

275-15 and 275-20, do not treat a trust in the same way as a

managed investment trust in relation to an income year if, at any

time in the income year, 20 or fewer individuals, directly or

indirectly:

(a) hold, or have the right to

acquire, interests representing 75%

or more of the value of the interests in the trust; or

(b) have the control of, or the ability to control, 75% or more of

the rights attaching to

membership interests in the trust; or

income that the trustee may make.

275-30 Temporary circumstances outside the control of the trustee

If, apart from a particular circumstance, a trust would be treated

under this Subdivision in the same way as a

managed investment

trust in relation to an income year, treat the trust in the same way

as a managed investment trust in relation to the income year for the

purposes of this Division if:

(a) the circumstance is temporary; and

(b) the circumstance arose outside the control of the trustee of

the trust; and

Schedule 3 Managed investment trusts

18 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

investment trust in relation to the income year, having regard

to the following matters:

(i) the matters in paragraphs (a) and (b);

(ii) the nature of the circumstance;

(iii) the actions (if any) taken by the trustee of the trust to

address or remove the circumstance, and the speed with

which such actions are taken;

(iv) the extent to which treating the trust as a managed

investment trust in relation to the income year would

increase or reduce the amount of tax otherwise payable

by the trustee, the beneficiaries of the trust or any other

entity;

(v) any other relevant matter.

275-35 Application of subsections 102L(15) and 102T(16)

To avoid doubt, subsections 102L(15) and 102T(16) of the Income

Tax Assessment Act 1936 do not apply for the purposes of this

Division.

Subdivision 275-B--Choice for capital treatment of managed

investment trust gains and losses

Table of sections

275-100 Consequences of making choice--CGT to be primary code for calculating

MIT gains or losses

275-105 Covered

assets

275-110 MIT not to be corporate unit trust or trading trust

275-115 MIT CGT choices

275-120 Consequences of not making choice--revenue account treatment

275-100 Consequences of making choice--CGT to be primary code

for calculating MIT gains or losses

(1) The modifications in subsection (2) apply if:

(a)

CGT event happens at a time involving a

CGT asset; and

(b) the CGT asset is owned at that time by an entity that is a

managed investment trust in relation to the income year in

which the time occurs; and

Managed investment trusts Schedule 3

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 19

trust

disposes of, ceases to own or otherwise realises the

asset; and

(d) the asset is covered by section 275-105; and

(e) the entity meets the requirement in section 275-110 at the

time; and

(f) a choice under section 275-115 covering the entity is in force

for the income year in which the time occurs.

(2) These provisions do not apply to the

CGT event:

(a) sections 6-5 (about

ordinary income), 8-1 (about amounts

you can deduct), and 15-15 and 25-40 (about profit-making

undertakings or plans);

(b) sections 25A and 52 of the Income Tax Assessment Act 1936

(about profit-making undertakings or schemes);

otherwise assessable);

(d) Division 70 and section 118-25 (about trading stock).

General exceptions

(3) The provisions referred to in subsection (2) can apply to the

CGT

event if a

capital gain or

capital loss from the event is disregarded

because of one of the provisions in this table:

Where gain or loss disregarded because of CGT provision

Item

Provision

Brief description

Paragraph 104-15(4)(a)

Title in a CGT asset does not pass when a hire

purchase or similar agreement ends

Section 118-13

Shares in a PDF

Section 118-60

Certain gifts

Trading stock and profit-making undertakings or plans involving

land etc.

(4) The provisions referred to in subsection (2) can also apply to the

CGT event if:

(a)

where

the

CGT asset is land (including an interest in land),

or a right or option to

acquire or

dispose of land (including

an interest in land):

Schedule 3 Managed investment trusts

20 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(i) the CGT asset is

trading stock; or

(ii) the circumstances existing at the time of the event

would, disregarding this Subdivision, give rise to an

amount being included in the assessable income of the

entity under section 15-15 or to a deduction for the

entity under section 25-40 (about profit-making

undertakings or plans); or

(b) where paragraph (a) does not apply:

(i)

the

managed investment trust acquired the CGT asset

in an income year for which the choice mentioned in

paragraph (1)(f) was not in force; and

(ii) the CGT asset was treated as trading stock in the

managed investment trust's financial report for the most

recent income year ending before the start of the income

year in which that choice first came into force; and

(iii) the CGT asset was treated as trading stock in the

income tax return for the managed investment trust for

the most recent income year ending before the start of

the income year in which that choice first came into

force; and

(iv) the CGT asset was treated as trading stock in the

managed investment trust's financial report for the most

recent income year ending before the time of the event;

and

(v) the CGT asset was treated as trading stock in the income

tax return for the managed investment trust for the most

recent income year ending before the time of the event.

Treatment of outgoings to acquire trading stock

(5) The modifications in subsection (6) apply if:

(a) an entity that is a

managed investment trust in relation to the

income year

acquires a

CGT asset at a time in that income

year; and

(b) the CGT asset is an item of

trading stock; and

right or option to acquire or

dispose of land (including an

interest in land); and

(d) the entity incurs an outgoing in connection with acquiring the

asset; and

Managed investment trusts Schedule 3

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 21

(e) the asset is covered by section 275-105; and

(f) the entity meets the requirement in section 275-110 at the

time; and

(g) a choice under section 275-115 covering the entity is in force

for the income year in which the time occurs.

(6) The modifications are as follows:

(a) section 8-1 (about amounts you can deduct) does not apply to

the

acquisition;

(b) Division 70 (about trading stock) does not apply in relation to

the asset in respect of:

(i) the income year in which the time occurs; and

(ii) any later income year in relation to which the entity is a

managed investment trust and throughout which the

entity meets the requirement in section 275-110.

275-105 Covered assets

(1) An asset is covered by this section if it is any of the following:

(a)

share in a company (including a share in a

foreign hybrid

company);

(b)

non-share equity interest in a company;

(d) land (including an interest in land);

(e) a right or option to

acquire or

dispose of an asset of a kind

mentioned in paragraph (a), (b), (c) or (d).

(2) However, the asset is not covered by this section if it is any of the

following:

(a)

Division 230 financial arrangement;

(b)

debt interest.

275-110 MIT not to be corporate unit trust or trading trust

(1) An entity that is a trust meets the requirement in this section at a

time if the entity is not any of the following at that time:

(a) a corporate unit trust (within the meaning of section 102J of

the Income Tax Assessment Act 1936) in relation to the year

of income in which the time occurs;

Schedule 3 Managed investment trusts

22 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(b) a trading trust for the purposes of Division 6C of that Act in

relation to that year of income.

(2) If, apart from a particular circumstance, a trust would meet the

requirement in paragraph (1)(b) at a time, the trust also meets the

requirement in this section at a time if:

(a) the circumstance is temporary; and

(b) the circumstance arose outside the control of the trustee of

the trust; and

net income of the trust under section 102S of the Income Tax

Assessment Act 1936 for the income year in which the time

occurs; and

(d) it is fair and reasonable to treat the trust as meeting the

requirement in this section at that time, having regard to the

following matters:

(i) the matters in paragraphs (a), (b) and (c);

(ii) the nature of the circumstance;

(iii) the actions (if any) taken by the trustee of the trust to

address or remove the circumstance, and the speed with

which such actions are taken;

(iv) the extent to which treating the trust as meeting the

requirement in this section at that time would increase

or reduce the amount of tax otherwise payable by the

trustee, the beneficiaries of the trust or any other entity;

(v) any other relevant matter.

275-115 MIT CGT choices

(1) The trustee of an entity that is a

managed investment trust may

make a choice under this section that covers the managed

investment trust.

(2) The choice must be made in the

approved form.

(3) The choice can be made only:

(a) if the entity became a

managed investment trust in the

2009-10 income year or a later income year (whether or not

the entity existed before it became a managed investment

trust)--on or before the latest of the following days:

Managed investment trusts Schedule 3

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 23

(i) the day it is required to lodge its

income tax return for

the income year in which it became a managed

investment trust;

(ii) if the Commissioner allows a later day for the managed

investment trust--that later day; or

(b) otherwise--on or before the latest of the following days:

(i) the last day in the 3 month period starting on the day on

which this section commences;

(ii) the last day of the 2009-10 income year;

(iii) if the Commissioner allows a later day for the managed

investment trust--that later day.

(4) The choice, once made, cannot be revoked.

(5) The choice is in force:

(a) in the circumstances mentioned in paragraph (3)(a)--for the

income year in which the entity became a

managed

investment trust (whether or not the entity existed before it

became a managed investment trust) and later income years;

(b) in the circumstances mentioned in paragraph (3)(b)--for the

2008-09 income year and later income years.

275-120 Consequences of not making choice--revenue account

treatment

(1) This section applies if:

(a) the requirements in subsection 275-100(1) are met in relation

to a

CGT asset held by a

managed investment trust, apart

from the requirement in paragraph 275-100(1)(f); and

(b) the CGT asset is not:

(i) land (including an interest in land); or

(ii) a right or option to

acquire or

dispose of land

(including an interest in land); and

otherwise realises the asset; and

(d) disregarding this section:

(i) the net proceeds (if any) from the disposal, cessation or

realisation would not be reflected in an amount being

Schedule 3 Managed investment trusts

24 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

included in the assessable income of the managed

investment trust (other than under Part 3-1 or 3-3); and

(ii) the gain or profit (if any) on the disposal, cessation or

realisation would not be reflected in an amount being

included in the assessable income of the managed

investment trust (other than under Part 3-1 or 3-3); and

(iii) the loss (if any) on the disposal, cessation or realisation

would not be reflected in an amount being deductible by

the managed investment trust.

(2) For the purposes of this Act, treat the disposal, cessation of

ownership of or realisation of the asset in the same way as the

disposal, cessation of ownership of or realisation of a

revenue

asset.

Subdivision 275-C--Carried interests in managed investment

trusts

Table of sections

275-200 Gains and losses etc. from carried interests in managed investment trusts

reflected in assessable income or deduction

275-200 Gains and losses etc. from carried interests in managed

investment trusts reflected in assessable income or

deduction

(1) This section applies if:

(a) you hold a

CGT asset in an income year that carries an

entitlement to a distribution from an entity; and

(b) the entitlement to such a distribution is contingent upon the

attainment of profits by the entity; and

(i) it is a

managed investment trust in relation to the

income year;

(ii) it was a managed investment trust in relation to a

previous income year; and

(d) you acquired the asset because of services you or your

associate provided, or will provide, to the entity; and

(e) you or your associate provided, or will provide, those

services:

Managed investment trusts Schedule 3

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 25

(i) as a manager of the entity; or

(ii) as an associate of a manager of the entity; or

(iii) as an employee of a manager of the entity; or

(iv) as an associate of an employee of a manager of the

entity; and

(f) any of the following apply:

(i) you become entitled in the income year to such a

distribution (regardless of whether the distribution is

made immediately, or is to be made in the future);

(ii)

CGT event happens in relation to the asset in the

income year.

(2) Include in your assessable income for the income year:

(a) the amount of the distribution (except to the extent that it

represents a return of capital that you or your associate

contributed in order for you to

acquire the asset); or

(b) the amount of your gain or profit (if any) on the

CGT event.

(3) Subsection (2) does not apply to the extent that the amount is

included in your assessable income as:

(a)

ordinary income under section 6-5; or

(b)

statutory income under a section of this Act, other than a

provision in Part 3-1 or 3-3.

(4) An amount to which subsection (2) applies is taken, for the

purposes of the

income tax laws, to have a source in Australia. For

the purposes of this subsection, disregard subsection (3).

(5) You are entitled to a deduction for the income year for the amount

of your loss (if any) on the

CGT event.

(6) Subsection (5) does not apply to the extent that you can deduct the

amount under another provision of this Act.

(7) Subdivision 115-C does not apply to the amount of a distribution

mentioned in subparagraph (1)(f)(i) if:

(a) that amount is included in your assessable income under

subsection (2); or

(b) an amount referable to that amount is included in your

assessable income under Division 6 of Part III of the Income

Tax Assessment Act 1936.

Schedule 3 Managed investment trusts

26 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

5 Subsection 840-805(6) (subsection heading)

Repeal the heading, substitute:

Exception--Australian permanent establishments

6 At the end of section 840-805

Add:

Exception--distributions on carried interests

(7) Subsections (2) and (3) do not apply to you to the extent that the

fund payment part:

(a) is included in your assessable income under subsection

275-200(2) (Gains etc. from carried interests) for the income

year because you hold or held a

CGT asset that carries an

entitlement to a distribution mentioned in subsection

275-200(2); or

(b) would be so included if subsection 275-200(3) were

disregarded.

(8) Subsection (4) does not apply to you to the extent that the fund

payment part:

(a) is attributable to an amount included in the net income of the

trust mentioned in that subsection because of subsection

275-200(2) (Gains etc. from carried interests) for the income

year because the trust holds or held a

CGT asset that carries

an entitlement to a distribution mentioned in subsection

275-200(2); or

(b) would be so included if subsection 275-200(3) were

disregarded.

7 Subsection 995-1(1) (definition of instalment income)

Omit "and 45-465", substitute ", 45-286 and 45-465".

Income Tax (Transitional Provisions) Act 1997

8 After Part 3-10

Insert:

Managed investment trusts Schedule 3

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 27

Part 3-25--Particular kinds of trusts

Division 275--Australian managed investment trusts

Table of Subdivisions

275-A Choice for capital treatment of MIT gains and losses

Subdivision 275-A--Choice for capital treatment of MIT gains

and losses

Table of sections

275-10

Consequences of making choice--Commissioner cannot make certain

amendments to previous assessments

275-10 Consequences of making choice--Commissioner cannot

make certain amendments to previous assessments

(1) This section applies if:

(a) the trustee of a managed investment trust makes a choice

under section 275-115 of the Income Tax Assessment Act

1997 covering the trust that is in force for the 2008-09

income year; and

(b) the Commissioner made an assessment (the previous

assessment) for a previous income year for any of the

following entities:

(i) the trustee of the managed investment trust;

(ii) a beneficiary of the managed investment trust;

(iii) an entity that holds interests in the managed investment

trust indirectly, through a chain of trusts; and

(i) a CGT event happened at a time involving a CGT asset

that was owned by the managed investment trust; and

(ii) a gain or loss was realised for income tax purposes

because of the circumstances that gave rise to the CGT

event; and

(d) the previous assessment was also made on the basis that:

(i) the gain or loss should be reflected in the net income of

the managed investment trust for that previous income

year; or

Schedule 3 Managed investment trusts

28 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(ii) the gain or loss should be reflected in a tax loss or net

capital loss of the managed investment trust for that

previous income year; and

(e) the previous assessment was also made on one of these bases:

(i) the CGT asset was a revenue asset;

(ii) the CGT asset was not a revenue asset; and

(f) none of the provisions mentioned in subsection 275-100(2) of

the Income Tax Assessment Act 1997 would have applied at

the time of the CGT event in relation to the asset, if these

assumptions were made:

(i) Subdivision 275-B of the Income Tax Assessment Act

1997 (and any other provision of that Act or of the

Income Tax Assessment Act 1936, to the extent that it

relates to that Subdivision) had applied in relation to the

CGT event;

(ii) a choice under section 275-115 of the Income Tax

Assessment Act 1997 covering the entity for which the

assessment was made was in force for the previous

income year.

(2) The Commissioner cannot amend the previous assessment on the

basis that:

(a) if subparagraph (1)(e)(i) applies--the CGT asset should not

have been treated as a revenue asset; or

(b) if subparagraph (1)(e)(ii) applies--the CGT asset should

have been treated as a revenue asset.

(3) Subsection (2) applies despite any other provision of this Act (apart

from subsection (4) of this section), the Income Tax Assessment

Act 1997 and the Income Tax Assessment Act 1936.

(4) Subsection (2) does not apply in any of these cases:

(a) if the entity for which the assessment was made gives the

Commissioner a written consent to the amendment;

(b) if the Commissioner may amend the assessment in

accordance with item 5 (fraud or evasion) or 6 (review or

appeal) of the table in subsection 170(1) of the Income Tax

Assessment Act 1936;

a provision specified in the regulations for the purposes of

this paragraph.

Managed investment trusts Schedule 3

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 29

Taxation Administration Act 1953

9 After section 45-285 in Schedule 1

Insert:

45-286 Instalment income includes distributions by certain managed

investment trusts

Your

instalment income for a period includes trust income or trust

capital that a trust distributes to you, or applies for your benefit,

during that period if:

(a) the income or capital is not included in your instalment

income under section 45-280 or 45-285; and

(b) the trust satisfies the condition in item 1 of the table in

subsection 12-400(1) in relation to the income year that is or

includes that period; and

(i)

managed investment trust for that income year; or

(ii) treated as a managed investment trust for that income

year for the purposes of Division 275 of the Income Tax

Assessment Act 1997; and

(d) the trust meets the requirement in section 275-110 of that Act

throughout the income year.

(It does not matter whether the trust income or trust capital is

included in your assessable income for the income year that is or

includes that period.)

10 Application provision

(1)

The amendments made by this Schedule apply in relation to CGT

events that happen on or after the start of the 2008-09 income year.

(2)

Despite subitem (1), subsections 275-100(5) and (6) of the Income Tax

Assessment Act 1997 as inserted by this Schedule (and any other

provision inserted by this Schedule, to the extent that it relates to those

subsections) apply in relation to acquisitions of assets that happen on or

after the start of the 2008-09 income year.

(3)

Despite subitem (1), section 275-120 of the Income Tax Assessment Act

1997 as inserted by this Schedule (and any other provision inserted by

Schedule 3 Managed investment trusts

30 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

this Schedule, to the extent that it relates to that section) applies in

relation to:

(a) disposals of assets; and

(b) cessations of ownership of assets; and

that happen on or after the commencement of this item.

(4)

Despite subitem (1), Subdivision 275-C of the Income Tax Assessment

Act 1997 as inserted by this Schedule (and any other provision inserted

by this Schedule, to the extent that it relates to that Subdivision) applies

in relation to:

(a) entitlements to distributions that arise on or after the

commencement of this item; and

(b) CGT events that happen on or after the commencement of

this item.

(5)

Despite subitem (1), section 45-286 in Schedule 1 to the Taxation

Administration Act 1953 as inserted by this Schedule (and any other

provision inserted by this Schedule, to the extent that it relates to that

section) applies in relation to distributions or applications of benefits

that are made on or after the commencement of this item.

25% entrepreneurs' tax offset Schedule 4

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 31

Schedule 4--25% entrepreneurs' tax offset

Income Tax Assessment Act 1997

1 Section 61-500

Omit:

Your entitlement to the offset varies depending on what kind of

entity you are. The amount of your offset varies depending on

whether your aggregated turnover is $50,000 or less or is more

than $50,000.

Substitute:

Your entitlement to the offset varies depending on what kind of

entity you are. The amount of your offset varies depending on:

(a)

whether your aggregated turnover is $50,000 or

less or is more than $50,000; and

(b)

if you are an individual--whether you (and your

spouse, if you have a spouse) have significant

income from sources other than your small

business.

2 Subsection 61-505(2) (at the end of step 4 of the method

statement)

Add:

Note:

If you are an individual, section 61-523 may reduce the

amount of the tax offset.

3 Subsection 61-505(2) (at the end of step 5 of the method

statement)

Add:

Note:

If you are an individual, section 61-523 may reduce the

amount of the tax offset.

Schedule 4 25% entrepreneurs' tax offset

32 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

4 Subsection 61-510(2) (at the end of step 4 of the method

statement)

Add:

Note:

If you are an individual, section 61-523 may reduce the

amount of the tax offset.

5 Subsection 61-510(2) (at the end of step 5 of the method

statement)

Add:

Note:

If you are an individual, section 61-523 may reduce the

amount of the tax offset.

6 Subsection 61-520(2) (at the end of step 4 of the method

statement)

Add:

Note:

If you are an individual, section 61-523 may reduce the

amount of the tax offset.

7 Subsection 61-520(2) (at the end of step 5 of the method

statement)

Add:

Note:

If you are an individual, section 61-523 may reduce the

amount of the tax offset.

8 After section 61-520

Insert:

61-523 25% entrepreneurs' tax offset--reduction for non-small

business income

Reduce the amount of your

tax offset worked out under subsection

61-505(2), 61-510(2) or 61-520(2) by the amount worked out using

the following formula (but not below nil), if:

(a) you are an individual; and

(b) the amount worked out using the formula is greater than nil:

25% entrepreneurs' tax offset Schedule 4

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 33

Non-ETO small business income

Threshold amount

for the income year

where:

non-ETO small business income for the income year is worked

out by:

(a) adding up the following:

(i) your taxable income for the year;

(ii)

your

reportable fringe benefits total for the year;

(iii)

your

reportable superannuation contributions (if any)

for the year;

(iv)

your

total net investment loss for the year; and

(b)

subtracting:

(i) in a case covered by subsection 61-505(2)--your

net

small business income for the year; or

(ii) in a case covered by subsection 61-510(2) or

61-520(2)--your net small business income share for

the year (within the meaning of paragraph 61-510(1)(e)

or 61-520(1)(e), whichever is applicable); and

who, on the last day of the year, is your

spouse:

(i) your spouse's taxable income for the year;

(ii) your spouse's reportable fringe benefits total for the

year;

(iii) your spouse's reportable superannuation contributions

(if any) for the year;

(iv) your spouse's total net investment loss for the year.

Note:

ETO is short for 25% entrepreneurs' tax offset.

threshold amount means:

(a)

$120,000

if:

(i) on any day during the income year, you have a

dependant (within the meaning of the definition of

dependant in subsection 159P(4) of the Income Tax

Assessment Act 1936, disregarding paragraph (a)

(spouse) of that definition); or

Consolidation Schedule 5

Use of the tax cost setting amount Part 1

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 35

Schedule 5--Consolidation

Part 1--Use of the tax cost setting amount

Division 1--Main amendments

Income Tax Assessment Act 1997

1 Section 12-5 (table item headed "financial arrangements"

(first occurring))

Repeal the item, substitute:

consolidated groups and MEC groups

assets in relation to Division 230 financial arrangement ... 701-61(4)

rights to future income ....................................................... 716-405

2 Subsection 701-55(3)

After "Division 70", insert "(other than Subdivision 70-E)".

3 Subsection 701-55(6)

Repeal the subsection, substitute:

Rights to future amounts to be included in assessable income of

head company

(5C) If section 716-410 (rights to future amounts that are expected to be

included in assessable income) covers the asset at the particular

time, the expression means that section 716-405 may apply in

relation to the asset after the particular time.

Other provisions

(6) If any provision of this Act that is not mentioned above is to apply

in relation to the asset by including an amount in assessable

income, or by allowing an amount as a deduction, in a way that

brings into account (directly or indirectly) any of the following

amounts:

(a) the cost of the asset;

(b) outgoings incurred, or amounts paid, in respect of the asset;

Schedule 5 Consolidation

Part 1 Use of the tax cost setting amount

36 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(d) an amount of a similar kind in respect of the asset;

the expression means that the provision applies, for the purpose of

determining the amount included in assessable income or the

amount of the deduction, as if the cost, outgoing, expenditure or

other amount had been incurred or paid to acquire the asset at the

particular time for an amount equal to its tax cost setting amount.

Note 1:

This subsection modifies the application of the provision only for the

purpose of determining the amount included in assessable income or

the amount of the deduction. Therefore:

(a) the acquisition mentioned in this subsection is recognised only

for that purpose; and

(b) apart from the things mentioned in subsection 701-56(1), that

acquisition does not affect the operation of section 701-5 (the

entry history rule) in relation to the asset for other purposes.

Note 2:

For specific clarifications of the operation of this subsection in

relation to bad debts, see Subdivision 716-S.

701-56 Setting the tax cost of an asset--subsection 701-55(6)

Entry history rule

(1) To avoid doubt, if subsection 701-55(6) applies in relation to an

asset at the time (the joining time) an entity (the joining entity)

became a

subsidiary member of a

consolidated group, the things

that are taken to have happened in relation to the

head company of

the group under section 701-5 (entry history rule) do not include:

(a) the cost, outgoing, expenditure or other amount incurred or

paid to acquire the asset by the joining entity; and

(b) whether the cost, outgoing, expenditure or other amount

incurred or paid by the joining entity to acquire the asset has

been deducted by the joining entity before the joining time.

Trading stock

(2) Subsection 701-55(6) does not apply in relation to an asset if it is

trading stock.

Certain depreciating assets etc.

(3) Subsection 701-55(6) does not apply in relation to an asset if any

of the following provisions are to apply in relation to the asset:

(a) Subdivision 40-F (Primary production depreciating assets);

Consolidation Schedule 5

Use of the tax cost setting amount Part 1

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 37

(b) Subdivision 40-G (Capital expenditure of primary producers

and other landholders);

deductible);

(d) Subdivision 40-I (Capital expenditure that is deductible over

time), other than section 40-880 (Business related costs);

(e) Subdivision 40-J (Capital expenditure for the establishment

of trees in carbon sink forests);

(f) Division 41 (Additional deduction for certain new business

investment);

(g) Division 43 (Deductions for capital works).

4 After Subdivision 716-G

Insert:

Subdivision 716-S--Miscellenous consequences of tax cost

setting

Table of sections

716-400 Tax cost setting and bad debts

716-405 Tax cost setting and rights to future income--deduction

716-410 Rights to amounts that are expected to be included in assessable income

after joining time

716-400 Tax cost setting and bad debts

(1) The object of this section is to clarify the effect of section 701-5

(entry history rule) and subsection 701-55(6) in relation to an asset

that may give rise to a bad debt. It achieves this object by

clarifying that certain things are taken to have happened in relation

to the asset through the operation of section 701-5 and subsection

701-55(6).

(2) This section applies if:

(a) the tax cost of an asset was set at the time (the joining time)

an entity (the joining entity) became a subsidiary member of

consolidated group at the asset's tax cost setting amount;

and

(b) the asset is a debt; and

Schedule 5 Consolidation

Part 1 Use of the tax cost setting amount

38 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(i) the debt was included in the joining entity's assessable

income before the joining time;

(ii) the debt was in respect of money that the joining entity

lent before the joining time in the ordinary course of a

business of lending money;

(iii) the joining entity bought the debt before the joining

time in the ordinary course of a business of lending

money; and

(d) the requirements in subsection 701-58(1) (intra-group assets)

are not satisfied in relation to the asset.

(3) To avoid doubt, in determining the extent to which the

head

company of the group can deduct an amount under section 25-35

(bad debts) in relation to the asset, section 701-5 (entry history

rule) and subsection 701-55(6) have the effect that, before the

joining time:

(a) in a case covered by subparagraph (2)(c)(i)--the head

company included an amount equal to the tax cost setting

amount in its assessable income in respect of the debt; or

(b) in a case covered by subparagraph (2)(c)(ii)--the head

company lent an amount of money in respect of the debt

equal to the tax cost setting amount in the ordinary course of

a business of lending money; or

company incurred expenditure equal to the tax cost setting

amount in buying the debt in the ordinary course of a

business of lending money.

716-405 Tax cost setting and rights to future income--deduction

(1) This section applies if:

(a) an entity (the joining entity) became a subsidiary member of

consolidated group at a time (the joining time); and

(b) subsection 701-55(5C) applies in relation to the asset at the

joining time.

Note:

Subsection 701-55(5C) deals with assets covered by section 716-410

(Rights to amounts that are expected to be included in assessable

income after joining time).

Consolidation Schedule 5

Use of the tax cost setting amount Part 1

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 39

(2) An entity qualified for a deduction under subsection (5) for the

asset for an income year ending after the joining time can deduct,

for that income year:

(a) unless paragraph (b) applies--the

unexpended tax cost

setting amount for the asset for that income year, to the

extent that an amount is included in the entity's assessable

income for that income year in respect of the asset; or

(b) if it is reasonable to expect that no amount will be included in

the assessable income of an entity qualified for a deduction

under subsection (5) for the asset for any later income year--

the unexpended tax cost setting amount for the asset for that

income year.

(3) Paragraph (2)(b) does not apply in relation to an entity qualified for

a deduction under subsection (5) for the asset for that income year

if:

(a) the entity is the

head company of the group; and

(b) another entity ceased to be a

subsidiary member of the group

in that income year; and

for that income year because it is also qualified for a

deduction under subsection (5) for the asset for that income

year.

(4)

The

unexpended tax cost setting amount for the asset for an

income year is the

tax cost setting amount for the asset, reduced

by:

(a) the amounts (if any) of all deductions under this section in

respect of the asset for previous income years ending after

the joining time; and

(b) in determining the amount of a deduction under this section

in respect of the asset for that income year for an entity that

ceased to be a

subsidiary member of the group in that

income year--the amount (if any) that the

head company of

the group can deduct under this section in respect of the asset

for that income year.

(5) An entity is qualified for a deduction under this subsection for an

income year for the asset if:

(a)

the

entity:

(i)

the

head company of the group; and

Schedule 5 Consolidation

Part 1 Use of the tax cost setting amount

40 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(ii) held the asset at a time in that income year (whether or

not because of the operation of subsection 701-1(1) (the

single entity rule)); or

(b)

the

entity:

(i) held the asset at a time in that income year; and

(ii) ceased to be a

subsidiary member of the group in that

income year or an earlier income year.

(6) An amount deducted under this section:

(a) is not to be deducted under any other provision of this Act;

and

(b) is not to be taken into account in determining an amount that

is included in the assessable income of any entity qualified

for a deduction under subsection (5) for any income year for

the asset; and

deduction of any entity qualified for a deduction under

subsection (5) for any income year for the asset; and

(d) despite paragraphs (b) and (c), is taken never to have been

included in any of the elements of the

cost base of the asset.

716-410 Rights to amounts that are expected to be included in

assessable income after joining time

This section covers an asset at a time if:

(a) the asset is a right (including a contingent right) to receive an

amount for the doing of a thing; and

(b) the asset is held by an entity just before the time (the joining

time) it became a

subsidiary member of a

consolidated

group; and

the assessable income of the entity or any other entity after

the joining time in relation to the right.

5 Subsection 995-1(1)

Insert:

unexpended tax cost setting amount has the meaning given by

section 716-405.

Consolidation Schedule 5

Use of the tax cost setting amount Part 1

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 41

Division 2--Foreign currency gains and losses

Income Tax Assessment Act 1997

6 After Subdivision 715-D

Insert:

Subdivision 715-E--Interactions with Division 775 (Foreign

currency gains and losses)

Table of sections

715-370 Cost setting--reference time for determining currency exchange rate effect

715-370 Cost setting--reference time for determining currency

exchange rate effect

(1) This section applies if:

(a) an entity (the joining entity) becomes a

subsidiary member

of a

consolidated group at a time (the joining time); and

(b) taking into account the operation of subsection 701-1(1) (the

single entity rule), the

head company of the group held an

asset at the joining time because the joining entity became a

subsidiary member of the group; and

the meaning of section 705-35); and

(d) in working out the asset's

tax cost setting amount, the

currency exchange rate of a particular

foreign currency is

taken into account in determining the

market value of the

asset.

(2) For the purposes of Division 775, determine the extent of any

currency exchange rate effect after the joining time in relation to

the asset, by reference to the currency exchange rate for the

foreign currency at the joining time.

Division 3--Application and transitional provisions

7 Application provision

Schedule 5 Consolidation

Part 1 Use of the tax cost setting amount

42 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(1)

The amendments made by Division 1 of this Part apply on and after

1 July 2002.

(2)

The amendment made by Division 2 of this Part applies in relation to a

consolidated group or MEC group on and after:

(a) if the head company of the group makes a choice in

accordance with subitems (3) and (4)--1 July 2002; or

(b) otherwise--the day on which the Bill that became this Act

was introduced into the House of Representatives.

(3)

A choice mentioned in paragraph (2)(a) must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

(4)

A choice mentioned in paragraph (2)(a) must be made in writing.

8 Transitional provision--use of the tax cost setting amount

(1)

This item applies if:

(a) the tax cost of an asset was set at the time (the joining time)

an entity (the joining entity) became a subsidiary member of

a consolidated group or MEC group, at the asset's tax cost

setting amount; and

(b) the asset is a trade receivable that is denominated in foreign

currency; and

(i) after the joining time; and

(ii) before 23 August 2006; and

(d) just before the CGT event, the head company of the group

held the asset because of the operation of subsection 701-1(1)

of the Income Tax Assessment Act 1997 (the single entity

rule); and

(e) disregarding section 118-20 of that Act, there is a capital gain

or capital loss from the event; and

(f) the head company of the group makes a choice to apply this

item, in accordance with subitems (4) and (5).

(2)

These provisions do not apply to the CGT event:

(a) section 6-5 of the Income Tax Assessment Act 1997 (about

ordinary income);

Consolidation Schedule 5

Use of the tax cost setting amount Part 1

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 43

(b) any other provision of that Act that includes an amount in

assessable income, other than a provision in Part 3-1 or 3-3

of that Act;

(d) any other provision of that Act that allows you to deduct an

amount from your assessable income;

(e) section 118-20 of that Act.

(3)

The provisions referred to in subitem (2) can apply to the CGT event to

the extent that any capital gain or capital loss from the event is

attributable to currency exchange rate fluctuations.

(4)

A choice mentioned in paragraph (1)(f) must be made:

(a) by the day the head company lodges its income tax return for

the income year in which the relevant CGT event happened;

(b) within a further time allowed by the Commissioner.

(5)

The way the head company prepares its income tax return is sufficient

evidence of the making of the choice.

Schedule 5 Consolidation

Part 2 Group restructures

44 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Part 2--Group restructures

Income Tax Assessment Act 1997

9 Paragraph 703-75(2)(d)

Omit "group);", substitute "group); or".

10 After paragraph 703-75(2)(d)

Insert:

(e) section 719-125 (about the effects of a group conversion

involving a MEC group);

11 Section 719-25 (heading)

Repeal the heading, substitute:

719-25 Head company, subsidiary members and members of a MEC

group

12 At the end of section 719-25

Add:

(3)

The

members of a

MEC group are the

head company of the

group and the

subsidiary members of the group.

13 Subparagraph 719-65(3)(d)(i)

Omit "the group came into existence as a result of a choice under

section 719-50, and".

14 After paragraph 719-90(2)(c)

Insert:

(ca) section 719-125 (about the effects of a group conversion

involving a MEC group); or

15 After Subdivision 719-B

Insert:

Consolidation Schedule 5

Group restructures Part 2

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 45

Subdivision 719-BA--Group conversions involving MEC

groups

Table of sections

719-120 Application

719-125 Head company of new group retains history of head company of old group

719-130 Provisions of this Part not to apply to conversion

719-135 Provisions of this Part applying to conversion despite section 719-130

719-140 Other provisions of this Part not applying to conversion

719-120 Application

(1) This Subdivision applies if, at a particular time (the conversion

time):

(a)

consolidated group (the new group) is

created from a

MEC group (the old group); or

(b) a MEC group (the new group) is created from a consolidated

group (the old group).

(2) However, sections 719-130 and 719-135 apply only in relation to

entities that:

(a)

were

members of the old group just before the conversion

time; and

(b) are members of the new group at that time.

719-125 Head company of new group retains history of head

company of old group

(1) Everything that happened in relation to the

head company of the

old group before the conversion time is taken instead to have

happened in relation to:

(a) if the head company of the old group is the same entity as the

head company of the new group--that entity in its role as

head company of the new group; or

(b) otherwise--the head company of the new group (just as if the

head company of the new group had been the head company

of the old group at all times before the conversion time).

(2) To avoid doubt, subsection (1) also covers everything that,

immediately before the conversion time, was taken to have

Schedule 5 Consolidation

Part 2 Group restructures

46 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

happened in relation to the

head company of the old group

because of:

(a) section 701-1 (the single entity rule); or

(b) section 701-5 (the entry history rule); or

consolidated group after shelf company becomes new head

company); or

(d) section 719-90 (about the effects of a change of head

company of a

MEC group); or

(e) one or more previous applications of this Division.

(3) Subsections (1) and (2) have effect:

(a)

for

the

head company core purposes in relation to an income

year ending after the conversion time; and

(b) for the entity core purposes in relation to an income year

ending after the conversion time; and

franking

account of the head company of the new group at and after

the conversion time.

(4) Subsections (1) and (2) have effect subject to:

(a) section 701-40 (Exit history rule); and

(b) a provision of this Act to which section 701-40 is subject

because of section 701-85 (about exceptions to the core rules

in Division 701).

Note:

An example of provisions covered by paragraph (b) of this subsection

is Subdivision 717-E (about transferring to a company leaving a

consolidated group various surpluses under the CFC rules in Part X of

the Income Tax Assessment Act 1936).

719-130 Provisions of this Part not to apply to conversion

(1) A provision mentioned in subsection (5) that applies on an entity

becoming a

member of a

consolidated group or

MEC group

does not apply to an entity becoming such a member because of a

situation described in subsection 719-120(1), unless the provision

is expressed to apply despite this subsection.

Note 1:

An example of the effect of this subsection is that section 701-5 (entry

history rule) does not apply. See instead section 719-125.

Note 2:

Further examples of the effect of this subsection are that Division 705

(cost setting on entry) and Division 707 (losses) do not apply.

Consolidation Schedule 5

Group restructures Part 2

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 47

(2) Subsection (1) does not affect the application of subsection

701-1(1) (the single entity rule).

(3) A provision mentioned in subsection (5) that applies on an entity

ceasing to be a

member of a

consolidated group or

MEC group

does not apply to an entity ceasing being such a member because

of a situation described in subsection 719-120(1), unless the

provision is expressed to apply despite this subsection.

Note 1:

An example of the effect of this subsection is that section 701-40 (Exit

history rule) does not apply. See instead section 719-125.

Note 2:

Another example of the effect of this subsection is that Division 711

(cost setting on exit) does not apply.

(4) Subsection (3) does not apply if:

(a) the old group mentioned in subsection 719-120(1) is a

consolidated group; and

(b) the new group mentioned in subsection 719-120(1) is a

MEC group; and

member of the old group becomes

eligible tier-1 company in respect of the new group.

(5) The provisions are as follows:

(a)

Subdivision

104-L;

(b)

section

165-212E;

(d) Part 3-90 of the Income Tax (Transitional Provisions) Act

1997.

719-135 Provisions of this Part applying to conversion despite

section 719-130

(1) This section applies despite subsections 719-130(1) and (3).

(2) If the new group is a

consolidated group, the following provisions

may apply on an entity ceasing to be a

member of the old group:

(a)

Subdivision

719-K;

(b) any other provision of this Part, to the extent that the

application of the provision is necessary for the application of

Subdivision 719-K.

Schedule 5 Consolidation

Part 2 Group restructures

48 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

719-140 Other provisions of this Part not applying to conversion

If the new group is a

consolidated group, the following provisions

do not apply merely because the old group ceases to exist at the

conversion time (or merely because the

potential MEC group of

which the old group consisted ceases to exist at that time):

(a)

section

719-280;

(b)

section

719-465;

(c)

section

719-705;

(d)

section

719-725;

(e) any other provision of this Part, to the extent that the

application of the provision is necessary for the application of

any of those sections.

16 Subsection 995-1(1) (after paragraph (b) of the definition

of member)

Insert:

(ba) in relation to a

MEC group--has the meaning given by

section 719-25; and

(bb) in relation to a

potential MEC group--has the meaning

given by section 719-10; and

17 Application provision

(1)

The amendments made by this Part apply in relation to the creation of a

MEC group from a consolidated group, or a consolidated group from a

MEC group, on or after:

(a) if the head company of the group makes a choice in

accordance with subitems (2) and (3)--1 July 2002; or

(b) otherwise--27 October 2006.

(2)

A choice mentioned in paragraph (1)(a) must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

(3)

A choice mentioned in paragraph (1)(a) must be made in writing.

(4)

Despite subitem (1), the amendment made by item 13 of this Schedule

applies on and after 1 July 2002.

Consolidation Schedule 5

Pre-CGT proportions Part 3

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 49

Part 3--Pre-CGT proportions

Income Tax Assessment Act 1997

18 Section 705-125 (heading)

Repeal the heading, substitute:

705-125 Pre-CGT proportion for joining entity

19 Subsection 705-125(1)

Omit "That mechanism involves working out a factor by which the

pre-CGT status can be attached to the joining entity's assets and then

recognised in membership interests held in an entity that owns the

assets on ceasing to be a

subsidiary member of the joined group.",

substitute "That mechanism involves:

(a) working out the proportion (measured by market value) of

the membership interests in the joining entity that have

pre-CGT status; and

(b) if the joining entity later ceases being a member of the group,

attaching pre-CGT status to that proportion of membership

interests in it (see section 711-65), subject to integrity rules

(see section 711-70).".

20 Subsections 705-125(2) and (3)

Repeal the subsections, substitute:

How to work out pre-CGT proportion

(2)

The

pre-CGT proportion is the amount worked out by dividing:

(a) the sum of the

market value of each

membership interest in

the joining entity that is:

(i) held by a

member of the group at the joining time; and

(ii)

pre-CGT asset;

by:

(b) the sum of the market value of each membership interest in

the joining entity that is held by a member of the group at the

joining time.

21 Subsection 705-125(4)

Schedule 5 Consolidation

Part 3 Pre-CGT proportions

50 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Omit "paragraph (3)(a)", substitute "subsection (2)".

22 Section 705-165

Repeal the section.

23 Section 705-205

Repeal the section.

24 Section 705-245

Repeal the section.

25 Section 711-65 (heading)

Repeal the heading, substitute:

711-65 Membership interests treated as having been acquired before

20 September 1985

26 Subsection 711-65(1)

Repeal the subsection, substitute:

When this section applies

(1) This section applies unless:

(a) Subdivision 705-C (about one group joining another

consolidated group) applies in relation to the old group; and

(b) the leaving entity is a

subsidiary member of the old group.

(1A) To avoid doubt, this section applies regardless of whether the

leaving entity ceases to be a

subsidiary member of the old group

at the leaving time because another entity also ceases to be a

subsidiary member of the old group at the leaving time.

27 Subsection 711-65(2) (note)

Repeal the note.

28 Subsection 711-65(4) (definition of leaving entity's

pre-CGT proportion)

Omit "subsection (5)", substitute "section 705-125".

29 Subsection 711-65(5)

Consolidation Schedule 5

Pre-CGT proportions Part 3

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 51

Repeal the subsection.

30 Section 711-70

Repeal the section, substitute:

711-70 Additional integrity rule if membership interests treated as

having been acquired before 20 September 1985 under

section 711-65--application of Division 149 to head

company

(1) This section applies if:

(a) the leaving entity held assets at the time it became a

subsidiary member of the old group (disregarding subsection

701-1(1) (the single entity rule)); and

(b) some or all of the assets:

(i)

stopped

being

pre-CGT assets under Division 149 at a

time (the Division 149 time) when the

head company

of the group held them under subsection 701-1(1) (the

single entity rule); or

(ii) would have stopped being pre-CGT assets under

Division 149 at a time (also the Division 149 time)

when the head company of the group held them under

subsection 701-1(1) (the single entity rule) if they had

been pre-CGT assets just before that time; and

that time.

(2)

The

pre-CGT proportion of the leaving entity at the leaving time

is taken to be nil.

(3) Adjust the old group's

allocable cost amount for the leaving entity

as follows:

(a) if the amount under subsection (4) exceeds the amount under

subsection (6)--increase the allocable cost amount by the

excess;

(b) if the amount under subsection (4) falls short of the amount

under subsection (6)--reduce the allocable cost amount by

the shortfall.

(4) Subject to subsection (5), the amount under this subsection is:

Schedule 5 Consolidation

Part 3 Pre-CGT proportions

52 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(a) if Subdivision 705-A applied in relation to the leaving entity

at the time it became a

subsidiary member of the old

group--the total of the amounts that were taken into account

under subsection 705-65(1) for

membership interests in the

leaving entity at that time; or

(b) otherwise--assuming that Subdivision 705-A had applied in

relation to the leaving entity at the time it became a

subsidiary member of the old group, the total of the amounts

that would have been taken into account under subsection

705-65(1) for membership interests in the leaving entity at

that time.

(5) For the purposes of subsection (4), if a

membership interest in the

leaving entity was covered under paragraph 705-125(2)(a)

(pre-CGT interests) when it became a

subsidiary member of the

old group, treat the amount that was taken into account for the

membership interest under subsection 705-65(1) as the interest's

market value just after the Division 149 time.

(6) The amount under this subsection is the old group's

allocable cost

amount for the leaving entity, worked out on the assumption that

the leaving entity ceased to be a

subsidiary member of the old

group just after the Division 149 time.

711-75 Additional integrity rule if membership interests treated as

having been acquired before 20 September 1985 under

section 711-65--application of CGT event K6

(1) This section applies if the leaving entity ceases to be a

subsidiary

member of the old group because of a situation giving rise to

CGT

event A1, C2, E1, E2 or E8 in relation to one or more

membership

interests in the leaving entity.

(2) For the purposes of applying subsections 104-230(2) and (8) in

relation to those

membership interests:

(a) disregard subsection 701-1(1) (the single entity rule) in

working out the

net value of the leaving entity; and

(b) treat the reference in subsection 104-230(2) to "Just before

the other event happened" as a reference to "Just before the

leaving time".

Consolidation Schedule 5

Pre-CGT proportions Part 3

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 53

Note 1:

The single entity rule will continue to apply in determining whether

the property mentioned in subsection 104-230(2) for the leaving entity

was acquired on or after 20 September 1985.

Note 2:

However, in a case of multiple exit from a consolidated group (see

section 711-55), the property mentioned in subsection 104-230(2) for

the leaving entity may include membership interests in another entity

leaving the group at the leaving time. To determine which of those

membership interests were acquired on or after 20 September 1985 for

the purposes of applying subsection 104-230(2) to the leaving entity,

see section 711-65.

(3) In determining the sum of the

cost bases of the property

mentioned in subsection 104-230(6), treat the cost base of an asset

that is included in that property as:

(a) if the asset has its

tax cost set at the leaving time under

section 701-50--its

tax cost setting amount; or

(b)

the

terminating value of the asset is taken into account in

working out the step 1 amount under section 711-25 for the

leaving entity--that terminating value; or

amount under section 711-40 for the leaving entity--the

value of the asset that is so taken into account.

31 Section 713-245

Repeal the section.

32 Section 713-270

Repeal the section.

33 Subsection 995-1(1) (definition of pre-CGT factor)

Repeal the definition.

34 Subsection 995-1(1)

Insert:

pre-CGT proportion has the meaning given by section 705-125.

35 Application provision

(1)

The amendments made by this Part apply in relation to an entity that

becomes a subsidiary member of a consolidated group or MEC group

on or after:

Schedule 5 Consolidation

Part 3 Pre-CGT proportions

54 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(a) if the head company of the group makes a choice in

accordance with subitems (2) and (3)--1 July 2002; or

(b) otherwise--the day on which the Bill that became this Act

was introduced into the House of Representatives.

(2)

A choice mentioned in paragraph (1)(a) must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

(3)

A choice mentioned in paragraph (1)(a) must be made in writing.

Consolidation Schedule 5

No double counting of amounts in ACA Part 4

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 55

Part 4--No double counting of amounts in ACA

Income Tax Assessment Act 1997

36 After section 705-60

Insert:

705-62 No double counting of amounts in allocable cost amount

(1) The object of this section is to prevent a particular amount from

being taken into account more than once in calculating the

allocable cost amount for the joining entity, in order to promote

the object of this Subdivision set out in section 705-10.

(2) Subsection (3) applies if, apart from this section, 2 or more

provisions of this Act operate with the result of altering:

(a)

the

allocable cost amount for the joining entity; or

(b) the allocable cost amount for another entity that becomes a

subsidiary member of the group at the joining time;

because of a particular economic attribute of the joining entity (see

subsection (6)).

(3) Only one of those alterations is to be made, as follows:

(a)

the

head company of the group makes a choice in

accordance with subsections (4) and (5)--the alteration

specified in the choice is to be made;

(b) otherwise--the alteration that is most appropriate (in the light

of the object of this Subdivision) is to be made.

(4) A choice mentioned in paragraph (3)(a) must be made:

(a) by the day the

head company of the group lodges its

income tax return for the income year in which the joining

time occurs; or

(b) within a further time allowed by the Commissioner.

(5) A choice mentioned in paragraph (3)(a) must be made in writing.

(6)

The

economic attributes of the joining entity mentioned in

subsection (2) include the following:

(a) the joining entity's retained profits;

(b) the joining entity's distributions of profits to other entities;

Schedule 5 Consolidation

Part 4 No double counting of amounts in ACA

56 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(d) the joining entity's deductions;

(e) the joining entity's accounting liabilities (within the meaning

of subsection 705-70(1));

(f) consideration received by the joining entity for issuing

membership interests in itself.

37 Application provision

(1)

The amendment made by this Part applies in relation to a consolidated

group or MEC group on and after:

(a) if the head company of the group makes a choice in

accordance with subitems (2) and (3)--1 July 2002; or

(b) otherwise--the day on which the Bill that became this Act

was introduced into the House of Representatives.

(2)

A choice mentioned in paragraph (1)(a) must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

(3)

A choice mentioned in paragraph (1)(a) must be made in writing.

38 Transitional provision--choice where pre-commencement

joining time

(1)

This item applies if the joining time mentioned in paragraph

705-62(4)(a) of the Income Tax Assessment Act 1997 occurs before the

day on which this item commences.

(2)

Despite subsection 705-62(4) of the Income Tax Assessment Act 1997,

the choice mentioned in that subsection must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

Consolidation Schedule 5

Pre-joining time roll-overs Part 5

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 57

Part 5--Pre-joining time roll-overs

Income Tax Assessment Act 1997

39 Paragraph 104-505(1)(b)

Omit "(after any application of section 705-150)".

40 Section 705-60 (table item 3A)

Repeal the item, substitute:

For each step 3A amount (if any)

under section 705-93 (which is about

pre-joining time roll-overs):

(a) if the step 3A amount is a

deferred roll-over loss--add to

the result of step 3 (as affected by

any previous application of this

step) the step 3A amount; or

(b) if the step 3A amount is a

deferred roll-over gain--subtract

from the result of step 3 (as

affected by any previous

application of this step) the step

3A amount

To adjust for certain roll-overs

before the joining time affecting

deferred gains and losses

41 Section 705-93 (heading)

Repeal the heading, substitute:

705-93 If pre-joining time roll-over from foreign resident company

or head company--step 3A in working out allocable cost

amount

42 After paragraph 705-93(1)(a)

Insert:

(aa) at the joining time, as a result of the Subdivision 126-B

roll-over or the section 160ZZO roll-over, the roll-over asset

has:

(i)

deferred roll-over gain; or

(ii)

deferred roll-over loss; and

43 Paragraph 705-93(1)(b)

Schedule 5 Consolidation

Part 5 Pre-joining time roll-overs

58 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Repeal the paragraph, substitute:

(b) the originating company in relation to the Subdivision 126-B

roll-over, or the transferor in relation to the section 160ZZO

roll-over:

(i) was a foreign resident; or

(ii)

the

head company in relation to the joined group;

and

44 Paragraph 705-93(1)(c)

Repeal the paragraph, substitute:

roll-over, or the transferee in relation to the section 160ZZO

roll-over:

(i) was an Australian resident; and

(ii)

spread entity in relation to the joined group; and

45 Paragraph 705-93(1)(d)

Repeal the paragraph, substitute:

(d) if the recipient company was previously a

subsidiary

member of another consolidated group--the conditions in

section 104-182 were not satisfied at any time in relation to

the other group between the Subdivision 126-B roll-over, or

the section 160ZZO roll-over, and the joining time; and

46 Subsection 705-93(2)

Repeal the subsection, substitute:

(2) The step 3A amount is the amount of the

deferred roll-over gain

or the

deferred roll-over loss mentioned in paragraph (1)(aa).

47 Subsections 705-147(3), (4) and (5)

Repeal the subsections, substitute:

Membership interests in subsidiary members of group

(3) In applying section 705-93 for the purposes of this Subdivision,

disregard paragraph 705-93(1)(f) if:

(a) the rollover asset mentioned in that section is a

membership

interest in an entity that becomes a

subsidiary member at the

formation time; and

Consolidation Schedule 5

Pre-joining time roll-overs Part 5

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 59

(b) the rollover asset is not held at that time by the entity that

becomes the

head company of the group.

Note:

The step 3A amount is worked out under section 705-93.

48 Section 705-150

Repeal the section.

49 Subsections 705-227(3), (4) and (5)

Repeal the subsections, substitute:

Membership interests in subsidiary members of group

(3) In applying section 705-93 for the purposes of this Subdivision,

disregard paragraph 705-93(1)(f) if:

(a) the rollover asset mentioned in that section is a

membership

interest in an entity that becomes a

subsidiary member at the

linked entity joining time; and

(b) the rollover asset is not held at that time by the entity that

becomes the

head company of the group.

Note:

The step 3A amount is worked out under section 705-93.

50 Subsection 995-1(1)

Insert:

deferred roll-over gain: an asset has a deferred roll-over gain at a

particular time if:

(a) before that time there was a roll-over under a provision or

former provision of this Act in relation to a disposal or a

CGT event that happened in relation to the asset; and

(b) as a result of the roll-over all or part of a

capital gain from

the disposal or CGT event was disregarded.

The amount of the deferred roll-over gain is equal to the amount of

the capital gain that was disregarded, reduced by the amount (if

any) by which the gain has been taken into account in working out

net capital gain (section 102-5) or

net capital loss

(section 102-10) in relation to the asset between the roll-over time

and the particular time.

51 Subsection 995-1(1)

Insert:

Schedule 5 Consolidation

Part 5 Pre-joining time roll-overs

60 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

deferred roll-over loss: an asset has a deferred roll-over loss at a

particular time if:

(a) before that time there was a roll-over under a provision or

former provision of this Act in relation to a disposal or a

CGT event that happened in relation to the asset; and

(b) as a result of the roll-over all or part of a

capital loss from

the disposal or CGT event was disregarded.

The amount of the deferred roll-over loss is equal to the amount of

the capital loss that was disregarded, reduced by the amount (if

any) by which the loss has been taken into account in working out

net capital gain (section 102-5) or

net capital loss

(section 102-10) in relation to the asset between the roll-over time

and the particular time.

52 Subsection 995-1(1)

Insert:

spread entity, in relation to a

consolidated group or

MEC group,

means a

member of the group that is not a

stick entity in relation

to the group.

53 Subsection 995-1(1)

Insert:

stick entity:

(a) in relation to a

consolidated group--means a

member of the

group that is:

(i)

the

head company of the group; or

(ii) a chosen transitional entity (within the meaning of

Division 701 of the Income Tax (Transitional

Provisions) Act 1997); or

(iii) a transitional foreign-held subsidiary (within the

meaning of Division 701C of the Income Tax

(Transitional Provisions) Act 1997); or

(b) in relation to a

MEC group--means a member of the group

that is:

(i) the head company of the group; or

(ii) a chosen transitional entity (within the meaning of

Division 701 of the Income Tax (Transitional

Provisions) Act 1997); or

Consolidation Schedule 5

Pre-joining time roll-overs Part 5

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 61

(iii) a transitional foreign-held subsidiary (within the

meaning of Division 701C of the Income Tax

(Transitional Provisions) Act 1997); or

(iv)

eligible tier-1 company.

Income Tax (Transitional Provisions) Act 1997

54 Section 126-165 (paragraph (c) of the example)

Omit "section 705-150", substitute "section 705-93".

55 Application provision

The amendments made by this Part apply on and after 1 July 2002.

Schedule 5 Consolidation

Part 6 Phasing out over-depreciation adjustments

62 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Part 6--Phasing out over-depreciation adjustments

Division 1--Joining times between 8 May 2007 and

30 June 2009

Income Tax Assessment Act 1997

56 Paragraph 705-50(2)(b)

Omit "before the joining time", substitute "during the period of 5 years

ending at the joining time".

57 Application provision

The amendment made by this Division applies in relation to entities that

become members of a consolidated group or MEC group during the

period:

(a) starting on 9 May 2007; and

(b) ending on 30 June 2009.

Division 2--Repeal of section 705-50 with effect from

1 July 2009

Income Tax Assessment Act 1997

58 Section 705-50

Repeal the section.

59 Section 705-55 (heading)

Repeal the heading, substitute:

705-55 Order of application of sections 705-40, 705-45 and 705-47

60 Subparagraph 705-55(b)(iii)

Omit "705-47;", substitute "705-47.".

61 Subparagraph 705-55(b)(iv)

Repeal the subparagraph.

62 Paragraph 705-57(2)(d)

Consolidation Schedule 5

Phasing out over-depreciation adjustments Part 6

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 63

Omit "705-45, 705-47 or 705-50", substitute "705-45 or 705-47".

63 Subsection 705-57(6)

Omit "705-45, 705-47 or 705-50", substitute "705-45 or 705-47".

64 Subsection 705-59(7)

Omit "705-45, 705-47 and 705-50", substitute "705-45 and 705-47".

65 Section 705-190

Repeal the section.

66 Section 713-225(5)

Repeal the subsection.

67 Section 713-230

Repeal the section.

68 Subsection 715-900(2) (note 2)

Repeal the note, substitute:

Note 2:

The operation of Division 58 just before the joining time can affect the

basis on which the tax cost is set for a depreciating asset that becomes

an asset of the head company of the consolidated group at the joining

time because of section 701-1 (the single entity rule). That Division

provides the basis for working out under Division 40 the asset's

adjustable value. This is the entity's terminating value for the asset,

which in turn can affect the tax cost setting amount for the asset under

sections 705-40, 705-45 and 705-47.

69 Subsection 716-330(9)

Repeal the subsection.

70 Subsection 716-340(8) (note)

Repeal the note, substitute:

Note:

Subsections (6), (7) and (8) can affect the working out of the tax cost

setting amount for the in-house software, by affecting the joining

entity's terminating value for the software, which section 705-30

defines as being the adjustable value of the software just before the

joining time, and which is relevant to sections 705-40 and 705-57

(which may reduce the tax cost setting amount for the software).

71 Subsection 995-1(1) (definition of over-depreciated)

Schedule 5 Consolidation

Part 6 Phasing out over-depreciation adjustments

64 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Repeal the definition.

72 Subsection 995-1(1) (definition of over-depreciation)

Repeal the definition.

Income Tax (Transitional Provisions) Act 1997

73 Section 126-165 (paragraph (b) of the example)

Repeal the paragraph.

74 Subsection 701-40(1)

Omit "(5)", substitute "(4)".

75 Paragraph 701-40(3)(b)

Omit "section 705-50", substitute "former section 705-50".

76 Subsection 701-40(5)

Repeal the subsection.

77 Subsection 705-305(9) (note)

Omit "sections 705-40 and 705-50", substitute "section 705-40".

78 Application provision

The amendments made by this Division apply in relation to entities that

become members of a consolidated group or MEC group on or after

1 July 2009.

Consolidation Schedule 5

Leaving time liabilities Part 7

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 65

Part 7--Leaving time liabilities

Division 1--Timing

Income Tax Assessment Act 1997

79 Subsection 711-20(1) (cell at table item 1, column headed

"What the step requires")

Omit "the

terminating values of assets that the leaving entity takes with

it when it ceases to be a

subsidiary member", substitute "the

terminating values of the leaving entity's assets just before the leaving

time".

80 Subsection 711-20(1) (cell at table item 2, column headed

"What the step requires")

Omit "the

terminating value of the assets that the leaving entity takes

with it", substitute "the

terminating value of the leaving entity's assets

just before the leaving time".

81 Subsection 711-20(1) (cell at table item 4, column headed

"What the step requires")

Omit:

(a) the liabilities that the leaving entity takes with it when it

ceases to be a

subsidiary member; and

Substitute:

(a) the leaving entity's liabilities just before the leaving time;

and

82 Section 711-25 (heading)

Repeal the heading, substitute:

711-25 Terminating values of the leaving entity's assets--step 1 in

working out allocable cost amount

83 Subsection 711-45(1)

Omit "is a liability of the leaving entity at the leaving time", substitute

"is a liability of the leaving entity just before the leaving time".

Schedule 5 Consolidation

Part 7 Leaving time liabilities

66 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

84 Paragraph 713-265(4)(a)

Omit "is a liability of the leaving entity at the leaving time", substitute

"is a liability of the leaving entity just before the leaving time".

85 Paragraph 713-265(4)(b)

Omit "of the partner at the leaving time", substitute "of the partner just

before the leaving time".

86 Subsection 713-265(4)

Omit "of the partner at the leaving time,", substitute "of the partner just

before the leaving time,".

87 Application provision

(1)

The amendments made by this Division apply on and after the day on

which the Bill that became this Act was introduced into the House of

Representatives.

(2)

The amendments made by this Division are to be disregarded for the

purposes of interpreting:

(a) the provisions amended by this Division, as they applied

before the day mentioned in subitem (1); and

(b) any other provision of the Income Tax Assessment Act 1997

or the Income Tax (Transitional Provisions) Act 1997, as that

provision applied before the day mentioned in subitem (1), to

the extent that it relates to a provision mentioned in

paragraph (a).

Division 2--Adjustment of step 4 amount

Income Tax Assessment Act 1997

88 Subsection 711-45(8)

Repeal the subsection, substitute:

Adjustment where amount of liability differed for purpose of

calculating allocable cost amount on entry

(8) Subsection (10) applies if:

(a)

either:

Consolidation Schedule 5

Leaving time liabilities Part 7

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 67

(i) an amount (the exit liability amount) was added for a

particular liability under subsection (5); or

(ii) a particular liability is covered by subsection (5), but no

amount was added for it under that subsection (in which

case the exit liability amount is zero); and

(b) the liability was taken into account in working out the

allocable cost amount (the original entry ACA) for a

subsidiary member (whether or not the leaving entity) of the

old group in accordance with Division 705; and

entry liability amount) of the liability that was taken into

account in working out the original entry ACA, after any

adjustments made under:

(i) section 705-70, 705-75 or 705-80; and

(ii) subsection (9) of this section; and

(d) if the liability is a provision for annual leave or long service

leave, or a provision for a liability contingent on a future

event:

(i) in the case of a liability that was, in accordance with the

accounting principles that the entity would have used if

it had prepared its financial statements just before the

time it became a subsidiary member of the group, a

current liability of the entity at that time--the leaving

time occurs less than 1 year after that time; or

(ii) otherwise--the leaving time occurs less than 4 years

after that time.

(9) Make these adjustments to the entry liability amount if, at a time

when the leaving entity was a

subsidiary member of the old group,

the

head company of the group paid an amount that reduced the

liability:

(a) reduce the entry liability amount by the amount of the

reduction; and

(b) if the payment gave rise to an amount being included in the

assessable income of the head company--after making the

reduction in paragraph (a), further reduce the entry liability

amount by the product of:

(i) the amount included in assessable income; and

(ii)

the

corporate tax rate; and

Schedule 5 Consolidation

Part 7 Leaving time liabilities

68 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

company--after making the reduction in paragraph (a),

increase the entry liability amount by the product of:

(i) the amount deducted; and

(ii) the corporate tax rate.

(10) The step 4 amount is altered by:

(a) if the entry liability amount exceeds the exit liability

amount--increasing the step 4 amount by the excess; or

(b) if the entry liability amount falls short of the exit liability

amount--decreasing the step 4 amount by the shortfall.

89 Application provision

The amendment made by this Division applies in relation to an entity

ceasing to be a subsidiary member of a consolidated group or MEC

group on or after the day on which the Bill that became this Act was

introduced into the House of Representatives.

Consolidation Schedule 5

Accounting principles Part 8

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 69

Part 8--Accounting principles

Income Tax Assessment Act 1997

90 Paragraph 701-40(2)(b)

Omit "

accounting standards, or statements of accounting concepts

made by the Australian Accounting Standards Board", substitute

accounting principles".

91 Paragraph 705-56(1)(b)

Omit "

accounting standards, or statements of accounting concepts

made by the Australian Accounting Standards Board", substitute "its

accounting principles for tax cost setting".

92 Subsection 705-58(1)

Omit "

accounting standards, or statements of accounting concepts

made by the Australian Accounting Standards Board, require them to be

set off against each other", substitute ", in accordance with

accounting

principles, they are required to be set off against each other".

93 Subsection 705-59(2)

Omit "

accounting standards, or statements of accounting concepts

made by the Australian Accounting Standards Board", substitute "the

entity's

accounting principles for tax cost setting".

94 Subsection 705-70(1)

Omit "

accounting standards, or statements of accounting concepts

made by the Australian Accounting Standards Board", substitute "the

joining entity's

accounting principles for tax cost setting".

95 Subsection 705-70(1)

Omit "that can or must be recognised in the entity's statement of

financial position".

96 Subsection 705-70(1A)

Omit "those

accounting standards or statements", substitute "the

accounting principles".

97 At the end of section 705-70

Schedule 5 Consolidation

Part 8 Accounting principles

70 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Add:

Joining entity's accounting principles for tax cost setting

(3) The joining entity's accounting principles for tax cost setting are

the

accounting principles that the entity would use if it were to

prepare its financial statements just before the joining time.

98 Paragraph 705-80(1)(a)

Omit "

accounting standards or statements of accounting concepts made

by the Australian Accounting Standards Board", substitute "the joining

entity's

accounting principles for tax cost setting".

99 Paragraph 705-85(3)(b)

Omit "

accounting standards, or statements of accounting concepts

made by the Australian Accounting Standards Board", substitute "the

joining entity's

accounting principles for tax cost setting".

100 Subsection 705-90(2)

Omit "

accounting standards, or statements of accounting concepts

made by the Australian Accounting Standards Board", substitute "the

joining entity's

accounting principles for tax cost setting".

101 Subsection 705-90(2)

Omit "that could be recognised in the joining entity's statement of

financial position if that statement were prepared as at the joining time".

102 Subsection 711-45(1)

Omit "

accounting standards, or statements of accounting concepts

made by the Australian Accounting Standards Board", substitute "the

leaving entity's

accounting principles for tax cost setting".

103 Subsection 711-45(1)

Omit "that can or must be identified in the entity's statement of

financial position".

104 After subsection 711-45(1)

Insert:

Consolidation Schedule 5

Accounting principles Part 8

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 71

Leaving entity's accounting principles for tax cost setting

(1A) The leaving entity's accounting principles for tax cost setting are

the

accounting principles that the group would use if it were to

prepare its financial statements just before the leaving time

(disregarding subsection 701-1(1) (the single entity rule)).

105 Subsection 711-45(5)

Omit "

accounting standards, or statements of accounting concepts

made by the Australian Accounting Standards Board", substitute "the

leaving entity's

accounting principles for tax cost setting".

106 Subsection 711-45(7)

Omit "

accounting standards, or statements of accounting concepts

made by the Australian Accounting Standards Board", substitute "the

leaving entity's

accounting principles for tax cost setting".

107 Paragraph 713-225(6)(a)

Omit "according to

accounting standards, or statements of accounting

concepts made by the Australian Accounting Standards Board",

substitute "in accordance with the

accounting principles that the

partnership would use if it were to prepare its financial statements just

before the joining time".

108 Paragraph 713-225(6)(a)

Omit "that can or must be recognised in the partnership's statement of

financial position".

109 Paragraph 713-265(4)(a)

Omit "according to

accounting standards, or statements of accounting

concepts made by the Australian Accounting Standards Board",

substitute "in accordance with the

accounting principles that the

partnership would use if it were to prepare its financial statements just

before the leaving time (disregarding subsection 701-1(1) (the single

entity rule))".

110 Paragraph 713-265(4)(a)

Omit "that can or must be recognised in the partnership's statement of

financial position".

Schedule 5 Consolidation

Part 8 Accounting principles

72 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

111 Subsection 995-1(1)

Insert:

accounting principles: A matter is in accordance with accounting

principles if it is in accordance with:

(a)

accounting standards; or

(b) if there are no accounting standards applicable to the

matter--authoritative pronouncements of the Australian

Accounting Standards Board that apply to the preparation of

financial statements.

112 Subsection 995-1(1)

Insert:

accounting principles for tax cost setting has the meaning given

by:

(a) subsection 705-70(3); and

(b)

subsection

711-45(1A).

113 Application provision

The amendments made by this Part apply on and after the day on which

the Bill that became this Act was introduced into the House of

Representatives.

Consolidation Schedule 5

Inherited deductions Part 9

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 73

Part 9--Inherited deductions

Income Tax Assessment Act 1997

114 At the end of section 705-115

Add:

(3) Subsection (2) does not cover a deduction under section 43-15

(which relates to

undeducted construction expenditure) if the

joining entity

acquired the asset to which the deduction relates at

or before 7.30 pm, by legal time in the Australian Capital Territory,

on 13 May 1997.

115 Subsection 711-35(1)

Repeal the subsection, substitute:

(1) Work out the step 2 amount for the purposes of the table in

subsection 711-20(1) by multiplying all deductions covered by

subsection (2) by the

general company tax rate.

116 At the end of section 711-35

Add:

(3) Subsection (2) does not cover a deduction under section 43-15

(which relates to

undeducted construction expenditure) if, because

of section 701-40 (the exit history rule), the leaving entity is taken

to have

acquired the asset to which the deduction relates at or

before 7.30 pm, by legal time in the Australian Capital Territory,

on 13 May 1997.

117 Application provision

(1)

The amendments made by items 114 and 116 apply on and after 1 July

2002.

(2)

The other amendment made by this Part applies on and after the day on

which the Bill that became this Act was introduced into the House of

Representatives.

Schedule 5 Consolidation

Part 10 General insurance companies

74 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Part 10--General insurance companies

Income Tax Assessment Act 1997

118 At the end of Subdivision 713-M

Add:

713-725 Treatment of certain assets and liabilities of general

insurance companies

(1) This section applies if a

general insurance company becomes or

ceases to be a

subsidiary member of a

consolidated group.

(2)

the

general insurance company becomes a

subsidiary member

of the group:

(a) in working out the step 2 amount for the purposes of the table

in section 705-60, reduce that amount by the sum of the

amount of each thing mentioned in subsection (4); and

(b) in working out the

tax cost setting amount of a thing

mentioned in subsection (4) for the purposes of

section 705-35, treat the

market value of the thing as zero.

(3)

the

general insurance company ceases to be a

subsidiary

member of the group:

(a) in working out the step 4 amount for the purposes of the table

in section 711-20, reduce that amount by the sum of the

amount of each thing mentioned in subsection (4); and

(b) for the purposes of section 711-25, treat the

terminating

value of a thing mentioned in subsection (4) as zero.

(4) The things are the

general insurance company's:

(a) deferred acquisition costs in relation to the company's

unearned premium reserve; and

(b) deferred reinsurance expenses in relation to the company's

unearned premium reserve; and

outstanding claims.

119 Application provision

Schedule 5 Consolidation

Part 11 Retained cost base assets

76 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Part 11--Retained cost base assets

Division 1--Cash management trusts

Income Tax Assessment Act 1997

120 Subsection 705-25(2)

Omit "paragraph (a) or (b)", substitute "paragraph (a), (b) or (ba)".

121 After paragraph 705-25(5)(b)

Insert:

(ba) a unit in a

cash management trust, if:

(i) the redemption value of the unit is expressed in

Australian dollars; and

(ii) the redemption value of the unit cannot increase; or

122 Subsection 995-1(1)

Insert:

cash management trust means a trust that satisfies these

requirements:

(a) the trust is of a kind commonly known as a cash management

trust;

(b) each unit in the trust carries the same rights as every other

unit in the trust.

Division 2--Rights to future income assets

Income Tax Assessment Act 1997

123 After subsection 705-25(4A)

Insert:

Rights to payments in respect of uncompleted work etc.

(4B)

the

retained cost base asset is covered by paragraph (d) of the

definition of that expression, its

tax cost setting amount is equal to

the joining entity's

terminating value for the asset.

Consolidation Schedule 5

Retained cost base assets Part 11

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 77

124 Subparagraph 705-25(5)(c)(ii)

Omit "is incurred.", substitute "is incurred; or".

125 After paragraph 705-25(5)(c)

Insert:

; or (d) a right that is an asset covered by section 716-410 (rights to

future amounts that are expected to be included in assessable

income) if at the time the right was created:

(i)

the

head company was the head company of a

consolidatable group; and

(ii) the joining entity was a

subsidiary member of the

consolidatable group.

Division 3--Application provision

126 Application provision

(1)

The amendments made by Division 1 of this Part apply in relation to a

consolidated group or MEC group on and after:

(a) if the head company of the group makes a choice in

accordance with subitems (2) and (3)--1 July 2002; or

(b) otherwise--the day on which the Bill that became this Act

was introduced into the House of Representatives.

(2)

A choice mentioned in paragraph (1)(a) must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

(3)

A choice mentioned in paragraph (1)(a) must be made in writing.

(4)

The amendments made by Division 2 of this Part apply in relation to a

consolidated group or MEC group on and after 1 July 2002.

Schedule 5 Consolidation

Part 12 Removal of CGT event L7

78 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Part 12--Removal of CGT event L7

Income Tax Assessment Act 1997

127 Section 104-5 (table item relating to CGT event L7)

Repeal the item.

128 Section 104-530

Repeal the section.

129 Section 110-10 (table item relating to CGT event L7)

Repeal the item.

Income Tax (Transitional Provisions) Act 1997

130 Section 701-34

Repeal the section.

131 Application provision

(1)

The amendments made by this Part apply on and after 1 July 2002.

(2)

However, the amendments made by this Part do not apply in relation to

a CGT event that:

(a) is CGT event L7; and

(b) happens before the day on which the Bill that became this

Act was introduced into the House of Representatives; and

Consolidation Schedule 5

Reduction in tax cost setting amount that exceeds market value of certain retained cost

base assets Part 13

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 79

Part 13--Reduction in tax cost setting amount that

exceeds market value of certain retained

cost base assets

Income Tax Assessment Act 1997

132 After section 705-25

Insert:

705-27 Reduction in tax cost setting amount that exceeds market

value of certain retained cost base assets

(1)

If:

(a)

retained cost base asset of the joining entity is a right to

receive a specified amount of such Australian currency,

covered by paragraph 705-25(5)(b); and

(b)

the

market value of the asset is less than the

tax cost setting

amount of the asset; and

capital gain under

CGT event

L3 (disregarding this subsection) as a result of the joining

entity becoming a

subsidiary member of the group;

reduce the tax cost setting amount of the asset by the amount of the

gain (but not below zero).

Note:

Reducing the tax cost setting amount of the asset will also reduce the

amount of the capital gain (see paragraph 104-510(1)(b)). The amount

of the capital gain might be reduced to nil.

(2)

If:

(a) the requirements in subsection 701-58(1) (intra-group assets)

are satisfied in relation to the asset; and

(b) the joining entity has been entitled to a deduction for an

income year ending on or before the joining time because of

the

market value of the asset being less than the specified

amount mentioned in paragraph (1)(a); and

been reduced under subsection 705-75(2);

reduce the amount of the reduction under subsection (1) by the

amount of the deduction (but not below zero).

Schedule 5 Consolidation

Part 13 Reduction in tax cost setting amount that exceeds market value of certain

retained cost base assets

80 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(3)

the

tax cost setting amount of 2 or more of the joining entity's

assets could be reduced in accordance with subsections (1) and (2):

(a) subsections (1) and (2) apply sequentially to each of those

assets; and

(b)

the

head company may choose the sequence of assets to

which subsections (1) and (2) apply; and

subsections (1) and (2) apply sequentially to each of those

assets according to the time at which they were created, from

earliest to latest.

Note:

Once the amount of the capital gain is reduced to nil as a result of the

application of subsections (1) and (2), no further reductions of tax cost

setting amount can be made under those subsections.

(4) A choice the

head company can make under paragraph (3)(b)

must be made:

(a) by the day the head company lodges its

income tax return

for the income year in which the

CGT event happened; or

(b) within a further time allowed by the Commissioner.

(5) The way the

head company prepares its

income tax return is

sufficient evidence of the making of the choice.

133 Paragraph 705-35(1)(b)

Omit "in accordance with section 705-25".

134 Application provision

(1)

The amendments made by this Part apply in relation to entities that

become members of a consolidated group or MEC group on or after:

(a) if the head company of the group makes a choice in

accordance with subitems (2) and (3)--1 July 2002; or

(b) otherwise--the day on which the Bill that became this Act

was introduced into the House of Representatives.

(2)

A choice mentioned in paragraph (1)(a) must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

(3)

A choice mentioned in paragraph (1)(a) must be made in writing.

Schedule 5 Consolidation

Part 15 Transitional concession for SAPs

82 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Part 15--Transitional concession for SAPs

New Business Tax System (Consolidation and Other

Measures) Act 2003

137 Subsection 2(1) (table item 2)

Repeal the item, substitute:

1A. Schedule 1,

items 1 to 27

Immediately after the commencement of

Schedule 1 to the New Business Tax System

(Consolidation and Other Measures) Act

(No. 1) 2002

24 October 2002

1B. Schedule 1,

item 27A

Immediately after the commencement of the

provisions covered by table item 1A

24 October 2002

1C. Schedule 1,

items 28 to 36

Immediately after the commencement of

Schedule 1 to the New Business Tax System

(Consolidation and Other Measures) Act

(No. 1) 2002

24 October 2002

2. Schedules 2

and 3

Immediately after the commencement of

Schedule 1 to the New Business Tax System

(Consolidation and Other Measures) Act

(No. 1) 2002

24 October 2002

138 After item 27 of Schedule 1

Insert:

27A Paragraph 701-30(1)(a)

Repeal the paragraph, substitute:

(a) on or before the first day of the first income year of the head

company starting after 30 June 2003; and

Note:

Section 701-30 of the Income Tax (Transitional Provisions) Act 1997 was repealed by

item 285 of Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions)

Act 2006 on 14 September 2006. Therefore the amendment made by this item will not

apply after that repeal.

139 Application provision

(1)

The amendments made by this Part apply in relation to a consolidated

group or MEC group only if the head company of the group makes a

choice in accordance with subitems (2) and (3).

(2)

The choice must be made:

Consolidation Schedule 5

Transitional concession for SAPs Part 15

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 83

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

(3)

The choice must be made in writing.

140 Transitional provision--revocation of choice for

transitional entities

(1)

This item applies in relation to a consolidated group or MEC group if:

(a) the head company of the group makes a choice in accordance

with subitems (2) and (3) of the previous item; and

(b) the group came into existence:

(i) on or after 1 July 2003; and

(ii) on a day other than the first day of the first income year

of the head company starting after 1 July 2003.

(2)

In determining whether a choice under subsection 701-5(1) of the

Income Tax (Transitional Provisions) Act 1997 in relation to the group

can be revoked, treat the reference in paragraph 701-5(4)(a) of that Act

to 31 December 2005 as instead being a reference to the day that is 6

months after the commencement of this item.

Schedule 5 Consolidation

Part 16 Loss multiplication rules for widely held companies

84 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Part 16--Loss multiplication rules for widely held

companies

Income Tax Assessment Act 1997

141 After subsection 165-115X(2)

Insert:

(2A)

widely held company that, apart from this subsection, would

have a relevant equity interest in a

loss company at a particular

time does not have such an interest at that time.

(2B) Subsection (2A) does not apply if:

(a) an entity has a controlling stake in the loss company (see

section 165-115Z); and

(b) that entity has a direct or indirect interest in, or is owed a

debt by, the

widely held company, being an interest or debt

in respect of which:

(i) the entity could, if a

CGT event happened in respect of

the interest or debt, make a

capital loss (other than a

capital loss that would be disregarded) that reflects any

part of the loss company's overall loss; or

(ii) the entity has deducted or can deduct, or could deduct at

a later time, an amount in respect of the cost of the

acquisition, or a net loss on the

disposal, of the interest

or debt, where the deduction reflected or would have

reflected, or would reflect, as the case may be, any part

of the company's overall loss.

(2C) Subsection (2A) does not apply in respect of a particular time if an

entity that had a direct or indirect interest in, or was owed a debt

by, the

widely held company at an earlier time, and had a

controlling stake in the loss company (see section 165-115Z) at the

earlier time:

(a) made a capital loss (other than a capital loss that was

disregarded) because a

CGT event happened in respect of

the interest or debt, where the capital loss reflected any part

of the

loss company's overall loss; or

(b) has deducted or could have deducted at an earlier time, or

could deduct at a later time, an amount in respect of the cost

Consolidation Schedule 5

Loss multiplication rules for widely held companies Part 16

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 85

of the

acquisition, or a net loss on the

disposal, of the

interest or debt, where the deduction reflected or would have

reflected, or would reflect, as the case may be, any part of the

company's overall loss.

142 After subsection 165-115X(3)

Insert:

(3A) Subsection (3) does not apply if the first entity is a

widely held

company.

143 Subsection 165-115X(4)

Omit "However, subsection (3)", substitute "Subsection (3)".

144 After subsection 165-115Y(3)

Insert:

(3A)

widely held company that, apart from this subsection, would

have a relevant debt interest in a

loss company at a particular time

does not have such an interest at that time.

(3B) Subsection (3A) does not apply if:

(a) an entity has a controlling stake in the loss company (see

section 165-115Z); and

(b) that entity has a direct or indirect interest in, or is owed a

debt by, the

widely held company, being an interest or debt

in respect of which:

(i) the entity could, if a

CGT event happened in respect of

the interest or debt, make a

capital loss (other than a

capital loss that would be disregarded) that reflects any

part of the loss company's overall loss; or

(ii) the entity has deducted or can deduct, or could deduct at

a later time, an amount in respect of the cost of the

acquisition, or a net loss on the

disposal, of the interest

or debt, where the deduction reflected or would have

reflected, or would reflect, as the case may be, any part

of the company's overall loss.

(3C) Subsection (3A) does not apply in respect of a particular time if an

entity that had a direct or indirect interest in, or was owed a debt

by, the

widely held company at an earlier time, and had a

Schedule 5 Consolidation

Part 16 Loss multiplication rules for widely held companies

86 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

controlling stake in the

loss company (see section 165-115Z) at

the earlier time:

(a)

made

capital loss (other than a capital loss that was

disregarded) because a

CGT event happened in respect of

the interest or debt, where the capital loss reflected any part

of the loss company's overall loss; or

(b) has deducted or could have deducted at an earlier time, or

could deduct at a later time, an amount in respect of the cost

of the

acquisition, or a net loss on the

disposal, of the

interest or debt, where the deduction reflected or would have

reflected, or would reflect, as the case may be, any part of the

company's overall loss.

145 After subsection 165-115Y(4)

Insert:

(4A) Subsection (4) does not apply if the first entity is a

widely held

company.

146 Subsection 165-115Y(5)

Omit "However, subsection (4)", substitute "Subsection (4)".

147 After paragraph 715-255(1)(b)

Insert:

and

(ba)

the

head company has a relevant equity interest under

section 165-115X in the leaving entity at the leaving time;

148 After subsection 715-255(1)

Insert:

(1A) For the purposes of paragraph (1)(ba), in determining whether the

head company has the relevant equity interest, disregard the

operation of subsection 701-1(1) (the single entity rule) in applying

subsections 165-115X(2C) and 165-115X(4).

149 Subsection 715-270(5)

Consolidation Schedule 5

Loss multiplication rules for widely held companies Part 16

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 87

Omit "If the trust is a

loss company at the leaving time, the

head

company must", substitute "If the trust is a

loss company at the leaving

time and the

head company has a relevant equity interest under

section 165-115X in the leaving entity at the leaving time, the head

company must".

150 After subsection 715-270(5)

Insert:

(5A) For the purposes of subsection (5), in determining whether the

head company has the relevant equity interest, disregard the

operation of subsection 701-1(1) (the single entity rule) in applying

subsections 165-115X(2C) and 165-115X(4).

151 After section 719-735

Insert:

719-740 Head company does not have relevant equity or debt

interest in a loss company if widely held top company

does not have such an interest

(1) For the purposes of Subdivision 165-CD, treat the

head company

of a

MEC group as not having a relevant equity interest in a

loss

company at a particular time if:

(a)

the

top company of the group is a

widely held company at

that time; and

(b) because of subsections 165-115X(2A), (2B) and (2C), the top

company does not have a relevant equity interest under

section 165-115X in the loss company at that time.

(2) For the purposes of paragraph (1)(b), disregard the operation of

subsection 701-1(1) (the single entity rule) in determining whether

subsection 165-115X(2C) has the effect that the

top company has

the relevant equity interest mentioned in that paragraph.

(3) For the purposes of Subdivision 165-CD, treat the

head company

of a

MEC group as not having a relevant debt interest in a

loss

company at a particular time if:

(a)

the

top company of the group is a

widely held company at

that time; and

Consolidation Schedule 5

CGT straddles Part 17

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 89

Part 17--CGT straddles

Income Tax Assessment Act 1997

153 At the end of Subdivision 716-Z

Add:

716-860 CGT event straddling joining or leaving time

(1) This section applies if:

(a) an entity (the joining entity) becomes a subsidiary member of

consolidated group at a particular time (the joining time);

and

(b) disregarding the operation of subsection 701-1(1) (the single

entity rule), the joining entity held a

CGT asset at the joining

time; and

single entity rule), the

head company of the group held the

CGT asset at the joining time; and

(d)

CGT event happened in relation to the asset at a time

before the joining time (disregarding this section), but the

circumstances that gave rise to the CGT event first existed at

a time on or after the joining time.

(2) This section also applies if:

(a) an entity (the leaving entity) ceases to be a

subsidiary

member of a

consolidated group at a particular time (the

leaving time); and

(b) taking into account the operation of subsection 701-1(1) (the

single entity rule), the

head company of the group held a

CGT asset at the leaving time; and

entity rule), the leaving entity held the CGT asset at the

leaving time; and

(d)

CGT event happened in relation to the asset at a time

before the leaving time (disregarding this section), but the

circumstances that gave rise to the CGT event first existed at

a time on or after the leaving time.

Consolidation Schedule 5

Choice to consolidate Part 18

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 91

Part 18--Choice to consolidate

Income Tax Assessment Act 1997

155 Subsection 703-50(1)

Omit "in the

approved form given to the Commissioner within the

period described in subsection (3)", substitute "in writing".

156 At the end of subsection 703-50(1)

Add:

Note:

The head company of the group must give the Commissioner a notice

in the approved form containing information about the group (see

sections 703-58 and 703-60).

157 Subsection 703-50(3)

Repeal the subsection, substitute:

(3) The choice can be made no later than:

(a) if the company is required to give the Commissioner its

income tax return for the income year during which the

specified day mentioned in subsection (1) occurs--the day on

which the company gives the Commissioner that income tax

return; or

(b) otherwise--the last day in the period within which the

company would be required to give the Commissioner such a

return if it were required to give the Commissioner such a

return.

158 Subsections 703-50(5) and (6)

Repeal the subsections.

159 Before section 703-60 (after the group heading)

Insert:

703-58 Notice of choice to consolidate

(1)

consolidated group comes into existence on the day specified

in a choice under section 703-50, the

head company of the group

must give the Commissioner a notice in the

approved form

containing the following information:

Schedule 5 Consolidation

Part 18 Choice to consolidate

92 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(a) the identity of the head company;

(b) the day specified in the choice on which the

consolidatable

group is taken to be consolidated;

subsidiary member of the group on that

day;

(d) the identity of each entity that was a subsidiary member of

the group on that day but was not such a subsidiary member

when the notice is given;

(e) the identity of each entity that was not a subsidiary member

of the group on that day but was such a subsidiary member

when the notice is given;

(f) the identity of each entity that became a subsidiary member

of the group after that day but was not such a subsidiary

member when the notice is given.

(2) The notice must be given no later than:

(a)

the

head company is required to give the Commissioner its

income tax return for the income year during which that day

occurs--the day on which the company gives the

Commissioner that income tax return; or

(b) otherwise--the last day in the period within which the head

company would be required to give the Commissioner such a

return if it were required to give the Commissioner such a

return.

160 Paragraph 703-60(2)(b)

Omit "more than 28 days before the choice is made", substitute "before

the relevant notice is given to the Commissioner under section 703-58

(notice of choice to consolidate)".

161 Subsection 703-60(2)

Omit "at the same time as the choice is made".

162 After subsection 703-60(2)

Insert:

(2A) The notice must be given no later than:

(a)

the

head company is required to give the Commissioner its

income tax return for the income year during which that day

Consolidation Schedule 5

Choice to consolidate Part 18

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 93

occurs--the day on which the company gives the

Commissioner that income tax return; or

(b) otherwise--the last day in the period within which the head

company would be required to give the Commissioner such a

return if it were required to give the Commissioner such a

return.

163 Paragraph 703-60(3)(b)

Omit "a notice of choice under section 719-50 is given after that time",

substitute "a choice under section 719-50 is made after that time".

164 Paragraph 703-60(3)(c)

Omit "more than 28 days before the notice of choice is given",

substitute "before the relevant notice is given to the Commissioner

under section 719-76 (notice of choice to consolidate)".

165 Subsection 703-60(3)

Omit "at the same time as the notice of choice is given".

166 At the end of section 703-60

Add:

(4) The notice must be given no later than:

(a)

the

head company is required to give the Commissioner its

income tax return for the income year during which that day

occurs--the day on which the company gives the

Commissioner that income tax return; or

(b) otherwise--the last day in the period within which the head

company would be required to give the Commissioner such a

return if it were required to give the Commissioner such a

return.

167 Paragraph 719-5(4)(c)

Omit "within the applicable period worked out under subsection (6), the

provisional head company of the MEC group gives the Commissioner

a written notice, in the

approved form", substitute "the

provisional

head company of the MEC group makes a choice in writing no later

than the day mentioned in subsection (6)".

168 Paragraph 719-5(4)(d)

Schedule 5 Consolidation

Part 18 Choice to consolidate

94 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Omit "the notice under paragraph (c)" (wherever occurring), substitute

"the choice".

169 Paragraph 719-5(4)(f)

Omit "the notice under paragraph (c)", substitute "the choice".

170 At the end of subsection 719-5(4)

Add:

Note:

The provisional head company of the group must give the

Commissioner a notice in the approved form containing information

about each entity that becomes a subsidiary member of the group on

that day because of the choice (see sections 719-77 and 719-80).

171 Subsection 719-5(6)

Repeal the subsection, substitute:

(6) The day mentioned in paragraph (4)(c) is:

(a) if the company mentioned in subsection (6A) is required to

give the Commissioner its

income tax return for the income

year during which the time mentioned in paragraph (4)(b)

occurs--the day on which that company gives the

Commissioner that income tax return; or

(b) otherwise--the last day in the period within which that

company would be required to give the Commissioner such a

return if it were required to give the Commissioner such a

return.

(6A) The company is:

(a) in a case where subsection 719-75(1) or (2) applies--the

company that will be the

head company of the group as at

the end of the income year; and

(b) in a case where subsection 719-75(3) applies--the company

that will be the head company of the group immediately

before the group ceased to exist.

172 Paragraph 719-40(1)(e)

Omit "within the applicable period worked out under subsection (2), the

company mentioned in paragraph (b) gives the Commissioner a written

notice, in the

approved form", substitute "the company mentioned in

paragraph (b) makes a choice in writing no later than the day mentioned

in subsection (2)".

Consolidation Schedule 5

Choice to consolidate Part 18

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 95

173 Subparagraph 719-40(1)(e)(ii)

After "comes into existence", insert "at that time".

174 Paragraph 719-40(1)(f)

Omit "the notice under paragraph (e)" (wherever occurring), substitute

"the choice".

175 At the end of subsection 719-40(1)

Add:

Note:

The company mentioned in paragraph (b) must give the Commissioner

a notice in the approved form containing information about the special

conversion event (see sections 719-78 and 719-80).

176 Subsection 719-40(2)

Repeal the subsection, substitute:

(2) The day mentioned in paragraph (1)(e) is:

(a) if the company is required to give the Commissioner its

income tax return for the income year during which that

time occurs--the day on which the company gives the

Commissioner that income tax return; or

(b) otherwise--the last day in the period within which the

company would be required to give the Commissioner such a

return if it were required to give the Commissioner such a

return.

177 Subsection 719-50(1)

Repeal the subsection, substitute:

Making a choice to consolidate

(1)

If:

(a)

potential MEC group (the first group) derived from 2 or

eligible tier-1 companies of a

top company is in

existence at the start of a particular day; and

(b) that day is after 30 June 2002; and

of a

MEC group or a

consolidated group;

Schedule 5 Consolidation

Part 18 Choice to consolidate

96 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

those eligible tier-1 companies, jointly, may make a choice in

writing that the first group be consolidated on and after that day. If

they do so, the choice must specify that day.

Note:

The provisional head company must give the Commissioner a notice

in the approved form containing information about the group (see

sections 719-76 and 719-80).

178 Subsection 719-50(3)

Repeal the subsection, substitute:

(3) A choice can be made no later than:

(a) if the company mentioned in subsection (3A) is required to

give the Commissioner its

income tax return for the income

year during which that day occurs--the day on which that

company gives the Commissioner that income tax return; or

(b) otherwise--the last day in the period within which that

company would be required to give the Commissioner such a

return if it were required to give the Commissioner such a

return.

(3A) The company is:

(a) in a case where subsection 719-75(1) or (2) applies--the

company that will be the

head company of the group as at

the end of the income year; and

(b) in a case where subsection 719-75(3) applies--the company

that will be the head company of the group immediately

before the group ceased to exist.

179 Paragraph 719-50(4)(b)

Repeal the paragraph, substitute:

(b) another company (the other company) that was an eligible

tier-1 company at the start of the specified day ceased to exist

at a time before:

(i) the day on which the company mentioned in

paragraph (a) gives the Commissioner its

income tax

return for the income year during which the day

specified in the choice occurs; or

(ii) the last day in the period within which the company

mentioned in paragraph (a) would be required to give

the Commissioner such a return if it were required to

give the Commissioner such a return; and

Consolidation Schedule 5

Choice to consolidate Part 18

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 97

180 Section 719-55

Repeal the section, substitute:

719-55 When choice starts to have effect

A choice under section 719-50 is taken to have started to have

effect on the day specified in the choice.

181 Subsection 719-60(1)

Omit "give notice of a choice under section 719-50, the notice",

substitute "make a choice under section 719-50, the choice".

182 Subsection 719-60(3)

Repeal the subsection, substitute:

Appointment after formation of group

(3)

cessation event happens to the

provisional head company of a

MEC group, the

eligible tier-1 companies that are or were

members of the MEC group immediately after the cessation event

may make a choice in writing, jointly appointing one of those

companies to be the provisional head company of the group. The

appointment is taken to have come into force immediately after the

cessation event.

183 Before section 719-80 (after the group heading)

Insert:

719-76 Notice of choice to consolidate

(1) This section applies if:

(a)

MEC group comes into existence on the day specified in a

choice under section 719-50; and

(b) subsection 719-75(1), (2) or (3) would apply to the MEC

group in relation to the

income year of a company in which

the specified day occurred; and

company will be the

head company of the group as at the

end of the income year; and

Schedule 5 Consolidation

Part 18 Choice to consolidate

98 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(d) in a case where subsection 719-75(3) applies--the company

will be the head company of the group immediately before

the group ceased to exist.

(2) The company must give the Commissioner a notice in the

approved form containing the following information:

(a) the identity of the company;

(b) the day specified in the choice on which the

MEC group

comes into existence;

eligible tier-1 company of the

top

company in relation to the MEC group on that day;

(d) the identity of each

subsidiary member of the group on that

day;

(e) the identity of each entity that was a subsidiary member of

the group on that day but was not such a subsidiary member

when the notice is given;

(f) the identity of each entity that was not a subsidiary member

of the group on that day but was such a subsidiary member

when the notice is given;

(g) the identity of each entity that became a subsidiary member

of the group after that day but was not such a subsidiary

member when the notice is given.

(3) The notice must be given no later than:

(a) if the company is required to give the Commissioner its

income tax return for the income year during which that day

occurs--the day on which the company gives the

Commissioner that income tax return; or

(b) otherwise--the last day in the period within which the

company would be required to give the Commissioner such a

return if it were required to give the Commissioner such a

return.

719-77 Notice in relation to new eligible tier-1 members etc.

(1) This section applies if:

(a)

MEC group consists of the members of a

potential MEC

group derived from one or more

eligible tier-1 companies of

top company; and

Consolidation Schedule 5

Choice to consolidate Part 18

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 99

(b) one or more other companies become eligible tier-1

companies of the top company at a time because of a choice

under subsection 719-5(4).

(2)

The

head company of the

MEC group must give the

Commissioner a notice in the

approved form containing the

following information:

(a) the identity of the head company;

(b) the time mentioned in paragraph (1)(b);

eligible tier-1

company of the

top company in relation to the MEC group

at that time because of the choice;

(d) the identity of each entity that became a

subsidiary member

of the group at that time because of the choice;

(e) the identity of each entity that was a subsidiary member of

the group at that time but was not such a subsidiary member

when the notice is given.

(3) The notice must be given no later than:

(a)

the

head company is required to give the Commissioner its

income tax return for the income year during which that

time occurs--the day on which the head company gives the

Commissioner that income tax return; or

(b) otherwise--the last day in the period within which the head

company would be required to give the Commissioner such a

return if it were required to give the Commissioner such a

return.

719-78 Notice of special conversion event

(1) This section applies if a

MEC group comes into existence at the

time because of a choice under paragraph 719-40(e).

(2) The company mentioned in paragraph 719-40(b) must give the

Commissioner a notice in the

approved form containing the

following information:

(a) the identity of the company;

(b) the time at which the

MEC group comes into existence;

eligible tier-1 company of the

top

company in relation to the MEC group on that day;

Schedule 5 Consolidation

Part 18 Choice to consolidate

100 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(d) the identity of each

subsidiary member of the group at that

time;

(e) the identity of each entity that was a subsidiary member of

the group at that time but was not such a subsidiary member

when the notice is given;

(f) the identity of each entity that was not a subsidiary member

of the group at that time but was such a subsidiary member

when the notice is given;

(g) the identity of each entity that became a subsidiary member

of the group after that time but was not such a subsidiary

member when the notice is given.

(3) The notice must be given no later than:

(a) if the company is required to give the Commissioner its

income tax return for the income year during which that

time occurs--the day on which the company gives the

Commissioner that income tax return; or

(b) otherwise--the last day in the period within which the

company would be required to give the Commissioner such a

return if it were required to give the Commissioner such a

return.

719-79 Notice of appointment of provisional head company after

formation of group

(1) This section applies if an entity is appointed to be the

provisional

head company of a

MEC group because of a choice under

subsection 719-60(3).

(2)

The

provisional head company must give the Commissioner a

notice in the

approved form containing the following information:

(a) the identity of the provisional head company;

(b) the day on which the choice was made;

cessation event mentioned in

subsection 719-60(3) occurs.

(3) The notice must be given no later than:

(a)

if:

(i) the group came into existence because of a choice under

section 719-50; and

Consolidation Schedule 5

Choice to consolidate Part 18

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 101

(ii) the event happens more than 28 days before a notice

under section 719-76 in relation to the choice is given;

the day on which the notice mentioned in subparagraph (ii) is

given; or

(b) in any other case--28 days after the

cessation event.

184 Subparagraph 719-80(2)(a)(ii)

Omit "more than 28 days before notice of the choice is given",

substitute "before the relevant notice is given to the Commissioner

under section 719-76 (notice of choice to consolidate)".

185 Paragraph 719-80(2)(a)

Omit "on the day on which notice of the choice is given", substitute "no

later than the day mentioned in subsection (3)".

186 Subparagraph 719-80(2)(b)(iii)

Omit "more than 28 days before notice of the choice is given",

substitute "before the relevant notice is given to the Commissioner

under section 703-58 (notice of choice to consolidate)".

187 Paragraph 719-80(2)(b)

Omit "on the day on which notice of the choice is given", substitute "no

later than the day mentioned in subsection (3)".

188 At the end of section 719-80

Add:

(3) The day is:

(a) if the entity is required to give the Commissioner its

income

tax return for the income year during which the notifiable

event happens--the day on which the company gives the

Commissioner that income tax return; or

(b) otherwise--the last day in the period within which the entity

would be required to give the Commissioner such a return if

it were required to give the Commissioner such a return.

Income Tax (Transitional Provisions) Act 1997

189 Paragraph 701-5(2)(a)

Schedule 5 Consolidation

Part 18 Choice to consolidate

102 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Repeal the paragraph, substitute:

(a) the day on which the head company must give the notice

under section 703-58 of the Income Tax Assessment Act 1997

(notice of choice to consolidate); and

190 Paragraph 701D-15(3)(a)

Repeal the paragraph, substitute:

(a) the day on which the head company must give the notice

under section 703-58 of the Income Tax Assessment Act 1997

(notice of choice to consolidate); and

Taxation Administration Act 1953

191 Paragraph 45-885(1)(e) in Schedule 1

Omit "the Commissioner receives the choice to consolidate", substitute

"the Commissioner receives the notice under section 703-58 of the

Income Tax Assessment Act 1997 in relation to the choice to

consolidate".

192 Section 45-935 in Schedule 1 (table item 1)

Omit "the Commissioner receives a notice of the consolidation",

substitute "the Commissioner receives a notice under section 719-76 of

the Income Tax Assessment Act 1997 in relation the consolidation".

193 Application provision

The amendments made by this Part apply on and after 1 July 2002.

Consolidation Schedule 5

Life insurance companies Part 19

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 103

Part 19--Life insurance companies

Division 1--Amendments applying before the

introduction of first home saver accounts

Income Tax Assessment Act 1997

194 After section 713-510

Insert:

713-510A Disregard single entity rule in working out certain

amounts in respect of life insurance company

(1) This section applies if a

life insurance company is a

member of a

consolidated group.

(2) However, if the

life insurance company is a

subsidiary member

of the group, this section does not apply:

(a) for the purposes of working out the

tax cost setting amount

of an asset of the life insurance company when it becomes a

subsidiary member of the group; and

(b) for the purposes of working out the tax cost setting amount of

membership interest in the life insurance company if it

ceases to be a subsidiary member of the group.

(3) Disregard section 701-1 (the single entity rule) in working out any

of the following for the purposes of Division 320 in relation to the

life insurance company:

(a) amounts of the

head company's ordinary income and

statutory income derived from

segregated exempt assets that

are not assessable income and are not

exempt income under

paragraph 320-37(1)(a);

(b) the head company's taxable income of the

complying

superannuation class (see section 320-137);

tax loss of the complying

superannuation class (see section 320-141);

(d)

the

total

transfer value of the head company's

virtual PST

assets (see paragraph 320-175(1)(a));

(e) the amount of the head company's virtual PST liabilities (see

paragraph 320-175(1)(b));

Schedule 5 Consolidation

Part 19 Life insurance companies

104 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(f) the total transfer value of the head company's segregated

exempt assets (see paragraph 320-230(1)(a));

(g) the amount of the head company's

exempt life insurance

policy liabilities (see paragraph 320-230(1)(b)).

195 Group heading before section 713-553

Repeal the heading.

196 Sections 713-553, 713-555 and 713-560

Repeal the sections.

197 Application provision

The amendments made by this Division apply on and after 1 July 2002.

Division 2--Amendments applying from the introduction

of first home savers accounts

Income Tax Assessment Act 1997

198 Paragraph 713-510A(3)(b)

Omit "

complying superannuation class", substitute "

complying

superannuation/FHSA class".

199 Paragraph 713-510A(3)(c)

Omit "complying superannuation class", substitute "complying

superannuation/FHSA class".

200 Paragraph 713-510A(3)(d)

Omit "

virtual PST", substitute "

complying superannuation/FHSA".

201 Paragraph 713-510A(3)(e)

Omit "

virtual PST", substitute "

complying superannuation/FHSA".

202 Application provision

The amendments made by this Division apply on and after the

commencement of the First Home Saver Accounts (Consequential

Amendments) Act 2008.

Consolidation Schedule 5

Non-membership equity interests Part 20

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 105

Part 20--Non-membership equity interests

Income Tax Assessment Act 1997

203 Subsection 705-65(6)

Repeal the subsection, substitute:

Non-membership equity interests

(6) For the purposes of this section, if at the joining time a

member of

the joined group holds a

non-membership equity interest in the

joining entity, that non-membership equity interest is treated as if it

were a

membership interest in the joining entity.

204 Subsection 705-85(3) (heading)

Repeal the heading, substitute:

Increase to cover certain non-membership equity interests and

certain equity interests

205 Paragraph 705-85(3)(a)

Repeal the paragraph, substitute:

(a) the amount that would be the balance of the joining entity's

non-share capital account, assuming that:

(i) if the joining entity is not a company--the joining entity

were a company; and

(ii)

each

non-membership equity interest (if any) in the

joining entity held at the joining time by a person other

than a

member of the joined group were a

non-share

equity interest in the joining entity; and

(iii) the non-share equity interests (if any) mentioned in

subparagraph (ii) were the only non-share equity

interests in the joining entity; and

206 Paragraph 705-85(3)(b)

Omit "market value", substitute "

market value".

207 Subsection 705-145(5)

Repeal the subsection, substitute:

Schedule 5 Consolidation

Part 20 Non-membership equity interests

106 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Non-membership equity interests

(5) For the purposes of this section, if, on becoming a

subsidiary

member, an entity holds a

non-membership equity interest in

another entity that becomes a subsidiary member at the same time,

that non-membership equity interest is treated as if it were a

membership interest in that other entity.

208 Subsection 705-195(1)

Omit "rights or options", substitute "

non-membership equity interests".

209 Subsection 705-195(2)

Repeal the subsection, substitute:

Non-membership equity interests

(2) Subsection 705-65(6) has effect as if it also treated as a

membership interest in the

head company of the acquired group a

non-membership equity interest in a

subsidiary member of the

acquired group, where that interest was held at the acquisition time

by a

member of the acquiring group.

210 Paragraph 705-200(1)(b)

Omit "rights or options to acquire

membership interests", substitute

non-membership equity interests".

211 Subsection 705-200(3)

Repeal the subsection, substitute:

Non-membership equity interests

(3) Paragraph 705-85(3)(a) has effect as if it also increased the step 2

amount worked out under section 705-70 by the amount that would

be the sum of the balances of the

non-share capital accounts of the

subsidiary members of the acquired group, assuming that:

(a) for a subsidiary member that is not a company--the

subsidiary member were a company; and

(b)

each

non-membership equity interest (if any) in a subsidiary

member held at the acquisition time by a person other than a

member of the acquiring group or acquired group were a

non-share equity interest in the subsidiary member; and

Consolidation Schedule 5

Non-membership equity interests Part 20

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 107

paragraph (b) were the only non-share equity interests in the

subsidiary member.

212 Subsection 705-225(5)

Repeal the subsection, substitute:

Non-membership equity interests

(5) For the purposes of this section, if, on becoming a

subsidiary

member, a linked entity holds a

non-membership equity interest in

another linked entity, that interest is treated as if it were a

membership interest in that other linked entity.

213 Subsection 711-15(2)

Repeal the subsection, substitute:

Non-membership equity interests

(2) For the purposes of this section, if at the leaving time a

member of

the old group holds a

non-membership equity interest in the

leaving entity, that non-membership equity interest is treated as if:

(a) it were a

membership interest in the leaving entity; and

(b) it were of a different class than any other membership

interest in the leaving entity.

214 Subsection 711-20(1) (cell at table item 4, column headed

"Purpose of the step")

Omit "

market".

215 After subsection 711-45(6A)

Insert:

Increase for non-share capital account balance

(6B) The step 4 amount is increased by the amount that would be the

balance of the leaving entity's

non-share capital account,

assuming that:

(a) if the leaving entity is not a company--the leaving entity

were a company; and

Schedule 5 Consolidation

Part 20 Non-membership equity interests

108 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(b)

each

non-membership equity interest (if any) in the leaving

entity held at just before the leaving time by a person other

than a

member of the old group were a

non-share equity

interest in the leaving entity; and

paragraph (b) were the only non-share equity interests in the

leaving entity.

216 Subsection 715-50(6)

Repeal the subsection, substitute:

Non-membership equity interests

(6) Subsection 705-65(6) (which treats

non-membership equity

interests as

membership interests) also applies for the purposes of

this section.

217 Subsection 715-255(6)

Repeal the subsection, substitute:

Non-membership equity interests

(6) Subsection 711-15(2) (which treats

non-membership equity

interests as

membership interests) also applies for the purposes of

this section, on the basis that the

consolidated group referred to in

section 715-240 is the old group referred to in that subsection.

218 Subsection 715-270(10)

Repeal the subsection, substitute:

Non-membership equity interests

(10) Subsection 711-15(2) (which treats

non-membership equity

interests as

membership interests) also applies for the purposes of

this section, on the basis that the

consolidated group is the old

group referred to in that subsection.

219 Subsection 995-1(1)

Insert:

non-membership equity interest: an interest in an entity is a

non-membership equity interest in the entity at a time to the extent

Consolidation Schedule 5

Non-membership equity interests Part 20

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 109

that it is not an accounting liability (within the meaning of

subsection 705-70(1)) of the entity at that time, if:

(a) the interest is not a

membership interest in the entity at that

time; and

(b) the interest is not a

debt interest in the entity at that time.

In determining the extent to which the interest is not an accounting

liability at that time:

entity as instead being a reference to the entity; and

(d) treat the reference in that subsection to the joining time as

instead being a reference to that time.

220 Application provision

(1)

The amendments made by this Part apply in relation to a consolidated

group or MEC group on and after:

(a) if the head company of the group makes a choice in

accordance with subitems (2) and (3)--1 July 2002; or

(b) otherwise--the day on which the Bill that became this Act

was introduced into the House of Representatives.

(2)

A choice mentioned in paragraph (1)(a) must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

(3)

A choice mentioned in paragraph (1)(a) must be made in writing.

Schedule 6 Miscellaneous amendments

Part 1 CGT main residence exemption for replacement dwelling

110 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Schedule 6--Miscellaneous amendments

Part 1--CGT main residence exemption for

replacement dwelling

Income Tax Assessment Act 1997

1 After subsection 118-145(3)

Insert:

(3A) This section does not apply if the

dwelling was your main

residence because of section 118-147 and ceases to be your main

residence because of subsections 118-147(3) and (4).

2 After section 118-145

Insert:

118-147 Absence from dwelling replacing main residence that was

compulsorily acquired, destroyed etc.

(1) This section applies if:

(a)

dwelling (the old dwelling) is treated as your main

residence because of your choice under section 118-145; and

(b) because of an event (the key event) described in subsection

124-70(1):

(i) you cease to have any

ownership interest in the old

dwelling; or

(ii) the old dwelling is lost or destroyed; and

substitute property interest) in:

(i) a dwelling (the substitute dwelling); or

(ii)

land

(the

substitute land) that did not have a dwelling

on it at the later of the time just after the key event and

the time you

acquired the interest; and

(d) you acquired the substitute property interest at a time (the

substitute property acquisition time) no later than one year,

or within such further time as the Commissioner allows in

special circumstances, after the end of the income year in

which the key event happens.

Miscellaneous amendments Schedule 6

CGT main residence exemption for replacement dwelling Part 1

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 111

Note 1:

Subsection 124-70(1) deals with compulsory acquisitions, disposals in

circumstances involving powers of compulsory acquisition, expiry of

leases granted by Australian government agencies and loss or

destruction of a CGT asset.

Note 2:

The substitute property acquisition time may be before, at or after the

time the key event happened. The old dwelling and the substitute

dwelling may be different or the same. The land on which the old

dwelling is erected and the substitute land may be different or the

same.

(2) You may choose to treat the substitute dwelling, or a

dwelling you

built on the substitute land within 4 years after the later of the time

of the key event and the substitute property acquisition time, as

your main residence from the later of the following times (or from

either of them if they are the same):

(a) the substitute property acquisition time;

(b) the time one year before the key event happened.

(3) Subsection (4) limits the time you can treat a

dwelling as your

main residence under this section if you use all or part of it or the

substitute land, after the later of the key event and the substitute

property acquisition time, for the

purpose of producing assessable

income.

(4) The maximum period you can treat the

dwelling that way while

you use it or the substitute land as described in subsection (3) is:

(a) 6 years; or

(b) if, just before the key event, you used all or part of the old

dwelling for that purpose--so much of the period of 6 years

described in subsection 118-145(2) in relation to the old

dwelling as had not passed before the event.

(5) If you do not use the

dwelling or substitute land as described in

subsection (3) you can treat the dwelling as your main residence

under this section indefinitely.

(6) If you make the choice:

(a) you cannot treat any other

dwelling as your main residence

while you apply this section; and

(b) section 118-140 does not apply in relation to your

acquisition, while you still have an

ownership interest in

the old dwelling, of an ownership interest in the dwelling you

choose to treat as your main residence under this section; and

Schedule 6 Miscellaneous amendments

Part 1 CGT main residence exemption for replacement dwelling

112 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

on which the old dwelling is erected or the substitute land;

and

(d) section 118-155 does not apply after the key event in relation

to the old dwelling, the substitute dwelling or a dwelling built

on the substitute land.

(7) Paragraph (6)(a) does not prevent the old dwelling from being your

main residence at any time before the key event happened.

3 Paragraph 118-150(3)(a)

After "residence", insert "(except because of section 118-147)".

4 After subsection 118-190(3)

Insert:

(3A) Also, you ignore any use of the

dwelling for the

purpose of

producing assessable income during any period that you treat it as

your main residence under section 118-147 (about absences) to the

extent that any part of the old dwelling mentioned in that section

was not used for that purpose just before the old dwelling last

ceased to be your main residence.

5 At the end of paragraph 118-200(4)(b)

Add "or (3A)".

6 Application provision

Section 118-147 of the Income Tax Assessment Act 1997 applies in

relation to CGT events happening on or after the day this Act receives

the Royal Assent in relation to dwellings described in subsection (2) of

that section (whether the key events described in that section happen

before, on or after that day).

Miscellaneous amendments Schedule 6

Small business retirement exemption Part 2

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 113

Part 2--Small business retirement exemption

Division 1--Main amendment

Income Tax Assessment Act 1997

7 Paragraph 152-310(2)(a)

Omit "exempt from income tax for", substitute "not assessable income,

and is not

exempt income, of".

8 Application provision

The amendment of paragraph 152-310(2)(a) of the Income Tax

Assessment Act 1997 made by this Division applies in relation to

payments made after 30 June 2007.

Division 2--Related amendments

Income Tax Assessment Act 1997

9 Section 11-15 (table item headed "small business

retirement exemption")

Repeal the item.

10 Section 11-55 (table item headed "capital gains tax")

Repeal the item, substitute:

capital gains tax

small business retirement exemption, payments made

directly or indirectly to CGT concession stakeholder so

company or trust complies with section 152-325 ..........

152-310

11 Section 12-5 (table item headed "capital gains tax")

After:

no deduction for an amount that would otherwise be

deductible only because a net capital gain is included

in assessable income ......................................................

51AAA

insert:

Miscellaneous amendments Schedule 6

Waiver connected with proceeds of crime proceedings Part 3

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 115

Part 3--Waiver connected with proceeds of crime

proceedings

Taxation Administration Act 1953

12 Division 340 in Schedule 1 (heading)

Repeal the heading, substitute:

Division 340--Commissioner's power in cases of hardship

13 At the end of Part 4-50 in Schedule 1

Add:

Division 342--Commissioner's power relating to proceeds

of crime proceedings

Table of Subdivisions

Guide to Division 342

342-A Power to waive right to payment of tax-related liabilities

Guide to Division 342

342-1 What this Division is about

To facilitate the starting, conduct and ending of proceedings under

the Proceeds of Crime Act 2002, the Commissioner may waive the

right to payment of certain tax-related liabilities.

Subdivision 342-A--Power to waive right to payment of

tax-related liabilities

Table of sections

342-5

Object of this Subdivision

342-10

Power to waive right to payment of tax-related liability

Schedule 6 Miscellaneous amendments

Part 3 Waiver connected with proceeds of crime proceedings

116 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

342-5 Object of this Subdivision

The object of this Subdivision is to facilitate the starting, conduct

and ending of proceedings under the Proceeds of Crime Act 2002

by allowing the Commissioner to waive the right to payment of

certain liabilities to the Commonwealth arising under

taxation

laws.

Note:

The Commissioner may also exercise other powers so as to facilitate

the starting, conduct and ending of proceedings under the Proceeds of

Crime Act 2002. Examples of those other powers include:

(a) the power under section 255-10 to defer the time a tax-related

liability is due and payable; and

(b) the power under section 8AAG to remit general interest charge.

342-10 Power to waive right to payment of tax-related liability

(1) The Commissioner may waive the Commonwealth's right to

payment of all or part of a

tax-related liability if the

Commissioner is satisfied that:

(a) the waiver will facilitate the starting, conduct or ending (by

settlement or otherwise) of proceedings under the Proceeds

of Crime Act 2002; and

(b) the liability is connected with circumstances associated with

the proceedings.

Note:

The Commissioner may waive the right to payment only after the

liability has arisen, but may do so whether or not the liability is due

and payable.

Example: A liability is connected with circumstances associated with the

proceedings if the liability arose because of activities constituting an

offence to which the proceedings relate.

(2) In deciding whether to waive the right, the Commissioner must

consider:

(a) the amount the Commonwealth will forgo as a result of the

waiver and the time the Commonwealth could reasonably be

expected to receive that amount apart from the waiver; and

(b) the amount the Commonwealth could reasonably be expected

to receive as a result of the proceedings and the time the

Commonwealth could reasonably be expected to receive that

amount.

(3) Subsection (2) does not limit the matters that the Commissioner

may consider in making the decision.

Miscellaneous amendments Schedule 6

Waiver connected with proceeds of crime proceedings Part 3

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 117

Extended operation of this section

(4) This section (except this subsection) applies in relation to a

pecuniary liability to the Commonwealth that arises directly under

taxation law, but is not a

tax-related liability, in the same way

as this section applies in relation to a tax-related liability.

Example: This section applies to a civil penalty under Division 290 (which

penalises certain conduct involving promotion of schemes) in the

same way as this section applies to a tax-related liability.

14 Application provision

(1)

Division 342 in Schedule 1 to the Taxation Administration Act 1953

applies in relation to:

(a) proceedings started, or proposed to be started, on or after the

commencement of that Division; and

(b) proceedings started, and not ended, before that

commencement.

That Division applies whether the liability was incurred before, on or

after that commencement.

(2)

For the purposes of paragraph (1)(b), proceedings are taken not to have

ended before that commencement if any appeal relating to the

proceedings has not ended, or a period for lodging an appeal relating to

the proceedings has not ended, before that commencement.

Schedule 6 Miscellaneous amendments

Part 4 Amendments relating to higher education

118 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Part 4--Amendments relating to higher education

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

15 Section 195-1 (definition of higher education institution)

Repeal the definition, substitute:

higher education institution means an entity that is a higher

education provider as defined in section 16-1 of the Higher

Education Support Act 2003.

Fringe Benefits Tax Assessment Act 1986

16 Section 135M (first paragraph)

Omit "the Higher Education Funding Act 1988 or".

Income Tax Assessment Act 1936

17 Subsection 82A(2) (paragraphs (a), (ab) and (b) of the

definition of expenses of self-education)

Repeal the paragraphs.

18 Application provision

The amendment of section 82A of the Income Tax Assessment Act 1936

made by this Part applies in relation to assessments for the income year

in which this Act receives the Royal Assent and later income years.

Income Tax Assessment Act 1997

19 Paragraphs 26-20(1)(a), (b) and (c)

Repeal the paragraphs.

20 Application provision

The amendment of subsection 26-20(1) of the Income Tax Assessment

Act 1997 made by this Part applies in relation to assessments for the

income year in which this Act receives the Royal Assent and later

income years.

Miscellaneous amendments Schedule 6

Amendments relating to higher education Part 4

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 119

21 Subsection 30-25(1) (cell at table item 2.1.3, column

headed "Fund, authority or institution")

Repeal the cell, substitute:

a charitable or public institution that is a

higher education provider within the meaning

of the Higher Education Support Act 2003

22 Subsection 30-25(1) (cell at table item 2.1.6, column

headed "Fund, authority or institution")

Repeal the cell, substitute:

a residential educational institution that is

affiliated with a charitable or public institution

that is a higher education provider within the

meaning of the Higher Education Support Act

2003

23 Application provision

The amendments of subsection 30-25(1) of the Income Tax Assessment

Act 1997 made by this Part apply in relation to gifts made on or after the

day this Act receives the Royal Assent.

24 Subparagraph 52-132(a)(x)

Repeal the subparagraph.

25 Subparagraph 52-140(3)(a)(x)

Repeal the subparagraph.

26 Application provision

The amendments of sections 52-132 and 52-140 of the Income Tax

Assessment Act 1997 made by this Part apply in relation to payments

received on or after the day this Act receives the Royal Assent.

Taxation Administration Act 1953

27 Section 8AAZA (definition of HEC assessment debt)

Repeal the definition.

28 Paragraph 8AAZLD(a)

Repeal the paragraph.

Schedule 6 Miscellaneous amendments

Part 4 Amendments relating to higher education

120 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Note:

The heading to section 8AAZLD is altered by omitting "HEC and".

29 Paragraph 8AAZLD(aa)

Omit "secondly,", substitute "first,".

30 Paragraph 11-1(c) in Schedule 1

Repeal the paragraph.

31 Subsection 15-25(1) in Schedule 1

Omit "(c),".

32 Paragraph 15-30(c) in Schedule 1

Repeal the paragraph.

33 Paragraph 15-50(1)(b) in Schedule 1

Omit "(c),".

34 Paragraph 45-5(1)(c) in Schedule 1

Repeal the paragraph.

35 Section 45-340 in Schedule 1 (method statement, step 3)

Omit "an accumulated HEC debt under the Higher Education Funding

Act 1988, or an

accumulated HELP debt under the Higher Education

Support Act 2003,", substitute "an

accumulated HELP debt".

36 Section 45-375 in Schedule 1 (method statement, step 3)

Omit "an accumulated HEC debt under the Higher Education Funding

Act 1988, or an

accumulated HELP debt under the Higher Education

Support Act 2003,", substitute "an

accumulated HELP debt".

Taxation (Interest on Overpayments and Early Payments)

Act 1983

37 Subsection 3(1) (definition of HEC assessment debt)

Repeal the definition.

38 Section 3C (table item 40)

Repeal the item.

Miscellaneous amendments Schedule 6

Amendments relating to higher education Part 4

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 121

39 Subparagraph 8A(1)(a)(ii)

Repeal the subparagraph.

40 Paragraph 8A(2)(b)

Repeal the paragraph.

41 Subparagraphs 8E(1)(d)(iii) and (2)(d)(iii)

Omit "an HEC assessment debt or", substitute "a".

42 Sub-subparagraph 12A(1)(a)(iv)(B)

Repeal the sub-subparagraph.

43 Paragraph 12A(2)(b)

Repeal the paragraph.

Schedule 6 Miscellaneous amendments

Part 5 PAYG withholding from delayed payments for termination of employment

122 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Part 5--PAYG withholding from delayed payments

for termination of employment

Division 1--Main amendments

Taxation Administration Act 1953

44 Subsection 10-5(1) in Schedule 1 (table item 8)

Omit "an

employment termination payment", substitute "a payment for

termination of employment".

45 Subsection 12-5(2) in Schedule 1 (table item 2)

Omit "an

employment termination payment", substitute "a payment for

termination of employment".

46 Subdivision 12-C in Schedule 1 (heading)

Repeal the heading, substitute:

Subdivision 12-C--Payments for retirement or because of

termination of employment

47 Section 12-85 in Schedule 1 (heading)

Repeal the heading, substitute:

12-85 Superannuation lump sums and payments for termination of

employment

48 Paragraph 12-85(b) in Schedule 1

Repeal the paragraph, substitute:

(b) a payment that is an

employment termination payment or

would be one except that it is received more than 12 months

after termination of employment.

49 Section 16-165 in Schedule 1 (heading)

Repeal the heading, substitute:

Miscellaneous amendments Schedule 6

PAYG withholding from delayed payments for termination of employment Part 5

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 123

16-165 Payment summaries for superannuation lump sums and

payments for termination of employment

50 Paragraph 16-165(2)(b) in Schedule 1

Omit "an

employment termination payment,", substitute "a payment

that is an

employment termination payment or would be one except

that it is received more than 12 months after termination of

employment,".

51 Subparagraph 18-65(3)(d)(ii) in Schedule 1

Omit "(

superannuation benefits, annuities,

employment termination

payments and unused leave payments)", substitute "(Payments for

retirement or because of termination of employment)".

52 Section 390-1 in Schedule 1 (note)

Omit "and employment termination payments".

53 Application provision

The amendments made by this Division apply in relation to payments

made on or after the later of the following days (or either of them if they

are the same):

(a) the day this Division commences;

(b) 1 July 2010.

Division 2--Related amendments

Child Support (Registration and Collection) Act 1988

54 Subsection 4(1) (note at the end of the definition of work

and income support related withholding payments)

Omit "employment termination payments,", substitute "payments for

termination of employment,".

Income Tax Assessment Act 1936

55 Subsection 6(1) (note at the end of the definition of work

and income support related withholding payments and

benefits)

Schedule 6 Miscellaneous amendments

Part 5 PAYG withholding from delayed payments for termination of employment

124 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Omit "employment termination payments,", substitute "payments for

termination of employment,".

Income Tax Assessment Act 1997

56 Subsection 28-185(3) (cell at table item 5, column headed

"Subject matter")

Repeal the cell, substitute:

Payments for retirement or because of termination

of employment

57 Subsection 900-12(3) (cell at table item 5, column headed

"Subject matter")

Repeal the cell, substitute:

Payments for retirement or because of termination

of employment

Miscellaneous amendments Schedule 6

Administrative penalties for false or misleading statements Part 6

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 125

Part 6--Administrative penalties for false or

misleading statements

Division 1--Main amendments

Taxation Administration Act 1953

58 Section 284-25 in Schedule 1

Omit "in an

approved form".

59 Paragraph 284-75(1)(a) in Schedule 1

Omit "or your agent makes", substitute "make".

60 Paragraph 284-75(1)(b) in Schedule 1

Omit "it; and", substitute "it.".

61 Paragraph 284-75(1)(c) in Schedule 1

Repeal the paragraph.

62 Subsection 284-75(1) in Schedule 1 (note)

Omit "Note:", substitute "Note 1:".

63 At the end of subsection 284-75(1) in Schedule 1

Add:

Note 2:

This section applies to a statement made by your agent as if it had

been made by you: see section 284-25.

64 Paragraph 284-75(2)(a) in Schedule 1

Omit "or your agent makes", substitute "make".

65 Paragraph 284-75(2)(b) in Schedule 1

Omit "or your agent".

66 Paragraph 284-75(2)(c) in Schedule 1

Repeal the paragraph.

67 At the end of section 284-75 in Schedule 1

Add:

Schedule 6 Miscellaneous amendments

Part 6 Administrative penalties for false or misleading statements

126 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(4) You are liable to an administrative penalty if:

(a) you make a statement to an entity other than:

(i) the Commissioner; and

(ii) an entity exercising powers or performing functions

under a

taxation law; and

(b) the statement is, or purports to be, one required or permitted

by a taxation law; and

whether because of things in it or omitted from it.

(5) You are not liable to an administrative penalty under subsection (1)

or (4) for a statement that is false or misleading in a material

particular if you, and your

agent (if relevant), took reasonable care

in connection with the making of the statement.

68 Subsection 284-80(1) in Schedule 1 (note)

Repeal the note.

69 Subsection 284-90(1) in Schedule 1

After "this table", insert "and section 284-224 if relevant".

70 Subsection 284-90(1) in Schedule 1 (table items 1, 2 and 3)

Omit "Your

shortfall amount or part of it", substitute "You have a

shortfall amount as a result of a statement described in subsection

284-75(1) or (4) and the amount, or part of the amount,".

71 Subsection 284-90(1) in Schedule 1 (after table item 3)

Insert:

A statement described in subsection 284-75(1) or (4)

was false or misleading because of intentional

disregard of a

taxation law by you or your

agent but

did not result in you having a

shortfall amount

60 penalty units

A statement described in subsection 284-75(1) or (4)

was false or misleading because of recklessness by you

or your

agent as to the operation of a

taxation law but

did not result in you having a

shortfall amount

40 penalty units

Miscellaneous amendments Schedule 6

Administrative penalties for false or misleading statements Part 6

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 127

A statement described in subsection 284-75(1) or (4)

was false or misleading because of a failure by you or

your

agent to take reasonable care to comply with a

taxation law but did not result in you having a

shortfall amount

20 penalty units

72 Subsection 284-90(1) in Schedule 1 (table item 4)

Omit "Your

shortfall amount or part of it", substitute "You have a

shortfall amount, all or part of which".

73 Subsection 284-90(1) in Schedule 1 (note)

Repeal the note.

74 Subsection 284-90(2) in Schedule 1

Omit "to you for your

shortfall amount or a part of it".

75 At the end of Subdivision 284-B in Schedule 1

Add:

284-95 Joint and several liability of directors of corporate trustee

that makes a false or misleading statement

(1) This section applies if a trustee of a

self managed superannuation

fund, or of a fund that is treated as a self managed superannuation

fund under subsection 10(4) of the Superannuation Industry

(Supervision) Act 1993:

(a) is liable to an administrative penalty under subsection

284-75(1) or (4); and

(b) is a body corporate.

(2) The directors of the body corporate at the time it becomes liable to

the penalty are jointly and severally liable to pay the amount of the

tax-related liability in respect of the penalty.

Note:

See section 265-45 for rules on joint liability.

76 Subsection 284-150(2) in Schedule 1 (note)

Repeal the note.

77 Section 284-160 in Schedule 1

After "

scheme is", insert ", subject to section 284-224".

Schedule 6 Miscellaneous amendments

Part 6 Administrative penalties for false or misleading statements

128 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

78 Section 284-160 in Schedule 1 (note)

Repeal the note.

79 Section 284-215 in Schedule 1

Repeal the section.

80 Subsection 284-220(1) in Schedule 1

Omit "for an accounting period".

81 Paragraph 284-220(1)(a) in Schedule 1

After "

shortfall amount", insert ", or the false or misleading nature of a

statement,".

82 Paragraph 284-220(1)(b) in Schedule 1

Repeal the paragraph, substitute:

(b)

you:

(i) became aware of such a shortfall amount after a

statement had been made to the Commissioner about the

relevant

tax-related liability; or

(ii) became aware of the false or misleading nature of a

statement made to the Commissioner or another entity

after the statement had been made;

and you did not tell the Commissioner or other entity about it

within a reasonable time; or

83 Paragraph 284-220(1)(c) in Schedule 1

Omit "for a previous accounting period", substitute "previously".

84 After paragraph 284-220(1)(c) in Schedule 1

Insert:

(ca) the base penalty amount was worked out using item 3A, 3B

or 3C of the table in subsection 284-90(1) and a base penalty

amount for you was worked out under one of those items

previously; or

85 Paragraph 284-220(1)(d) in Schedule 1

Omit "for a previous accounting period", substitute "previously".

86 Paragraph 284-220(1)(e) in Schedule 1

Miscellaneous amendments Schedule 6

Administrative penalties for false or misleading statements Part 6

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 129

After "you were", insert "previously".

87 Paragraph 284-220(1)(e) in Schedule 1

Omit "for a previous accounting period".

88 After section 284-220 in Schedule 1

Insert:

284-224 Reduction of base penalty amount if law was applied in an

accepted way

(1) If, apart from this section, you would have a

base penalty amount

because you or your

agent treated a

taxation law as applying in a

particular way, and that way agreed with:

(a) advice given to you or your agent by or on behalf of the

Commissioner; or

(b) general administrative practice under that law; or

Commissioner;

your base penalty amount is reduced to the extent that it was

caused by that treatment.

(2) For the purposes of subsection (1) it does not matter whether the

base penalty amount also relates to:

(a) a statement; or

(b) a failure to give the Commissioner a return, notice or other

document when required; or

(c)

scheme.

89 Section 284-225 in Schedule 1 (heading)

Repeal the heading, substitute:

284-225 Reduction of base penalty amount if you voluntarily tell the

Commissioner

90 Subsections 284-225(1) and (2) in Schedule 1

Repeal the subsections, substitute:

Schedule 6 Miscellaneous amendments

Part 6 Administrative penalties for false or misleading statements

130 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(1)

The

base penalty amount for your

shortfall amount or

scheme

shortfall amount, for part of it or for your false or misleading

statement is reduced by 20% if:

(a) the Commissioner tells you that an examination is to be made

of your affairs relating to a

taxation law for a relevant

period; and

(b)

after that time, you voluntarily tell the Commissioner, in the

approved form, about the shortfall, the part of it or the false

or misleading nature of the statement; and

have saved the Commissioner a significant amount of time or

significant resources in the examination.

(2)

The

base penalty amount for your

shortfall amount or

scheme

shortfall amount, for part of it or for your false or misleading

statement is reduced under subsection (3), (4) or (4A) if you

voluntarily tell the Commissioner, in the

approved form, about the

shortfall amount, the part of it or the false or misleading nature of

the statement before:

(a) the day the Commissioner tells you that an examination is to

be made of your affairs relating to a

taxation law for a

relevant period; or

(b) if the Commissioner makes a public statement requesting

entities to make a voluntary disclosure by a particular earlier

day about a

scheme or transaction that applies to your

affairs--that earlier day.

91 After subsection 284-225(4) in Schedule 1

Insert:

(4A)

The

base penalty amount for your false or misleading statement

that does not result in you having a

shortfall amount is reduced to

nil.

92 Subsection 284-225(5) in Schedule 1

Omit "or part of it, after the Commissioner tells you that a

tax audit is

to be conducted of your financial affairs", substitute "part of it or the

false or misleading nature of the statement after the Commissioner tells

you that an examination is to be conducted of your affairs relating to a

taxation law for a relevant period".

Miscellaneous amendments Schedule 6

Administrative penalties for false or misleading statements Part 6

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 131

93 Subsection 284-225(5) in Schedule 1

Omit "the audit", substitute "the examination".

94 Section 288-85 in Schedule 1

Repeal the section.

95 Subsection 361-5(1) in Schedule 1 (note 1)

Omit "1".

96 Subsection 361-5(1) in Schedule 1 (note 2)

Repeal the note.

97 Subsection 361-5(3) in Schedule 1

Repeal the subsection.

Division 2--Consequential amendments

Product Grants and Benefits Administration Act 2000

98 Paragraph 35(1)(b)

After "subsection 284-75(1)", insert "or (4)".

Superannuation Industry (Supervision) Act 1993

99 Section 38A (subparagraph (ab)(i) of the definition of

regulatory provision)

Repeal the subparagraph, substitute:

(i) subsections 284-75(1) and (4) and section 284-95;

100 Subsection 39(1B)

Omit "section 288-85 in Schedule 1 to the Taxation Administration Act

1953 as a contravention of that section", substitute "subsection

284-75(1) or (4) in Schedule 1 to the Taxation Administration Act 1953

as a contravention of that subsection".

Division 3--Application provision

101 Application provision--Divisions 1 and 2

Schedule 6 Miscellaneous amendments

Part 6 Administrative penalties for false or misleading statements

132 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

The amendments made by Divisions 1 and 2 apply in relation to things

done on or after the commencement of those Divisions.

Division 4--Amendments with contingent

commencement

Taxation Administration Act 1953

102 Subsections 284-75(1A) and (1B) in Schedule 1

Repeal the subsections.

103 Before subsection 284-75(5) in Schedule 1

Insert:

Exceptions to subsections (1) and (4)

104 At the end of section 284-75 in Schedule 1

Add:

(6) You are not liable to an administrative penalty under subsection (1)

or (4) if:

(a) you engage a

registered tax agent or BAS agent; and

(b) you give the registered tax agent or BAS agent all relevant

taxation information; and

and

(d) the false or misleading nature of the statement did not result

from:

(i) intentional disregard by the registered tax agent or BAS

agent of a

taxation law; or

(ii) recklessness by the agent as to the operation of a

taxation law.

(7) If you wish to rely on subsection (6), you bear an evidential burden

in relation to paragraph (6)(b).

105 Application provision

The amendments made by this Division apply in relation to statements

made on or after the commencement of this Division.

Miscellaneous amendments Schedule 6

Offsets against superannuation guarantee charge Part 7

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 133

Part 7--Offsets against superannuation guarantee

charge

Tax Laws Amendment (2008 Measures No. 2) Act 2008

106 After item 7 of Schedule 2

Insert:

7A Application of section 23A of the Superannuation

Guarantee (Administration) Act 1992 as amended

(1)

Section 23A of the Superannuation Guarantee (Administration) Act

1992, as amended by this Schedule, applies to:

(a) contributions made before, on or after 1 January 2006; and

(b) elections made on or after 24 June 2008.

Note:

The amendments of that section made by this Schedule commenced on 24 June 2008.

(2)

This item has effect subject to items 8 and 9.

(3)

To avoid doubt, this item:

(a) has effect despite subitem 10(1) of Schedule 6 to the Tax

Laws Amendment (Loss Recoupment Rules and Other

Measures) Act 2005; and

(b) does not affect the application of amendments of section 23A

of the Superannuation Guarantee (Administration) Act 1992

commencing after the commencement of the amendments of

that section made by this Schedule.

Note:

Subitem 10(1) of Schedule 6 to the Tax Laws Amendment (Loss Recoupment Rules and

Other Measures) Act 2005 applied the amendment inserting section 23A in the

Superannuation Guarantee (Administration) Act 1992 to contributions made on or after

1 January 2006.

107 Paragraphs 8(1)(a) and 9(a) of Schedule 2

After "this Schedule", insert "(apart from item 7A)".

Miscellaneous amendments Schedule 6

Technical corrections Part 9

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 135

Part 9--Technical corrections

A New Tax System (Luxury Car Tax) Act 1999

109 Section 9-20

Omit "from", substitute "form".

Note:

This item corrects a misspelling.

Taxation Administration Act 1953

110 Section 363-35 in Schedule 1

Renumber as section 263-35.

Note:

This item corrects a numbering error.

111 Subparagraphs 426-165(1)(b)(a) and (b) in Schedule 1

Renumber as subparagraphs (i) and (ii).

Note:

This item corrects a numbering error.

Tax Laws Amendment (2009 Measures No. 4) Act 2009

112 Item 132 of Schedule 5

Omit "the Arts", substitute "Arts".

Note:

This item corrects a misdescribed amendment.

113 Item 133 of Schedule 5

Omit "and Arts", substitute "and the Arts".

Note:

This item corrects a misdescribed amendment.

Schedule 6 Miscellaneous amendments

Part 10 Repeal of redundant material

136 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Part 10--Repeal of redundant material

Income Tax Assessment Act 1936

114 Subsection 6(1) (definition of accrued leave transfer

payment)

Repeal the definition.

Note:

This repeals a definition that is not used any more and defines accrued leave transfer

payment by reference to a repealed provision.

Income Tax Assessment Act 1997

115 Subsection 116-30(1) (note)

Repeal the note.

Note:

This repeals a note that merely refers to 2 sections that have been repealed.

Taxation Administration Act 1953

116 Subsection 16-150(1) in Schedule 1

Omit "(1) An", substitute "An".

Note:

This omits a subsection number from a section that is no longer divided into

subsections.

Miscellaneous amendments Schedule 6

Other minor changes Part 11

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 137

Part 11--Other minor changes

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

117 Section 195-1

Insert:

luxury car has the same meaning as in section 25-1 of the A New

Tax System (Luxury Car Tax) Act 1999.

Income Tax Assessment Act 1936

118 Subsection 6(1) (definition of agent)

Repeal the definition, substitute:

agent: this Act applies to some entities (within the meaning of the

Income Tax Assessment Act 1997) that are not agents in the same

way as it applies to agents: see section 960-105 of the Income Tax

Assessment Act 1997.

119 Transitional provision relating to agents

A declaration in force for the purposes of paragraph (b) of the definition

of agent in subsection 6(1) of the Income Tax Assessment Act 1936

immediately before the repeal of that definition by this Part continues to

have effect on and after that repeal as if it were a determination under

subsection 960-105(2) of the Income Tax Assessment Act 1997.

120 Subsection 6(1) (definition of allowable deduction)

Repeal the definition, substitute:

allowable deduction has the same meaning as deduction has in the

Income Tax Assessment Act 1997.

121 Subsection 6(1) (definition of friendly society dispensary)

Repeal the definition, substitute:

friendly society dispensary has the meaning given by subsection

995-1(1) of the Income Tax Assessment Act 1997.

122 Subsection 6(1) (definition of paid-up share capital)

Schedule 6 Miscellaneous amendments

Part 11 Other minor changes

138 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

Repeal the definition, substitute:

paid-up share capital has the meaning given by subsection

995-1(1) of the Income Tax Assessment Act 1997.

123 Subsection 6(1) (definition of person)

Repeal the definition, substitute:

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

1997.

124 Subsection 45B(9)

Omit "a dividend.", substitute "an assessable dividend.".

125 Application provision

(1)

The amendment of subsection 45B(9) of the Income Tax Assessment Act

1936 made by this Part applies to capital benefits provided on or after

30 November 2009.

(2)

The amendment is to be disregarded for the purposes of interpreting that

subsection as in force before the commencement of the amendment.

126 Subsection 45B(10)

Repeal the subsection, substitute:

(10) In this section:

scheme has the meaning given by subsection 995-1(1) of the

Income Tax Assessment Act 1997.

Income Tax Assessment Act 1997

127 Section 12-5 (table item headed "family tax benefit")

Repeal the item.

128 Section 25-7

Repeal the section.

129 Section 67-23 (after table item 10)

Insert:

Miscellaneous amendments Schedule 6

Other minor changes Part 11

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 139

12 education

expenses

the

tax offset available under

Subdivision 61-M

130 Application provision

Item 12 of the table in section 67-23 of the Income Tax Assessment Act

1997 applies to tax offsets for the 2009-2010 income year and later

income years.

131 Section 67-23 (after table item 20)

Insert:

23 National

Rental

Affordability Scheme

the

tax offsets available under Division 380

132 Application provision

Item 23 of the table in section 67-23 of the Income Tax Assessment Act

1997 applies to tax offsets for the 2008-09 income year and later

income years.

133 Subsection 67-25(7)

Repeal the subsection.

134 Application provision

The repeal of subsection 67-25(7) of the Income Tax Assessment Act

1997 by this Part applies to tax offsets for the 2009-2010 income year

and later income years.

135 Section 109-55 (table item 8C)

After "replacement-asset roll-over", insert "(other than a roll-over

covered by section 115-34)".

136 At the end of section 109-55

Add:

Note:

Section 115-34 sets out other acquisition rules for certain cases

involving replacement-asset roll-overs covered by that section.

137 Section 112-97 (cell at table item 21, column headed

"See:")

Repeal the cell, substitute:

subsection

Schedule 6 Miscellaneous amendments

Part 11 Other minor changes

140 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

320-200(2)

138 Section 112-97 (cell at table item 22, column headed

"See:")

Repeal the cell, substitute:

subsection

320-255(2)

139 Subsection 115-25(1) (note)

Omit "Note", substitute "Note 1".

140 At the end of subsection 115-25(1)

Add:

Note 2:

Section 115-30 or 115-34 may affect the time when the entity is

treated as having acquired the CGT asset.

141 Subsection 115-30(1) (table item 2)

Repeal the item, substitute:

CGT asset that the acquirer

acquired

as a replacement asset for a

replacement-asset roll-over (other than a

roll-over covered by paragraph

115-34(1)(c))

(a) when the acquirer acquired

the original asset involved in

the roll-over; or

(b) if the acquirer acquired the

replacement asset for a

roll-over that was the last in

an unbroken series of

replacement-asset roll-overs

(other than roll-overs

covered by paragraph

115-34(1)(c))--when the

acquirer acquired the original

asset involved in the first

roll-over in the series

142 After section 115-30

Insert:

115-32 Special rule about time of acquisition for certain

replacement-asset roll-overs

(1) This section applies if:

(a)

CGT event happens to:

Miscellaneous amendments Schedule 6

Other minor changes Part 11

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 141

(i)

your

share in a company; or

(ii)

your

trust voting interest, unit or other fixed interest in

a trust; and

(b)

you

acquired the share or interest as a replacement asset for

replacement-asset roll-over (other than a roll-over covered

by paragraph 115-34(1)(c)); and

(i)

owns

membership interest in an entity (the original

entity); and

(ii) has owned that membership interest for less than 12

months; and

(d) that membership interest is the original asset for the roll-over.

Note:

This section does not affect the time when you are treated as having

acquired the replacement asset. That time is worked out under item 2

of the table in subsection 115-30(1).

Application of tests about the assets of the company or trust

(2) Subsection 115-45(4) applies as if the company or trust had

acquired the original asset at least 12 months before the

CGT

event, if the condition in that subsection would not be met were it

to be applied to the original entity and the CGT event.

(3) Subsection 115-45(6) applies as if the company or trust had

acquired the original asset at least 12 months before the

CGT

event, if the condition in subsection 115-45(5) would not be met

were it to be applied to the original entity and the CGT event.

115-34 Further special rule about time of acquisition for certain

replacement-asset roll-overs

(1) This section applies if:

(a)

CGT event happens to your

share in a company; and

(b) at the time of the CGT event, you had owned the share for

less than 12 months; and

(c)

you

acquired the share as a replacement asset for:

(i)

replacement-asset roll-over under Subdivision 122-A

(disposal of assets by individuals or trustees to a

wholly-owned company) for which you

disposed of a

CGT asset, or all the assets of a

business, to the

company; or

Schedule 6 Miscellaneous amendments

Part 11 Other minor changes

142 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(ii) a replacement-asset roll-over under Subdivision 122-B

(disposal of assets by partners to a wholly-owned

company) for which you disposed of your interests in a

CGT asset, or your interests in all the assets of a

business, to the company; or

(iii) a replacement-asset roll-over under Subdivision 124-N

(disposal of assets by trusts to a company) for which a

trust of which you were a beneficiary disposed of all of

its CGT assets to the company.

Application of tests about when you acquired the share

(2) Sections 115-25 and 115-40 apply as if you had

acquired the

share at least 12 months before the

CGT event.

Application of tests about the company's assets

(3) For each asset mentioned in subparagraph (1)(c)(i), subsections

115-45(4) and (6) apply as if the company had

acquired that asset

when you acquired it.

(4) For each asset mentioned in subparagraph (1)(c)(ii), subsections

115-45(4) and (6) apply as if the company had

acquired that asset

when you acquired your interests in it.

(5) For each asset mentioned in subparagraph (1)(c)(iii), subsections

115-45(4) and (6) apply as if the company had

acquired that asset

when the trust acquired it.

Relationship with Subdivision 109-A

(6) This section has effect despite Subdivision 109-A (which contains

rules about the time of acquisition of CGT assets).

143 Section 115-40 (note)

After "Section 115-30", insert "or 115-34".

144 Subsection 115-45(4) (note)

Omit "Section 115-30", substitute "Sections 115-30 and 115-32, or

section 115-34,".

145 Subsection 115-45(6) (note)

Miscellaneous amendments Schedule 6

Other minor changes Part 11

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 143

Omit "Section 115-30", substitute "Sections 115-30 and 115-32, or

section 115-34,".

146 Application provision

The amendments made by items 135, 136 and 139 to 145 apply to

assessments for the income year including 21 September 1999 and for

later income years, in relation to CGT events happening after 11.45 am

(by legal time in the Australian Capital Territory) on that day.

147 At the end of subsection 152-320(1)

Add:

Note:

The $500,000 is also reduced by any reduction under old provisions

about reduction of the CGT retirement exemption limit: see item 62 of

Schedule 1 to the New Business Tax System (Capital Gains Tax) Act

1999.

148 Paragraph 974-110(1)(b)

After "subsequently changed", insert ", including where one or more

(but not all) of the schemes cease to exist".

149 Application provision

The amendment of paragraph 974-110(1)(b) of the Income Tax

Assessment Act 1997 made by this Part applies in relation to changes

occurring on or after the day this Act receives the Royal Assent.

150 Subsection 995-1(1)

Insert:

common stake has the meaning given by section 124-783.

151 Subsection 995-1(1)

Insert:

common stakeholder has the meaning given by section 124-783.

152 Subsection 995-1(1) (definition of quote)

Repeal the definition, substitute:

quote:

(a)

quote an entity's

ABN means quote in a form and manner

approved by the Commissioner;

Schedule 6 Miscellaneous amendments

Part 11 Other minor changes

144 Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010

(b)

quote a

tax file number in connection with a

Part VA

investment: you quote your tax file number in connection

with the investment if you are taken, for the purposes of

Part VA of the Income Tax Assessment Act 1936, to have

quoted the number in connection with the investment.

153 Subsection 995-1(1) (definition of quoted)

Repeal the definition.

154 Subsection 995-1(1)

Insert:

significant stake has the meaning given by section 124-783.

155 Subsection 995-1(1)

Insert:

significant stakeholder has the meaning given by section 124-783.

Income Tax (Transitional Provisions) Act 1997

156 Section 1-10

Repeal the section, substitute:

1-10 Definitions and rules for interpreting this Act

(1) In this Act, an expression has the same meaning as in the Income

Tax Assessment Act 1997.

(2) Division 950 of the Income Tax Assessment Act 1997 (which

contains rules for interpreting that Act) applies to this Act as if the

provisions of this Act were provisions of that Act.

157 Subsection 770-230(5)

Omit "limit".

158 Application provision--amendment of subsection

770-230(5)

Miscellaneous amendments Schedule 6

Other minor changes Part 11

Tax Laws Amendment (2010 Measures No. 1) Bill 2010 No. , 2010 145

The amendment of subsection 770-230(5) of the Income Tax

(Transitional Provisions) Act 1997 made by this Part applies in relation

to income years, statutory accounting periods and notional accounting

periods starting on or after 1 July 2008.

Taxation Administration Act 1953

159 Paragraph 45-288(a) in Schedule 1

After "resident", insert "unit".

160 At the end of Chapter 2 in Schedule 1

Add:

Part 2-30--Collecting Medicare levy with income

tax

Division 90--Medicare levy and Medicare levy surcharge

Table of Subdivisions

90-A

Treatment like income tax

Subdivision 90-A--Treatment like income tax

Table of sections

90-1

Laws apply in relation to Medicare levy and Medicare levy surcharge as

they apply in relation to income tax

90-1 Laws apply in relation to Medicare levy and Medicare levy

surcharge as they apply in relation to income tax

Except so far as the contrary intention appears, this Schedule and

the Income Tax Assessment Act 1997 apply, and are taken always

to have applied, in relation to the following in the same way as

they apply in relation to income tax and

tax:

(a) Medicare levy (as defined in section 251R of the Income Tax

Assessment Act 1936);

(b)

Medicare levy surcharge.

Commonwealth of Australia Bills

TAX LAWS AMENDMENT (2010 MEASURES NO. 1) BILL 2010