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This is a Bill, not an Act. For current law, see the Acts databases.
1996-97-98
The Parliament of
the
Commonwealth of
Australia
HOUSE OF
REPRESENTATIVES
Presented and read a first
time
Taxation Laws
Amendment Bill (No. 4) 1998
No. ,
1998
(Treasury)
A Bill
for an Act to amend the law relating to taxation
9804820—1,147/31.3.1998—(48/97)
Cat. No. 97 2875 9 ISBN 0644 519436
Contents
Fringe Benefits Tax Assessment Act
1986 0644519436.html
Income Tax Assessment Act
1936 0644519436.html
Taxation Administration Act
1953 0644519436.html
Income Tax Assessment Act
1997 0644519436.html
Airports (Transitional) Act
1996 0644519436.html
Income Tax (Transitional Provisions) Act
1997 0644519436.html
Tax Law Improvement Act
1997 0644519436.html
Part 1—Amendment of the Income Tax Assessment Act
1997 0644519436.html
Part 2—Amendment of the Income Tax Assessment Act
1936 0644519436.html
Part 1—Income Tax Assessment Act
1997 0644519436.html
Part 2—Income Tax (Transitional Provisions) Act
1997 0644519436.html
Part 3—Income Tax Assessment Act
1936 0644519436.html
Part 1—Insertion of Divisions 240 and
243 0644519436.html
Income Tax Assessment Act
1997 0644519436.html
Part 2—Consequential amendments: arrangements treated as a sale and
loan 0644519436.html
Income Tax Assessment Act
1936 0644519436.html
Income Tax Assessment Act
1997 0644519436.html
Part 3—Consequential amendments: limited recourse
debt 0644519436.html
Income Tax Assessment Act
1936 0644519436.html
Income Tax Assessment Act
1997 0644519436.html
Part 4—Property transferred by way of
security 0644519436.html
Income Tax Assessment Act
1997 0644519436.html
Income Tax Assessment Act
1936 0644519436.html
Part 5—Application of
amendments 0644519436.html
Part 1—Fringe Benefits Tax Assessment Act
1986 0644519436.html
Part 2—Application and
transitional 0644519436.html
Income Tax Assessment Act 1936 0644519436.html
A Bill for an Act to amend the law relating to
taxation
The Parliament of Australia enacts:
This Act may be cited as the Taxation Laws Amendment Act (No. 4)
1998.
(1) Subject to this section, this Act commences on the day on which it
receives the Royal Assent.
(2) Unless this Act receives the Royal Assent on a day after the day on
which the Tax Law Improvement Act (No. 1) 1998 receives the Royal Assent,
items 35, 74, 81 and 88 of Schedule 11 commence on the day after the Tax Law
Improvement Act (No. 1) 1998 receives the Royal Assent.
(3) Item 66 of Schedule 11 commences immediately after item 22 of that
Schedule.
Subject to section 2, 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.
Section 170 of the Income Tax Assessment Act 1936 does not prevent
the amendment of an assessment made before the commencement of this section for
the purposes of giving effect to this Act.
1 At the end of Item 192 of Schedule
1
Add:
(4) However, this Item only applies if the property is housing provided
by, or on behalf of, an always-exempt person at a rate below the market rate
or:
(a) the property is:
(i) occupied principally by an always-exempt person or the government of a
foreign country; or
(ii) used principally by a person who is providing services to an
always-exempt person, or the government of a foreign country, for the provision
of those services; and
(b) the property is not ineligible Item 192 property.
(5) The following are ineligible Item 192
properties:
(a) shops and shopping centres;
(b) hotels;
(c) casinos;
(d) apartment blocks;
(e) properties mainly consisting of, or of a kind similar to, properties
covered by one or more of the preceding paragraphs;
(f) properties of a kind prescribed for the purposes of this
definition.
2 Application
The amendment made by this Part applies to dealings after 2 April
1998.
Fringe
Benefits Tax Assessment Act 1986
1 At the end of Division 13 of Part
III
Add:
(1) Where:
(a) a benefit is provided in, or in respect of, a year of tax in respect
of the employment of an employee of an employer; and
(b) the benefit is in respect of participation in an approved student
exchange program by the employee or an associate of the employee; and
(c) the employer or an associate of the employer did not select, or take
part in the selection of, the employee or associate as a participant in the
program;
the benefit is an exempt benefit in relation to the year of tax.
(2) An approved student exchange program is a student
exchange program run by a body that is registered as a student exchange body
with the relevant State or Territory body in accordance with the National
Guidelines for Student Exchange that are published by the National Co-ordinating
Committee for International Secondary Student Exchange.
2 Application
The amendment made by this Schedule applies to the year of tax commencing
on 1 April 1996 and all later years of tax.
Income
Tax Assessment Act 1936
1 Subsection 160ZC(4E)
Omit “the immediately preceding year of income”, substitute
“an earlier year of income”.
2 Subsection 245-105(6) in Schedule
2C
Omit “the year of income immediately preceding the forgiveness year
of income”, substitute “years of income before the forgiveness year
of income”.
3 Application of amendments
The amendments made by this Schedule apply in relation to debts forgiven
after 2 April 1998.
Taxation
Administration Act 1953
1 Section 2 (after paragraph (dad) of the
definition of head)
Insert:
(dae) in the case of the New South Wales Police Integrity
Commission—the Commissioner for the New South Wales Police Integrity
Commission;
2 Section 2 (after paragraph (dad) of the
definition of law enforcement agency)
Insert:
(dae) the New South Wales Police Integrity Commission;
Income
Tax Assessment Act 1997
1 Subsection 30-40(2) (at the end of the
table)
Add:
|
3.2.4 |
The Menzies Research Centre Public Fund |
the gift must be made after 2 April 1998 |
2 Subsection 30-315(2) (after table item
72)
Insert:
|
72A |
Menzies Research Centre Public Fund |
item 3.2.4 |
Omit “Except where the gaps follow a regular pattern, notes
are”, substitute “Where the reason for a gap is not apparent, a note
is”.
2 Subsection 4-10(3) (step 4 of the method
statement)
After “other liability”, insert “, unless a provision of
this Act says you can”.
3 Subsection 4-10(3) (note)
Omit “Note”, substitute “Note 1”.
4 At the end of subsection
4-10(3)
Add:
Note 2: In a few cases you can get a refund of excess tax
offsets. See:
• Subsection 98A(2) of the Income Tax Assessment
Act 1936 (trustee and beneficiary assessed on the same trust income)
• Section 126 of the Income Tax Assessment Act
1936 (about interest on bearer debentures).
5 Subsection 20-20(2)
Omit “An amount you receive”, substitute “An amount you
have received”.
6 Paragraph 20-20(2)(a)
Omit “receive”, substitute “received”.
7 Subsection 20-20(3)
Omit “An amount you receive”, substitute “An amount you
have received”.
8 After subsection 41-30(2)
Insert:
(2A) If the transferee gains the entitlement, the transferee cannot also
deduct under the rules for the *capital allowance any expenditure incurred in
order for the transferee to acquire the property or otherwise become its owner
or *quasi-owner.
9 Section 42-315
After “over land”, insert “granted by an *exempt
Australian government agency or an *exempt foreign government
agency”.
10 Section 42-315
After “a grant”, insert “(by such an
agency)”.
11 Section 50-25 (item 5.2 of the
table)
Omit “a *Commonwealth law”, substitute “an *Australian
law”.
12 Before section 70-1
Insert:
13 Paragraph 70-100(10)(a)
Omit “transferee”, substitute
“transferor”.
14 Section 70-110 (example
2)
Omit “purposes: see Subdivision 42-B”, substitute
“purposes (see Subdivision 42-B) and the item’s cost base for CGT
purposes (see Division 110)”.
15 Section 385-5 (item 1 of the
table)
Omit “60-D”, substitute
“70-D”.
16 Section 385-5 (item 2 of the
table)
Omit “60-D”, substitute “70-D”.
17 Subsection 387-305(1) (note
2)
Repeal the note, substitute:
Note 2: If an amount of the expenditure is recouped, the
amount may be included in your assessable income. See
Subdivision 20-A.
18 Subsection 387-355(2) (note
1)
Omit “sections 387-370”, substitute “section
387-370”.
19 Application
The amendments made by this Schedule apply to assessments for the 1997-98
income year and later income years.
1 After subsection 75B(3C)
Insert:
(3D) Subsection (4) does not apply to an amount received in the 1997-98
year of income or a later year of income if the amount is received as recoupment
as defined by section 20-25 of the Income Tax Assessment Act
1997.
Note: Subdivision 20-A of the Income Tax Assessment Act
1997 applies instead.
2 Subsection 82KH(1ABA)
Omit “63 of this Act or section 8-1”, substitute “8-1 or
25-35”.
3 Subsection 110(1) (definition of modified
51/52 amount)
Omit “52 of this Act or section 8-1”, substitute “8-1 or
25-40”.
4 Subsection 110(1) (definition of ordinary
51/52 amount)
Omit “52 of this Act or section 8-1”, substitute “8-1 or
25-40”.
5 Subsection 116E(1) (definition of modified
51/52 amount)
Omit “52 of this Act or section 8-1”, substitute “8-1 or
25-40”.
6 Subsection 116E(1) (definition of ordinary
51/52 amount)
Omit “52 of this Act or section 8-1”, substitute “8-1 or
25-40”.
7 Before subsection 122T(1)
Insert:
(1A) This section does not apply to an amount received in the 1997-98 year
of income or a later year of income if the amount is received as recoupment as
defined by section 20-25 of the Income Tax Assessment Act 1997.
Note: Subdivision 20-A of the Income Tax Assessment Act
1997 applies instead.
8 Before subsection 123A(2)
Insert:
(1H) Subsections (2) and (3) do not apply to an amount received in the
1997-98 year of income or a later year of income if the amount is received as
recoupment as defined by section 20-25 of the Income Tax Assessment Act
1997.
Note: Subdivision 20-A of the Income Tax Assessment Act
1997 applies instead.
9 Before subsection
123BD(4)
Insert:
(3A) Subsections (4) and (5) do not apply to an amount received in the
1997-98 year of income or a later year of income if the amount is received as
recoupment as defined by section 20-25 of the Income Tax Assessment Act
1997.
Note: Subdivision 20-A of the Income Tax Assessment Act
1997 applies instead.
10 Before subsection
124AQ(1)
Insert:
(1A) This section does not apply to an amount received in the 1997-98 year
of income or a later year of income if the amount is received as recoupment as
defined by section 20-25 of the Income Tax Assessment Act 1997.
Note: Subdivision 20-A of the Income Tax Assessment Act
1997 applies instead.
11 Paragraph 160ZK(1A)(a)
After “Part III”, insert “of”.
12 Paragraph 399A(2)(a)
Omit “63 of this Act or section 8-1”, substitute “8-1 or
25-35”.
13 Subsection 399A(5)
Omit “63 of this Act or section 8-1”, substitute “8-1 or
25-35”.
14 Subsection 413(3)
Omit “Division 10C or 10D of Part III”, substitute
“Division 43 of the Income Tax Assessment Act 1997 or Division 10C
or 10D of Part III of this Act”.
15 Application
The amendments made by this Schedule apply to assessments for the 1997-98
income year and later income years.
Airports
(Transitional) Act 1996
1 Subparagraph
49A(2)(a)(ii)
Omit “under subsection 42-310(2) of the Income Tax Assessment Act
1997”.
2 Paragraph 49A(2)(d)
Omit “42-310(2)(b) of that Act”, substitute “42-310(1)(b)
of the Income Tax Assessment Act 1997”.
3 Paragraph 49A(3)(c)
Omit “42-310(2)(b)”, substitute
“42-310(1)(b)”.
4 Paragraph 49A(3)(e)
Omit “acquisition of the lease”, substitute “acquisition
of the right”.
5 Application
The amendments made by items 1 to 4 apply to assessments for the 1997-98
income year and later income years.
Income
Tax (Transitional Provisions) Act 1997
6 Section 20-5 (after table item
2)
Insert:
|
2A |
122T |
General mining and quarrying expenditure |
|
2B |
123A(2) and (3) |
Expenditure on transporting minerals |
|
2C |
123BD(4) and (5) |
Expenditure on transporting quarry materials |
|
2D |
124AQ |
Petroleum mining expenditure |
7 Subsection 42-2(2)
Repeal the subsection, substitute:
(2) However, section 42-15 of the 1997 Act does not apply to allow you to
deduct an amount for depreciation of a ship for an income year if you calculate
the amount of a deduction in accordance with section 57AM of the 1936 Act for
the ship for that year.
Note: Depreciation deductions for these ships are allowable
under the 1936 Act: see subsection 53I(2) of the 1936 Act.
8 Paragraph 330-75(1)(d)
Repeal the paragraph.
9 After subsection
330-75(1)
Insert:
(1A) If:
(a) Common rule 1 applies as mentioned in subsection (1) of this section;
and
(b) any of the old recoupment provisions has applied to:
(i) the transferor; or
(ii) if there have been 2 or more prior applications of that Common
rule—any of the prior transferors of the property;
section 170 of the Income Tax Assessment Act 1936 does not stop the
Commissioner amending, at any time, an assessment of the transferee.
The amendments made by items 6 to 9 apply to assessments for the 1997-98
income year and later income years.
11 Items 120, 125, 126, 128, 129, 134 and 135 of
Schedule 4
The items are taken never to have commenced.
Note: Those items are superseded by the amendments made by
items 2 to 6, 12 and 13 of Schedule 7 to this Act.
12 Item 43 of Schedule 8
The item is taken never to have commenced.
Note: The item is superseded by the amendment made by item 1
of Schedule 7 to this Act.
Part
1—Amendment of the Income
Tax Assessment Act 1997
1 Section 11-15 (table item headed
“education”)
Repeal the item, substitute:
|
education |
|
|
bursary, educational allowance etc. |
51-10 and 51-35 |
|
CRAFT scheme, employer’s income from |
51-10 |
|
foreign student, scholarship and bursary to |
23(ya) |
|
full-time student, income from a scholarship, bursary, other educational
allowance or educational assistance |
|
|
isolated child, income for the provision of education of |
51-10 and 51-40 |
|
secondary student, income for the provision |
|
2 Section 11-15 (table item headed “social
security or like payments”)
Before
|
disability services payment |
53-10 |
insert
|
Commonwealth education or training payment |
Subdivision 52-E |
3 Section 51-10 (before table item
2.1)
Insert:
|
2.1A |
a full-time student at a school, college or university |
a scholarship, bursary, educational allowance or educational
assistance |
see section 51-35 |
|
2.1B |
(a) a student; or |
a payment under a Commonwealth scheme for assistance of: |
see section 51-40 |
4 Section 51-30 (link note)
Repeal the link note.
5 After section 51-30
Insert:
The following payments made to or on behalf of a full-time student at a
school, college or university are not exempt from income tax under item
2.1 of the table in section 51-10:
(a) a payment by the Commonwealth for assistance for secondary education
or in connection with education of isolated children;
(b) a *Commonwealth education or training payment;
(c) a payment by a person or an authority on the condition that the
student will (or will if required) become, or continue to be, an employee of the
person or authority;
(d) a payment by a person or an authority on the condition that the
student will (or will if required) enter into, or continue to be a party to, a
contract with the person or authority that is wholly or principally for the
labour of the student;
(e) a payment under a scholarship where the scholarship is not provided
principally for educational purposes;
(f) an education entry payment under Part 2.13A of the Social Security
Act 1991.
Note: The whole or part of a Commonwealth education or
training payment may be exempt under Subdivision 52-E.
The following payments made to or on behalf of a student are not
exempt from income tax under item 2.2 of the table in section 51-10:
(a) a *Commonwealth education or training payment;
(b) an education entry payment under Part 2.13A of the Social Security
Act 1991.
Note: The whole or part of a Commonwealth education or
training payment may be exempt under Subdivision 52-E.
6 At the end of Division 52
Add:
Table of sections
52-120 Supplementary amount of a Commonwealth education or
training payment is exempt
52-125 Meaning of Commonwealth education or training
payment
(1) This section tells you about the income tax treatment of a
*Commonwealth education or training payment.
(2) The *supplementary amount of the payment is exempt from income
tax.
(3) The supplementary amount is the total of:
(a) so much of the payment as is included to assist you with, or to
reimburse you for, the costs of any one or more of the following:
(i) rent;
(ii) living in a remote area;
(iii) commencing employment;
(iv) travel to, or participation in, courses, interviews, education or
training;
(v) a child or children wholly or substantially dependent on
you;
(vi) telephone bills;
(vii) living away from your usual residence;
(viii) maintaining your usual residence while living away from that
residence;
(ix) accommodation, books or equipment;
(x) discharging a HEC assessment debt (within the meaning of
Chapter 4 of the Higher Education Funding Act 1988);
(xi) transport in travelling to undertake education or training, or to
visit your usual residence when undertaking education or training away from that
residence;
(xii) if you are disabled—acquiring any special equipment, services
or transport as a result of the disability;
(xiii) anything that would otherwise prevent you from beginning,
continuing or completing any education or training; and
(b) so much of the payment as is included by way of pharmaceutical
allowance.
(1) A Commonwealth education or training
payment is a payment by the Commonwealth, or in connection with a
payment by the Commonwealth, of an allowance or reimbursement:
(a) to or on behalf of a participant in a *Commonwealth labour market
program; or
(b) to or on behalf of a student under:
(i) the scheme known as ABSTUDY; or
(ii) the scheme known as the Assistance for Isolated Children Scheme;
or
(iii) the scheme known as the Veterans’ Children Education
Scheme;
in respect of a period commencing at a time when the student was at least
16 years old.
(2) A Commonwealth labour market program is a program
administered by the Commonwealth under which:
(a) unemployed persons are given training in skills to improve their
employment prospects; or
(b) unemployed persons are assisted in obtaining employment or to become
self-employed; or
(c) employed persons are given training in skills and other assistance to
aid them in continuing to be employed by their current employer or in obtaining
other employment.
7 Subsection 995-1(1)
Insert:
Commonwealth education or training payment has the meaning
given by section 52-125.
8 Subsection 995-1(1)
Insert:
Commonwealth labour market program has the meaning given by
section 52-125.
9 Subsection 995-1(1) (table in the definition
of supplementary amount)
Repeal the table, substitute:
|
Supplementary amount of a payment |
||
|---|---|---|
|
Supplementary amount of this kind of payment: |
has the meaning given by: |
|
|
1 |
Commonwealth education or training payment |
section 52-120 |
|
2 |
Drought relief payment |
section 53-15 |
|
3 |
Payment made because of the Veterans’ Entitlements (Transitional
Provisions and Consequential Amendments) Act 1986 |
section 52-105 |
|
4 |
Social security payment |
section 52-15 |
|
5 |
Veterans’ affairs payment |
section 52-70 |
10 Application of
amendments
The amendments made by this Part apply to assessments for the 1998-99
income year and later income years.
Part
2—Amendment of the Income
Tax Assessment Act 1936
11 At the end of section
22A
Add:
Provisions cut off from 1998-99
(2) A provision of this Act set out in the second column of the table does
not apply to an assessment for the 1998-99 year of income or a later year of
income.
Note: The last column of the table shows the provision of
the Income Tax Assessment Act 1997 that applies instead.
|
Old exempt income provisions that no longer apply |
||
|---|---|---|
|
|
|
Corresponding provision of the Income Tax Assessment Act
1997 |
|
1 |
Paragraph 23(z) |
table item 2.1A in section 51-10 |
|
2 |
Paragraph 23(zaa) |
table item 2.1B in section 51-10 |
12 At the end of section 24
Add:
(2) Subdivision BA does not apply to an assessment for the 1998-99 year of
income or a later year of income.
Note: For the law applying to the 1998-99 year of income and
later years of income, see Subdivision 52-E of the Income Tax Assessment Act
1997.
13 Subsection 159ZR(1) (paragraph (e) of the
definition of eligible income)
Repeal the paragraph, substitute:
(e) a payment that is covered by Division 52, 53 or 55 of the Income
Tax Assessment Act 1997, but that is not exempt from income tax under that
Division.
14 Subsection 221A(1) (definition of salary
or wages)
Omit “Subdivision BA of Division 1AA of Part III of this Act
or”.
15 Application
The amendment made by item 13 applies for the purpose of determining
whether a lump sum payment is eligible income in the 1998-99 year of income or a
later year of income.
Part
1—Income Tax Assessment Act
1997
1 Section 42-65 (at the end of the
table)
Add:
|
15 |
in relation to which Division 58 applies |
the amount applicable under section 58-40, 58-95, 58-160 or 58-220, as the
case may be |
2 Paragraph 42-175(d)
Repeal the paragraph, substitute:
(d) if Common rule 1 applied to your acquisition of the plant and you
acquired the plant from a *transition entity to which Subdivision 58-B
applies—the sum of the amounts that are to be deducted under paragraphs
58-80(a), (b) and (c) in calculating the *notional written down value of the
plant in relation to the transition entity or are to be deducted under
paragraphs 58-145(5)(a) and (b) in calculating the *undeducted cost of the plant
in relation to the transition entity, as the case may be; and
(e) if Common rule 1 applied to your acquisition of the plant—the
sum of the amounts that would apply under paragraphs (a), (b), (c) and (d) to
the transferor and earlier successive transferors.
(2) This section has effect subject to Subdivision 58-B in relation to
*plant to which that Subdivision applies.
3 At the end of section
42-190
Add:
(4) The operation of subsection (2) is affected, in relation to certain
*plant to which Division 58 applies, by subsections 58-85(7), 58-145(7),
58-215(2) and 58-270(2).
(5) If a *transition entity or a *tax exempt vendor had at any previous
time been the owner or a *quasi-owner of the *plant and either of the following
paragraphs applies:
(a) the transferor was the transition entity or the purchaser from the tax
exempt vendor and Common rule 1 applied to your acquisition of the plant;
(b) the transferor was not the transition entity or the purchaser from the
tax exempt vendor and Common rule 1 applied to:
(i) your acquisition of the plant; and
(ii) all earlier successive acquisitions of the plant by entities that
acquired it from, or became the owners or quasi-owners of it after it was
acquired from, the transition entity or the purchaser from the tax exempt
vendor;
subsection (2) has effect in relation to the plant as if paragraph (a) of
that subsection were omitted and replaced by whichever of the paragraphs
mentioned in subsections 58-85(7), 58-145(7), 58-215(2) or 58-270(2) would have
applied to the transition entity or the purchaser from the tax exempt vendor, as
the case may be.
4 At the end of section
42-195
Add:
(4) The operation of subsection (3) is affected, in relation to certain
*plant to which Division 58 applies, by subsections 58-85(5) and
58-145(4).
5 At the end of section
42-200
Add:
(2) The operation of subsection (1) is affected, in relation to certain
*plant to which Division 58 applies, by subsection 58-85(6).
(3) If a *transition entity had at any previous time been the owner or
*quasi-owner of the *plant and had made a choice under paragraph 58-20(1)(a) in
relation to the plant and either of the following paragraphs applies:
(a) the transferor was the transition entity and Common rule 1 applied to
your acquisition of the plant;
(b) the transferor was not the transition entity and Common rule 1 applied
to your acquisition of the plant and all earlier successive acquisitions of the
plant by entities that acquired it from, or became the owners or quasi-owners of
it after it was acquired from, the transition entity;
the cost of the plant is taken to be its *notional written down value at
the transition time.
6 Section 55-10 (link note)
Repeal the link note, substitute:
[The next Division is Division 58.]
7 At the end of Part 2-15
Add:
Table of Subdivisions
Guide to Division 58
58-A Interpretation
58-B Plant of exempt entities that become taxable
58-C Plant acquired from exempt entities in connection with the acquisition
of a business
This Division sets out special rules that apply in calculating depreciation
deductions and balancing adjustments in respect of plant previously owned by an
exempt entity if the plant:
• continues to be owned by that entity after
the entity becomes taxable; or
• is acquired from that entity, in connection
with the acquisition of a business, by a purchaser that is a taxable
entity.
The following diagram shows the operation of this Division.
Table of sections
58-5 Application of Division to quasi-owners of
plant
58-10 Pre-existing audited book value of unit of
plant
This Division applies in relation to a unit of *plant of which an entity
has been or is, or becomes, a *quasi-owner in the same way as it applies in
relation to a unit of plant that has been or is owned by, or is acquired by, an
entity.
(1) If:
(a) a balance sheet, as at the end of an annual accounting period (the
balance date), that was prepared as part of an *exempt
entity’s final accounts for that period showed a unit of *plant (the
unit) as an asset of the exempt entity and specified a value for
the unit; and
(b) a qualified independent auditor who was engaged, or was required by
law, to undertake an audit of those accounts had prepared and signed, before 4
August 1997, a final audit report on those accounts; and
(c) the report did not state that the auditor was not satisfied that the
specified value fairly represented the value of the unit;
the unit is taken to have had a pre-existing audited book
value at the balance date of an amount equal to the specified
value.
(2) If a balance sheet did not specify a value for the unit but specified
a total value for 2 or more units of plant including the unit, the balance sheet
is taken to have specified as the value of the unit so much of that total value
as is reasonably attributable to the unit.
(3) The latest time at which a unit of *plant is taken to have had a
*pre-existing audited book value is the test time in relation to
the unit.
Table of sections
58-15 Transition entities etc.
58-20 Choice by entity
Provisions applying where depreciation of the unit is calculated by
reference to notional written down value
58-25 Exclusion of certain provisions
58-30 Undeducted cost of unit
58-35 Ownership of unit
58-40 Cost of unit to transition entity
58-45 Effective life of unit
58-50 Choice or election to calculate assumed effective
life
58-55 Use of unit for producing assessable
income
58-60 Method of depreciation
58-65 Application of certain provisions in calculating
depreciation rates
58-70 Choice of rate
58-75 Nomination or election of depreciation
percentage
58-80 Notional written down value
58-85 Calculation of depreciation deductions and balancing
adjustments
Provisions applying where depreciation of the unit is calculated by
reference to undeducted pre-existing audited book value
58-90 Exclusion of certain provisions
58-95 Cost of unit to transition entity
58-100 Ownership of unit
58-105 Assumed cost of unit to transition entity for purpose
of calculating undeducted pre-existing audited book value
58-110 Effective life of unit
58-115 Election to calculate assumed effective
life
58-120 Use of unit for producing assessable
income
58-125 Method of depreciation
58-130 Application of certain provisions in calculating
depreciation rates
58-135 Nomination or election of depreciation
percentage
58-140 Undeducted pre-existing audited book
value
58-145 Calculation of depreciation deductions and balancing
adjustments
If:
(a) at a particular time on or after 4 August 1997, an entity is an
*exempt entity; and
(b) immediately after that time, the entity’s *ordinary income or
*statutory income becomes to any extent assessable income;
then:
(c) the entity is a transition entity; and
(d) the time when the entity’s ordinary income or statutory income
becomes to that extent assessable is the transition time;
and
(e) the income year in which the *transition time occurs is the
transition year for the entity.
(1) A *transition entity must, in relation to every unit of *plant (the
unit) that was owned by it at the *transition time, do either of
the following:
(a) choose that depreciation deductions and balancing adjustments for
periods after the transition time are to be calculated by reference to the
*notional written down value of the unit;
(b) choose that depreciation deductions and balancing adjustments for
periods after the transition time are to be calculated by reference to the
*undeducted pre-existing audited book value (if any) of the unit.
(2) A choice under subsection (1) must be made:
(a) by the day on which the *transition entity lodges its *income tax
return for the *transition year; or
(b) within a further period allowed by the Commissioner.
(3) A choice, once made, applies to *the transition year and all later
income years.
(4) If the *transition entity makes a choice under paragraph (1)(a),
sections 58-25 to 58-85 have effect in relation to the unit.
(5) If the *transition entity makes a choice under paragraph (1)(b),
sections 58-90 to 58-145 have effect in relation to the unit.
The following provisions do not apply in respect of the unit in relation
to the *transition entity:
(a) Subdivision 57-I of the Income Tax Assessment Act
1936;
(b) Subdivision 57-K of that Act in so far as that Subdivision deals with
depreciation balancing adjustments.
(1) Section 42-175 has effect in relation to the unit as if that section
provided that the *undeducted cost of the unit were the *notional written down
value of the unit.
(2) Sections 58-35 to 58-75 have effect for the purpose of the calculation
of that value under section 58-80.
(1) If the *transition entity was an *exempt Australian government agency
immediately before the *transition time and had acquired the unit from another
exempt Australian government agency:
(a) assume that the transition entity acquired it at the time when it was
acquired or constructed by the other exempt Australian government agency;
or
(b) if it had, before its acquisition by the transition entity, been
successively owned by 2 or more exempt Australian government
agencies—assume that the transition entity acquired it at the time when it
was acquired or constructed by the first of those exempt Australian government
agencies that owned it.
(2) To avoid doubt, if subsection (1) does not apply, the *transition
entity is taken to have acquired the unit at the time when the transition entity
acquired or constructed it.
(1) To avoid doubt, Subdivision 42-B applies for the purpose of
determining the cost of the unit to the *transition entity.
(2) However, if the *transition entity was an *exempt Australian
government agency immediately before the *transition time and had acquired the
unit from another exempt Australian government agency:
(a) assume that its cost to the transition entity is the amount that was
its cost to the other exempt Australian government agency; or
(b) if it had, before its acquisition by the transition entity, been
successively owned by 2 or more exempt Australian government agencies, assume
that its cost to the transition entity is the amount that was its cost to the
first of those exempt Australian government agencies that owned it.
Assume that the *effective life of the unit is the period that would have
been calculated to be its effective life:
(a) if subsection 58-35(1) applies—at the time when it is assumed
under that subsection to have been acquired by the *transition entity;
or
(b) if subsection 58-35(2) applies—at the time when it was acquired
or constructed by the transition entity.
For the purpose of calculating the assumed *effective life of the unit
under section 58-45:
(a) if the *transition entity would have been required to make a choice
under subsection 42-100(1) at a particular time during the period for which the
transition entity owned, or is assumed to have owned, it—assume that the
transition entity made a choice at that time under paragraph 42-100(1)(b) to
adopt the effective life specified by the Commissioner; or
(b) if the transition entity could have made an election under subsection
54A(1) of the Income Tax Assessment Act 1936 at a particular time during
the period for which the transition entity owned, or is assumed to have owned,
it—assume that the transition entity made the election at that
time.
Assume that the unit had, at all times during the period beginning when
it was acquired or constructed, or is assumed to have been acquired, by the
*transition entity and ending immediately before the *transition time, been used
wholly for the purpose of producing assessable income by the transition entity,
and assume that deductions for depreciation in respect of it had been allowed to
the transition entity during that period.
Assume that the *method of depreciation selected by the *transition
entity in relation to the unit for:
(a) the *transition year; or
(b) if the transition entity does not claim depreciation for the
transition year—the first income year after the transition year in which
the transition entity claims depreciation;
was also used by the transition entity in each income year before the
transition year.
In calculating the rate of depreciation in relation to the unit in each
income year before the *transition year:
(a) if section 57AG of the Income Tax Assessment Act 1936 as in
force at any time before its repeal had applied in respect of that income
year—that section is to be taken into account; and
(b) if subsection 55(6) of the Income Tax Assessment Act 1936 as in
force immediately before the commencement of section 7 of the Taxation
Laws Amendment Act (No. 2) 1992 had applied in respect of that income
year—that subsection is to be taken into account; and
(c) if section 57AL of the Income Tax Assessment Act 1936 as in
force at any time before its repeal had applied in respect of that income
year—that section is to be disregarded.
(1) If the *transition entity could have made a choice under subsection
42-120(1) at a particular time (the relevant time) during the
period for which the transition entity owned, or is assumed to have owned, the
unit, the transition entity may make the choice and, if the choice is made, it
is taken to have been made at the relevant time.
(2) A *diminishing value rate chosen must not be less than the percentage
worked out by using the formula:
where:
number of years in effective life means the number of years
in the assumed *effective life of the unit under section 58-45.
(3) A *prime cost rate chosen must not be less than two-thirds of the
percentage that would be worked out under subsection (2) if a *diminishing value
rate had been chosen.
(1) If the *transition entity could have made a nomination or election
under subsection 55(8) of the Income Tax Assessment Act 1936 as in force
at a particular time (the relevant time) during the period for
which the transition entity owned, or is assumed to have owned, the unit, the
transition entity may make the nomination or election, as the case may be, and,
if the nomination or election is made, it is taken to have been made at the
relevant time.
(2) If the *transition entity makes a nomination under subsection 55(8) of
the Income Tax Assessment Act 1936 as in force immediately before the
commencement of section 23 of the Taxation Laws Amendment Act 1993, the
following paragraphs apply:
(a) the nomination applies to the income year for which it is taken to
have been made and all later income years;
(b) a *diminishing value rate nominated must not be less than the
percentage worked out by using the formula:
where:
number of years in effective life means the number of years
in the assumed *effective life of the unit under section 58-45;
(c) a *prime cost rate nominated must not be less than two-thirds of the
percentage that would be worked out under paragraph (b) if a diminishing value
rate had been nominated.
(3) If the *transition entity makes an election under subsection 55(8) of
the Income Tax Assessment Act 1936 as in force immediately before the
commencement of section 7 of the Taxation Laws Amendment Act (No. 2)
1992, the election applies to the income year in which it is taken to have
been made and all later income years.
The notional written down value of the unit in relation to
the *transition entity is the amount of its cost or assumed cost to the
transition entity under section 58-40 less the sum of:
(a) the amounts in respect of which deductions for depreciation are
assumed under section 58-55 to have been allowed to the transition entity in
respect of it; and
Note: Sections 58-35 to 58-50, and sections 58-60 to 58-75,
have effect for the purpose of determining the amounts referred to in paragraph
(a).
(b) the amounts the transition entity has deducted or can deduct for
depreciation of it; and
(c) any further amounts the transition entity could have deducted for
depreciation of it for any period after the *transition time during which the
transition entity was its owner and used it, or had it *installed ready for use,
assuming that:
(i) the transition entity used it wholly for the purpose of producing
assessable income during that period; and
(ii) the transition entity used the same rate of depreciation and the same
method of depreciation during that period as the transition entity used for the
income year in which a depreciation deduction was first allowable to the
transition entity for it.
(1) The rules otherwise applying in calculating depreciation deductions
and balancing adjustments in respect of the unit have effect in relation to the
*transition entity subject to this section and section 58-30.
(2) Sections 58-35 to 58-50 and sections 58-65 to 58-75 apply in the same
way as they apply in calculating the deductions for depreciation assumed under
section 58-55 to have been allowed to the *transition entity.
(3) The rate of depreciation is to be the same as the rate that was used
in calculating the deduction for depreciation assumed under section 58-55 to
have been allowed to the *transition entity in respect of the latest income year
in the period referred to in that section.
(4) Subdivision 42-L, and sections 62AAB to 62AAV of the Income Tax
Assessment Act 1936, do not apply in respect of the unit.
(5) Subsection 42-195(3) does not apply to any period in which the unit
was used, or *installed ready for use, before the *transition time.
(6) For the purposes of section 42-200, the cost of the unit is taken to
be its *notional written down value at the *transition time.
(7) If a *balancing adjustment event has occurred, subsection 42-190(2)
has effect in relation to the unit as if paragraph (a) of that subsection were
omitted and replaced by the following paragraph:
(a) the amount by which the higher of:
(i) the cost base of the *plant for the purposes of Part IIIA of the
Income Tax Assessment Act 1936; or
(ii) the *notional written down value of the plant at the *transition
time;
exceeds its *written down value; and
The following provisions do not apply in respect of the unit in relation
to the *transition entity:
(a) Subdivision 57-I of the Income Tax Assessment Act
1936;
(b) Subdivision 57-K of that Act in so far as that Subdivision deals with
depreciation balancing adjustments.
(1) The cost of the unit to the *transition entity is taken to be the
*undeducted pre-existing audited book value of the unit.
(2) Sections 58-100 to 58-135 have effect for the purpose of the
calculation of that value under section 58-140.
(1) If the *transition entity was an *exempt Australian government agency
immediately before the *transition time and had acquired the unit from another
exempt Australian government agency:
(a) assume that the transition entity acquired it at the time when it was
acquired or constructed by the other exempt Australian government agency;
or
(b) if it had, before its acquisition by the transition entity, been
successively owned by 2 or more exempt Australian government
agencies—assume that the transition entity acquired it at the time when it
was acquired or constructed by the first of those exempt Australian government
agencies that owned it.
(2) To avoid doubt, if subsection (1) does not apply, the *transition
entity is taken to have acquired the unit at the time when the transition entity
acquired or constructed it.
Assume that the cost of the unit to the *transition entity is the sum
of:
(a) its *pre-existing audited book value at the test time; and
(b) the amounts of any capital expenditure on improving it incurred by the
transition entity, or by an earlier owner that was an *exempt Australian
government agency, during the period beginning immediately after the test time
and ending immediately before the *transition time.
Assume that the *effective life of the unit is the period that would have
been calculated to be its effective life:
(a) if subsection 58-100(1) applies—at the time when it is assumed
under that subsection to have been acquired by the *transition entity;
or
(b) if subsection 58-100(2) applies—at the time when it was acquired
or constructed by the transition entity.
For the purpose of calculating the assumed *effective life of the unit
under section 58-110, if the *transition entity could have made an election
under subsection 54A(1) of the Income Tax Assessment Act 1936 at a
particular time during the period for which the transition entity owned, or is
assumed to have owned, it, assume that the transition entity made the election
at that time.
Assume that the unit had, at all times during the period beginning at the
test time and ending immediately before the *transition time, been used wholly
for the purpose of producing assessable income by the *transition entity, and
assume that deductions for depreciation in respect of it had been allowed to the
transition entity during that period.
Assume that the *method of depreciation selected by the *transition
entity in relation to the unit for:
(a) the *transition year; or
(b) if the transition entity does not claim depreciation for the
transition year—the first income year after the transition year in which
the transition entity claims depreciation;
was also used by the transition entity for each income year in the period
referred to in section 58-120.
In calculating the rate of depreciation in relation to the unit in each
income year in the period referred to in section 58-120:
(a) if section 57AG of the Income Tax Assessment Act 1936 as in
force at any time before its repeal had applied in respect of that income
year—that section is to be taken into account; and
(b) if subsection 55(6) of the Income Tax Assessment Act 1936 as in
force immediately before the commencement of section 7 of the Taxation
Laws Amendment Act (No. 2) 1992 had applied in respect of that income
year—that subsection is to be taken into account; and
(c) if section 57AL of the Income Tax Assessment Act 1936 as in
force at any time before its repeal had applied in respect of that income
year—that section is to be disregarded.
(1) If the *transition entity could have made a nomination or election
under subsection 55(8) of the Income Tax Assessment Act 1936 as in force
at a particular time (the relevant time) during the period
referred to in section 58-120, the transition entity may make the nomination or
election, as the case may be, and, if the nomination or election is made, it is
taken to have been made at the relevant time.
(2) If the *transition entity makes a nomination under subsection 55(8) of
the Income Tax Assessment Act 1936 as in force immediately before the
commencement of section 23 of the Taxation Laws Amendment Act 1993, the
following paragraphs apply:
(a) the nomination applies to the income year in which it is taken to have
been made and all later income years;
(b) a *diminishing value rate nominated must not be less than the
percentage worked out by using the formula:
where:
number of years in effective life means the number of years
in the assumed *effective life of the unit under section 58-110;
(c) a *prime cost rate nominated must not be less than two-thirds of the
percentage that would be worked out under paragraph (b) if a diminishing value
rate had been nominated.
(3) If the *transition entity makes an election under subsection 55(8) of
the Income Tax Assessment Act 1936 as in force immediately before the
commencement of section 7 of the Taxation Laws Amendment Act (No. 2)
1992, the election applies to the income year in which it is taken to have
been made and all later income years.
The undeducted pre-existing audited book value of the unit
in relation to the *transition entity is:
(a) if the test time in relation to the unit is less than one year before
the *transition time—the amount of its assumed cost under section 58-105;
or
(b) if the test time in relation to the unit is one year or more before
the transition time—the amount of its assumed cost under section 58-105
less any amounts in respect of which deductions for depreciation are assumed
under section 58-120 to have been allowed to the transition entity in respect of
it.
Note: Sections 58-100 to 58-135 have effect for the purpose
of determining the amounts referred to in paragraph (b).
(1) The rules otherwise applying in calculating depreciation deductions
and balancing adjustments in respect of the unit have effect in relation to the
*transition entity subject to this section and section 58-95.
(2) Sections 58-100, 58-110 and 58-115 apply in the same way as they apply
in calculating the *undeducted pre-existing audited book value of the
unit.
(3) Subdivision 42-L, and sections 62AAB to 62AAV of the Income Tax
Assessment Act 1936, do not apply in respect of the unit.
(4) Subsection 42-195(3) does not apply to any period in which the unit
was used, or *installed ready for use, before the *transition time.
(5) Section 42-175 has effect in relation to the unit as if that section
provided that the *undeducted cost of the unit were the *undeducted pre-existing
audited book value of the unit less the sum of:
(a) the amounts the *transition entity has deducted or can deduct for
depreciation of it; and
(b) any further amounts the transition entity could have deducted for
depreciation of it for any period after the *transition time during which the
transition entity was its owner and used it, or had it *installed ready for use,
assuming that:
(i) the transition entity used it wholly for the purpose of producing
assessable income during that period; and
(ii) the transition entity used the same rate of depreciation and method
of depreciation during that period as the transition entity used for the income
year in which a depreciation deduction was first allowable to the transition
entity for it.
(6) If the test time in relation to the unit is one year or more before
the *transition time, the rate of depreciation is to be the same as the rate
that was used in calculating the deduction for depreciation assumed under
section 58-120 to have been allowed to the *transition entity in respect of the
latest income year in the period referred to in that section.
(7) If a *balancing adjustment event has occurred, subsection 42-190(2)
has effect in relation to the unit as if paragraph (a) of that subsection were
omitted and replaced by the following paragraph:
(a) the amount by which the higher of:
(i) the cost base of the *plant for the purposes of Part IIIA of the
Income Tax Assessment Act 1936; or
(ii) the cost of the plant to you;
exceeds its *written down value; and
Table of sections
58-150 Purchase of unit of plant from tax exempt vendor in
connection with acquisition of a business
58-155 Choice by purchaser
Provisions applying where depreciation of the unit is calculated by
reference to notional written down value
58-160 Cost of unit to purchaser
58-165 Ownership of unit
58-170 Cost of unit to tax exempt vendor
58-175 Effective life of unit
58-180 Choice or election to calculate assumed effective
life
58-185 Use of unit for producing assessable
income
58-190 Method of depreciation
58-195 Application of certain provisions in calculating
depreciation rates
58-200 Choice of rate
58-205 Nomination or election of depreciation
percentage
58-210 Notional written down value
58-215 Calculation of depreciation deductions and balancing
adjustments
Provisions applying where depreciation of the unit is calculated by
reference to undeducted pre-existing audited book value
58-220 Cost of unit to purchaser
58-225 Ownership of unit
58-230 Assumed cost of unit to tax exempt vendor for purpose
of calculating undeducted pre-existing audited book value
58-235 Effective life of unit
58-240 Election to calculate assumed effective
life
58-245 Use of unit for producing assessable
income
58-250 Method of depreciation
58-255 Application of certain provisions in calculating
depreciation rates
58-260 Nomination or election of depreciation
percentage
58-265 Undeducted pre-existing audited book
value
58-270 Calculation of depreciation deductions and balancing
adjustments
(1) If:
(a) at a particular time on or after 4 August 1997, an entity whose
*ordinary income or *statutory income is to any extent assessable acquires a
unit of *plant from an *exempt entity; and
(b) the unit of plant is acquired in connection with the acquisition of a
*business from the exempt entity;
then:
(c) the exempt entity is the tax exempt vendor;
and
(d) the time when the unit of plant is acquired is the acquisition
time; and
(e) the income year in which the *acquisition time occurs is the
acquisition year; and
(f) the entity that acquired the unit of plant is the
purchaser; and
(g) the unit of plant is the unit.
(2) The unit is taken to be acquired in connection with the acquisition of
a *business from the *exempt entity if:
(a) the unit was used by the exempt entity in carrying on a business and
the purchaser or another person uses the unit in carrying on the business;
or
(b) both of the following subparagraphs apply:
(i) the unit was used by the exempt entity in performing functions, or
engaging in activities, that did not constitute the carrying on of a business by
the exempt entity;
(ii) the unit is used by the purchaser or another person in performing
those functions or engaging in those activities as part of carrying on a
business; or
(c) all of the following subparagraphs apply:
(i) the acquisition by the purchaser of the unit was connected with the
acquisition of another asset by the purchaser or another person from the exempt
entity or from an *associate of the exempt entity;
(ii) ownership of the other asset gives the purchaser or other person a
right, or imposes on the purchaser or other person an obligation, to perform
functions or engage in activities as part of the carrying on of a business or
confers on the purchaser or other person a commercial advantage or opportunity
in connection with performing functions or engaging in activities as part of the
carrying on of a business;
(iii) the unit is used by the purchaser or other person in performing
those functions or engaging in those activities pursuant to the right or
obligation or in taking the benefit of the advantage or opportunity, as the case
may be; or
(d) the unit was acquired by the purchaser under an arrangement under
which the purchaser or another person acquired another asset from the exempt
entity or from an associate of the exempt entity and:
(i) the other asset is taken by paragraph (a), (b) or (c); or
(ii) where the other asset is not a unit of plant, it would, if it were a
unit of plant, be taken by paragraph (a), (b) or (c);
to be acquired in connection with the acquisition of a business from the
exempt entity.
(3) Paragraphs (2)(b), (c) and (d) do not apply if the unit is used by the
purchaser solely to derive assessable income from the provision of office or
residential accommodation.
(1) The purchaser must, in relation to the unit, do either of the
following:
(a) choose that depreciation deductions and balancing adjustments are to
be calculated by reference to the *notional written down value of the
unit;
(b) choose that depreciation deductions and balancing adjustments are to
be calculated by reference to the *undeducted pre-existing audited book value
(if any) of the unit.
(2) A choice under subsection (1) must be made:
(a) by the day on which the purchaser lodges the purchaser’s *income
tax return for the *acquisition year; or
(b) within a further period allowed by the Commissioner.
(3) A choice, once made, applies to the *acquisition year and all later
income years.
(4) If the purchaser makes a choice under paragraph (1)(a), sections
58-160 to 58-215 have effect in relation to the unit.
(5) If the purchaser makes a choice under paragraph (1)(b), sections
58-220 to 58-270 have effect in relation to the unit.
(1) The cost of the unit to the purchaser is taken to be the
amount that is the sum of:
(a) the *notional written down value of the unit in relation to the *tax
exempt vendor; and
(b) the amount of any incidental costs to the purchaser in respect of the
acquisition of the unit.
(2) Sections 58-165 to 58-205 have effect for the purpose of the
calculation under section 58-210 of the *notional written down value referred to
in paragraph (1)(a).
(1) If the *tax exempt vendor was an *exempt Australian government agency
immediately before the *acquisition time and had acquired the unit from another
exempt Australian government agency:
(a) assume that the tax exempt vendor acquired it at the time when it was
acquired or constructed by the other exempt Australian government agency;
or
(b) if it had, before its acquisition by the tax exempt vendor, been
successively owned by 2 or more exempt Australian government
agencies—assume that the tax exempt vendor acquired it at the time when it
was acquired or constructed by the first of those exempt Australian government
agencies that owned it.
(2) To avoid doubt, if subsection (1) does not apply, the *tax exempt
vendor is taken to have acquired the unit at the time when the tax exempt vendor
acquired or constructed it.
(1) To avoid doubt, Subdivision 42-B applies for the purpose of
determining the cost of the unit to the *tax exempt vendor.
(2) However, if the *tax exempt vendor was an *exempt Australian
government agency immediately before the *acquisition time and had acquired the
unit from another exempt Australian government agency:
(a) assume that its cost to the tax exempt vendor is the amount that was
its cost to the other exempt Australian government agency; or
(b) if the unit had, before its acquisition by the tax exempt vendor, been
successively owned by 2 or more exempt Australian government agencies, assume
that its cost to the tax exempt vendor is the amount that was its cost to the
first of those exempt Australian government agencies that owned it.
Assume that the *effective life of the unit is the period that would have
been calculated to be its *effective life:
(a) if subsection 58-165(1) applies—at the time when it is assumed
under that subsection to have been acquired by the *tax exempt vendor;
or
(b) if subsection 58-165(2) applies—at the time when it was acquired
or constructed by the tax exempt vendor.
For the purpose of calculating the assumed *effective life of the unit
under section 58-175:
(a) if the *tax exempt vendor would have been required to make a choice
under subsection 42-100(1) at a particular time during the period for which the
tax exempt vendor owned, or is assumed to have owned, it—assume that the
tax exempt vendor made a choice at that time under paragraph 42-100(1)(b) to
adopt the effective life specified by the Commissioner; or
(b) if the tax exempt vendor could have made an election under subsection
54A(1) of the Income Tax Assessment Act 1936 at a particular time during
the period for which the tax exempt vendor owned, or is assumed to have owned,
it—assume that the tax exempt vendor made the election at that
time.
Assume that the unit had, at all times during the period beginning when
it was acquired or constructed, or is assumed to have been acquired, by the *tax
exempt vendor and ending immediately before the *acquisition time, been used
wholly for the purpose of producing assessable income by the tax exempt vendor,
and assume that deductions for depreciation in respect of it had been allowed to
the tax exempt vendor during that period.
(1) Assume that the *tax exempt vendor could have selected a *method of
depreciation to use in relation to the unit for the income years included in the
period referred to in section 58-185.
(2) The purchaser must make the selection that the *tax exempt vendor
could have made.
(3) Assume that the *method of depreciation selected was used by the *tax
exempt vendor for each of the income years referred to in subsection
(1).
In calculating the rate of depreciation in relation to the unit in each
income year included in the period referred to in section 58-185:
(a) if section 57AG of the Income Tax Assessment Act 1936 as in
force at any time before its repeal had applied in respect of that income
year—that section is to be taken into account; and
(b) if subsection 55(6) of the Income Tax Assessment Act 1936 as in
force immediately before the commencement of section 7 of the Taxation Laws
Amendment Act (No. 2) 1992 had applied in respect of that income
year—that subsection is to be taken into account; and
(c) if section 57AL of the Income Tax Assessment Act 1936 as in
force at any time before its repeal had applied in respect of that income
year—that section is to be disregarded.
(1) If the *tax exempt vendor could have made a choice under subsection
42-120(1) at a particular time (the relevant time) during the
period referred to in section 58-185, the purchaser may make the choice and, if
the choice is made, it is taken to have been made by the tax exempt vendor at
the relevant time.
(2) A *diminishing value rate chosen must not be less than the percentage
worked out by using the formula:
where:
number of years in effective life means the number of years
in the assumed *effective life of the unit under section 58-175.
(3) A *prime cost rate chosen must not be less than two-thirds of the
percentage that would be worked out under subsection (2) if a *diminishing value
rate had been chosen.
(1) If the *tax exempt vendor could have made a nomination or election
under subsection 55(8) of the Income Tax Assessment Act 1936 as in force
at a particular time (the relevant time) during the period
referred to in section 58-185, the purchaser may make the nomination or
election, as the case may be, and, if the nomination or election is made, it is
taken to have been made by the tax exempt vendor at the relevant time.
(2) If the purchaser makes a nomination under subsection 55(8) of the
Income Tax Assessment Act 1936 as in force immediately before the
commencement of section 23 of the Taxation Laws Amendment Act 1993, the
following paragraphs apply:
(a) the nomination applies to the income year in which it is taken to have
been made and all later income years in the period referred to in section
58-185;
(b) a *diminishing value rate nominated must not be less than the
percentage worked out by using the formula:
where:
number of years in effective life means the number of years
in the assumed *effective life of the unit under section 58-175;
(c) a *prime cost rate nominated must not be less than two-thirds of the
percentage that would be worked out under paragraph (b) if a diminishing value
rate had been nominated.
(3) If the purchaser makes an election under subsection 55(8) of the
Income Tax Assessment Act 1936 as in force immediately before the
commencement of section 7 of the Taxation Laws Amendment Act (No. 2)
1992, the election applies to the income year in which it is taken to have
been made and all later income years in the period referred to in section
58-185.
The notional written down value of the unit in relation to
the *tax exempt vendor is the amount of its cost or assumed cost to the tax
exempt vendor under section 58-170 less the sum of the amounts in respect of
which deductions for depreciation are assumed under section 58-185 to have been
allowed to the tax exempt vendor in respect of it.
Note: Sections 58-165 to 58-180, and sections 58-190 to
58-205, have effect for the purpose of determining the amounts referred to in
this section.
(1) The rules otherwise applying to the purchaser in the calculation of
depreciation deductions and balancing adjustments in respect of the unit have
effect in relation to the purchaser subject to subsection (2) and section
58-160.
(2) If a *balancing adjustment event has occurred, subsection 42-190(2)
has effect in relation to the unit as if paragraph (a) of that subsection were
omitted and replaced by the following paragraph:
(a) the amount by which the higher of:
(i) the cost of the *plant to you; or
(ii) the amount that would be that cost if section 58-160 did not apply to
you and had not applied to any previous owner or *quasi-owner of the
plant;
exceeds its *written down value; and
(1) The cost of the unit to the purchaser is taken to be the
amount that is the sum of:
(a) the *undeducted pre-existing audited book value of the unit in
relation to the *tax exempt vendor; and
(b) the amount of any incidental costs to the purchaser in respect of the
acquisition of the unit.
(2) Sections 58-225 to 58-260 have effect for the purpose of the
calculation under section 58-265 of the *undeducted pre-existing audited book
value referred to in paragraph (1)(a).
(1) If the *tax exempt vendor was an *exempt Australian government agency
immediately before the *acquisition time and had acquired the unit from another
exempt Australian government agency:
(a) assume that the tax exempt vendor acquired it at the time when it was
acquired or constructed by the other exempt Australian government agency;
or
(b) if it had, before its acquisition by the tax exempt vendor, been
successively owned by 2 or more exempt Australian government
agencies—assume that the tax exempt vendor acquired it at the time when it
was acquired or constructed by the first of those exempt Australian government
agencies that owned it.
(2) To avoid doubt, if subsection (1) does not apply, the *tax exempt
vendor is taken to have acquired the unit at the time when the tax exempt vendor
acquired or constructed it.
Assume that the cost of the unit to the *tax exempt vendor is the sum
of:
(a) its *pre-existing audited book value at the test time; and
(b) the amounts of any capital expenditure on improving it incurred by the
tax exempt vendor, or by an earlier owner that was an *exempt Australian
government agency, during the period beginning immediately after the test time
and ending immediately before the *acquisition time.
Assume that the *effective life of the unit is the period that would have
been calculated to be its effective life:
(a) if subsection 58-225(1) applies—at the time when it is assumed
under that subsection to have been acquired by the *tax exempt vendor;
or
(b) if subsection 58-225(2) applies—at the time when it was acquired
or constructed by the tax exempt vendor.
For the purpose of calculating the assumed *effective life of the unit
under section 58-235, if the *tax exempt vendor could have made an election
under subsection 54A(1) of the Income Tax Assessment Act 1936 at a
particular time during the period for which the tax exempt vendor owned, or is
assumed to have owned, it, assume that the tax exempt vendor made the election
at that time.
Assume that the unit had, at all times during the period beginning at the
test time and ending immediately before the *acquisition time, been used wholly
for the purpose of producing assessable income by the *tax exempt vendor, and
assume that deductions for depreciation in respect of it had been allowed to the
tax exempt vendor during that period.
(1) Assume that the *tax exempt vendor could have selected a *method of
depreciation to use in relation to the unit for the income years included in the
period referred to in section 58-245.
(2) The purchaser must make the selection that the *tax exempt vendor
could have made.
(3) Assume that the *method of depreciation selected was used by the *tax
exempt vendor for each of the income years referred to in subsection
(1).
In calculating the rate of depreciation in relation to the unit in each
income year included in the period referred to in section 58-245:
(a) if section 57AG of the Income Tax Assessment Act 1936 as in
force at any time before its repeal had applied in respect of that income
year—that section is to be taken into account; and
(b) if subsection 55(6) of the Income Tax Assessment Act 1936 as in
force immediately before the commencement of section 7 of the Taxation
Laws Amendment Act (No. 2) 1992 had applied in respect of that income
year—that subsection is to be taken into account; and
(c) if section 57AL of the Income Tax Assessment Act 1936 as in
force at any time before its repeal had applied in respect of that income
year—that section is to be disregarded.
(1) If the *tax exempt vendor could have made a nomination or election
under subsection 55(8) of the Income Tax Assessment Act 1936 as in force
at a particular time (the relevant time) during the period
referred to in section 58-245, the purchaser may make the nomination or
election, as the case may be, and, if the nomination or election is made, it is
taken to have been made by the tax exempt vendor at the relevant time.
(2) If the purchaser makes a nomination under subsection 55(8) of the
Income Tax Assessment Act 1936 as in force immediately before the
commencement of section 23 of the Taxation Laws Amendment Act 1993, the
following paragraphs apply:
(a) the nomination applies to the income year in which it is taken to have
been made and all later income years in the period referred to in section
58-245;
(b) a *diminishing value rate nominated must not be less than the
percentage worked out by using the formula:
where:
number of years in effective life means the number of years
in the assumed *effective life of the unit under section 58-235;
(c) a *prime cost rate nominated must not be less than two-thirds of the
percentage that would be worked out under paragraph (b) if a diminishing value
rate had been nominated.
(3) If the purchaser makes an election under subsection 55(8) of the
Income Tax Assessment Act 1936 as in force immediately before the
commencement of section 7 of the Taxation Laws Amendment Act (No. 2)
1992, the election applies to the income year in which it is taken to have
been made and all later income years in the period referred to in section
58-245.
The undeducted pre-existing audited book value of the unit
in relation to the *tax exempt vendor is:
(a) if the test time in relation to the unit is less than one year before
the *acquisition time—the amount of its assumed cost to the tax exempt
vendor under section 58-230; or
(b) if the test time in relation to the unit is one year or more before
the acquisition time—the amount of its assumed cost to the tax exempt
vendor under section 58-230 less any amounts in respect of which deductions for
depreciation are assumed under section 58-245 to have been allowed to the tax
exempt vendor in respect of it.
Note: Sections 58-225 to 58-260 have effect for the purpose
of determining the amounts referred to in paragraph (b).
(1) The rules otherwise applying to the purchaser in the calculation of
depreciation deductions and balancing adjustments in respect of the unit have
effect in relation to the purchaser subject to subsection (2) and section
58-220.
(2) If a *balancing adjustment event has occurred, subsection 42-190(2)
has effect in relation to the unit as if paragraph (a) of that subsection were
omitted and replaced by the following paragraph:
(a) the amount by which the higher of:
(i) the cost of the *plant to you; or
(ii) the amount that would have been that cost if section 58-220 did not
apply to you and had not applied to any previous owner or *quasi-owner of the
plant;
exceeds its *written down value; and
[The next Part is Part 2-20.]
8 At the end of section
330-375
Add:
(4) Transport capital expenditure also does not include
expenditure on *plant to which Subdivision 58-B or 58-C applies.
(5) Transport capital expenditure also does not include
expenditure on *plant if:
(a) at any time a *transition entity or a purchaser from a *tax exempt
vendor had been the owner or a *quasi-owner of the plant; and
(b) Subdivision 58-B or 58-C had applied to the plant at that time;
and
(c) either of the following subparagraphs applies:
(i) the transferor was the transition entity or the purchaser from the tax
exempt vendor and Common rule 1 applied to your acquisition of the plant;
(ii) the transferor was not the transition entity or the purchaser from
the tax exempt vendor and Common rule 1 applied to your acquisition of the plant
and all earlier successive acquisitions of the plant by entities that acquired
it from, or became the owners or quasi-owners of it after it was acquired from,
the transition entity or the purchaser from the tax exempt vendor.
9 Subsection 995-1(1)
Insert:
acquisition time has the meaning given by section
58-150.
10 Subsection 995-1(1)
Insert:
acquisition year has the meaning given by section
58-150.
11 Subsection 995-1(1) (definition of exempt
entity)
Repeal the definition, substitute:
exempt entity means:
(a) in Division 58:
(i) an exempt Australian government agency; or
(ii) any other entity whose *ordinary income and *statutory income are
exempt from income tax; or
(b) otherwise:
(i) an entity whose *ordinary income and *statutory income are exempt from
income tax because of Division 50; or
(ii) an entity whose *ordinary income and *statutory income are exempt
from income tax because of any *Commonwealth law other than this Act.
12 Subsection 995-1(1)
Insert:
method of depreciation means the way of working out the
depreciation allowable under this Act in respect of plant set out in section
42-160 or 42-165.
13 Subsection 995-1(1) (definition of
notional written down value)
Repeal the definition, substitute:
notional written down value of a unit of *plant:
(a) in relation to a *transition entity—has the meaning given by
section 58-80; or
(b) in relation to a *tax exempt vendor—has the meaning given by
section 58-210; or
(c) otherwise—has the meaning given by section 42-260.
14 Subsection 995-1(1)
Insert:
pre-existing audited book value of a unit of *plant has the
meaning given by subsection 58-10(1).
15 Subsection 995-1(1)
Insert:
tax exempt vendor has the meaning given by section
58-150.
16 Subsection 995-1(1) (definition of test
time)
After “sections”, insert “58-10,”.
17 Subsection 995-1(1)
Insert:
transition entity has the meaning given by section
58-15.
18 Subsection 995-1(1)
Insert:
transition time has the meaning given by section
58-15.
19 Subsection 995-1(1)
Insert:
transition year has the meaning given by section
58-15.
20 Subsection 995-1(1)
Insert:
undeducted pre-existing audited book value of a unit of
*plant:
(a) in relation to a *transition entity—has the meaning given by
section 58-140; and
(b) in relation to a *tax exempt vendor—has the meaning given by
section 58-265.
Part
2—Income Tax (Transitional
Provisions) Act 1997
21 At the end of section
42-175
Add:
Note: The provisions of section 42-175 of the 1997 Act are
replaced by other provisions in relation to a *transition entity in respect of
*plant of which the entity is the owner or a *quasi-owner. Section 42-175 of
this Act therefore does not have any effect in respect of such
plant.
Part
3—Income Tax Assessment Act
1936
22 At the end of Schedule
2D
Add:
Subdivision 57-I, and Subdivision 57-K in so far as it applies to
depreciation balancing adjustments, do not apply in respect of plant to which
Subdivision 58-B of the Income Tax Assessment Act 1997
applies.
Part
1—Insertion of Divisions 240
and 243
Income
Tax Assessment Act 1997
Insert:
[The next Division is Division 240.]
Guide to Division 240
240-A Application and scope of Division
240-B The notional sale and notional loan
240-C Amounts to be included in notional seller’s assessable
income
240-D Deductions allowable to notional buyer
240-E Notional interest and arrangement payments
240-F The end of the arrangement
240-G Adjustments if total amount assessed to notional seller differs from
amount of finance charge
240-H Provisions applying to hire purchase agreements
For income tax purposes, some arrangements (such as hire purchase
agreements) are recharacterised as a sale of property, combined with a loan, by
the seller to the buyer, to finance the purchase price.
Effect of notional sale
(1) The consideration for the notional sale is either the price stated as
the cost or value of the property or its arm’s length value. If the
notional seller is disposing of the property as trading stock, the normal
consequences of disposing of trading stock follow. In particular, the seller
will be assessed on the purchase price.
(2) Where the property is not trading stock the seller’s assessable
income will include any profit made by the seller on the notional sale or on the
sale of the property after a notional re-acquisition.
Effect of notional loan
(3) The seller’s assessable income will include notional interest
over the period of the loan.
Other effects
(4) These effects displace the income tax consequences that would
otherwise arise from the arrangement. For example, the actual payments to the
notional seller are not included in its assessable income. Also, the seller
loses the right to deduct amounts for depreciation (under Division 42) or under
any of the other capital allowances (listed in Division 40).
Effect of notional purchase
(1) The cost of the acquisition is either the price stated as the cost or
value of the property or its arm’s-length value. If the *notional buyer is
acquiring the property as trading stock, the normal consequences of acquiring
trading stock follow. In particular, the buyer can usually deduct the purchase
price.
(2) If the property is not trading stock, the buyer may be able to deduct
depreciation (under Division 42), or to deduct amounts for the expenditure under
one of the other capital allowances (listed in Division 40).
Effect of notional loan
(3) The buyer may be able to deduct notional interest payments over the
period of the loan.
Other effects
(4) These effects displace the income tax consequences that would
otherwise arise from the arrangement. For example, the notional buyer cannot
deduct the actual payments to the notional seller.
Table of sections
Operative provisions
240-10 Application of this Division
240-15 Scope of Division
An *arrangement is treated as a notional sale and *notional loan
if:
(a) the arrangement is listed in the table below; and
(b) the arrangement relates to the kind of property listed in the table;
and
(c) any conditions listed in the table are satisfied.
Special provisions that apply to particular arrangements are also listed in
the table.
|
This Division applies to: |
||||
|---|---|---|---|---|
|
|
|
That relate to this kind of property: |
If these conditions are satisfied: |
|
|
1 |
*Hire purchase agreement |
Any property |
None |
See Subdivision 240-H |
This Division has effect for the purposes of this Act and for the
purposes of the Income Tax Assessment Act 1936 other than:
(a) Parts 3-1 and 3-3 of this Act and Part IIIA of the Income Tax
Assessment Act 1936 (capital gains tax); and
(b) Division 11A of Part III of the Income Tax Assessment Act
1936 (certain payments to non-residents etc.).
Operative provisions
240-17 Who is the notional seller and the notional
buyer?
240-20 Notional sale of property by notional seller and
notional acquisition of property by notional buyer
240-25 Notional loan by notional seller to notional
buyer
(1) An entity is the notional seller if it is a party to the
*arrangement and:
(a) actually owns the property; or
(b) is the owner of the property because of a previous operation of this
Division.
(2) An entity is the notional buyer if it is a party to the
*arrangement and, under the arrangement, has the *right to use the
property.
Example: If the arrangement is a hire purchase agreement,
the finance provider will be the notional seller and the hirer will be the
notional buyer.
(1) The *notional seller is taken to have disposed of the property by way
of sale to the *notional buyer, and the notional buyer is taken to have acquired
it, at the start of the *arrangement.
(2) The *notional buyer is taken to own the property until:
(a) the *arrangement ends; or
(b) the notional buyer becomes the *notional seller under a later
*arrangement to which this Division applies.
(1) On entering into the *arrangement, the *notional seller is taken to
have made a loan (the notional loan) to the *notional
buyer.
(2) The loan is for a period:
(a) starting at the start of the *arrangement; and
(b) ending on the day on which the arrangement is to cease to have effect
or, if the arrangement is of indefinite duration, on the day on which it would
be reasonable to conclude, having regard to the terms and conditions of the
arrangement, that the arrangement will cease to have effect.
(3) The loan is of an amount (the notional loan principal)
equal to the consideration for the sale of the property less any amount paid, or
credited by the *notional seller as having been paid, by the *notional buyer to
the notional seller, at or before the start of the *arrangement, for the cost of
the property.
Note: Section 240-80 affects the amount of the notional loan
principal where the arrangement is an extension or renewal of another
arrangement.
(4) The loan is subject to payment of a charge (the finance
charge).
(5) The consideration for the sale of the property by the *notional
seller, and the cost of the acquisition of the property by the *notional buyer,
are each taken to have been:
(a) if an amount is stated to be the cost or value of the property for the
purposes of the *arrangement and the notional seller and the notional buyer were
dealing with each other at *arm’s length in connection with the
arrangement—the amount so stated; or
(b) otherwise—the amount that could reasonably have been expected to
have been paid by the notional buyer for the purchase of the property
if:
(i) the notional seller had actually sold the property to the notional
buyer at the start of the arrangement; and
(ii) the notional seller and the notional buyer were dealing with each
other at arm’s length in connection with the sale.
(6) The *notional loan principal is taken to be repaid, and the *finance
charge is taken to be paid, by the making of the payments under the
*arrangement.
This Subdivision provides for the inclusion in the notional seller’s
assessable income of:
(a) amounts (notional interest) on account of the finance charge for the
notional loan that the notional seller is taken to have made to the notional
buyer; and
(b) any profit made by the notional seller:
(i) on the notional sale of the property to the notional buyer;
or
(ii) on a sale of the property after any notional re-acquisition of the
property by the notional seller.
Operative provisions
240-35 Amounts to be included in notional seller’s
assessable income
240-40 Arrangement payments not to be included in notional
seller’s assessable income
[This is the end of the Guide]
Notional interest
(1) The *notional seller’s assessable income of an income year
includes the *notional interest for *arrangement payment periods, and parts of
arrangement payment periods, in the income year.
Profit on notional sale
(2) If the property is not *trading stock of the *notional seller and the
consideration for the notional sale of the property exceeds the cost of the
acquisition of the property by the notional seller, the excess is included in
the notional seller’s assessable income of the income year of the notional
sale.
Profit on actual sale after notional re-acquisition
(3) If:
(a) the *notional seller is taken under this Division to have re-acquired
the property from the *notional buyer; and
(b) the notional seller afterwards sells the property; and
(c) the consideration for the sale exceeds the cost of the
re-acquisition;
the excess is included in the notional seller’s assessable income of
the income year in which the sale occurred.
(1) The *arrangement payments that the *notional seller receives, or is
entitled to receive, under the *arrangement:
(a) are not to be included in the *notional seller’s assessable
income of any income year; but
(b) are not taken to be *exempt income of the notional seller.
(2) However, those *arrangement payments are taken into account in
calculating *notional interest that is included in the *notional seller’s
assessable income under section 240-35.
(3) A loss or outgoing incurred by the *notional seller in deriving any
such *arrangement payments is not taken to be a loss or outgoing incurred by the
notional seller in relation to gaining or producing *exempt income.
This Subdivision provides that the notional buyer may, in certain
circumstances, be entitled to deductions for the notional interest for the
notional loan that the notional seller is taken to have made to the notional
buyer.
Operative provisions
240-50 Extent to which deductions are allowable to notional
buyer
240-55 Arrangement payments not to be allowable
deductions
[This is the end of the Guide]
(1) The *notional buyer is only entitled to deduct *notional interest for
an income year to the extent that the notional buyer would, apart from this
Division, have been entitled to deduct *arrangement payments for that income
year if no part of those payments were capital in nature.
(2) The *notional buyer is entitled to deduct *notional interest for
*arrangement payment periods, and parts of arrangement payment periods, in the
income year.
The *notional buyer is not entitled to deduct *arrangement payments that
the *notional buyer makes under the *arrangement, but those payments are taken
into account in calculating *notional interest that may be deducted under
section 240-50.
Table of sections
Operative provisions
240-60 Notional interest
240-65 Arrangement payments
240-70 Arrangement payment periods
(1) The *notional interest for an *arrangement payment
period is worked out as follows:
Calculating *notional interest
Step 1. Add the *notional interest from previous *arrangement
payment periods to the *notional loan principal.
Step 2. Subtract any *arrangement payments that have already been
made or that are due but that have not been made. The result is the
outstanding notional loan principal as at the start of the
*arrangement payment period.
Step 3. Work out the implicit interest rate. It is the
rate of compound interest for the *arrangement payment period at which the
*notional loan principal equals the sum of:
(a) the present value of the *arrangement payments payable by the
*notional buyer under the *arrangement; and
(b) the present value of any *termination amounts.
Step 4. Multiply the outstanding *notional loan principal by the
implicit interest rate. The result is the notional interest for
the *arrangement payment period.
(2) If only part of an *arrangement payment period occurs during an income
year, the *notional interest for that part of the arrangement payment period is
so much of the notional interest for that arrangement payment period as may
appropriately be related to that income year in accordance with generally
accepted accounting principles.
(3) In calculating the implicit interest rate, if any of the relevant
amounts are not known at the start of the *arrangement, a reasonable estimate of
the amount is to be made and is to be used for the purposes of calculating the
implicit interest rate for each income year of the *notional seller.
(4) If a reasonable estimate cannot be made at that time, an estimate of
the amount is to be made at the end of each income year of the *notional seller
for the purposes of calculating the implicit interest rate for each income year
of the notional seller.
An arrangement payment is an amount that the *notional buyer
is required to pay under the *arrangement but does not include:
(a) an amount in the nature of a penalty payable for failure to make a
payment on time; or
(b) a *termination amount.
(1) An *arrangement payment period is a period for which a
payment under the *arrangement is allocated or expressed to be
payable.
(2) However, if a period exceeds 6 months, the period is not an
*arrangement payment period but each of the following parts of the period is a
separate arrangement payment period:
(a) the part of the period beginning at the start of that period and
ending 6 months later;
(b) each part of the period:
(i) beginning immediately after a part of the period that is an
arrangement payment period under paragraph (a) or under a previous
application of this paragraph; and
(ii) ending 6 months after the start of that later part or at the end of
the period, whichever first occurs.
Operative provisions
240-75 When is the end of the arrangement
240-78 Termination amounts
240-80 What happens if the arrangement is extended or
renewed
240-85 What happens if an amount is paid by or on behalf of
the notional buyer to acquire the property
240-90 What happens if the notional buyer ceases to have the
right to use the property
(1) If the *arrangement is stated to cease to have effect at a particular
time, it is taken for the purposes of this Division to end (even if it is
extended or renewed) at the earlier of:
(a) that time; or
(b) the time at which the arrangement ceases to have effect (whether
because the arrangement is terminated or for any other reason).
Note: Section 240-80 deals with extensions and
renewals.
(2) An *arrangement is taken to have ended if it is extended or
renewed.
(3) If the *arrangement is of indefinite duration, it ends at the time at
which the arrangement ceases to have effect even if the *arrangement is
renewed.
Note: Section 240-80 deals with extensions and
renewals.
(4) An *arrangement is taken to have ended if it is reasonable to
conclude, having regard to the terms and conditions of the *arrangement, that
the arrangement has ceased to have effect.
(5) An
*arrangement is also taken to have ended if the property has been lost or
destroyed.
A termination amount is an amount payable because an
*arrangement ends and includes:
(a) if, at the end of the arrangement, the *notional buyer acquires the
property from the *notional seller—an amount payable to the notional
seller for the acquisition; or
(b) if, at the end of the arrangement, the property is lost or
destroyed—any amounts paid to the notional seller (whether by the notional
buyer or another entity) as a result of the loss or destruction of the property;
or
(c) otherwise—the value of the property at the end of the
arrangement.
(1) This section sets out what happens if, after the end of the
*arrangement, the *notional buyer and *notional seller extend or renew the
*arrangement.
(2) This Division applies as if the original *arrangement has ended and
the extended arrangement or renewed arrangement is a separate arrangement (the
new arrangement).
(3) There is not, however, taken to be any disposal or acquisition as a
result of the original arrangement ending or of the new arrangement starting and
the *notional buyer does not cease to own the property.
(4) Also, the *notional loan principal for the new loan is:
(a) if the *arrangement as extended or renewed states an amount as the
cost or value of the property for the purposes of the extension or renewal and
the *notional seller and the *notional buyer were dealing with each other at
*arm’s length in connection with the extension or renewal—the amount
so stated; or
(b) otherwise—the amount that could reasonably have been expected to
have been paid by the notional buyer for the purchase of the property
if:
(i) the notional seller had actually sold the property to the notional
buyer when the arrangement was extended or renewed; and
(ii) the notional seller and notional buyer were dealing with each other
at arm’s length in connection with the sale.
(5) Subdivision 240-G applies to the *notional loan for the original
arrangement. For that purpose, the *notional loan principal for the new
arrangement is taken to be a *termination amount paid to the *notional seller
under the original arrangement.
If, at or after the end of the *arrangement, an amount is paid to the
*notional seller by, or on behalf of, the *notional buyer to acquire the
property, the following provisions have effect:
(a) the amount paid is not included in the notional seller’s
assessable income;
(b) the notional buyer cannot deduct the payment;
(c) the notional buyer is taken to continue to own the property;
(d) the transfer to the notional buyer of legal title to the property is
not taken to be a disposal of the property by the notional seller.
(1) This section applies if, at the end of the *arrangement:
(a) the arrangement is not extended or renewed in the way mentioned in
subsection 240-80(1); and
(b) no amount is paid to the *notional seller by, or on behalf of, the
*notional buyer to acquire the property; and
(c) the property is not lost or destroyed.
(2) The property is taken to have been disposed of by the *notional buyer
by way of sale back to the *notional seller, and to have been acquired by the
*notional seller, at the end of the *arrangement.
(3) The consideration for the sale of the property by the *notional buyer,
and the cost of the acquisition of the property by the *notional seller, are
each taken to be equal to the market value of the property at the end of the
*arrangement.
(4) Subsection (5) applies where the property is a car and if
it:
(a) had been bought from the *notional seller, at the first time when this
Division first applied to an *arrangement in respect of the car, by the
*notional buyer for a price equal to the *notional loan principal; and
(b) been first used by the notional buyer for any purpose in the
*financial year in which that time occurred;
the cost of the car, for the purpose of calculating the depreciation
allowable to that person for the car, would have been reduced because of the
operation of section 42-80.
(5) Where an associate of the *notional buyer acquires the car, the cost
of the car for the purposes of the application of Division 42 to the associate
is taken to be whichever is the lesser of:
(a) the sum of:
(i) the amount that would have been the written down value of the car at
that time for the purposes of the application of that Division to the notional
buyer if the notional buyer were not taken under this Division to have disposed
of the car; and
(ii) any amount that is included in the notional buyer’s assessable
income under section 42-190 because the notional buyer is taken to have disposed
of the car; and
(iii) any amount that is treated as being deducted for depreciation of
another asset under section 42-285 or 42-290; or
(b) the cost of the acquisition of the car by the associate.
This Subdivision provides for adjustments if the sum of the amounts
included in the notional seller’s assessable income are greater or less
than the finance charge, worked out at the end of the arrangement, for the
notional loan.
Operative provisions
240-105 Adjustments for notional seller
240-110 Adjustments for notional buyer
[This is the end of the Guide]
(1) This section applies at the end of the *arrangement.
(2) If the sum of:
(a) all amounts (other than *termination amounts) that were paid or
payable to the *notional seller under the *arrangement; and
(b) any termination amounts paid to the notional seller;
exceeds the amount worked out using the formula in subsection (4), the
excess is included in the notional seller’s assessable income of the
income year in which the arrangement ends.
Note: Subsection 240-80(5) provides that the amount of
a notional loan that is taken to be made by an extended or renewed arrangement
to be a termination amount paid under the previous arrangement.
(3) If the amount worked out using the formula in subsection (4)
exceeds:
(a) all amounts (other than *termination amounts) that were paid or
payable to the *notional seller under the *arrangement; and
(b) any termination amounts paid to the notional seller;
the notional seller is entitled to deduct the excess in the income year in
which the arrangement ends.
Note: Subsection 240-80(5) provides that the amount of
a notional loan that is taken to be made by an extended or renewed arrangement
to be a termination amount paid under the previous arrangement.
(4) The formula for the purposes of subsections (2) and (3)
is:
where:
assessed notional interest means the *notional interest that
has been or is to be included in the *notional seller’s assessable income
of any income year.
(1) If:
(a) an amount is included in the *notional seller’s assessable
income of an income year under subsection 240-105(2); or
(b) an amount would have been so included if the notional seller had been
subject to tax on assessable income;
the *notional buyer is entitled to deduct a corresponding amount in the
notional buyer’s income year.
(2) If:
(a) the *notional seller is entitled to deduct an amount for an income
year under subsection 240-105(3); or
(b) the notional seller would have been so entitled if the *notional
seller had been subject to tax on assessable income;
a corresponding amount is included in the notional buyer’s assessable
income for the notional buyer’s income year.
(3) The *notional buyer is entitled to a deduction, and is required to
include an amount in his or her assessable income only to the extent (if any)
that the notional buyer would, apart from this Division, have been entitled to
deduct *arrangement payments if no part of those payments were capital in
nature.
Operative provisions
240-115 Another person, or no person taken to own property
in certain cases
(1) This section sets out special modifications of the effect of this
Division that apply in relation to a *hire purchase agreement unless:
(a) the notional buyer would have been the owner or the *quasi-owner of
the property if the *arrangement had been a sale of the property; and
(b) it is reasonably likely that the right or obligation to acquire the
property will be exercised by, or in respect of, the notional buyer.
(2) The modifications also apply if the *notional buyer:
(a) disposes of his or her interest in the property; or
(b) enters into a lease covered by Division 42A of Schedule 2E to the
Income Tax Assessment Act 1936 under which he or she leases the property
to another person.
Modifications
(3) For the purpose of the *capital allowance provisions, if, apart from
the operation of this Division, an entity other than the *notional seller would
own the property that is the subject of an agreement covered by this section,
that entity is taken to be the owner of the property.
(4) For the purpose of the *capital allowance provisions, if, apart from
the operation of this Division, the *notional seller would own the property that
is the subject of an agreement covered by this section, no entity is taken to be
the owner of the property.
[The next Division is Division 243.]
Guide to Division 243
243-A Circumstances in which Division operates
243-B Working out the excessive deductions
243-C Amounts included in assessable income and deductions
243-D Special provisions
This Division tells you when you must include an additional amount in your
assessable income at the termination of a limited recourse debt arrangement. It
also tells you what the additional amount is.
Basically, the Division applies where the capital allowance deductions that
have been obtained for expenditure that is funded by the debt and the deductions
are excessive having regard to the amount of the debt that was repaid.
The reason for the adjustment is to ensure that, where you have not been at
risk in relation to an amount of expenditure, you do not get a net deduction if
you fail to pay that amount.
Operative provisions
243-15 When does this Division apply?
243-20 What is limited recourse debt?
243-25 When is a debt arrangement
terminated?
243-30 What is the financed property and the debt
property?
(1) This Division applies if:
(a) *limited recourse debt has been used to wholly or partly finance or
refinance expenditure; and
(b) at the time that the debt *arrangement is terminated, the debt has not
been paid in full by the debtor; and
(c) the debtor can deduct an amount as a *capital allowance (other than
development allowance or drought investment allowance) for the income year in
which the termination occurs, or has deducted or can deduct an amount for an
earlier income year, in respect of the expenditure or the *financed
property.
Note: This Division does not apply to certain limited
recourse debts that are used to refinance non-recourse debt to which this
Division has applied (see subsection 243-50(4)).
(2) However, unless the net *capital allowance deductions have been
excessive having regard to the amount of the debt that remains unpaid (see
section 243-35), no amount is included in the debtor’s assessable income
under this Division although future deductions may be reduced.
(3) In working out if the debt has been paid in full, and in working out
the unpaid amount of the debt, the following amounts are to be treated as if
they were not payments in respect of the debt:
(a) any reduction in the debt as a result of the *financed property being
surrendered or returned to the creditor at the termination of the
debt;
(b) any payment to reduce the debt that is funded directly or indirectly
by *limited recourse debt or by proceeds from the disposal of the debtor’s
interest in the financed property.
However, any amounts accrued that are interest, *notional interest or in
the nature of interest are taken not to be unpaid.
(4) In working out if the debt has been paid in full, and in working out
the unpaid amount of the debt, payments are to be attributed first to the
payment of any accrued amounts that are interest, *notional interest or in the
nature of interest .
(5) A *notional loan is taken to be debt that has been used to wholly or
partly finance or refinance expenditure.
Note: Notional loans arise under Division
240.
(1) A limited recourse debt is an obligation imposed by law
on an entity (the debtor) to pay an amount to another entity (the
creditor) where the rights of the creditor as against the debtor
in the event of default in payment of the debt or of interest are limited wholly
or predominantly to any or all of the following:
(a) rights (including the right to money payable) in relation to any or
all of the following:
(i) the *debt property or the use of the debt property;
(ii) goods produced, supplied, carried, transmitted or delivered, or
services provided, by means of the debt property;
(iii) the loss or disposal of the whole or a part of the debt property or
of the debtor’s interest in the debt property;
(b) rights in respect of a mortgage or other security over the debt
property or other property;
(c) rights that arise out of any *arrangement relating to the financial
obligations of an end-user of the *financed property towards the debtor, and are
financial obligations in relation to the financed property.
(2) An obligation imposed by law on an entity (the debtor)
to pay an amount to another entity (the creditor) is also a
limited recourse debt if it is reasonable to conclude that the
rights of the creditor as against the debtor in the event of default in payment
of the debt or of interest are capable of being limited in the way mentioned in
subsection (1). In reaching this conclusion, have regard to:
(a) the assets of the debtor (other than assets that are indemnities or
guarantees provided in relation to the debt);
(b) any *arrangement to which the debtor is a party;
(c) whether all of the assets of the debtor would be available for the
purpose of the discharge of the debt (other than assets that are security for
other debts of the debtor or any other entity);
(d) whether the debtor and creditor are dealing at *arm’s length in
relation to the debt.
(3) An obligation imposed by law on an entity (the debtor)
to pay an amount to another entity (the creditor) is also a
limited recourse debt if there is no *debt property and it is
reasonable to conclude that the rights of the creditor as against the debtor in
the event of default in payment of the debt or of interest are capable of being
limited. In reaching this conclusion, have regard to:
(a) the assets of the debtor (other than assets that are indemnities or
guarantees provided in relation to the debt);
(b) any *arrangement to which the debtor is a party;
(c) whether all of the assets of the debtor would be available for the
purpose of the discharge of the debt (other than assets that are security for
other debts of the debtor or any other entity);
(d) whether the debtor and creditor are dealing at *arm’s length in
relation to the debt.
(4) A *notional loan under a *hire purchase agreement is also a
limited recourse debt.
Note: Notional loans arise under Division
240.
(5) However,
an obligation that is covered by subsection (1), (2) or (3) is not a limited
recourse debt if, having regard to all relevant circumstances, it would be
unreasonable for the obligation to be treated as limited recourse
debt.
(1) A debt arrangement is taken to have terminated if:
(a) it is actually terminated; or
(b) the debtor’s obligation to repay the debt is waived, novated or
otherwise varied so as to reduce, transfer or extinguish the debt; or
(c) an agreement is entered into to waive, novate or otherwise vary the
debtor’s obligation to repay the debt so as to reduce, transfer or
extinguish the debt; or
(d) the creditor ceases to have an entitlement to recover the debt from
the debtor; or
(e) the debtor ceases to be the owner or the *quasi-owner of some or all
of the *debt property because that property is surrendered to the creditor
because of the debtor’s failure to pay the whole or a part of the debt;
or
(f) the debtor ceases to be the owner of a beneficial interest in some or
all of the debt property because the interest is surrendered to the creditor
because of the debtor’s failure to pay the whole or a part of the debt;
or
(g) the debt becomes a bad debt.
(2) However, a debt arrangement that is a *notional loan is not taken to
have terminated merely because it has been renewed or extended.
Note: Notional loans arise under Division 240. Under that
Division, they are taken to have ended if they are renewed or
extended.
(1) Property is the financed property if the expenditure is
on the property, is on the acquisition of the property, results in the creation
of the property or is otherwise connected with the property.
(2) If the debt agreement is a *notional loan, the property that is the
subject of the agreement is the financed property.
Note: Notional loans arise under Division
240.
(3) Property is the debt property if:
(a) it is the *financed property; or
(b) the property is provided as security for the debt.
Operative provisions
243-35 Working out the excessive deductions
(1) The *capital allowance deductions have been excessive having regard to
the amount of the debt that remains unpaid if the amount worked out under
subsection (2) exceeds the amount worked out under subsection (4).
(2) This is how to work out the total net *capital allowance
deductions:
Working out the total net capital allowance deductions
Step 1. Add up all of the debtor’s *capital allowance
deductions (other than development allowance or drought investment allowance) in
respect of the expenditure or the *financed property (including deductions
because of balancing adjustments) for the income year in which the termination
occurs or an earlier income year.
Step 2. Deduct from that any amount that is included in the
assessable income of the debtor of any income year by virtue of a provision of
this Act (other than this Division) as a result of the disposal of the *financed
property the effect of which is to reverse a deduction covered by
Step 1.
Step 3. Deduct from the result an amount equal to the sum of any
amounts included in the entity’s assessable income as a result of an
earlier application of this Division to the debt.
Step 4. Add to the result an amount equal to the sum of any
deductions to which the entity is entitled under section 243-45 or 243-50
because of payments in respect of the debt.
(3) The reference in Step 2 to an amount that is included in the
assessable income of a taxpayer as a result of the disposal of the *financed
property includes a reference to an amount:
(a) that is included under section 26AG of the Income Tax Assessment
Act 1936 as a result of the disposal of the financed property; or
(b) that is treated as being deducted for depreciation of another asset
under section 42-285 or 42-290.
Note: Division 20 deals with amounts included to reverse the
effect of past deductions.
(4) This is how to work out the total net capital allowance deductions
that would otherwise be allowable taking into account the amount of the debt
that is unpaid:
Working out the total net capital allowance deductions that would
otherwise be allowable
Work out the amount that would be worked out under subsection (2) if the
deductions and the amounts included in assessable income had been calculated
using the following assumptions:
(1) The original expenditure in respect of which deductions were calculated
was reduced by the amount of the debt that was unpaid by the debtor when the
debt was terminated. (In calculating the amount unpaid the following are to be
disregarded:
(a) any reduction in the amount as a result of the *financed property
being surrendered or returned to the creditor at the termination of the
debt;
(b) any reduction in the amount to the extent that it is funded directly
or indirectly by *limited recourse debt or by the consideration for the disposal
of the debtor’s interest in the financed property.)
(2) Deductions for income years after the income year in which the
termination occurred were also taken into account.
(3) The original expenditure in respect of which deductions were calculated
was increased by any amount that is paid by the debtor as consideration for
another person assuming a liability under the debt. (This assumption does not
apply to the extent that the consideration is funded directly or indirectly by
*limited recourse debt or by the consideration for the disposal of the
debtor’s interest in the *financed property.)
Operative provisions
243-40 Amount included in debtor’s assessable
income
243-45 Deduction for later payments in respect of
debt
243-50 Deduction for payments for replacement
debt
243-55 Effect of Division on later capital allowance
deductions
243-57 Effect of Division on later capital allowance
balancing adjustments
243-58 Adjustment where debt only partially used for
expenditure
The debtor’s assessable income for the income year in which the
termination occurs is to include the excess referred to in subsection
243-35(1).
Note: Section 243-60 applies in relation to certain
partnership debts.
(1) This section applies if:
(a) an amount was included in the debtor’s assessable income under
section 243-40 or a deduction was reduced under section 243-55; and
(b) the debtor makes a payment to the creditor, after the termination of
the debt arrangement, in respect of the debt (other than an amount to the extent
to which it is a payment of interest, of *notional interest or in the nature of
interest ).
(2) This is how to work out the amount of the deduction:
Working out the amount of the deduction
Step 1. Work out the amount that would be worked out under
subsection 243-35(2) if the debt were terminated immediately before the
payment.
Step 2. Work out the amount that would have been worked out under
subsection 243-35(4) at that time if the payment had been taken into
account.
Step 3. The amount of the deduction is the amount (if
any) by which the amount worked out under Step 2 exceeds the amount worked out
under Step 1.
(3) The amount can be deducted for the income year in which the payment is
made.
Limit on deductions
(4) The total amounts deducted under this section in respect of a debt,
and under 243-50 in respect of a replacement debt, cannot exceed the sum
of:
(a) any amounts included in the debtor’s assessable income under
this Division in respect of the original debt; and
(b) any amount by which deductions in respect of the original debt were
reduced under section 243-55.
Payments where debt refinanced
(1) This section applies if:
(a) an amount was included in the debtor’s assessable income under
section 243-40 or a deduction was reduced under section 243-55; and
(b) an amount funded by a *limited recourse debt (the replacement
debt) was disregarded in calculations under subsection 243-35(4);
and
(c) the debtor makes a payment, after the termination of the original debt
arrangement, in respect of the replacement debt (other than to the extent to
which it is a payment of interest, of *notional interest or in the nature of
interest ).
(2) This is how to work out the amount of the deduction:
Working out the amount of the deduction
Step 1. Work out the amount that would be worked out under
subsection 243-35(2) if the debt were terminated immediately before the
payment.
Step 2. Work out the amount that would have been worked out under
subsection 243-35(4) at that time if the payment had been made in respect of the
original debt and it had been taken into account.
Step 3. The amount of the deduction is the amount (if
any) by which the amount worked out under Step 2 exceeds the amount worked out
under Step 1.
(3) The amount can be deducted for the income year in which the payment is
made.
Division not to apply to termination of replacement debt
(4) This Division does not apply to termination of the replacement
debt.
Limit on deductions
(5) The total amounts deducted under section 243-45 in respect of the
original debt, or under this section in respect of the replacement debt, cannot
exceed the sum of:
(a) any amounts included in the debtor’s assessable income under
this Division in respect of the original debt; and
(b) any amount by which deductions in respect of the original debt were
reduced under section 243-55.
(1) This section applies where this Division (other than section 243-65)
has applied in relation to a debt and the debtor is entitled to a *capital
allowance deduction (other than development allowance or drought investment
allowance) in respect of the expenditure or the *financed property in relation
to a time or period after the termination of the debt.
(2) The *capital allowance deduction is reduced if the amount that would
have been worked out under subsection 243-35(2) would have exceeded the amount
worked out under subsection 243-35(4) if the following assumptions were applied
in both subsections:
Assumptions to be applied
(1) That the debt was terminated at the time, or at the end of the period,
referred to in subsection (1) of this section.
(2) The debtor’s *capital allowance deductions in respect of the
expenditure or the *financed property were increased by the amount of the
capital allowance deduction referred to in subsection (1) of this
section.
(3) The deduction is to be reduced by the amount of the excess.
(1) This section applies where this Division (other than section 243-65)
has applied in relation to a debt and an amount is later included in the
assessable income of an entity by virtue of a provision of this Act (other than
this Division) as a result of the disposal of the *financed property the effect
of which is to reverse a deduction covered by Step 1 in subsection
243-35(2).
(2) Any amount that would be included in the debtor’s assessable
income is reduced if the amount that would have been worked out under subsection
243-35(4) would have exceeded the amount worked out under subsection 243-35(2)
if the following assumptions were applied in both subsections:
Assumptions to be applied
(1) That the debt was terminated at the time, or at the end of the period,
referred to in subsection (1) of this section.
(2) The amount in Step 2 in subsection 243-35(2) were increased by the
amount that would otherwise be included in the debtor’s assessable
income.
(3) The amount is to be reduced by the amount of the excess.
If the debt is only partially used to finance the expenditure, or the
property, in respect of which the *capital allowance deductions referred to in
Step 1 in subsection 243-35(2) are allowed, the amount of any deduction, any
reduction in a deduction or any amount included in assessable income is to be so
much as is reasonable taking into account the proportion of the debt that is
used for that purpose.
Operative provisions
243-60 Application of Division to
partnerships
243-65 Application where partner reduces
liability
243-70 Application of Division to companies ceasing to be
100% subsidiary
243-75 Application of Division where debt forgiveness rules
also apply
This Division applies to a partnership in respect of the
partnership’s debts, and references to a debtor include a reference to a
partnership in respect of the partnership’s debts.
(1) This section applies to a debt in relation to a partner in a
partnership if:
(a) during an income year, the partner’s interest in the partnership
ceases or is varied or transferred and this had the effect of reducing or
eliminating the partner’s liability to pay the debt; and
(b) an excess would have been worked out under subsection 243-35(1) if the
debt had been terminated and remained unpaid and this section had not
applied.
(2) If this section applies to a debt in relation to a partner in a
partnership, an amount is to be included in his or her assessable
income.
(3) This is how to work out the amount to be included:
Working out the amount included
Step 1. Work out which income years the partner was a member of the
partnership and the partnership was entitled to a *capital allowance deduction
(other than development allowance or drought investment allowance) in respect of
the expenditure or the *financed property (including deductions because of
balancing adjustments).
Step 2. For each of those income years, work out the proportion of
net income of the partnership or the partnership loss (as the case requires)
that was included in the assessable income of the partner or which the partner
could deduct.
Step 3. For each of those income years, multiply the *capital
allowance deductions (other than development allowance or drought investment
allowance) in respect of the expenditure or the *financed property (including
deductions because of balancing adjustments) of the partnership by the
corresponding proportion worked out under Step 2. Sum all of the
amounts.
Step 4. Divide the sum by the total of the *capital allowance
deductions (other than development allowance or drought investment allowance) in
respect of the expenditure or the *financed property (including deductions
because of balancing adjustments) of the partnership for all of those income
years.
Step 5. Work out the amount that would have been included in the
partnership’s assessable income under section 243-40 if the debt had been
terminated and remained unpaid and this section had not applied.
Step 6. Multiply the amount worked out in Step 5 by the factor
worked out in Step 4. The result is the amount to be included in the
partner’s assessable income.
(1) This section applies to a company if:
(a) the company ceases to be a *100% subsidiary in relation to at least
one other company; and
(b) at that time, the company is the debtor for a *limited recourse debt
that has not been paid in full by the company; and
(c) the creditor’s rights under the debt are transferred or assigned
to another entity.
(2) If this section applies, this Division applies as if the debt were
terminated, and refinanced, at the time the company ceased to be a *100%
subsidiary of that other company.
(1) This section is to remove doubt about how this Division and Schedule
2C to the Income Tax Assessment Act 1936 apply where both apply to the
same debt.
(2) Where both apply:
(a) this Division is to be applied first and is to be applied disregarding
any operation of that Schedule; and
(b) any amounts included in assessable income under this Division are
taken into account under paragraph 245-85(1)(a) of that Schedule.
[The next Part is Part 3-45.]
Part
2—Consequential amendments:
arrangements treated as a sale and loan
Income
Tax Assessment Act 1936
2
Subsection 51AD(1) (definition of
hire-purchase
agreement)
Repeal the definition, substitute:
hire-purchase agreement means a hire purchase agreement to
which Division 240 of the Income Tax Assessment Act 1997
applies.
Repeal the subsection.
4
Subsection 82AQ(1) (definition of
hire-purchase
agreement)
Repeal the definition, substitute:
hire-purchase agreement means a hire purchase agreement to
which Division 240 of the Income Tax Assessment Act 1997
applies.
Repeal the paragraph.
Repeal the sections, substitute:
A hire purchase agreement means a hire purchase agreement to
which Division 240 of the Income Tax Assessment Act 1997
applies.
Note: Division 240 of the Income Tax Assessment Act
1997 sets out when property under a hire purchase agreement is disposed
of.
Income
Tax Assessment Act 1997
Insert in its appropriate alphabetical position, determined on a
letter-by-letter basis:
notional sales and loans
|
adjustment amounts (lessee) 240-110(2) |
|
adjustment amounts (lessor) 240-105(2) |
|
notional interest 240-35(1) |
|
profit on actual sale 240-35(3) |
|
profit on notional sale 240-35(2) |
Insert in its appropriate alphabetical position, determined on a
letter-by-letter basis:
notional sales and loans
|
adjustment amounts (lessee) 240-110(1) |
|
adjustment amounts (lessor) 240-105(3) |
|
arrangement payments, no deduction for 240-55 |
|
notional interest 240-50 |
|
payments to acquire property, no deduction for 240-85 |
Omit “or hired a *car under a *hire purchase
agreement”.
10
At the end of subsection 28-12(1)
Add:
Note 3: In certain circumstances (for example, under a hire
purchase agreement) the notional buyer of property is taken to be its owner (see
subsection 240-20(2)).
Omit “or hired it under a *hire purchase agreement”.
Renumber the note as Note 1.
13
At the end of subsection 28-45(1)
Add:
Note 2: The cost of a car to which Division 240 applies is
to be worked out under section 240-25.
Omit “or are hiring it”.
Omit “, lease or hire” (wherever occurring), substitute
“or lease”.
Omit “, leased or hired”, substitute “or
leased”.
Omit “, or you are hiring it under a *hire purchase
agreement”.
Renumber the note as Note 1.
19
At the end of subsection 28-90(6)
Add:
Note 2: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
20
At the end of section 42-15
Add:
Note 3: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
21
Subsection 42-30(3) (after paragraph (ab) of table item 1)
Insert:
(ac) you are taken to have ceased to be its owner as mentioned in
paragraph 240-20(2)(b); or
(ad) you are taken to have disposed of it as mentioned in subsection
240-20(1) or 240-90(2); or
22
At the end of section 42-55
Add:
Notional sales and notional loans
(8) Division 240 has special rules in respect of the *arrangements that
are taken to be a notional sale and *notional loan.
23
Section 42-65 (after table item 9E)
Insert:
|
9F |
you are taken to acquire as mentioned in subsection 240-90(2) |
the amount applying under subsection 240-90(3) |
car discount (42-70) car limit (42-80) double deduction (42-85) prev. dep. limit (42-90) |
|
9G |
you acquire as mentioned in subsection 240-90(5) |
the amount applying under subsection 240-90(5) |
|
24
At the end of section 42-160
Add:
Note: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
25
At the end of section 42-175
Add:
Note: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
26
At the end of subsection 42-195(3)
Add:
Note: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
27
Section 42-205 (after table item 5D)
Insert:
|
5E |
that you are taken to have disposed of under subsection 240-20(1) |
the amount worked out under subsection 240-25(5) |
car limit (42-215) |
|
5F |
of which you are taken to have ceased to be the owner under paragraph
240-20(2)(b) |
the amount worked out under subsection 240-25(5) |
car limit (42-215) |
|
5G |
that you are taken to have disposed of under subsection 240-90(2) |
the amount worked out under subsection 240-90(3) |
car limit (42-215) |
28
Subsection 42-235(1) (note)
Renumber the note as Note 1.
29
At the end of subsection 42-235(1)
Add:
Note 2: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
Renumber the note as note 1.
31
At the end of section 42-250
Add:
Note 2: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
32
At the end of subsection 42-330(1)
Add:
Note: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
33
At the end of section 42-365
Add:
Note: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
34
At the end of section 43-110
Add:
Note: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
35
At the end of subsection 104-15(1)
Add:
Note: Division 240 provides for the inclusion of amounts
under hire purchase agreements in assessable income.
Repeal the link note, substitute:
[The next Part is Part 3-10.]
37
At the end of subsection 330-480(1)
Note
4: In certain circumstances (for example, under a hire purchase agreement) the
notional buyer of property is taken to be its owner (see subsection
240-20(2)).
38 Subsection 330-480(2)
(note)
Omit “and 3”, substitute “, 3 and 4”.
39
At the end of subsection 387-305(1)
Add:
Note 3: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
Omit “or hired the *car under a *hire purchase
agreement”.
41
At the end of subsection 900-15(2)
Add:
42
Subsection 900-30(7) (note)
Renumber the note as Note 1.
43
At the end of subsection 900-30(7)
Add:
Note 2: In certain circumstances (for example, under a hire
purchase agreement) the notional buyer of property is taken to be its owner (see
subsection 240-20(2)).
Omit “or hired the *car under a *hire purchase
agreement”.
45
At the end of subsection 900-70(2)
Add:
Note: In certain circumstances (for example, under a hire
purchase agreement) the notional buyer of property is taken to be its owner (see
subsection 240-20(2)).
Omit “or hired the *car under a *hire purchase
agreement”.
47
At the end of subsection 900-80(2)
Add:
Note: In certain circumstances (for example, under a hire
purchase agreement) the notional buyer of property is taken to be its owner (see
subsection 240-20(2)).
48 Subsection 995-1(1)
Insert:
arrangement payment has the meaning given by section
240-65.
Insert:
arrangement payment period has the meaning given by section
240-70.
Insert:
finance charge has the meaning given by section
240-25.
51
Subsection 995-1(1) (subparagraph (a)(iii) of the definition of
hire purchase
agreement)
Omit “to purchase”, substitute “referred to in
subparagraph (a)(i)”.
Insert:
notional buyer has the meaning given by section
240-17.
Insert:
notional interest has the meaning given by section
240-60.
Insert:
notional loan has the meaning given by section
240-25.
Insert:
notional loan principal has the meaning given by section
240-25.
Insert:
notional seller has the meaning given by section
240-17.
Insert:
right to use includes the right to possess.
Insert:
termination amount has the meaning given by section
240-78.
Part
3—Consequential amendments:
limited recourse debt
Income
Tax Assessment Act 1936
59 After subsection
160ZJA(1)
Insert:
(1A) The reference in paragraph (1)(a) to an amount that has been allowed
or is allowable as a deduction does not include an amount allowed under Division
243 of the Income Tax Assessment Act 1997.
60 At the end of subsection
160ZJA(2)
Add:
However, it does not include an amount included in a taxpayer’s
assessable income under Division 243 of the Income Tax Assessment Act
1997.
61 After subsection
160ZJB(1)
Insert:
(1A) The reference in paragraph (1)(a) to an amount that has been allowed
or is allowable as a deduction does not include an amount allowed under Division
243 of the Income Tax Assessment Act 1997.
62 At the end of subsection
160ZJB(2)
Add:
However, it does not include an amount included in a taxpayer’s
assessable income under Division 243 of the Income Tax Assessment Act
1997.
Income
Tax Assessment Act 1997
Insert in its appropriate alphabetical position, determined on a
letter-by-letter basis:
limited recourse debt
|
excessive deduction amount (debtor) 243-40 |
|
excessive deduction amount (partner) 243-65 |
Insert in its appropriate alphabetical position, determined on a
letter-by-letter basis:
limited recourse debt
|
later payments 243-45 |
|
later payments (replacement debt) 243-50 |
65 Section 20-5
(before table item 3)
Insert:
|
3A |
Limited recourse debt terminates that was used to finance expenditure
deductible under a capital allowance (or on property for which you have deducted
or can deduct amounts under a capital allowance): an amount is included in your
assessable income |
243-40 |
66 At the end of
section 42-55
Add:
Limited recourse debt
(9) Where you have had a deduction under this Division an amount may be
included in your assessable income if the expenditure was financed by limited
recourse debt that has terminated: see Division 243.
67 At the end of
section 43-50
Add:
(8) Where you have had a deduction under this Division an amount may be
included in your assessable income if the expenditure was financed by limited
recourse debt that has terminated: see Division 243.
68 At the end of
subsection 330-15(1)
Add:
Note 3: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
69 Section 330-80 (after note
1A)
Insert:
Note 1B: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
70 Section 330-370
(after note 1)
Insert:
Note 1A: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
71 At the end of
subsection 330-435(1)
Add:
Note: Where you have had a deduction under this Subdivision
an amount may be included in your assessable income if the expenditure was
financed by limited recourse debt that has terminated: see Division
243.
72 At the end of subsection
387-55(1)
Add:
Note 3: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
73 At the end of subsection
387-125(2)
Add:
Note 3: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
74 At the end of
subsection 387-165(5)
Add:
Note 3: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
75 At the end of
subsection 387-305(1)
Add:
Note 3: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
76 At the end of
subsection 387-355(2)
Add:
Note 3: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
77 Subsection
387-405(2) (note)
Renumber the note as Note 1.
78 At the end of subsection
387-405(2)
Add:
Note 2: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
Renumber the note as Note 1.
80 At the end of
section 387-460
Add:
Note 2: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
81 At the end of
subsection 400-15(3)
Add:
Note 3: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
Insert:
debt property has the meaning given by section
243-30.
Insert:
financed property has the meaning given by section
243-30.
Insert:
limited recourse debt has the meaning given by section
243-20.
Part
4—Property transferred by
way of security
Income
Tax Assessment Act 1997
85
Section 40-5 (box relating to Common rule 3)
Omit “Anti-avoidance provisions”, substitute
“Provisions”.
86 Section 41-5
(heading to table column dealing with Common rule 3)
Omit “Anti-avoidance provisions”, substitute
“Provisions”.
87 Section 41-5
(table column dealing with Common rule 3)
Omit “Does not apply” (wherever occurring), substitute
“Applies (other than section 41-85)”.
88 Section 41-5
(table column dealing with Common rule 3)
Omit “Does not apply” (wherever occurring), substitute
“Applies (other than section 41-85)”.
Note: This item commences immediately after the commencement
of Schedule 7 to the Tax Law Improvement Act (No. 1)
1998.
Repeal the heading, substitute:
90
At the end of Subdivision 41-C
Add:
(1) If the rules for a *capital allowance apply this Common rule, then for
the purposes of those rules (including any other Common rule that those rules
apply) disregard an acquisition or disposal of property by way of the transfer
of the property for the provision or redemption of a security.
(2) Consequently those rules apply as if the person who was the owner of
the property before the transfer continues to be the owner after the
transfer.
Omit “anti-avoidance—”.
Omit “anti-avoidance”.
Income
Tax Assessment Act 1936
Insert:
(3B) For the purpose of this section, disregard an acquisition or disposal
of property by way of the transfer of the property for the provision or
redemption of a security. Consequently this section applies as if the person who
was the owner of the property before the transfer continues to be the owner
after the transfer.
Insert:
(2) For the purpose of this section, disregard an acquisition or disposal
of property by way of the transfer of the property for the provision or
redemption of a security. Consequently this section applies as if the person who
was the owner of the property before the transfer continues to be the owner
after the transfer.
Insert:
For the purpose of this Subdivision, disregard an acquisition or disposal
of property by way of the transfer of the property for the provision or
redemption of a security. Consequently this Subdivision applies as if the person
who was the owner of the property before the transfer continues to be the owner
after the transfer.
Add:
(5) For the purpose of this Division, disregard an acquisition or disposal
of property by way of the transfer of the property for the provision or
redemption of a security. Consequently this Division applies as if the person
who was the owner of the property before the transfer continues to be the owner
after the transfer.
97 At the end of
Subdivision A of Division 10BA of Part III
Add:
For the purpose of this Division, disregard an acquisition or disposal of
property by way of the transfer of the property for the provision or redemption
of a security. Consequently this Division applies as if the person who was the
owner of the property before the transfer continues to be the owner after the
transfer.
98 At the end of
section 159GE
Add:
(10) For the purpose of this Division, disregard an acquisition or
disposal of property by way of the transfer of the property for the provision or
redemption of a security. Consequently this Division applies as if the person
who was the owner of the property before the transfer continues to be the owner
after the transfer.
Add:
(3) For the purpose of this Part, disregard an acquisition or disposal of
property by way of the transfer of the property for the provision or redemption
of a security. Consequently this Part applies as if the person who was the owner
of the property before the transfer continues to be the owner after the
transfer.
Note: The heading to section 673 is altered by omitting
“: quasi-ownership”.
Part
5—Application of
amendments
100 Amendments
related to arrangements treated as sale and loan
(1) Division 240 of the Income Tax Assessment Act 1997 applies to
arrangements entered into after 27 February 1998.
(2) The amendments made by Part 2 of this Schedule (other than by item 35)
apply to arrangements entered into after 27 February 1998.
(3) The amendment made by item 35 of this Schedule applies to assessments
for the 1998-99 income year and later income years.
101 Amendments
related to limited recourse debt
(1) Division 243 of the Income Tax Assessment Act 1997 applies to
debts that are terminated after 27 February 1998.
(2) The amendments made by Part 3 of this Schedule (other than by items 74
and 81) apply to debts that are terminated after 27 February 1998.
(3) The amendments made by items 74 and 81 of this Schedule apply to
assessments for the 1998-99 income year and later income years.
102 Amendments
related to property transferred as security
(1) The amendments made by Part 4 of this Schedule (other than by item 88)
apply to transfers of property where the transaction under which the property
was provided, or redeemed, as security was entered into after 27 February
1998.
(2) The amendment made by item 88 of this Schedule applies to assessments
for the 1998-99 income year and later income years.
Part
1—Fringe Benefits Tax
Assessment Act 1986
1 At the end of subsection
132(1)
Add:
Note: There is an exemption from the requirements of this
subsection in certain cases: see Part XIA (Record keeping
exemption).
2 After Part XI
Insert:
(1) Basically, this Part provides that, if certain conditions are
satisfied, an employer need not keep or retain most of the records otherwise
required to be kept and retained under subsection 132(1).
(2) If the conditions are satisfied, the employer’s FBT liability is
generally worked out using the aggregate fringe benefits amount from a previous
FBT year (the base year) instead of the current FBT
year.
(1) This section has 2 conditions that must be satisfied for Division 3 to
apply to an employer for an FBT year (the current year).
First condition: base year established
(2) Either of the following must be true:
(a) the FBT year immediately before the current year was a base year (see
section 135C) of the employer; or
(b) some other FBT year before the current year was a base year of the
employer and section 135G applied to the employer for every FBT year after that
base year but before the current year.
Second condition: no Commissioner’s notice in previous
year
(3) The employer must not have been given a paragraph 135E(2)(c) notice by
the Commissioner during the FBT year immediately before the current
year.
(1) An FBT year is a base year of an employer if:
(a) the employer carries on business operations throughout the FBT year;
and
(b) the employer lodges an FBT return for the FBT year within the time
allowed for doing so under section 68; and
(c) as at the declaration date for the FBT year, the employer has kept and
retained all the records that are (ignoring section 135E) required to be kept
and retained under subsection 132(1) in relation to the employer’s
liability under this Act for the FBT year; and
(d) the employer’s aggregate fringe benefits amount for the FBT year
does not exceed the exemption threshold (see subsections (2) and (3)) for the
year; and
(e) section 135G does not apply to the employer for the FBT year (that
section allows employers to work out their liability to pay tax using their
aggregate fringe benefits amount from a previous base year, instead of the
current FBT year).
Exemption threshold for 1996-97 FBT year
(2) The exemption threshold for the FBT year beginning on 1
April 1996 is $5,000.
Exemption threshold for later FBT years
(3) The exemption threshold for a later FBT year is the
amount worked out using the formula:
where:
exemption threshold is the exemption threshold for the
previous FBT year.
indexation factor is the number worked out, to 3 decimal
places (rounding up if the fourth decimal place is 5 or more), under subsection
(4) for the later FBT year.
Indexation factor
(4) The indexation factor for an FBT year is the greater of:
(a) 1; and
(b) the number worked out using the formula:
(5) In subsection (4):
earlier December year means the period of 12 months
immediately before the most recent December year.
index number, for a quarter, means the All Groups Consumer
Price Index number for the quarter (being the weighted average of the 8 capital
cities) first published by the Australian Statistician for the
quarter.
most recent December year means the period of 12 months
ending on 31 December immediately before the FBT year for which the threshold is
being worked out.
Disregard new publications
(6) If the Australian Statistician publishes an index number for a quarter
in substitution for an index number previously published for that quarter,
disregard the later publication.
Changed reference base
(7) However, if the Australian Statistician changes the reference base for
the Consumer Price Index, take into account only the index numbers published in
terms of the new reference base.
Rounding down to whole dollar amount
(8) Round the subsection (3) result down to the nearest whole dollar (if
the result is not already a number of whole dollars).
This Division has the consequences that apply if both conditions in
section 135B are satisfied in relation to an employer for an FBT year (the
current year).
(1) Subsection 132(1) (which requires certain records to be kept and
retained) does not apply to the employer in relation to the employer’s
liability under this Act for the current year.
Records the employer must still keep
(2) However, subsection 132(1) still applies in relation to the
employer’s liability under this Act for the current year so far as it
relates to the following:
(a) copies of records that an associate of the employer gives the employer
under paragraph 132(2)(b);
(b) benefits provided at a time when the employer was:
(i) a government body (see subsection 136(1)); or
(ii) a person all of whose income is exempt from income tax;
(c) benefits provided after the Commissioner has given the employer a
written notice under this paragraph, during the current year, requiring the
employer to resume keeping records.
The period in paragraph 132(1)(b) for retaining records relating to the
employer’s liability under this Act in respect of the employer’s
most recent base year is extended (or further extended) to 5 years after the end
of the current year (if the period is not already that long).
The employer’s liability to pay tax under section 66 is worked out
using the employer’s aggregate fringe benefits amount for the
employer’s most recent base year, instead of for the current
year.
Section 135G does not apply if the employer chooses to work out his or
her liability using the employer’s aggregate fringe benefits amount for
the current year.
Section 135G does not apply if the employer is:
(a) a government body (see subsection 136(1)); or
(b) a person all of whose income is exempt from income tax;
at any time during the current year.
(1) Section 135G does not apply if the employer’s aggregate fringe
benefits amount for the current year is more than 20% greater than it was for
the employer’s most recent base year (unless the difference is $100 or
less).
Example: The aggregate fringe benefits amount was $100 for
the most recent base year and $180 for the current year. This is 80%
greater—well over the 20% limit. But section 135G can still apply because
the difference is only $80.
Special rules for applying this test
(2) In working out, for the purposes of subsection (1), the
employer’s aggregate fringe benefits amount for the current year, apply
the following rules.
Section 123 disregarded
(3) Disregard the effect of section 123 (which deals with failing to
retain statutory evidentiary documents).
Special rule for car fringe benefits—statutory formula method used
in earlier year
(4) If:
(a) for the employer’s first car benefit year (if any—see
subsection (6)), the employer used the method in section 9 (statutory formula)
to determine the taxable value of one or more car fringe benefits relating to a
particular car; and
(b) the employer uses the same method for that car, or for a car provided
as a replacement of that car, for the current year; and
(c) the annualised number of kilometres the car (or its replacement)
travelled in the current year is at least 80% of the annualised number of
kilometres the car travelled in the first car benefit year;
the employer may, in using that same method, use the statutory fraction for
the car from the first car benefit year, instead of from the current
year.
Special rule for car fringe benefits—cost basis method used in
earlier year
(5) If:
(a) for the employer’s first car benefit year (if any—see
subsection (6)), the employer used the method in section 10 (cost basis) to
determine the taxable value of one or more car fringe benefits relating to a
particular car; and
(b) the employer uses the same method for that car, or for a car provided
as a replacement of that car, for the current year; and
(c) the business use percentage (see subsection 136(1)) for the current
year is not lower than the business use percentage for the first car benefit
year by more than 20 percentage points;
the employer may, in using that same method, use the business use
percentage for the car from the first car benefit year, instead of from the
current year.
Meaning of first car benefit year
(6) In subsections (4) and (5), the employer’s first car
benefit year is the first FBT year (if any) in the period:
(a) beginning with the employer’s most recent base year;
and
(b) ending with the FBT year immediately before the current
year;
during which one or more car fringe benefits were provided in relation to
the employer.
(1) This section applies if the employer does not carry on business
operations throughout the current year.
Pro-rata reduction of base year aggregate fringe benefits
amount
(2) For the purposes of sections 135G and 135K, the employer’s
aggregate fringe benefits amount for the employer’s most recent base year
is replaced by the amount worked out using the following formula:
3 Section 136AA (at the end of the definition of
aggregate fringe benefits amount)
Add:
Note: In certain cases, the employer can instead use the
aggregate fringe benefits amount in relation to a previous year of tax: see Part
XIA (Record keeping exemption).
Part
2—Application and
transitional
4 Application of amendments
(1) The amendments made by this Schedule apply in relation to benefits
provided in the FBT year beginning on 1 April 1998 and later FBT
years.
(2) However, section 135E of the Fringe Benefits Tax Assessment Act
1986 (as inserted by this Schedule) does not apply in relation to benefits
provided before the commencement of this Schedule.
5 Transitional—first base
year
(1) For the purposes of Part XIA of the Fringe Benefits Tax Assessment
Act 1986 (as inserted by this Schedule), an employer may use the FBT year
beginning on 1 April 1996, or any later FBT year, as the employer’s first
base year.
(2) If the employer uses the FBT year beginning on 1 April 1996 as the
first base year, then, in determining whether the conditions in Division 2 of
that Part are satisfied for any later FBT year:
(a) section 135B of that Act is taken to require that the employer’s
aggregate fringe benefits amount for the FBT year beginning on 1 April 1997 was
no more than 20% greater than it was for that base year (unless the difference
is $100 or less); and
(b) that section is taken not to require anything else to be true of the
FBT year beginning on 1 April 1997; and
(c) the test in paragraph (a) of this subitem is to be applied using the
rules in subsections 135K(3) to (6) of that Act.
Income
Tax Assessment Act 1936
1 Subsection 46F(1)
Insert:
exempting company has the same meaning as in Part
IIIAA.
2 Subsection 46F(1) (at the end of the
definition of unfranked part)
Add “or 160AQFA”.
3 Subsection 46F(2)
Repeal the subsection, substitute:
(2) Subject to this section, a shareholder that is a private company in
relation to a year of income and to which a dividend is paid in the year of
income is not entitled to, and is not to be allowed, a rebate under section 46
or 46A in respect of:
(a) if the dividend was paid by a company other than an exempting company,
or the dividend was paid by an exempting company and section 160APPA applies in
relation to the dividend:
(i) the unfranked part of the dividend; or
(ii) any part of the dividend in respect of which a determination is made
under paragraph 160AQCBA(3)(b) or 177EA(5)(b); or
(b) if the dividend was paid by an exempting company and section 160APPA
does not apply in relation to the dividend—any part of the
dividend.
4 Paragraph 46M(3)(b)
After “(1AAA)(c)”, insert “or 160AQFA(1)(c) or
(2)(c)”.
5 Subparagraph
46M(4)(a)(ii)
After “(1AAA)(c)”, insert “or 160AQFA(1)(c) or
(2)(c)”.
6 Subparagraph
102AAU(1)(c)(iii)
After “160AQF”, insert “or 160AQFA”.
7 Subsection 109ZC(2)
After “160AQF”, insert “or 160AQFA”.
8 Paragraph 109ZC(3)(a)
Repeal the paragraph, substitute:
(a) section 160APP, 160APPA or 160AQCNC (which gives, to companies
receiving franked dividends or exempted dividends, franking credits or exempting
credits except to the extent to which the dividends are exempt income);
or
9 At the end of paragraphs 128B(3)(a) to (g),
(gaa) and (gb)
Add “or”.
10 Paragraph 128B(3)(ga)
Repeal the paragraph, substitute:
(ga) income that consists of so much of a dividend as has been franked in
accordance with section 160AQF or 160AQFA (other than a dividend in respect of
which a determination is made under paragraph 160AQCBA(3)(b) or a dividend or a
part of a dividend in respect of which a determination is made under paragraph
177EA(5)(b)); or
11 At the end of paragraph
128TE(2)(d)
add “or 160AQFA”.
12 Section 160APA
Insert:
accountable interest, in relation to shares in a company, has
the meaning given by section 160APHBD.
13 Section 160APA
Insert:
accountable share, in relation to a company, has the meaning
given by section 160APHBC.
14 Section 160APA
Insert:
arrangement has the same meaning as in the Income Tax
Assessment Act 1997.
15 Section 160APA
Insert:
associate has the same meaning as in section 318.
16 Section 160APA
Insert:
class A exempted amount, in relation to a dividend, means so
much of the dividend as has been franked in accordance with subsection
160AQFA(1).
17 Section 160APA
Insert:
class A exempted dividend means a dividend to the extent (if
any) to which it has been franked in accordance with subsection
160AQFA(1).
18 Section 160APA
Insert:
class A exempting account balance, in relation to a former
exempting company, means:
(a) if the company has a class A exempting surplus—the amount of the
surplus; or
(b) if the company has a class A exempting deficit—the amount of the
deficit; or
(c) otherwise—nil.
19 Section 160APA
Insert:
class A exempting deficit means a deficit calculated under
subsection 160AQCND(3).
20 Section 160APA
Insert:
class A exempting surplus means a surplus calculated under
subsection 160AQCND(1).
21 Section 160APA (definition of class A
franked dividend)
Repeal the definition, substitute:
class A franked dividend means a dividend to the extent (if
any) to which it has been franked in accordance with subsection
160AQF(1).
22 Section 160APA
Insert:
class C exempted amount, in relation to a dividend, means so
much of the dividend as has been franked in accordance with subsection
160AQFA(2).
23 Section 160APA
Insert:
class C exempted dividend means a dividend to the extent (if
any) to which it has been franked in accordance with subsection
160AQFA(2).
24 Section 160APA
Insert:
class C exempting account balance, in relation to a former
exempting company, means:
(a) if the company has a class C exempting surplus—the amount of the
surplus; or
(b) if the company has a class C exempting deficit—the amount of the
deficit; or
(c) otherwise—nil.
25 Section 160APA
Insert:
class C exempting deficit means a deficit calculated under
subsection 160AQCND(4).
26 Section 160APA
Insert:
class C exempting surplus means a surplus calculated under
subsection 160AQCND(2).
27 Section 160APA (definition of class C
franked dividend)
Repeal the definition, substitute:
class C franked dividend means a dividend to the extent (if
any) to which it has been franked in accordance with subsection
160AQF(1AAA).
28 Section 160APA
Insert:
effectively owned by prescribed persons has the meaning given
by section 160APHBB.
29 Section 160APA
Insert:
eligible continuing substantial shareholder has the meaning
given by section 160APHBJ.
30 Section 160APA
Insert:
eligible employee share scheme: the question whether a share
was acquired under an eligible employee share scheme is to be determined in
accordance with section 160APHBH.
31 Section 160APA
Insert:
exempted amount, in relation to a dividend, means so much of
the dividend as has been franked in accordance with section 160AQFA.
32 Section 160APA
Insert:
exempted dividend means a dividend to the extent (if any) to
which it has been franked in accordance with section 160AQFA.
33 Section 160APA
Insert:
exempting company has the meaning given by section
160APHBA.
34 Section 160APA
Insert:
exempting credit means a class A exempting credit or a class
C exempting credit.
35 Section 160APA
Insert:
exempting debit means a class A exempting debit or a class C
exempting debit.
36 Section 160APA
Insert:
fixed trust has the same meaning as in Schedule 2F.
37 Section 160APA
Insert:
former exempting company has the meaning given by section
160APHBE.
38 Section 160APA (definition of franked
dividend)
Repeal the definition, substitute:
franked dividend means a dividend to the extent (if any) to
which it has been franked in accordance with section 160AQF.
39 Section 160APA
Insert:
interest, in relation to shares or other property, has the
meaning given by section 160APHE.
40 Section 160APA
Insert:
member of the same effectively wholly-owned group of
companies has the meaning given by section 160APHBI.
41 Section 160APA
Insert:
prescribed person has the meaning given by section 160APHBF
or 160APHBG.
42 Before Division 1A of Part
IIIAA
Insert:
A company is taken to be, or to have been, an exempting
company at a particular time if:
(a) that time is, or was, as the case may be, a time later than 7.30 pm by
legal time in the Australian Capital Territory on 13 May 1997; and
(b) at that time the company is or was, as the case may be, effectively
owned by prescribed persons.
(1) A company is taken to be, or to have been, effectively owned by
prescribed persons at a particular time if:
(a) at that time:
(i) not less than 95% of the accountable shares in the company;
or
(ii) not less than 95% of the accountable interests in shares in the
company;
are or were held by, or held indirectly for the benefit of, prescribed
persons; or
(b) paragraph (a) does not apply but it would nevertheless be reasonable
to conclude that, at that time, the risks involved in, and the opportunities
resulting from, holding:
(i) accountable shares or shares that, except for paragraph 160PHBC(4)(d),
would be accountable shares; or
(ii) accountable interests in shares or interests that, except for
subsection 160APHBD(4), would be accountable interests in shares;
in the company that are not, or were not, held by, or indirectly for the
benefit of, prescribed persons are or were substantially borne by, or
substantially accrue or accrued to, prescribed persons.
(2) In deciding whether it would be reasonable to conclude as mentioned in
paragraph (1)(b):
(a) regard is to be had to any arrangement in respect of shares (including
unissued shares), or in respect of interests in shares, in the company
(including any derivatives held or issued in connection with those shares or
interests) of which the company is aware; but
(b) no regard is to be had to risks involved in the ownership of shares,
or interests in shares, in the company that are substantially borne by any
person in the person’s capacity as a secured creditor.
(1) The purpose of this section is to identify which shares in a company
are relevant in determining whether the company is effectively owned by
prescribed persons.
(2) A share in a company is an accountable share if it is
not an excluded share.
(3) A share in a company is an excluded share if, having
regard to:
(a) the purposes for which the share was issued; and
(b) any special or limited rights attached to the share (including rights
that are conferred or exercisable only if the holder of the share is a
prescribed person or is not a prescribed person); and
(c) whether any such special or limited rights are similar to or different
from rights that are ordinarily attached to ownership of shares; and
(d) any arrangement in respect of shares (including unissued shares) in
the company of which the company is aware;
it would be reasonable to conclude that the share is not relevant in
determining whether the company is effectively owned by prescribed persons
because the share does not involve the holder bearing the risks, or result in
the accrual to the holder of the opportunities, that are ordinarily attached to
the ownership of shares.
(4) Without limiting subsection (3), a share in a company is also an
excluded share if:
(a) it is a finance share; or
(b) it is a dividend access share; or
(c) it does not carry the right to receive dividends; or
(d) it was issued for a purpose (other than an incidental purpose) of
ensuring that the company is not effectively owned by prescribed
persons.
(5) A share is a finance share if, having regard to the
rights attached to the share and to any arrangement with respect to the share of
which the company is aware, the share is equivalent to a debt owed by the
company to the holder of the share.
(6) A share to which subsection (5) does not apply is a finance
share if:
(a) the manner in which the dividends payable in respect of the share are
calculated, and the conditions applying to the payment of such dividends,
indicate that the payment of the dividends may reasonably be regarded as
equivalent to the payment of interest; or
(b) the capital invested by the holder of the share will be redeemed, or,
because of an arrangement between the holder and the company or an associate of
the company, it is reasonable for the holder to expect that the capital will be
redeemed, for an amount that is not less than, or for property (including other
shares in the company) the value of which is not less than, the amount paid for
the share; or
(c) the share is redeemable by the company by payment of a lump sum or by
the transfer of property, or the share has a preferred right to a repayment of
capital on a winding up, where the amount of the lump sum or the value of the
property, or the amount of the capital to be repaid, as the case may be, is to
be calculated by reference to an implicit interest rate.
(7) A share in a company is a dividend access share if,
having regard to:
(a) the terms of the issue of the share, including any guarantee of
payment of dividends; and
(b) the amounts of the dividends paid on the share relative to the issue
price of the share; and
(c) whether there is any guaranteed rate at which franked dividends are to
be paid on the share; and
(d) the duration of the period within which the share was issued;
and
(e) the rights attached to other shares in the company; and
(f) any other relevant matters;
it could be concluded that the share was issued only for the purpose of
paying dividends to the holder of the share.
(1) The purpose of this section is to identify which interests in shares
in a company are relevant in determining whether the company is effectively
owned by prescribed persons.
(2) An interest in a share in a company is an accountable
interest if it is an interest in an accountable share and is not an
excluded interest.
(3) An interest in an accountable share in a company is an excluded
interest if, having regard to:
(a) the purposes for which the interest was granted; and
(b) any special or limited rights attached to the interest (including
rights that are conferred or exercisable only if the holder of the interest is a
prescribed person or is not a prescribed person); and
(c) whether any such special or limited rights are similar to or different
from rights that are ordinarily attached to ownership; and
(d) any arrangement in respect of interests in shares in the company of
which the company is aware;
it would be reasonable to conclude that the interest is not relevant in
determining whether the company is effectively owned by prescribed persons
because the interest does not involve the holder bearing the risks, or result in
the accrual to the holder of the opportunities, that are ordinarily attached to
the ownership of interests in shares.
(4) Without limiting subsection (3), an interest in an accountable share
in a company is also an excluded interest if it was granted or
otherwise created, or was transferred or acquired, for a purpose (other than an
incidental purpose) of ensuring that the company is not effectively owned by
prescribed persons.
(1) Subject to subsection (2), a company is a former exempting
company if it has at any time ceased to be an exempting company and is
not again an exempting company.
(2) If:
(a) a company that has not previously been an exempting company becomes an
exempting company; and
(b) within 12 months afterwards it ceases to be an exempting
company;
the company does not, by so ceasing, become a former exempting
company.
(1) A company is a prescribed person if:
(a) the company is a non-resident; or
(b) were the company to receive a dividend, the dividend would be exempt
income of the company for the purposes of this Part.
(2) A trustee is a prescribed person if:
(a) all the beneficiaries in the trust are prescribed persons under other
provisions of this section; or
(b) were the trustee to receive a dividend, the dividend would be exempt
income of the trust estate for the purposes of this Part.
(3) A partnership is a prescribed person if:
(a) all the partners are prescribed persons under other provisions of this
section; or
(b) were the partnership to receive a dividend, the dividend would be
exempt income of the partnership for the purposes of this Part.
(4) An individual (other than a trustee) is a prescribed person
if:
(a) he or she is a non-resident; or
(b) were he or she to receive a dividend, the dividend would be exempt
income of the individual for the purposes of this Part.
(5) The Commonwealth, each of the States, the Australian Capital
Territory, the Northern Territory and Norfolk Island are prescribed
persons.
(1) This section applies to a person that:
(a) is a company, a trustee, or a partnership, that holds accountable
shares, or accountable interests in shares, in a company (the relevant
company); and
(b) is not a prescribed person under section 160APHBF.
(2) A company (the shareholding company) that holds
accountable shares, or accountable interests in shares, in the relevant company
is taken to be a prescribed person in relation to the relevant
company if the risks involved in, and the opportunities resulting from, holding
the shares or interests are substantially borne by, or substantially accrue to,
as the case may be, one or more prescribed persons.
(3) A trustee of a fixed trust who holds accountable shares, or
accountable interests in shares, in the relevant company is taken to be a
prescribed person in relation to the relevant company if the risks
involved in, and the opportunities resulting from, holding the shares or
interests are substantially borne by, or substantially accrue to, as the case
may be, one or more prescribed persons.
(4) In determining whether subsection (3) applies in respect of a trust
that is controlled by a person, regard is to be had to the way in which the
person, or any associate of the person, exercises powers in relation to the
trust.
(5) A trustee of a trust (other than a fixed trust) who holds accountable
shares, or accountable interests in shares, in the relevant company is taken to
be a prescribed person in relation to the relevant company
if:
(a) unless subsection (7) applies, the trust is controlled by one or more
persons who are prescribed persons; or
(b) all the beneficiaries who are presently entitled to, or during the
relevant year of income become presently entitled to, income from the trust are
prescribed persons.
(6) A person controls a trust if:
(a) the person has the power, either directly, or indirectly through one
or more interposed entities, to control the application of the income, or the
distribution of the property, of the trust; or
(b) the person has the power, either directly, or indirectly through one
or more entities, to appoint or remove the trustee of the trust; or
(c) the person has the power, either directly, or indirectly through one
or more entities, to appoint or remove beneficiaries of the trust; or
(d) the trustee of the trust is accustomed or under an obligation, whether
formal or informal, to act according to the directions, instructions or wishes
of the person or of an associate of the person.
(7) Paragraph (5)(a) does not apply in relation to a trust if some of the
beneficiaries receiving income from the trust are not prescribed persons and the
Commissioner considers that it is reasonable to conclude that the risks involved
in, and the opportunities resulting from, holding the accountable shares and
accountable interests in the relevant company are substantially borne by, or
substantially accrue to, as the case may be, one or more persons who are not
prescribed persons.
(8) A partnership that holds accountable shares, or accountable interests
in shares, in the relevant company is taken to be a prescribed
person in relation to the relevant company if the risks involved in, and
the opportunities resulting from, holding the shares or interests are
substantially borne by, or substantially accrue to, as the case may be, one or
more prescribed persons.
(9) If any of the prescribed persons referred to in subsection (2), (3),
(5) or (6) is a company, that subsection applies even if the risks involved in,
and the opportunities resulting from, holding any of the shares, or interests in
shares, in that company are substantially borne by, or substantially accrue to,
as the case may be, one or more persons who are not prescribed
persons.
A share in a company is taken to be acquired by a person under an
eligible employee share scheme if:
(a) the share is acquired by the person in respect of, or for or in
relation directly or indirectly to, any employment of the person by the company
or by a holding company of the company; and
(b) all the shares available for acquisition under the scheme are ordinary
shares or are preference shares to which are attached substantially the same
rights as are attached to ordinary shares; and
(c) immediately after the acquisition of the shares:
(i) the person does not hold a legal or beneficial interest in more than
5% of the shares in the company; and
(ii) the person is not in a position to control, or control the casting
of, more than 5% of the maximum number of votes that might be cast at a general
meeting of the company.
(1) 2 companies are members of the same effectively wholly-owned group of
companies on a particular day if:
(a) throughout that day, not less than 95% of the accountable shares in
each of the companies, and not less than 95% of the accountable interests in
shares in each of the companies, are held by, or are held indirectly for the
benefit of, the same persons; or
(b) paragraph (a) does not apply but it would nevertheless be reasonable
to conclude, having regard to the matters mentioned in subsection (2), that,
throughout that day, the risks involved in, and the opportunities resulting
from, holding accountable shares, or accountable interests in shares, in each of
the companies are substantially borne by, or substantially accrue to, the same
persons.
(2) The matters to which regard is to be had as mentioned in paragraph
(1)(b) are:
(a) any special or limited rights attaching to accountable shares, or
accountable interests in shares, in each of the companies held by persons other
than the persons mentioned in paragraph (1)(b) or their associates;
and
(b) any special rights attaching only to accountable shares, or
accountable interests in shares, in each of the companies held by the persons
mentioned in paragraph (1)(b) or their associates; and
(c) the respective proportions:
(i) that accountable shares in each of the companies held by the persons
mentioned in paragraph (1)(b) or their associates, and other accountable shares
in the company concerned, bear to all the accountable shares in that company;
and
(ii) that accountable interests in shares in each of the companies held by
the persons mentioned in paragraph (1)(b) or their associates, and other
accountable interests in shares in the company concerned, bear to all the
accountable interests in shares in that company; and
(d) the respective proportions that:
(i) the total value of accountable shares in each of the companies held by
the persons mentioned in paragraph (1)(b) or their associates, and the total
value of other accountable shares in the company concerned, bear to the total
value of all the accountable shares in that company; and
(ii) the total value of accountable interests in shares in each of the
companies held by the persons mentioned in paragraph (1)(b) or their associates,
and the total value of other accountable interests in shares in the company
concerned, bear to the total value of all the accountable interests in shares in
that company; and
(e) the purposes for which accountable shares, or accountable interests in
shares, in each of the companies were issued or granted to persons other than
the persons mentioned in paragraph (1)(b) or their associates; and
(f) any arrangement in respect of accountable shares, or accountable
interests in shares, in each of the companies held by persons other than the
persons mentioned in paragraph (1)(b) or their associates (including any
derivatives held or issued in connection with those shares or interests) of
which the company concerned is aware.
(1) A shareholder is an eligible continuing substantial
shareholder in relation to a dividend paid by a former exempting company
(the relevant former exempting company) if the following
provisions apply.
(2) At both of the following times:
(a) the time when the dividend was paid; and
(b) the time immediately before the relevant former exempting company
ceased to be an exempting company;
the shareholder:
(c) was entitled to not less than the prescribed percentage of:
(i) if the voting shares (as defined in the Corporations Law) in the
relevant former exempting company are not divided into classes—those
voting shares; or
(ii) if the voting shares (as so defined) in the relevant former exempting
company are divided into 2 or more classes—the shares in one of those
classes; and
(d) was a person referred to in one or more of the following
subparagraphs:
(i) a non-resident; or
(ii) a life assurance company; or
(iii) an exempting company; or
(iv) a former exempting company; or
(v) a trustee of a trust in which an interest was held by a person
referred to in any of subparagraphs (i) to (iv); or
(vi) a partnership in which an interest was held by a person referred to
in any of subparagraphs (i) to (iv).
(3) If the assumptions set out in subsection (4) are made:
(a) if the shareholder was a person referred to in any of subparagraphs
(2)(d)(i) to (iv)—the shareholder; or
(b) if the shareholder was a trustee of a trust or a partnership, being a
trust or partnership in which a person referred to in any of those subparagraphs
held an interest—the holder of the interest;
would (if a non-resident) be exempt from dividend withholding tax on the
dividend or (if a resident) be entitled to a franking credit or a franking
rebate in respect of the dividend.
(4) The assumptions referred to in subsection (3) are that:
(a) the relevant former exempting company was an exempting company at the
time it paid the dividend; and
(b) the dividend was a franked dividend paid to the shareholder;
and
(c) if the shareholder was a former exempting company—the
shareholder was an exempting company; and
(d) if the shareholder was a trustee of a trust or partnership in which a
former exempting company had an interest—that former exempting company was
an exempting company.
(5) The question whether a person was entitled at a particular time to not
less than the prescribed percentage of voting shares or a class of voting shares
in a company is to be determined in the same way as that question is determined
under subsection 708(5) of the Corporations Law.
(6) A person is taken to hold an interest in a trust if:
(a) the person is a beneficiary under the trust; or
(b) the person derives, or will derive, income indirectly, through
interposed trusts or partnerships, from dividends received by the
trustee.
(7) A person is taken to hold an interest in a partnership if:
(a) the person is a partner in the partnership; or
(b) the person derives, or will derive, income indirectly, through
interposed trusts or partnerships, from dividends received by the
partnership.
43 Before subsection
160APP(1)
Insert:
(1AA) This section does not apply in relation to a class A franked
dividend, a class B franked dividend or a class C franked dividend, paid to a
shareholder by an exempting company. However, section 160APPA may apply in
relation to such a dividend.
44 After section 160APP
Insert:
(1) Subject to this section, if, on a particular day, a class A franked
dividend is paid by an exempting company (the first company) to a
shareholder being another exempting company (the second company)
and:
(a) the second company is a resident at the time the dividend is paid;
and
(b) either of the following subparagraphs applies:
(i) the first company and the second company are members of the same
effectively wholly-owned group of companies;
(ii) the second company holds more than 5% of the shares in the first
company (other than finance shares or dividend access shares within the meaning
of section 160APHBC or shares that do not carry the right to receive dividends)
and it would be reasonable to conclude that the risks involved in, and the
opportunities resulting from, holding those shares are substantially borne by,
or substantially accrue to, the second company;
there arises on that day a class A franking credit of the second company
equal to the class A franked amount of the dividend.
(2) Subject to this section, if, on a particular day, a class C franked
dividend is paid by an exempting company (the first company) to a
shareholder being another exempting company (the second company)
and:
(a) the second company is a resident at the time the dividend is paid;
and
(b) either of the following subparagraphs applies:
(i) the first company and the second company are members of the same
effectively wholly-owned group of companies;
(ii) the second company holds more than 5% of the shares in the first
company (other than finance shares or dividend access shares within the meaning
of section 160APHBC or shares that do not carry the right to receive dividends)
and it would be reasonable to conclude that the risks involved in, and the
opportunities resulting from, holding those shares are substantially borne by,
or substantially accrue to, the second company;
there arises on that day a class C franking credit of the second company
equal to the class C franked amount of the dividend.
(3) In deciding whether it would it would be reasonable to conclude as
mentioned in subparagraph (1)(b)(ii) or (2)(b)(ii):
(a) regard is to be had to any arrangement in respect of shares (including
unissued shares) in the first company (including any derivatives held or issued
in connection with those shares); but
(b) no regard is to be had to risks involved in the ownership of shares in
the first company that are substantially borne by any person in the
person’s capacity as a secured creditor.
(4) No franking credit arises if the dividend is wholly exempt income of
the second company.
(5) If a determination is made under paragraph 160AQCBA(3)(b) or
177EA(5)(b) in respect of the whole of the dividend, no franking credit arises
in respect of the dividend.
(6) If a determination is made under paragraph 177EA(5)(b) in respect of a
part of the dividend, the franking credit that would otherwise arise in respect
of the dividend is reduced by the same proportion as that part of the dividend
bears to the whole of the dividend.
(7) If the dividend is partly exempt income of the second company, the
franking credit arising under subsection (1) or (2) is reduced by the amount
worked out by using the formula:
where:
dividend means the number of dollars in the total amount of
the dividend.
exempt part of dividend means the number of dollars in the
part of the dividend that is exempt income.
franking credit means the franking credit determined under
whichever of subsections (1) and (2) is applicable.
(8) In determining for the purposes of subsection (3) or (7) whether the
dividend is wholly or partly exempt income of the second company, section 124ZM
(which exempts dividends paid by PDFs) is to be disregarded.
(9) The franking credit arising under subsection (1) or (2) is to be
reduced by 80% if:
(a) the second company is a life assurance company; and
(b) the assets of the second company from which the dividend was derived
were included in insurance funds of the second company at any time during the
period beginning at the start of the year of income of the second company in
which the dividend was paid and ending at the time the dividend was
paid.
(10) No franking credit arises if the dividend was paid as part of a
dividend stripping operation.
45 Paragraph 160AQCBA(3)(a)
After “franking debit”, insert “or an exempting
debit”.
46 Subsections 160AQCBA(8) to
(12)
Repeal the subsections, substitute:
Effect of determination of franking debit or exempting
debit
(8) If the Commissioner makes a determination under paragraph
(3)(a):
(a) on the day on which notice of the determination is served in writing
on the company, a franking debit or exempting debit of the company arises in
respect of the dividend or other benefit; and
(b) the amount of the franking debit or exempting debit is worked out in
accordance with subsections (9) to (13).
Franking debit or exempting debit in respect of partly franked
dividend
(9) In the case of a franking debit or exempting debit in respect of a
partly franked or partly exempted dividend, the amount of the franking debit or
exempting debit is the difference between the franked amount or the exempted
amount and the amount that would have been the franked amount or exempted amount
if the dividend had been franked to the maximum extent to which the dividends
paid to the advantaged shareholders were franked.
Franking debit in respect of unfranked dividend
(10) In the case of a franking debit in respect of an unfranked dividend,
the amount of the franking debit is the amount that would have been the franked
amount if the dividend had been franked to the maximum extent to which the
dividends paid to the advantaged shareholders were franked.
Exempting debit in respect of dividend that has not been franked in
accordance with section 160AQFA
(10A) In the case of an exempting debit in respect of a dividend that has
not been franked in accordance with section 160AQFA, the amount of the exempting
debit is the amount that would have been the franked amount if the dividend had
been franked to the maximum extent to which the dividends paid to the advantaged
shareholders were franked.
Franking debit or exempting debit in respect of bonus shares from share
premium account
(11) In the case of a franking debit or exempting debit in respect of a
benefit by way of the issue of bonus shares from a share premium account, the
amount of the franking debit or exempting debit is the amount that, if the
company had paid a dividend of an amount equal to the amount debited to the
share premium account in respect of the bonus shares and had franked the
dividend to the maximum extent to which the dividends paid to the advantaged
shareholders were franked, would have been the franked amount of the
dividend.
Franking debit or exempting debit in respect of any other
benefit
(12) In the case of a franking debit or exempting debit in respect of any
other benefit, the amount of the franking debit or exempting debit is the amount
that, if the company had paid a dividend of an amount equal to the value of the
benefit at the time when it was paid and had franked the dividend to the maximum
extent to which the dividends paid to the advantaged shareholders were franked,
would have been the franked amount of the dividend.
47 Subparagraph
160AQCBA(16)(a)(i)
After “160APP”, insert “or 160APPA”.
48 At the end of subsection
160AQCBA(16)
Add:
; or (e) the shareholder is a company and an exempting credit of the
company arises under section 160AQCNF.
49 Subsection 160AQCBA(17)
Repeal the subsection, substitute:
Meaning of greater benefit from franking credits
(17) The circumstances in which a shareholder would, in a year of income,
derive a greater benefit from franking credits than another
shareholder include, but are not limited to:
(a) any of the following circumstances existing in relation to the other
shareholder and not in relation to the first shareholder:
(i) the shareholder is a non-resident;
(ii) the amount of tax (if any) that, apart from this Part, would be
payable by the shareholder is less than the amount of the rebate of tax to which
the shareholder would be entitled under section 160AQU or 160AQY;
(iii) the shareholder is a company that is unable to pay a dividend to its
shareholders in the year of income because it has not made any profits or has
not made sufficient profits to do so;
(iv) the shareholder is an exempting company or a company for which no
franking credits arise; and
(b) any of the following circumstances existing in relation to the first
shareholder and not in relation to the other shareholder:
(i) a franking credit arises under section 160APPA;
(ii) a franking credit or exempting credit arises under section
160AQCNF;
(iii) subsection 160AQTA(2) or (5) applies;
(iv) section 160AQTB applies.
50 Sections 160AQCNA and
160AQCNB
After “franking debit” (wherever occurring), insert “or
exempting debit”.
51 After Division 2 of Part
IIIAA
Insert:
(1) The class A exempting surplus of a former exempting company at a
particular time in a franking year is the amount by which the total of the class
A exempting credits of the company arising in the franking year and before that
time exceeds the total of the class A exempting debits of the company arising in
the franking year and before that time.
(2) The class C exempting surplus of a former exempting company at a
particular time in a franking year is the amount by which the total of the class
C exempting credits of the company arising in the franking year and before that
time exceeds the total of the class C exempting debits of the company arising in
the franking year and before that time.
(3) The class A exempting deficit of a former exempting company at a
particular time in a franking year is the amount by which the total of the class
A exempting debits of the company arising in the franking year and before that
time exceeds the total of the class A exempting credits of the company arising
in the franking year and before that time.
(4) The class C exempting deficit of a former exempting company at a
particular time in a franking year is the amount by which the total of the class
C exempting debits of the company arising in the franking year and before that
time exceeds the total of the class C exempting credits of the company arising
in the franking year and before that time.
(1) If, on a particular day, a former exempting company pays a class A
exempted dividend, there arises on that day a class A exempting debit of the
company equal to the amount that, except for subsection 160AQFA(4), would be the
class A exempted amount of the dividend.
(2) If, on a particular day, a former exempting company pays a class C
exempted dividend, there arises on that day a class C exempting debit of the
company equal to the amount that, except for subsection 160AQFA(4), would be the
class C exempted amount of the dividend.
(1) Subject to this section, if, on a particular day, a class A exempted
dividend is paid to a former exempting company, or to an exempting company, that
is a resident at the time the dividend is paid, there arises on that day a class
A exempting credit of the former exempting company or a class A franking credit
of the exempting company, as the case may be, equal to the class A exempted
amount of the dividend.
(2) Subject to this section, if, on a particular day, a class C exempted
dividend is paid to a former exempting company, or to an exempting company, that
is a resident at the time the dividend is paid, there arises on that day a class
C exempting credit of the former exempting company or a class C franking credit
of the exempting company, as the case may be, equal to the class C exempted
amount of the dividend.
(3) No exempting credit or franking credit arises if the dividend is
wholly exempt income of the company.
(4) If a determination is made under paragraph 160AQCBA(3)(b) or
177EA(5)(b) in respect of the dividend, no exempting credit or franking credit
arises in respect of the dividend.
(5) If a determination is made under paragraph 177EA(5)(b) in respect of a
part of the dividend, the exempting credit or franking credit that would
otherwise arise in respect of the dividend is reduced by the same proportion as
that part of the dividend bears to the whole of the dividend.
(6) If the dividend is partly exempt income of the company, the exempting
credit or franking credit arising under subsection (1) or (2) is reduced by the
amount worked out by using the formula:
where:
credit means the exempting credit or franking credit, as the
case may be, determined under whichever of subsections (1) and (2) is
applicable.
dividend means the number of dollars in the total amount of
the dividend.
exempt part of dividend means the number of dollars in the
part of the dividend that is exempt income.
(7) In determining for the purposes of subsection (3) or (6) whether the
dividend is wholly or partly exempt income of the former exempting company or of
the exempting company, section 124ZM (which exempts dividends paid by PDFs) is
to be disregarded.
(8) The exempting credit or franking credit arising under subsection (1)
or (2) is to be reduced by 80% if:
(a) the former exempting company, or the exempting company, is a life
assurance company; and
(b) the assets of the former exempting company, or of the exempting
company, from which the dividend was derived were included in insurance funds of
the company at any time during the period beginning at the start of the year of
income of the company in which the dividend was paid and ending at the time the
dividend was paid.
(9) No exempting credit or franking credit arises if the dividend was paid
as part of a dividend stripping operation.
(1) If:
(a) an exempting company becomes a former exempting company; and
(b) at the time when it becomes a former exempting company it has a class
A franking surplus;
then, subject to section 160AQCNI, immediately after it became a former
exempting company:
(c) there arises a class A franking debit of the company equal to the
surplus; and
(d) there arises a class A exempting credit of the company equal to the
surplus.
(2) If:
(a) an exempting company becomes a former exempting company; and
(b) at the time when it becomes a former exempting company it has a class
C franking surplus;
then, subject to section 160AQCNI, immediately after it became a former
exempting company:
(c) there arises a class C franking debit of the company equal to the
surplus; and
(d) there arises a class C exempting credit of the company equal to the
surplus.
(1) If:
(a) an exempting company becomes a former exempting company; and
(b) at the time when it becomes a former exempting company it has a class
A franking deficit;
then, subject to section 160AQCNI, immediately after it became a former
exempting company:
(c) there arises a class A franking credit of the company equal to the
deficit; and
(d) there arises a class A exempting debit of the company equal to the
deficit.
(2) If:
(a) an exempting company becomes a former exempting company; and
(b) at the time when it becomes a former exempting company it has a class
C franking deficit;
then, subject to section 160AQCNI, immediately after it became a former
exempting company:
(c) there arises a class C franking credit of the company equal to the
deficit; and
(d) there arises a class C exempting debit of the company equal to the
deficit.
Conversion of franking surplus or deficit not to apply if change in
company’s status resulted from contract made before particular
time
(1) Subject to subsection (2), sections 160AQCNG and 160AQCNH do not apply
to an exempting company that became a former exempting company as mentioned in
the section concerned as a result of an acquisition of shares in the company
under a contract that was entered into before 7.30 pm by legal time in the
Australian Capital Territory on 13 May 1997.
Exception where contract made for purpose of obtaining franking
credits
(2) Subsection (1) does not apply if the contract was entered into for a
purpose (whether or not the purpose was the dominant purpose but not including
an incidental purpose) of obtaining a franking credit benefit within the meaning
of subsection 177EA(18).
Former exempting company reverts to that status within 12 months after
becoming an exempting company
(3) If:
(a) a former exempting company becomes an exempting company; and
(b) within a period of less than 12 months afterwards it again becomes a
former exempting company;
whichever of the following subsections is applicable has effect.
Exempting company has franking surplus
(4) If, at the time when the company again became a former exempting
company, it had a class A franking surplus or a class C franking surplus, the
references in paragraphs 160AQCNG(1)(c) or (d) or (2)(c) or (d), as the case may
be, to the surplus are taken to be references to only so much of the surplus as
would have been the company’s class A exempting surplus or class C
exempting surplus, as the case may be, if the company had remained a former
exempting company throughout that period.
Exempting company has franking deficit
(5) If, at the time when the company again became a former exempting
company, it had a class A franking deficit or a class C franking deficit, the
references in paragraphs 160AQCNH(1)(c) or (d) or (2)(c) or (d), as the case may
be, to the deficit are taken to be references to only so much of the deficit as
would have been the company’s class A exempting deficit or class C
exempting deficit, as the case may be, if the company had remained a former
exempting company throughout that period.
(1) If a former exempting company pays a frankable dividend in respect of
which there is a class A required franking amount and:
(a) the reckoning day of the dividend is before the day on which the
company became a former exempting company; or
(b) subsection 160AQE(3) or (4) applies in relation to the
dividend;
then, subject to subsection (3), there arises a class A exempting debit of
the company equal to the amount (if any) by which the class A required franking
amount of the dividend exceeds the actual franked amount of the
dividend.
(2) If a former exempting company pays a frankable dividend in respect of
which there is a class C required franking amount and:
(a) the reckoning day of the dividend is before the day on which the
company became a former exempting company; or
(b) subsection 160AQE(3) or (4) applies in relation to the
dividend;
then, subject to subsection (3), there arises a class C exempting debit of
the company equal to the amount (if any) by which the class C required franking
amount of the dividend exceeds the actual franked amount of the
dividend.
(3) If:
(a) a class A exempting debit, or a class C exempting debit, of a company
arises under subsection (1) or (2) in respect of a dividend paid by the company;
and
(b) a class A exempting debit, or a class C exempting debit, of the
company arises under subsection 160AQCNE(1) or (2) in respect of the
dividend;
the amount of the debit that, apart from this subsection, would arise under
subsection (1) or (2) is reduced by the amount of the debit that arises under
subsection 160AQCNE(1) or (2).
(4) When a class A exempting debit of a company arises, or, apart from
subsection (3), would arise, under subsection (1), or a class C exempting debit
of a company arises, or, apart from subsection (3), would arise, under
subsection (2), in respect of the payment of a dividend, the dividend is taken
for the purposes of section 160APX to have been class A franked or class C
franked, as the case may be, to the extent of the amount worked out by using the
formula:
(5) For the purposes of subsection (4), the notional
percentage is the percentage worked out by using the
formula:
(6) In the formulas in subsections (4) and (5):
dividend means the amount of the dividend.
exempting debit means the amount of the class A exempting
debit or class C exempting debit that, apart from subsection (3), would arise in
respect of the dividend under subsection (1) or (2).
franking debit means the amount (if any) of the class A
franking debit or class C franking debit arising in respect of the dividend
under section 160AQB.
(1) If:
(a) a former exempting company becomes an exempting company; and
(b) at the time when it becomes an exempting company it has a class A
exempting surplus;
then, immediately after it becomes an exempting company:
(c) there arises a class A exempting debit of the company equal to the
surplus; and
(d) there arises a class A franking credit of the company equal to the
surplus.
(2) If:
(a) a former exempting company becomes an exempting company; and
(b) at the time when it becomes an exempting company it has a class C
exempting surplus;
then, immediately after it becomes an exempting company:
(c) there arises a class C exempting debit of the company equal to the
surplus; and
(d) there arises a class C franking credit of the company equal to the
surplus.
(1) If:
(a) a former exempting company becomes an exempting company; and
(b) at the time when it becomes an exempting company it has a class A
exempting deficit;
then, immediately after it becomes an exempting company:
(c) there arises a class A exempting credit of the company equal to the
deficit; and
(d) there arises a class A franking debit of the company equal to the
deficit.
(2) If:
(a) a former exempting company becomes an exempting company; and
(b) at the time when it becomes an exempting company it has a class C
exempting deficit;
then, immediately after it becomes an exempting company:
(c) there arises a class C exempting credit of the company equal to the
deficit; and
(d) there arises a class C franking debit of the company equal to the
deficit.
(1) If, apart from this section, a franking credit of a former exempting
company would have arisen under any of sections 160APM, 160APMAA, 160APMAB,
160APMD, 160APQA, 160APQB, 160APU to 160APVH and 160ASI, the following
provisions of this section have effect.
(2) If the franking credit is wholly attributable to a period during
which, or to an event taking place at a time when, the company was an exempting
company:
(a) the franking credit is taken not to arise; and
(b) an exempting credit of the company equal to the amount of the franking
credit is taken to arise.
(3) If the franking credit is partly attributable to a period during
which, or to an event taking place at a time when, the company was an exempting
company:
(a) the franking credit is, to the extent to which it is so attributable,
taken not to arise; and
(b) an exempting credit of the company equal to the amount of the franking
credit to the extent to which it is so attributable, is taken to
arise.
(4) A reference in subsection (2) or (3) to a period during which, or to a
time when, a company was an exempting company includes a reference to a period
during which, or to a time when, a company would have been an exempting company
if paragraph 160APHBA(1)(a) had not been enacted.
(5) For the purposes of subsection (2) or (3), a class C franking credit
that arises under section 160ASI is taken to be attributable to a period or time
to the extent to which the class A franking credit or class B franking credit
because of which the class C franking credit arose was attributable to that
period or time.
(1) If, apart from this section, a franking debit of a former exempting
company would have arisen under section 160APY, 160APYA, 160APYBA, 160APYBB,
160APYC, 160APZ, 160AQC, 160AQCB, 160AQCBA, 160AQCCA to 160AQCN and 160ASI, the
following provisions of this section have effect.
(2) If the franking debit is wholly attributable to a period during which,
or to an event taking place at a time when, the company was an exempting
company:
(a) the franking debit is taken not to arise; and
(b) an exempting debit of the company equal to the amount of the franking
debit is taken to arise.
(3) If the franking debit is partly attributable to a period during which,
or to an event taking place at a time when, the company was an exempting
company:
(a) the franking debit is, to the extent to which it is so attributable,
taken not to arise; and
(b) an exempting debit of the company equal to the amount of the franking
debit to the extent to which it is so attributable, is taken to arise.
(4) A reference in subsection (2) or (3) to a period during which, or to a
time when, a company was an exempting company includes a reference to a period
during which, or to a time when, a company would have been an exempting company
if paragraph 160APHBA(1)(a) had not been enacted.
(5) For the purposes of subsection (2) or (3), a class C franking debit
that arises under section 160ASI is taken to be attributable to a period or time
to the extent to which the class A franking debit or class B franking debit
because of which the class C franking debit arose was attributable to that
period or time.
(1) If, apart from this subsection, a former exempting company would have
a class A exempting deficit at the end of a franking year, then, immediately
before the end of that franking year:
(a) there is taken to have arisen a class A exempting credit of the
company equal to the deficit; and
(b) there is taken to have arisen a class A franking debit of the company
equal to the deficit.
(2) If, apart from this subsection, a former exempting company would have
a class C exempting deficit at the end of a franking year, then, immediately
before the end of that franking year:
(a) there is taken to have arisen a class C exempting credit of the
company equal to the deficit; and
(b) there is taken to have arisen a class C franking debit of the company
equal to the deficit.
Application
(1) This section applies if:
(a) at a particular time, whether before or after the commencement of this
section, a company was or is an exempting company; and
(b) at that time all the shares in the company were or are owned by the
Commonwealth; and
(c) the Commonwealth has offered for sale or sold, or proposes to offer
for sale, some or all of the shares; and
(d) the Treasurer is satisfied, having regard to the matters mentioned in
subsection (2), that it is desirable to make a declaration or declarations under
this section in relation to the company.
Matters to be taken into account
(2) The matters to which the Treasurer is to have regard under paragraph
(1)(d) are:
(a) whether the making of the declaration or declarations is necessary to
enable the company to pay fully franked dividends after the sale; and
(b) the extent to which the success of the sale or proposed sale depended
or will depend upon the ability of the company to pay franked dividends;
and
(c) the extent to which the reduction in receipts of income tax resulting
from the making of the declaration or declarations would be offset by the
receipt of increased proceeds from the sale; and
(d) any other matters that the Treasurer thinks relevant.
When declarations may be made
(3) The following provisions of this section apply after the company
became or becomes a former exempting company.
Conversion of class A exempting surplus
(4) If the former exempting company would, apart from this section, have a
class A exempting surplus at the end of a franking year, the Treasurer may, in
writing, declare that:
(a) a class A exempting debit of the company (not exceeding the class A
exempting surplus) specified in the declaration is taken to have arisen
immediately before the end of that franking year; and
(b) a class A franking credit of the company equal to the amount of the
debit is taken to have arisen immediately before the end of that franking
year.
Conversion of class C exempting surplus
(5) If the former exempting company would, apart from this section, have a
class C exempting surplus at the end of a franking year, the Treasurer may, in
writing, declare that:
(a) a class C exempting debit of the company (not exceeding the class C
exempting surplus) specified in the declaration is taken to have arisen
immediately before the end of that franking year; and
(b) a class C franking credit of the company equal to the amount of the
debit is taken to have arisen immediately before the end of that franking
year.
Declarations may be conditional
(6) A declaration may be expressed to be subject to compliance by the
former exempting company with such conditions as are specified in the
declaration.
Effect of breach of condition
(7) If a condition specified in a declaration is not complied with, the
Treasurer may revoke the declaration and, if he or she thinks appropriate, make
a further declaration under subsection (4) or (5), as the case
requires.
Effect of declaration
(8) A declaration, unless it is revoked, has effect according to its
terms.
52 At the end of paragraphs 160AQF(1)(a) and
(b)
Add “and”.
Note: The heading to section 160AQF is replaced by the
heading “What constitutes franking with a franked
amount”.
53 At the end of section
160AQF
Add:
(3) If:
(a) an exempting company makes a declaration under subparagraph
160AQF(1)(c)(i), paragraph 160AQF(1)(d), subparagraph 160AQF(1AAA)(c)(i) or
paragraph 160AQF(1AAA)(d) in relation to a dividend or dividends; and
(b) the company becomes a former exempting company before the reckoning
day for the dividend or for at least one of the dividends;
subsection (2) does not prevent the company from varying or revoking the
declaration.
54 After section 160AQF
Insert:
Franking with class A exempted amount
(1) If:
(a) a frankable dividend (the current dividend) is paid by a
former exempting company to a shareholder in that company; and
(b) the company is a resident at the time of payment; and
(c) where the current dividend is paid under a resolution:
(i) the company makes a declaration, before the reckoning day for the
current dividend, that each dividend to which the resolution relates is a class
A exempted dividend to the extent of a percentage (not exceeding 100%) specified
in the declaration in relation to the dividend; and
(ii) the percentage so specified is the same for each of the dividends to
which the resolution relates; and
(d) where the current dividend is not paid under a resolution—the
company makes a declaration before the reckoning day for the current dividend
that the current dividend is a class A exempted dividend to the extent of a
percentage (not exceeding 100%) specified in the declaration;
the current dividend is taken to have been class A exempted to the extent
of the amount calculated in accordance with the formula:
where:
current dividend is the amount of the current
dividend.
specified percentage is the percentage specified in the
declaration in relation to the dividend.
Note: Because of subsection 46M(3) and paragraph 46M(4)(a),
paragraph (c) of this subsection does not apply to dividends that are taken by
subsection 46M(3) or paragraph 46M(4)(a) not to be frankable
dividends.
Franking with class C exempted amount
(2) If:
(a) a frankable dividend (the current dividend) is paid by a
former exempting company to a shareholder in that company; and
(b) the company is a resident at the time of payment; and
(c) if the current dividend is paid under a resolution:
(i) before the reckoning day for the current dividend, the company makes a
declaration that each dividend to which the resolution relates is a class C
exempted dividend to the extent of a percentage (not exceeding 100%) specified
in the declaration in relation to the dividend; and
(ii) the percentage so specified is the same for each of the dividends to
which the resolution relates; and
(d) if the current dividend is not paid under a resolution—the
company makes a declaration before the reckoning day for the current dividend
that the current dividend is a class C exempted dividend to the extent of a
percentage (not exceeding 100%) specified in the declaration;
the current dividend is taken to have been class C exempted to the extent
of the amount worked out using the formula:
where:
current dividend means the amount of the current
dividend.
specified percentage means the percentage specified in the
declaration in relation to the dividend.
Note: Because of subsection 46M(3) and paragraph 46M(4)(a),
paragraph (c) of this subsection does not apply to dividends that are taken by
subsection 46M(3) or paragraph 46M(4)(a) not to be frankable
dividends.
Limits on exempted amounts
(3) Despite subsections (1) and (2), a dividend is taken not to have been
class A exempted or class C exempted if the sum of:
(a) the class A exempted amount of the dividend; and
(b) the class C exempted amount of the dividend; and
(c) any class A franked amount of the dividend; and
(d) any class C franked amount of the dividend;
exceeds the amount of the dividend.
Franking with exempted amounts limited to dividends on certain
shares
(4) A dividend is taken by subsection (1) or (2) to be class A exempted or
class C exempted only to the extent (if any) to which it is paid to:
(a) an eligible continuing substantial shareholder; or
(b) an employee who acquired the share in respect of which the dividend is
paid under an eligible employee share scheme.
All dividends paid under resolution to be franked to same
extent
(5) A former exempting company is not entitled to make a declaration under
subparagraph (1)(c)(i) or (2)(c)(i) specifying a percentage in relation to a
dividend paid to a shareholder in the company unless it also makes a declaration
under that subparagraph specifying the same percentage in relation to each other
frankable dividend in the same combined class of dividends that it paid to a
shareholder in the company.
All dividends not paid under resolution to be franked to same
extent
(6) A former exempting company is not entitled to make a declaration under
paragraph (1)(d) or (2)(d) specifying a percentage in relation to a dividend
paid to a shareholder in the company unless it also makes a declaration under
that paragraph specifying the same percentage in relation to each other
frankable dividend in the same combined class of dividends that it paid during
the same franking year to a shareholder in the company.
Declaration to be irrevocable
(7) A declaration made for the purposes of this section cannot be varied
or revoked.
55 Subsection 160AQG(2)
After “160AQF”, insert “or 160AQFA”.
56 Paragraph 160AQH(a)
Repeal the paragraph, substitute:
(a) if the company is not a former exempting company and the dividend is
not a franked dividend—a declaration to that effect; and
(aa) if the company is a former exempting company and the dividend is
neither a franked dividend nor an exempted dividend—a declaration to that
effect; and
57 Subparagraph
160AQH(b)(ii)
Repeal the subparagraph.
58 Paragraph 160AQH(c)
Repeal the paragraph, substitute:
(c) if the dividend is an exempted dividend—the exempted amount of
the dividend; and
(d) if the company is not a former exempting company and the dividend is a
franked dividend—the amount of the dividend that is not a franked amount;
and
(e) if the company is a former exempting company and the dividend is a
franked dividend or an exempted dividend or both—the amount of the
dividend that is neither a franked amount nor an exempted amount; and
(f) in any case—such other information in relation to the dividend
as is required by the approved form to be set out.
59 At the end of section
160AQH
Add:
(2) An exempting company that pays a dividend to a shareholder in the
company must, before or at the time of payment of the dividend, give to the
shareholder a statement to the effect that Australian resident shareholders are
not entitled to a franking rebate or franking credit in respect of the dividend
except for certain companies and employees who receive the dividend in
connection with an eligible employee share scheme.
60 Before subsection
160AQT(1)
Insert:
(1AAA) This section has effect subject to section 160AQTA.
61 At the end of Subdivision A of Division 6 of
Part IIIAA
Add:
Grossed-up amount not to be included in assessable income of
shareholder
(1) Subject to subsections (2) and (5), section 160AQT does not apply in
relation to a class A franked dividend, a class B franked dividend, or a class C
franked dividend, paid to a shareholder by an exempting company.
Exception where shareholder is life assurance company holding all the
shares or substantially bearing the risks associated with holding the
shares
(2) Subsection (1) does not preclude section 160AQT from applying in
relation to a franked dividend paid by an exempting company to a life assurance
company (other than a life assurance company acting as a trustee) in respect of
accountable shares held by the life assurance company in the exempting company
if:
(a) the exempting company and the life assurance company are members of
the same effectively wholly-owned group of companies; or
(b) the life assurance company holds more than 5% of the shares in the
exempting company (other than finance shares or dividend access shares within
the meaning of section 160APHBC or shares that do not carry the right to receive
dividends) and it would be reasonable to conclude that the risks involved in,
and the opportunities resulting from, holding those shares are substantially
borne by, or substantially accrue to, the life assurance company.
Matters to be taken into account in determining whether life assurance
company bears the risks associated with the holding of shares
(3) In deciding whether it would be reasonable to conclude as mentioned in
paragraph (2)(b):
(a) regard is to be had to any arrangement in respect of shares (including
unissued shares) in the exempting company held by persons who are not, and are
not associates of, the life assurance company (including any derivatives held or
issued in connection with those shares); but
(b) no regard is to be had to risks involved in the ownership of shares in
the exempting company that are substantially borne by any person in the
person’s capacity as a secured creditor.
Exception for grossing-up limited to grossed-up amount attributable to
credits arising while life assurance company held shares
(4) Subsection (2) does not apply to so much of the franked amount of a
franked dividend paid by an exempting company to a life assurance company as
related to franking credits of the exempting company that arose at a time before
the life assurance company acquired the shares in respect of which the dividend
was paid.
Exception where shares held under employee share scheme
(5) Subsection (1) does not preclude section 160AQT from applying in
relation to a franked dividend paid by an exempting company in respect of a
share held by a person who:
(a) was an employee of the company, or of a holding company of the
company, at the time when the dividend was paid; and
(b) acquired the share under an eligible employee share scheme;
and
(c) did not hold the share as a trustee.
Grossed-up amount to be included in assessable income of life assurance
company that holds shares
(1) Subject to this section, if:
(a) a class A exempted dividend, or a class C exempted dividend, is paid
in a year of income to a shareholder in a former exempting company in respect of
accountable shares held by the shareholder in the former exempting company;
and
(b) at both of the following times:
(i) the time when the dividend was paid;
(ii) the time immediately before the former exempting company ceased to be
an exempting company;
the shareholder was a life assurance company;
subsection 160AQT(1A) or (1C) applies as if the dividend were a class A
franked dividend or a class C franked dividend and the class A exempted amount
or class C exempted amount were a class A franked amount or a class C franked
amount, as the case may be.
Grossing-up limited to grossed-up amount attributable to credits arising
while life assurance company held shares
(2) Subsection (1) does not apply to so much of the exempted amount of an
exempted dividend paid by a former exempting company to a life assurance company
as related to exempting credits of the former exempting company that arose at a
time before the life assurance company acquired the shares in respect of which
the dividend was paid.
Grossed-up amount to be included in assessable income of holder of
shares under employee share scheme
(3) If a class A exempted dividend, or a class C exempted dividend, is
paid in a year of income in respect of a share in a former exempting company
held by a person who:
(a) was an employee of the company, or of a holding company of the
company, at the time when the dividend was paid; and
(b) acquired the share under an eligible employee share scheme;
subsection 160AQT(1) or (1AB) applies as if the dividend were a class A
franked dividend or a class C franked dividend and the class A exempted amount
or class C exempted amount were a class A franked amount or a class C franked
amount, as the case may be.
62 Paragraph 160AQUA(1)(a)
After “franked dividend”, insert “or exempted
dividend”.
63 At the end of Subdivision B of Division 7 of
Part IIIAA
Add:
Person holding an interest in a trust or partnership to be treated as
having received share of dividend directly from exempting company
(1) If:
(a) a class A franked dividend or a class C franked dividend (the
relevant dividend) is paid by an exempting company to a
shareholder that is a trustee of a trust or is a partnership; and
(b) at the time when the relevant dividend was paid, a person who held an
interest in the trust or partnership was a life assurance company, an exempting
company, or a person who acquired the interest under an eligible employee share
scheme, being a company or person in respect of whom or in respect of which a
franking credit or franking rebate would have arisen if the relevant dividend
had been paid to the company or person; and
(c) an amount attributable to the relevant dividend is included in the
assessable income of the holder of the interest, or would have been so included
if:
(i) sections 110C, 112A and 116FB had not been enacted; and
(ii) the definition of eligible insurance policy in section
116E were amended by omitting “an RA policy, a superannuation policy, a
sickness policy, a funeral policy or an eligible policy” and substituting
“an RA policy or a superannuation policy”;
then, for the purposes of the application of this Part in relation to the
holder of the interest, the part of the relevant dividend to which the amount
referred to in paragraph (1)(c) is attributable is taken:
(d) to have been a class A franked dividend or a class C franked dividend,
as the case may be, paid to the holder of the interest; and
(e) to have been franked to the same extent as the relevant
dividend.
Holding an interest in a trust
(2) A person is taken to hold an interest in a trust if:
(a) the person is a beneficiary under the trust; or
(b) the person derives, or will derive, income indirectly, through
interposed trusts or partnerships, from dividends received by the
trustee.
Holding an interest in a partnership
(3) A person is taken to hold an interest in a partnership if:
(a) the person is a partner in the partnership; or
(b) the person derives, or will derive, income indirectly, through
interposed trusts or partnerships, from dividends received by the
partnership.
Calculation of part of dividend to which amount received by holder of
interest is attributable
(4) For the purposes of subsection (1), the part of the relevant
dividend to which the amount referred to in paragraph (1)(c) is
attributable is taken to be the amount worked out using the
formula:
where:
amount of dividend means the amount of the relevant dividend
paid to the trustee or partnership.
share of income means the share of the income of the trust,
or of the income of the partnership, of the year of income to which the holder
of the interest is entitled.
total income means the income of the trust or partnership of
the year of income.
Person holding an interest in a trust or partnership to be treated as
having received share of dividend directly from former exempting
company
(1) If:
(a) a class A exempted dividend or a class C exempted dividend (the
relevant dividend) is paid by a former exempting company to a
shareholder that is a trustee of a trust or is a partnership; and
(b) at the time when the relevant dividend was paid, a person who held an
interest in the trust or partnership was a life assurance company, an exempting
company, a former exempting company, or a person who acquired the interest under
an eligible employee share scheme, being a company or person in respect of which
or in respect of whom a franking credit, franking rebate or exempting credit
would have arisen if the relevant dividend had been paid to the company or
person; and
(c) an amount attributable to the relevant dividend is included in the
assessable income of the holder of the interest, or would have been so included
if:
(i) sections 110C, 112A and 116FB had not been enacted; and
(ii) the definition of eligible insurance policy in section
116E were amended by omitting “an RA policy, a superannuation policy, a
sickness policy, a funeral policy or an eligible policy” and substituting
“an RA policy or a superannuation policy”;
then, for the purposes of the application of this Part in relation to the
holder of the interest, the part of the relevant dividend to which the amount
referred to in paragraph (1)(c) is attributable is taken:
(d) to have been a class A exempted dividend or a class C exempted
dividend, as the case may be, paid to the holder of the interest; and
(e) to have been exempted to the same extent as the relevant
dividend.
Holding an interest in a trust
(2) A person is taken to hold an interest in a trust if:
(a) the person is a beneficiary under the trust; or
(b) the person derives, or will derive, income indirectly, through
interposed trusts or partnerships, from dividends received by the
trustee.
Holding an interest in a partnership
(3) A person is taken to hold an interest in a partnership if:
(a) the person is a partner in the partnership; or
(b) the person derives, or will derive, income indirectly, through
interposed trusts or partnerships, from dividends received by the
partnership.
Calculation of part of dividend to which amount received by holder of
interest is attributable
(4) For the purposes of subsection (1), the part of the relevant
dividend to which the amount referred to in paragraph (1)(c) is attributable
is taken to be the amount worked out using the formula:
where:
amount of dividend means the amount of the relevant dividend
paid to the trustee or partnership.
share of income means the share of the income of the trust,
or of the income of the partnership, of the year of income to which the holder
of the interest is entitled.
total income means the income of the trust or partnership of
the year of income.
64 Paragraph 160ASC(b)
After “class C franking account
balance”, insert “and, if the company is a former exempting company,
includes a reference to matters relevant to working out the class A exempting
account balance or the class C exempting account balance”.
65 Subsection 177EA(1) (paragraph (a) of the
definition of franked)
After “160AQF”, insert “or 160AQFA”.
66 Paragraph 177EA(5)(a)
After “franking debit”, insert “or exempting
debit”.
67 Subsection 177EA(10)
Repeal the subsection, substitute:
Effect of determination of franking debit or exempting
debit
(10) If the Commissioner makes a determination under paragraph
(5)(a):
(a) on the day on which notice in writing of the determination is served
on the company, a franking debit or exempting debit of the company arises in
respect of the dividend; and
(b) the amount of the franking debit or exempting debit is such amount as
is stated in the Commissioner’s determination, being an amount
that:
(i) the Commissioner considers reasonable in the circumstances;
and
(ii) does not exceed the amount of the franking debit or exempting debit
of the company arising under section 160AQB or 160AQCNE in respect of the
dividend.
68 Subsection 177EA(16)
Repeal the subsection, substitute:
Meaning of franked distribution
(16) A distribution in respect of an interest in shares is taken to be
franked if:
(a) there is a class A flow-on franking amount, a class B flow-on franking
amount or a class C flow-on franking amount in relation to the relevant
partnership amount or trust amount; or
(b) the distribution is taken by section 160AQZB or 160AQZC to be
franked.
69 Subparagraph
177EA(18)(a)(i)
After “160APP”, insert “or 160APPA”.
70 At the end of subsection
177EA(18)
Add:
; or (e) the shareholder is a company and an exempting credit of the
company arises under section 160AQCNF.”.
71 Paragraph 177EA(19)(c)
After “franking credits” (wherever occurring), insert “or
exempting credits”.
72 Subsection 177EA(20)
Repeal the subsection, substitute:
Meaning of greater benefit from franking credits
(20) The circumstances in which the relevant taxpayer would, in a year of
income, derive a greater benefit from franking credits than
another person referred to in paragraph (19)(b) include, but are not limited
to:
(a) any of the following circumstances existing in relation to the other
person and not in relation to the relevant taxpayer:
(i) the person is a non-resident;
(ii) the amount of tax (if any) that, apart from Part IIIAA, would be
payable by the person is less than the amount of the rebate of tax to which the
person would be entitled under section 160AQU, 160AQX, 160AQY, 160AQYA, 160AQZ
or 160AQZA;
(iii) the person is a company that is unable to pay a dividend to its
shareholders in the year of income because it has not made any profits or has
not made sufficient profits to do so;
(iv) the person is an exempting company or a company for which no franking
credits arise; and
(b) any of the following circumstances existing in relation to the
relevant taxpayer and not in relation to the other person:
(i) a franking credit arises under section 160APPA;
(ii) a franking credit or exempting credit arises under section
160AQCNF;
(iii) subsection 160AQTA(2) or (5) applies;
(iv) section 160AQTB applies.
73 Subsection 221YHZC(1B)
Repeal the subsection, substitute:
(1B) Subsection (1A) does not apply in relation to income paid in respect
of a share investment if the income is paid as a dividend that has been franked
in accordance with section 160AQF or 160AQFA and:
(a) the franking percentage (within the meaning of section 160APA), if
any, in relation to the dividend is 100%; and
(b) if the dividend is an exempted dividend—the sum of the exempted
amount and the franked amount (if any) is equal to the amount of the
dividend.
74 Subsection 221YHZC(1D)
Repeal the subsection, substitute:
(1D) If:
(a) unattributed income is to be paid, in respect of a share investment,
as a dividend that has been franked in accordance with section 160AQF or
160AQFA; and
(b) the percentage to which the dividend has been franked in accordance
with section 160AQF or 160AQFA is less than 100%;
the amount to be deducted, in accordance with paragraph (1A)(d) of this
section, from the unattributed income is the amount (being a multiple of 5
cents) that is, or is nearest to, the amount worked out by using the
formula:
where:
exempted amount means the exempted amount in relation to the
dividend.
factor means the factor prescribed for the purposes of
subsection (1C).
franked amount means the franked amount (within the meaning
of section 160APA) in relation to the dividend.
unattributed income means the amount of unattributed
income.
75 After subsection
221YL(3)
Insert:
(3AA) For the purpose of determining whether a deduction is required to be
made under subsection (2) in relation to an exempted dividend paid to the
trustee of a trust, or a partnership, in which a non-resident holds an interest
within the meaning of section 160AQZB or 160AQZC, the dividend is taken to have
been franked in accordance with section 160AQFA to the extent of the lesser
of:
(a) so much of the dividend as the non-resident is entitled to receive or
to have credited to the non-resident, or otherwise dealt with on behalf of the
non-resident or as the non-resident directs, by the trustee or partnership;
and
(b) the exempted amount of the dividend.
76 Paragraph 365(3)(b)
After “160AQF”, insert “or 160AQFA”.
77 At the end of paragraph
377(1)(e)
Add “or 160AQFA”.
78 At the end of paragraph
402(2)(b)
Add “or 160AQFA”.
79 At the end of paragraph
436(1)(d)
Add “or 160AQFA”.
80 Statements given by company to shareholders
before 2 April 1998
A company is not liable to a penalty under section 160ARY merely
because:
(a) the company gave to a shareholder before 2 April 1998 a dividend
statement that complied with section 160AQH of the Income Tax Assessment Act
1936 as in force at the time when the statement was given; or
(b) the company gave to a shareholder before that date a dividend
statement that the Commissioner is satisfied reasonably complied with section
160AQH of the Income Tax Assessment Act 1936 as amended by this
Schedule.
81 Application
The amendments made by this Schedule apply to dividends paid at or after
7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 other
than:
(a) dividends declared before that time by a listed public company (within
the meaning of the Income Tax Assessment Act 1997); or
(b) dividends paid after that time that related to dividends referred to
in paragraph (a).