Commonwealth Numbered Acts

TAX LAW IMPROVEMENT ACT 1997 NO. 121, 1997 - SCHEDULE 11

Part 1—Amendment of the Income Tax (Transitional Provisions) Act 1997
1 At the end of Part 3-45

Add:

[The next Division is Division 387.]

Division 387—Capital allowances for primary producers and some land-holders

Table of Subdivisions

387-A Landcare operations
387-B Installations to conserve or convey water
387-D Establishing grapevines
387-E Mains electricity supply
387-F Telephone lines
387-G Forestry roads and timber mill buildings

Subdivision 387-A—Landcare operations

Table of sections

387-50 Application of Subdivision 387-A of the Income Tax Assessment Act 1997
387-80 Transitional provision for approved management plans
387-85 Transitional provisions for approvals of farm consultants

387-50 Application of Subdivision 387-A of the Income Tax Assessment Act 1997

Subdivision 387-A of the Income Tax Assessment Act 1997 applies to expenditure incurred in the 1997-98 income year or a later income year.

[The next section is section 387-80.]

387-80 Transitional provision for approved management plans

(1)

An approved land management plan under section 75D of the Income Tax Assessment Act 1936 is taken to be an approved management plan for the purposes of Subdivision 387-A of the Income Tax Assessment Act 1997 also.

Note: This means that you can deduct amounts for capital expenditure in the 1997-98 income year or a later income year on fencing under an approved management plan that was prepared or approved before the 1997-98 income year.

(2)

An approved management plan for the purposes of Subdivision 387-A of the Income Tax Assessment Act 1997 also has effect as if it were an approved land management plan under section 75D of the Income Tax Assessment Act 1936 .

Note: This allows an entity whose 1996-97 income year ends after 30 June 1997 to deduct expenditure incurred after that date on fencing under a management plan prepared or approved after 30 June 1997 but before the end of the entity's 1996-97 income year.

387-85 Transitional provisions for approvals of farm consultants

(1)

An approval of a person as a farm consultant for the purposes of section 75D of the Income Tax Assessment Act 1936 that was in force immediately before 1 July 1997 also has effect on and after that day as an approval of the person as a farm consultant for the purposes of Subdivision 387-A of the Income Tax Assessment Act 1997 (until the approval is revoked).

(2)

Anything done in relation to the approval under that Subdivision also has effect for the purposes of section 75D of the Income Tax Assessment Act 1936 .

(3)

If:

(a)

the Secretary to the Department of Primary Industries and Energy has authorised an officer of that Department to approve persons as farm consultants for the purposes of section 75D of the Income Tax Assessment Act 1936 ; and

(b)

the authority was in force immediately before 1 July 1997;

the authority also has effect on and after that day as an authority to approve persons as farm consultants for the purposes of Subdivision 387-A of the Income Tax Assessment Act 1997 (until the authority is revoked).

(4)

Anything relating to an authority done under that Subdivision also has effect for the purposes of section 75D of the Income Tax Assessment Act 1936 .

Subdivision 387-B—Installations to conserve or convey water

Table of sections

387-120 Application of Subdivision 387-B of the Income Tax Assessment Act 1997
387-140 Income Tax Assessment Act 1997 taken to apply to expenditure covered by section 75A or 75B of the Income Tax Assessment Act 1936

387-120 Application of Subdivision 387-B of the Income Tax Assessment Act 1997

(1)

Subdivision 387-B of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years, in relation to capital expenditure relating to a water facility, regardless of when it was incurred.

(2)

For the purpose of applying that Subdivision in relation to expenditure you incurred before the 1997-98 income year, you are taken to have incurred the amount of expenditure for which you could deduct an amount under section 75B of the Income Tax Assessment Act 1936 for an income year before the 1997-98 income year.

Note: This means that you cannot get a deduction under that Subdivision for expenditure that you recouped before the 1997-98 income year.

[The next section is section 387-140.]

387-140 Income Tax Assessment Act 1997 taken to apply to expenditure covered by section 75A or 75B of the Income Tax Assessment Act 1936

In determining whether section 387-140 of the Income Tax Assessment Act 1997 prevents you from deducting expenditure on acquiring a water facility, treat the following amounts as if they had been deducted under Subdivision 387-B of that Act:

(a)

an amount that was or can be deducted for any income year under section 75A or 75B of the Income Tax Assessment Act 1936 for earlier expenditure by any person on constructing or manufacturing the facility or on a previous acquisition of the facility;

(b)

an amount that could have been so deducted if the person who incurred the earlier expenditure had neither recouped it nor become entitled to recoup it.

[The next Subdivision is Subdivision 387-D.]

Subdivision 387-D—Establishing grapevines

Table of sections

387-300 Application of Subdivision 387-D of the Income Tax Assessment Act 1997
387-315 Deduction for destruction of grapevine established before 1997-98 income year

387-300 Application of Subdivision 387-D of the Income Tax Assessment Act 1997

(1)

Subdivision 387-D of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years, in relation to expenditure incurred on or after 1 July 1993.

(2)

For the purpose of applying that Subdivision in relation to expenditure you incurred before the 1997-98 income year, you are taken to have incurred the amount of expenditure for which you could deduct an amount under section 75AA of the Income Tax Assessment Act 1936 for an income year before the 1997-98 income year.

Note: This means that you cannot get a deduction under that Subdivision for expenditure that you recouped before the 1997-98 income year.

[The next section is section 387-315.]

387-315 Deduction for destruction of grapevine established before 1997-98 income year

Despite section 387-300 of this Act, section 387- 315 of the Income Tax Assessment Act 1997 applies in relation to a grapevine established before the 1997-98 income year and destroyed in that income year or later, as if section 387-305 of that Act had applied to assessments for income years before that income year.

Subdivision 387-E—Mains electricity supply

Table of sections

387-350 Application of Subdivision 387-E of the Income Tax Assessment Act 1997
387-375 Saving of deductions under section 70A of the Income Tax Assessment Act 1936

387-350 Application of Subdivision 387-E of the Income Tax Assessment Act 1997

Subdivision 387-E of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years, in relation to:

(a)

capital expenditure on connecting power to land or upgrading the connection, regardless of when it was incurred; and

(b)

contributions to the cost of connecting power to land or upgrading the connection, regardless of when they were made.

[The next section is section 387-375.]

387-375 Saving of deductions under section 70A of the Income Tax Assessment Act 1936

Subdivision 387-E of the Income Tax Assessment Act 1997 does not affect a deduction, or an entitlement to a deduction, under section 70A of the Income Tax Assessment Act 1936 for the 1996-97 income year or an earlier income year.

Subdivision 387-F—Telephone lines

Table of sections

387-400 Application of Subdivision 387-F of the Income Tax Assessment Act 1997
387-410 Disregarding deductions under section 70 of the Income Tax Assessment Act 1936
387-415 Saving of deductions under section 70 of the Income Tax Assessment Act 1936

387-400 Application of Subdivision 387-F of the Income Tax Assessment Act 1997

Subdivision 387-F of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years, in relation to capital expenditure on a telephone line, regardless of when it was incurred.

[The next section is section 387-410.]

387-410 Disregarding deductions under section 70 of the Income Tax Assessment Act 1936

(1)

In applying subsection 387- 410(1) of the Income Tax Assessment Act 1997 to work out whether you can deduct an amount under Subdivision 387-F of that Act for your expenditure, disregard any amount that you have deducted, or can deduct, for that expenditure under section 70 of the Income Tax Assessment Act 1936 .

Note: This ensures that you can deduct amounts under Subdivision 387-F of the Income Tax Assessment Act 1997 for the 1997-98 income year and later income years, even if you did or can deduct amounts for your expenditure under section 70 of the Income Tax Assessment Act 1936 for one or more income years before the 1997-98 income year.

(2)

Disregard an amount deducted or deductible for any income year under section 70 of the Income Tax Assessment Act 1936 for capital expenditure on a part of a telephone line by an entity that worked on installing that part, when applying subsection 387- 410(2) of the Income Tax Assessment Act 1997 to work out whether you can deduct an amount under that Subdivision.

Note: This helps prevent deductions by different entities for capital expenditure on the same part of a telephone line.

387-415 Saving of deductions under section 70 of the Income Tax Assessment Act 1936

Subdivision 387-F of the Income Tax Assessment Act 1997 does not affect a deduction, or an entitlement to a deduction, under section 70 of the Income Tax Assessment Act 1936 for the 1996-97 income year or an earlier income year.

Subdivision 387-G—Forestry roads and timber mill buildings

Table of sections

387-450 Application of Subdivision 387-G of the Income Tax Assessment Act 1997
387-470 Expenditure incurred before the 1997-98 income year
387-472 Treatment of deductions for income years before 1997-98
387-485 How the balancing adjustment is affected if there has only been old roll-over relief
387-505 Application of Common rule 1 to disposal of road or building under new law
387-507 Transitional provision for certain non-arm's length transactions

387-450 Application of Subdivision 387-G of the Income Tax Assessment Act 1997

Subdivision 387-G of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years, in relation to expenditure, regardless of when it was incurred.

[The next section is section 387-470.]

387-470 Expenditure incurred before the 1997-98 income year

(1)

The purpose of this section is to ensure that the amount of capital expenditure you must take into account for the purposes of working out the amount of a deduction under Subdivision 387-G of the Income Tax Assessment Act 1997 is the same as the amount of your capital expenditure taken into account as a basis for working out a deduction under section 124F or 124JA of the Income Tax Assessment Act 1936 .

(2)

This section applies if, before the 1997-98 income year, you incurred capital expenditure (the original expenditure ) on an access road or a timber mill building for which you did or can deduct an amount for an income year before the 1997-98 income year under section 124F or 124JA of the Income Tax Assessment Act 1936 .

(3)

For the purposes of Subdivision 387-G of the Income Tax Assessment Act 1997 :

(a)

you are taken to have incurred an amount (the base amount ) of capital expenditure on the road or building equal to:

(i)

what was your residual capital expenditure for the road or building for the purposes of section 124F or 124JA of the Income Tax Assessment Act 1936 immediately after you incurred the original expenditure; or

(ii)

if you incurred the original expenditure before the first income year for which you could deduct an amount for it—what was your residual capital expenditure for the road or building for the purposes of section 124F or 124JA of that Act at the start of that first income year; and

(b)

you are taken to have incurred the base amount:

(i)

when you incurred the original expenditure; or

(ii)

if you incurred the original expenditure before the first income year for which you could deduct an amount for it—at the start of that first income year.

Note: Your residual capital expenditure mentioned in subparagraph (3)(a)(i) will equal your capital expenditure (as affected by section 124H or 124JC of the Income Tax Assessment Act 1936 ) if you incurred the original expenditure on construction of an access road after the 1955-56 income year, or on construction of a timber mill building after the 1962-63 income year.

(4)

Despite subsection (3), if before the 1997-98 income year:

(a)

you incurred capital expenditure on constructing or acquiring an access road for which you did or can deduct an amount under section 124F of the Income Tax Assessment Act 1936 ; and

(b)

you stopped using the road for the purpose for which it was primarily and principally constructed; and

(c)

you started using the road again for that purpose;

you are taken to have incurred an amount of capital expenditure on the road equal to the amount described in subsection 124F(4) of that Act in the income year in which you started using the road again.

387-472 Treatment of deductions for income years before 1997-98

(1)

If you deducted, or can deduct, an amount for an income year (the old law year ) before the 1997-98 income year under section 124F or 124JA of the Income Tax Assessment Act 1936 for your expenditure on an access road or a timber mill building:

(a)

you are taken to have deducted that amount for the old law year under Subdivision 387-G of the Income Tax Assessment Act 1997 (which allows deductions for the 1997-98 income year and later income years for expenditure on forestry roads and timber mill buildings), as if that Subdivision had applied to assessments for the old law year; and

(b)

the amount is taken not to have been deducted or be deductible under section 124F or 124JA of the Income Tax Assessment Act 1936 .

(2)

This section applies only for the purposes of Subdivision 387-G of the Income Tax Assessment Act 1997 . It does not affect a deduction, or an entitlement to a deduction, under section 124F or 124JA of the Income Tax Assessment Act 1936 for an income year before the 1997-98 income year for the purposes of that Act.

[The next section is section 387-485.]

387-485 How the balancing adjustment is affected if there has only been old roll-over relief

(1)

If:

(a)

before the 1997-98 income year, roll-over relief was available under section 124GA or section 124JD of the Income Tax Assessment Act 1936 in relation to the disposal of an access road or a timber mill building by a taxpayer (the transferor ) to another taxpayer (the transferee ); and

(b)

in the 1997-98 income year or a later income year:

(i)

the road or building is destroyed; or

(ii)

the transferee disposes of it in circumstances where Subdivision 41-A of the Income Tax Assessment Act 1997 (which sets out Common rule 1 dealing with roll-over relief for related entities) does not apply to the disposal; or

(iii)

for some other reason, the transferee stops using it for the purpose for which it was primarily and principally constructed or acquired; and

(c)

there has been no earlier disposal of the road or building where roll-over relief was available under Common rule 1;

the balancing adjustment is affected in 2 ways.

(2)

First:

(a)

the total amounts deductible by the transferor under

section 124F or 124JA of the Income Tax Assessment Act 1936 in relation to the road or building; or

(b)

if there have been 2 or more prior applications of

section 124GA or 124JA of that Act in relation to the road or building—the total amounts deductible by the prior transferors under section 124F or 124JA of that Act in relation to the road or building;

are taken to have been deductible by the transferee under Subdivision 387-G of the Income Tax Assessment Act 1997 in relation to the road or building.

(3)

Second:

(a)

the transferor's total capital expenditure (of a kind that qualified for a deduction under section 124F or 124JA of the Income Tax Assessment Act 1936 ) relating to the road or building; or

(b)

if there have been 2 or more prior applications of

section 124GA or 124JD of that Act—the prior transferors' total capital expenditure (of a kind that qualified for a deduction under section 124F or 124JA of that Act) relating to the road or building;

is taken to have been the transferee's total capital expenditure (of a kind that qualified for a deduction under Subdivision 387-G of the Income Tax Assessment Act 1997 ) relating to the road or building.

[The next section is section 387-505.]

387-505 Application of Common rule 1 to disposal of road or building under new law

If:

(a)

you deducted or can deduct amounts for capital expenditure relating to an access road or a timber mill building under Division 10A of Part III of the Income Tax Assessment Act 1936 (except section 124J of that Act) for the 1996-97 income year or an earlier income year; and

(b)

in the 1997-98 income year or a later income year you dispose of the road or building;

Subdivision 41-A of the Income Tax Assessment Act 1997 (which sets out Common rule 1 dealing with roll-over relief for related entities) applies as if:

(c)

a reference in that Common rule to the rules for the capital allowance included a reference to that Division (except section 124J); and

(d)

that Common rule had applied to any disposal of the road or building during or before the 1996-97 income year for which roll-over relief was available under section 124GA or 124JD of the Income Tax Assessment Act 1936 .

387-507 Transitional provision for certain non-arm's length transactions

(1)

If:

(a)

an entity incurred capital expenditure on an access road or a timber mill building for which the entity has deducted, or can deduct, an amount for a year of income before the

1997-98 income year under Division 10A of Part III of the Income Tax Assessment Act 1936 (except section 124J); and

(b)

the entity disposes of the road or building during the 1997-98 income year or a later income year in a transaction in which the parties do not deal at arm's length; and

(c)

under the transaction the entity receives an amount less than the market value of what the amount is for; and

(d)

subsection 41- 65(2) of the Income Tax Assessment Act 1997 does not apply;

the entity is taken to have received that market value for the disposal.

(2)

In determining whether the parties to the transaction dealt at arm's length, consider any connection between them, as well as any other relevant circumstance.

Part 2—Consequential amendment of the Income Tax Assessment Act 1997
2 Section 10-5 (table item headed "timber")

Omit:

substitute:

3 Section 10-5 (table item headed "timber")

Omit "124JB", substitute "387-485".

4 Section 12-5 (table item headed "electricity connections")

Omit "70A", substitute "Subdivision 387-E".

5 Section 12-5 (table item headed "primary production")

Omit:

substitute:

6 Section 12-5 (table item headed "primary production")

Omit:

substitute:

7 Section 12-5 (table item headed "primary production")

Omit "70", substitute "Subdivision 387-F".

8 Section 12-5 (table item headed "primary production")

Omit "75B", substitute "Subdivision 387-B".

9 Section 12-5 (table item headed "timber")

Omit:

10 Section 12-5 (table item headed "timber")

After:

insert:

11 Section 12-5 (table item headed "timber")

Omit "124JA to 124JD", substitute "Subdivision 387-G".

12 Section 40-30 (table item dealing with electricity connections, column headed "What expenditure qualifies?")

Omit "mains electricity facilities on land used or intended for use in producing assessable income", substitute "supply of mains electricity for use in a business for producing assessable income on land in Australia".

13 Section 40-30 (table item dealing with electricity connections, column headed "For more detail, see ...")

Omit "Section 70A", substitute "Subdivision 387-E".

14 Section 40-30 (table item dealing with grapevines, column headed "For more detail, see ...")

Omit "Section 75AA", substitute "Subdivision 387-D".

15 Section 40-30 (table item dealing with land degradation)

Omit "Land degradation", substitute "Landcare operations".

16 Section 40-30 (table item dealing with land degradation, column headed "What expenditure qualifies?")

Omit "activities to prevent degradation of land", substitute "landcare operations".

17 Section 40-30 (table item dealing with land degradation, column headed "For more detail, see ...")

Omit "Section 75D", substitute "Subdivision 387-A".

18 Section 40-30 (table item dealing with telephone lines, column headed "For more detail, see ...")

Omit "Section 70", substitute "Subdivision 387-F".

19 Section 40-30 (table item dealing with timber mill buildings, column headed "For more detail, see ...")

Omit "Subdivision B of Division 10A of Part III", substitute "Subdivision 387-G".

20 Section 40-30 (table item dealing with timber operations)

Omit "operations: access", substitute "operations: forestry".

21 Section 40-30 (table item dealing with timber operations, column headed "What expenditure qualifies?")

Omit "on access", substitute "on forestry".

22 Section 40-30 (table item dealing with timber operations, column headed "For more detail, see ...")

Omit "Subdivision A of Division 10A of Part III", substitute "Subdivision 387-G".

23 Section 40-30 (table item dealing with water conservation, column headed "For more detail, see ...")

Omit "Section 75B", substitute "Subdivision 387-B".

24 Section 41-5 (after the table item dealing with depreciation)

Insert:

25 Section 41-5 (at the end of the table)

Add:

26 Paragraph 43-70(2)(f)

Repeal the paragraph, substitute:

(f)

expenditure on property for which a deduction is allowable, or would be allowable if the property were for use for the ^* purpose of producing assessable income, under:

(i)

Division 330 of this Act or Division 10, 10AAA or 10AA of Part III of the Income Tax Assessment Act 1936 (all of which deal with mining and/or quarrying); or

(ii)

section 73A of the Income Tax Assessment Act 1936 (Expenditure on scientific research); or

(iii)

Subdivision 387-A of this Act or section 75D of the Income Tax Assessment Act 1936 (both of which allow deductions for capital expenditure to prevent land degradation); or

(iv)

Subdivision 387-B of this Act or section 75B of the Income Tax Assessment Act 1936 (both of which allow deductions for capital expenditure on facilities to conserve or convey water); or

(v)

Subdivision 387-G of this Act or section 124F or 124JA of the Income Tax Assessment Act 1936 (all of which allow deductions for capital expenditure on forestry roads and/or timber mill buildings); or

27 Subsection 995- 1(1)

Insert: