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TAX LAW IMPROVEMENT ACT 1997 NO. 121, 1997 - SCHEDULE 5

- Trading stock (and some related matters)

Part 1—Amendment of the Income Tax (Transitional Provisions) Act 1997
1 At the end of Chapter 2

Add:

Part 2-25—Trading stock

[The next Division is Division 70.]

Division 70—Trading stock

Table of sections

70-1 Application of Division 70 of the Income Tax Assessment Act 1997
70-5 Treatment of items that become trading stock because of the change of definition
70-10 Accounting for your disposal of items that stop being trading stock because of the change of definition
70-20 Application of section 70-20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997
70-40 Value of trading stock at the start of the 1997-98 income year
70-55 Cost of live stock acquired by natural increase
70-70 Valuing interests in FIFs on hand at the start of 1991-92
70-90 Application of sections 70-90 and 70- 95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business
70-100 Application of section 70-100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business
70-105 Application of section 70- 105 of the Income Tax Assessment Act 1997 to deaths on or after 1 July 1997
70-115 Application of section 70- 115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997-98 and later income years

70-1 Application of Division 70 of the Income Tax Assessment Act 1997

(1)
Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years. (It applies to assessments for the 1997-98 income year as if the value of trading stock on hand at the start of that year were the value specified in section 70-40 of this Act.)

(2)
However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act.


Application provisions for specific sections




Item


This section of the Income Tax Assessment Act 1997 ...


Applies as described in this provision of this Act ...


1


70-20


70-20


2


70-55


70-55(1)


3


70-70


70-70


4


70-90


70-90


5


70-95


70-90


6


70-100


70-100


7


70-105


70-105


8


70-115


70-115


70-5 Treatment of items that become trading stock because of the change of definition

If:

(a)
immediately before the 1997-98 income year you owned an item that was not trading stock as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and
(b)
at the start of that income year you hold the item as trading stock as defined in section 70-10 of the Income Tax Assessment Act 1997 (the 1997 Act );

section 70-30 of the 1997 Act applies as if you had started to hold the item as trading stock as defined in section 70-10 of the 1997 Act immediately after the start of that income year.

70-10 Accounting for your disposal of items that stop being trading stock because of the change of definition

(1)
This section explains how to account for your disposal of an item if:

(a)
immediately before 1 July 1997, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and
(b)
the item has not been an item of your trading stock, as defined in section 70-10 of the Income Tax Assessment Act 1997 , after that time; and
(c)
the disposal occurs on or after 1 July 1997; and
(d)
subsection 36(1) of the Income Tax Assessment Act 1936 would have applied to the disposal if it had occurred before 1 July 1997.
Example: This section applies to your disposal on or after 1 July 1997 of an item you produced, manufactured, acquired or purchased before that day for manufacture, sale or exchange, but did not hold for that purpose immediately before that day or since the start of that day.

(2)
Sections 70-90 and 70- 95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70-10 of the Income Tax Assessment Act 1997 ).

Note: Applying those sections ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock.

[The next section is section 70-20.]

70-20 Application of section 70-20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997

Section 70-20 (Non-arm's length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997.

[The next section is section 70-40.]

70-40 Value of trading stock at the start of the 1997-98 income year

(1)
The value of an item of trading stock on hand at the start of the 1997-98 income year is its value as taken into account at the end of the 1996-97 income year under Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 .

(2)
The value of the item is a nil amount if the item was not taken into account as described in subsection (1).

[The next section is section 70-55.]

70-55 Cost of live stock acquired by natural increase

(1)
Section 70- 55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997-98 income year.

(2)
For the purposes of Subdivision 70-C of the Income Tax Assessment Act 1997 , the cost of an animal acquired by natural increase before the 1997-98 income year is the cost price of the animal under section 34 of the Income Tax Assessment Act 1936 .

[The next section is section 70-70.]

70-70 Valuing interests in FIFs on hand at the start of 1991-92

(1)
If:

(a)
an interest in a FIF was an item of your trading stock on hand at the start of the 1991-92 income year; and
(b)
that interest was also an item of your trading stock on hand at the end of the 1997-98 income year or a later income year;

the value of the item at the end of the 1997-98 or later income year is the value of the item as taken into account under Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991-92 income year.

(2)
This section has effect despite section 70-45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997 , but subject to subsection 70-70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act.

Effect of election under subsection 31(5) of the Income Tax Assessment Act 1936 on valuation of interests in FIFs

(3)
If you made an election under subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70-70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70-70(2).

[The next section is section 70-90.]

70-90 Application of sections 70-90 and 70- 95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business

Sections 70-90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70-95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997.

[The next section is section 70-100.]

70-100 Application of section 70-100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business

Basic application

(1)
Section 70-100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997.

Transitional provision if that section affects an assessment for 1996-97

(2)
The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70-C of the Income Tax Assessment Act 1997 ) if:

(a)
that section affects an assessment for the 1996-97 year of income under the Income Tax Assessment Act 1936 ; and
(b)
an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity.
Note: Section 70-100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996-97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996-97 income year ending on or after 1 July 1997.

70-105 Application of section 70- 105 of the Income Tax Assessment Act 1997 to deaths on or after 1 July 1997

(1)
Section 70-105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997.

Transitional provision if that section affects an assessment for 1996-97

(2)
The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70-C of the Income Tax Assessment Act 1997 ) if:

(a)
that section affects an assessment for the 1996-97 year of income under the Income Tax Assessment Act 1936 ; and
(b)
an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value.
Note: Section 70- 105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996-97 income year if an entity on which the item devolves has a 1996-97 income year ending on or after 1 July 1997.

[The next section is section 70-115.]

70-115 Application of section 70- 115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997-98 and later income years

Section 70-115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997-98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997-98 income year.

2 At the end of Part 3-45

Add:

[The next Division is Division 385.]

Division 385—Primary production

Table of sections

385-100 Application of Subdivision 385-E of the Income Tax Assessment Act 1997 to disposal or death of live stock on or after 1 July 1997
385-130 Application of Subdivision 385-F of the Income Tax Assessment Act 1997 to loss of live stock or trees in 1997-98 and later income years
385-135 Application of Subdivision 385-G of the Income Tax Assessment Act 1997 to earlier than normal wool clips in 1997-98 and later income years

385-100 Application of Subdivision 385-E of the Income Tax Assessment Act 1997 to disposal or death of live stock on or after 1 July 1997

Subdivision 385-E (Primary producer can elect to spread or defer tax on profit from forced disposal or death of live stock) of the Income Tax Assessment Act 1997 applies to a disposal or death of live stock on or after 1 July 1997.

[The next section is section 385-130.]

385-130 Application of Subdivision 385-F of the Income Tax Assessment Act 1997 to loss of live stock or trees in 1997-98 and later income years

Subdivision 385-F (Insurance for loss of live stock or trees) of the Income Tax Assessment Act 1997 applies if your assessable income for the 1997-98 income year or a later income year would include an insurance recovery.

385-135 Application of Subdivision 385-G of the Income Tax Assessment Act 1997 to earlier than normal wool clips in 1997-98 and later income years

(1)
Subdivision 385-G (Double wool clips) of the Income Tax Assessment Act 1997 applies if your assessable income for the 1997-98 income year or a later income year would include the proceeds of the sale of 2 wool clips.

Election to defer including profit on second wool clip in 1997-98 income year

(2)
Section 385-135 (Election to defer including profit on second wool clip) of the Income Tax Assessment Act 1997 applies to the 1997-98 income year as if:

(a)
subparagraph 385-135(3)(b)(ii) referred to wool that you took into account at cost price under section 31 of the Income Tax Assessment Act 1936 (instead of wool you took into account at cost under Division 70 of the Income Tax Assessment Act 1997 ); and
(b)
subparagraph 385-135(3)(b)(iii) referred to an election under section 26BA of the Income Tax Assessment Act 1936 (instead of an election under section 385-135 itself).

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

Omit "26B", substitute "385-130".

4 Section 10-5 (table item headed "compensation")

Omit "26(j)" (last occurring), substitute "70-115".

5 Section 10-5 (table item headed "live stock")

Omit "36, 36AAA, 36AA" (first occurring), substitute "Subdivision 385-E".

6 Section 10-5 (table item headed "live stock")

Omit "36, 36AAA, 36AA" (second and third occurring), substitute "385-160, 385-163".

7 Section 10-5 (table item headed "live stock")

Omit "36, 36AAA, 36AA" (last occurring), substitute "Subdivision 385-E, 385-160".

8 Section 10-5 (table item headed "trading stock")

Omit "36A", substitute "70-100".

9 Section 10-5 (table item headed "trading stock")

Omit "37", substitute "70-105".

10 Section 10-5 (table item headed "trading stock")

Omit "28", substitute "70-35".

11 Section 10-5 (table item headed "trading stock")

Omit "31C", substitute "70-20".

12 Section 10-5 (table item headed "trading stock")

Omit "36(1)", substitute "70-90, 70-95".

13 Section 12-5 (after table item headed "currency exchange gains and losses")

Insert:

death of timber owner



see timber



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

After " electricity connections ", insert "and timber ".

15 Section 12-5 (table item headed "tax avoidance schemes")

Omit "31C", substitute "70-20".

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

Omit:

land attributable to felled timber, part of purchase price


124J


substitute:

death of owner of land carrying trees, deduction of the part of land price paid for trees



70-120


disposal of land carrying trees, deduction of the part of land price paid for trees



70-120


felling trees, deduction of price of land attributable to trees felled or of price of right to fell trees



70-120


17 Section 12-5 (table item headed "trading stock")

Omit "28(3)", substitute "70-35(3)".

18 Section 12-5 (table item headed "trading stock")

Omit "51(2)", substitute "70-25".

19 Section 12-5 (table item headed "trading stock")

Omit "51(2A)", substitute "70-15".

20 Section 12-5 (table item headed "trading stock")

After " tax avoidance schemes ", insert "and timber ".

21 Paragraph 165-60(3)(a) (note)

After "See", insert "section 385-130 of this Act and".

22 Paragraph 165-60(3)(b) (note)

After "See", insert "Subdivision 385-E and section 385-160 of this Act and".

23 Subsection 165-60(4)

Omit "26BA (Double wool clips) of the Income Tax Assessment Act 1936 ", substitute "385-135 (Election to defer including profit on second wool clip)".

24 Application of amendment of subsection 165-60(4)

The amendment made by item 23 applies for assessments for the 1998-99 income year and later income years.

25 Subsection 995- 1(1)

Insert:

"consideration receivable":

(a)
consideration receivable on the disposal of a leased * car has the meaning given by section 20-115; and
(b)
consideration receivable for trading stock changing hands has the meaning given by subsection 70-100(11).

26 Subsection 995- 1(1)

Insert:

"cost":

(a)
cost of a unit of * plant for depreciation purposes has the meaning given by Subdivision 42-B; and
(b)
cost of an item of * trading stock, in the case of an animal that you acquired by natural increase, has the meaning given by section 70-55.

Note: The cost of an animal acquired by natural increase before the 1997-98 income year is the cost price of the animal under section 34 of the Income Tax Assessment Act 1936 . See subsection 70- 55(2) of the Income Tax (Transitional Provisions) Act 1997 .

27 Subsection 995- 1(1)

Insert:

"disentitling event" has the meaning given by section 385-163.

28 Subsection 995- 1(1)

Insert:

"disposal year" has the meaning given by subsection 385-105(2).

29 Subsection 995- 1(1)

Insert:

"FIF" has the meaning given by section 481 of the Income Tax Assessment Act 1936 .

30 Subsection 995- 1(1)

Insert:

"foreign investment fund" means a FIF as defined by section 481 of the Income Tax Assessment Act 1936 .

31 Subsection 995- 1(1)

Insert:

"horse opening value" has the meaning given by subsection 70-65(1).

32 Subsection 995- 1(1)

Insert:

"horse reduction amount" has the meaning given by

subsection 70-65(2).

33 Subsection 995- 1(1)

Insert:

live stock does not include animals used as beasts of burden or working beasts in a * business other than a * primary production business.

34 Subsection 995- 1(1)

Insert:

"notional accounting period" has the meaning given by section 486 of the Income Tax Assessment Act 1936 .

35 Subsection 995- 1(1)

Insert:

"primary production business": you carry on a primary production business if you carry on a * business of:

(a)
cultivating or propagating plants, fungi or their products or parts (including seeds, spores, bulbs and similar things), in any physical environment; or
(b)
maintaining animals for the purpose of selling them or their bodily produce (including natural increase); or
(c)
manufacturing dairy produce from raw material that you produced; or
(d)
conducting operations relating directly to taking or catching fish, turtles, dugong, bêche-de-mer, crustaceans or aquatic molluscs; or
(e)
conducting operations relating directly to taking or culturing pearls or pearl shell; or
(f)
planting or tending trees in a plantation or forest that are intended to be felled; or
(g)
felling trees in a plantation or forest; or
(h)
transporting trees, or parts of trees, that you felled in a plantation or forest to the place:
(i)
where they are first to be milled or processed; or
(ii)
from which they are to be transported to the place where they are first to be milled or processed.

36 Subsection 995- 1(1)

Insert:

"proceeds of the disposal or death" has the meaning given by subsection 385-100(2).

37 Subsection 995- 1(1)

Insert:

proceeds of the sale of 2 wool clips has the meaning given by subsection 385-135(3).

38 Subsection 995- 1(1)

Insert:

"reduction amount" has the meaning given by subsections 385-120(2) and (3).

39 Subsection 995- 1(1)

Insert:

"tax profit on the disposal or death" has the meaning given by subsection 385-105(3).

40 Subsection 995- 1(1)

Insert:

"trading stock" has the meaning given by section 70-10, as modified by sections 124ZO and 124ZQ of the Income Tax Assessment Act 1936 .

41 Subsection 995- 1(1)

Insert:

"unused tax profit on the disposal or death" has the meaning given by subsection 385-110(3).

42 Subsection 995- 1(1)

Insert:

"value" of an item of * trading stock has the meaning given by Subdivision 70-C.

Note: For the value of trading stock at the start of the 1997-98 income year, see section 70-40 of the Income Tax (Transitional Provisions) Act 1997 .

Part 3—Consequential amendment of the Income Tax Assessment Act 1936
43 Subsection 6(1) (definition of trading stock )

Repeal the definition, substitute:

"trading stock" has the meaning given by section 70-10 of the Income Tax Assessment Act 1997 .

44 Paragraph 6BA(3)(a)

Repeal the paragraph, substitute:

(a)
the value of such of the original shares and bonus shares as the taxpayer elects under section 70- 45 of the Income Tax Assessment Act 1997 to value at cost; and

45 Subsection 26B(2)

After "year of income", insert "before the 1997-98 year of income".

46 At the end of subsection 26B(2)

Add:

Note: Subdivision 385-F (Insurance for loss of live stock or trees) of the Income Tax Assessment Act 1997 allows an election to reduce the amount of an insurance recovery received in or after the 1997-98 year of income.

47 Before subsection 26BA(2)

Insert:

(1A)
A taxpayer cannot make an election under subsection (3) relating to the 1997-98 year of income or a later year of income. However, this does not limit the effect of paragraph (6)(b) or subsection (7) in relation to an election that relates to the 1996-97 year of income.

Note: Subdivision 385-G (Double wool clips) of the Income Tax Assessment Act 1997 provides for elections for the 1997-98 year of income and later years of income.

48 Before subsection 28(1)

Insert:

(1A)
This section does not apply to the 1997-98 year of income or a later year of income.

Note: Subdivision 70-C (Accounting for trading stock you hold at the start or end of the income year) of the Income Tax Assessment Act 1997 applies to those years of income.

49 At the end of section 29

Add:

(2)
This section does not apply to the valuation of live stock or other trading stock at the beginning of the 1997-98 year of income or at the beginning of a later year of income.

Note: Section 70-40 (Value of trading stock at start of income year) of the Income Tax Assessment Act 1997 applies to the valuation of trading stock at the beginning of those years of income. Section 70-40 (Value of trading stock at the start of the 1997-98 income year) of the Income Tax (Transitional Provisions) Act 1997 is also relevant.

50 Before subsection 31(1)

Insert:

(1A)
This section does not apply to the valuation of trading stock at the end of the 1997-98 year of income or at the end of a later year of income.

Note: Section 70-45 (Value of trading stock at end of income year) of the Income Tax Assessment Act 1997 deals with the valuation of trading stock at the end of those years of income. Section 70-70 (Valuing interests in FIFs) of that Act provides special rules for valuing interests in FIFs for those years of income.

51 Before subsection 31C(1)

Insert:

(1A)
This section applies only to a purchase that takes place before 1 July 1997.

Note: Section 70-20 (Non-arm's length transactions) of the Income Tax Assessment Act 1997 deals with purchases taking place on or after 1 July 1997.

52 Before subsection 32(1)

Insert:

(1A)
This section does not apply to the valuation of live stock at the end of the 1997-98 year of income or at the end of a later year of income.

Note: Section 70-45 (Value of trading stock at end of income year) of the Income Tax Assessment Act 1997 applies to the valuation of live stock at the end of those years of income. Section 70-60 (Valuation of horse breeding stock) of the Income Tax Assessment Act 1997 also applies to the valuation of horse breeding stock at the end of those years.

53 After subsection 32A(1)

Insert:

(1A)
This section does not apply to the valuation of horse breeding stock at the end of the 1997-98 year of income or at the end of a later year of income.

Note: Section 70-45 (Value of trading stock at end of year) or 70-60 (Valuation of horse breeding stock) of the Income Tax Assessment Act 1997 applies to such a valuation.

54 At the end of section 33

Add:

(2)
This section does not apply to the valuation of live stock at the end of the 1997-98 year of income or at the end of a later year of income.

Note: For those income years, the Income Tax Assessment Act 1997 does not prevent a change in the basis for valuing your live stock.

55 Before subsection 34(1)

Insert:

(1A)
This section does not apply to animals acquired by natural increase in the 1997-98 year of income or a later year of income.

Note: Section 70-55 (Working out the cost of natural increase of live stock) of the Income Tax Assessment Act 1997 applies to live stock acquired by natural increase in those years of income.

56 Before subsection 36(1)

Insert:

(1A)
Subsection (1) applies to a disposal of property only if the disposal takes place before 1 July 1997.

Note: Sections 70-90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70-95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 deal with a disposal occurring on or after 1 July 1997.

57 After subsection 36(1)

Insert:

(2A)
Subsection (3) does not apply to a disposal of live stock that takes place on or after 1 July 1997.

Note: Subdivision 385-E (Primary producer can elect to spread or defer tax on profit from forced disposal or death of live stock) of the Income Tax Assessment Act 1997 deals with such a disposal.

58 After subsection 36(7)

Insert:

(7AA)
Subsection (7A) does not allow a deduction for the 1997-98 year of income or a later year of income.

Note: Paragraph 70-120(2)(c) and subsection 70-120(5) of the Income Tax Assessment Act 1997 allow you to deduct the price you paid for trees on land, and associated capital expenditure, if you dispose of the trees in one of those years of income outside the ordinary course of carrying on a business.

59 Before subsection 36AAA(1)

Insert:

(1AAA)
This section does not apply to a disposal or death of live stock on or after 1 July 1997.

Note: Subdivision 385-E (Primary producer can elect to spread or defer tax on profit from forced disposal or death of live stock) of the Income Tax Assessment Act 1997 deals with such a disposal or death.

60 Before subsection 36AA(1)

Insert:

(1AA)
This section does not apply to a disposal or death of live stock on or after 1 July 1997.

Note: Subdivision 385-E (Primary producer can elect to spread or defer tax on profit from forced disposal or death of live stock) of the Income Tax Assessment Act 1997 deals with such a disposal or death.

61 Before subsection 36A(1)

Insert:

(1A)
Subsection (1) applies to a change of ownership of, or interests in, property only if the change takes place before 1 July 1997.

Note: Section 70-100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 deals with a change taking place on or after 1 July 1997.

62 Before subsection 37(1)

Insert:

(1A)
Subsection (1) applies only to property devolving as a result of a person dying before 1 July 1997.

Note: Section 70-105 (Death of owner) of the Income Tax Assessment Act 1997 applies to property devolving as a result of a person dying on or after 1 July 1997.

63 Subsection 46(7A)

Repeal the subsection, substitute:

(7A)
Subsection (7B) applies if:

(a)
a shareholder that is a company elects to value an item of trading stock in a particular way under section 70- 45 of the Income Tax Assessment Act 1997 ; and
(b)
that value is greater than it would have been if the shareholder had elected to value the item in a different way; and
(c)
the shareholder made the actual election for the purpose, or for purposes including the purpose, of increasing the rebate to which the shareholder would be entitled under subsection (2) or (2A), or the rebate that might be allowed to the shareholder under subsection (3).
(7B)
In calculating the rebate, the following are determined as if the shareholder had instead elected to value the item at the lowest amount at which the shareholder could have elected to value it under section 70- 45 of the Income Tax Assessment Act 1997 :

(a)
the part of any dividends (except PDF dividends) included in the shareholder's taxable income;
(b)
the part of any private company dividends included in the shareholder's taxable income;
(c)
the part of any PDF dividends included in the shareholder's taxable income.

64 After subsection 47A(10)

Insert:

(10A)
Subsection (10) does not apply to a transfer that is taken by section 70-30 or 70-110 of the Income Tax Assessment Act 1997 to have occurred.

65 After subsection 51(2)

Insert:

(2AA)
Subsection (2A) does not apply to expenditure incurred in the 1997-98 year of income or a later year of income.

Note: Section 70-15 (In which income year do you deduct an outgoing for trading stock?) of the Income Tax Assessment Act 1997 deals with deduction of expenditure incurred in those years of income.

66 Paragraph 51(2A)(c)

After "this subsection", insert "and subsection (1A)".

67 Subsection 51(2A)

After "subsection (1)" (last occurring), insert "or section 8-1 of the Income Tax Assessment Act 1997 (as appropriate)".

68 Subsection 52A(7)

Omit "or cost price".

69 Subsection 52A(7)

Omit "Subdivision B of Division 2 of Part III", substitute "Divisions 70 (Trading stock) and 385 (Primary production) of the Income Tax Assessment Act 1997 ".

70 Subsection 82KH(1N)

Omit "Subdivision B of Division 2 of Part III", substitute "Division 70 (Trading stock) or 385 (Primary production) of the Income Tax Assessment Act 1997 ".

71 Subsection 82KH(1N)

Omit "or cost price".

72 Subsection 82KL(6)

After "this Act" (first occurring), insert "and the Income Tax Assessment Act 1997 ".

73 Subsection 82KL(6)

After "this Act" (second occurring), insert "or that Act".

74 Subsection 82KL(6)

After "Subdivision B of Division 2 of Part III", insert "of this Act or Division 70 (Trading stock) or 385 (Primary production) of the Income Tax Assessment Act 1997 ".

75 Subsection 83(2)

Omit "paragraph 36(8)(a) and to".

76 Subsection 83(2)

After "subsection 73A(4)", insert "of this Act and to sections 70-90 and 70- 95 of the Income Tax Assessment Act 1997 ".

77 Subsection 100A(6B)

After "this Act" (first occurring), insert "and the Income Tax Assessment Act 1997 ".

78 Subsection 100A(6B)

After "this Act" (second occurring), insert "or that Act".

79 Subsection 100A(6B)

After "Subdivision B of Division 2", insert "of Part III of this Act or Division 70 (Trading stock) or 385 (Primary production) of the Income Tax Assessment Act 1997 ".

80 Section 102AAY

Repeal the section, substitute:

102AAY Modified application of trading stock provisions

When applying this Act and the Income Tax Assessment Act 1997 in calculating the attributable income of the trust estate, Division 70 of the Income Tax Assessment Act 1997 has effect as if the cost of the item of trading stock were the value to be taken into account at the start of the year of income.

81 After subsection 103A(3B)

Insert:

(3C)
Paragraph (3A)(c) does not apply to an acquisition that is taken by section 70-30 or 70-110 of the Income Tax Assessment Act 1997 to have occurred.

82 Subsection 121G(10)

Omit all the words after "in respect of", substitute "expenditure:

(a)
taken under sections 36 and 36A of this Act to have been incurred in the acquisition of trading stock by the partnership; or
(b)
taken under sections 70-90 and 70-95 and subsection 70-100(3) of the Income Tax Assessment Act 1997 to have been incurred in the acquisition of trading stock by the partnership.".

83 Subsection 136AB(2)

Omit "31C", substitute "70-20 of the Income Tax Assessment Act 1997 ".

84 Paragraphs 160L(3)(a) and (4)(a)

Omit "throughout the period when the asset was owned by the taxpayer", substitute "at the time of the disposal".

85 Paragraph 160L(5)(a)

Omit "throughout the period when the asset was a partnership asset of the partnership", substitute "at the time of the disposal".

86 At the end of section 160ZB

Add:

(7)
When an item already owned by a taxpayer becomes trading stock of the taxpayer:

(a)
a capital gain does not accrue to the taxpayer; and
(b)
the taxpayer does not make a capital loss;

if the taxpayer elects under paragraph 70-30(1)(a) of the Income Tax Assessment Act 1997 to be treated as having sold the item for its cost (as worked out under that section).

87 After paragraph 170(10AA)(a)

Insert:

(h)
section 70-20;

88 After paragraph 170(10AA)(m)

Insert:

(r)
Subdivision 385-E and section 385-160;

89 Subsection 225(5)

Omit "section 31C,".

90 Subsection 225(5)

After "Part IVA", insert "of this Act or section 70-20 of the Income Tax Assessment Act 1997 ".

91 Section 397

Repeal the section, substitute:

397 Modified application of trading stock provisions

When applying this Act and the Income Tax Assessment Act 1997 in calculating the attributable income of the eligible CFC:

(a)
Subdivision B of Division 2 of Part III of this Act has effect as if the value of any article of trading stock to be taken into account at the beginning or end of a year of income were its cost price; and
(b)
Division 70 of the Income Tax Assessment Act 1997 has effect as if the value of any item of trading stock to be taken into account at the beginning or end of an income year were its cost.

92 Section 520

Omit "31", substitute "70-70 of the Income Tax Assessment Act 1997 ".

93 Paragraph 521(a)

Omit "31(5)", substitute "70-70(2) of the Income Tax Assessment Act 1997 ".

Part 4—Consequential amendments of other Acts

Cattle Transaction Levy Act 1995

94 At the end of paragraph 4(2)(f)

Add:

(iv)
as described in subsection 70-100(1) of the Income Tax Assessment Act 1997 ; or

Financial Corporations (Transfer of Assets and Liabilities) Act 1993

95 Paragraph 21(1)(c)

After " Income Tax Assessment Act 1936 ", insert "or section 70- 35 of the Income Tax Assessment Act 1997 ".

96 Subparagraph 21(1)(d)(ii)

After " Income Tax Assessment Act 1936 ", insert "or section 70- 45 of the Income Tax Assessment Act 1997 ".

97 Paragraph 21(1)(e)

Omit "does", substitute "and sections 70-90 and 70- 95 of the Income Tax Assessment Act 1997 do".

98 Paragraph 21(2)(e)

Omit "does", substitute "and sections 70-90 and 70- 95 of the Income Tax Assessment Act 1997 do".

99 Application of amendments

(1) The amendments of section 21 of the Financial Corporations (Transfer of Assets and Liabilities) Act 1993 apply in relation to years of income after the 1996-97 year of income.
(2) However, the amendments of paragraphs 21(1)(e) and (2)(e) apply in relation to years of income after the 1995-96 year of income.


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