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This is a Bill, not an Act. For current law, see the Acts databases.
2002-2003-2004
The Parliament
of the
Commonwealth of
Australia
HOUSE OF
REPRESENTATIVES
Presented and read a first
time
Tax
Laws Amendment (2004 Measures No. 4) Bill
2004
No. ,
2004
(Treasury)
A Bill
for an Act to amend the law relating to taxation, and for related
purposes
Contents
Part 1—Application 4
Part 2—Membership rules and insolvency
etc. 5
Income Tax Assessment Act
1997 5
Part 3—Finance
leases 6
Income Tax Assessment Act
1997 6
Part 4—Expenditure relating to mining or
quarrying 9
Income Tax Assessment Act
1997 9
Income Tax (Transitional Provisions) Act
1997 10
Part 5—Low-value and software development
pools 16
Income Tax Assessment Act
1997 16
Income Tax (Transitional Provisions) Act
1997 24
Part 6—Notice requirements for inter-entity loss multiplication
rules 26
Income Tax Assessment Act
1997 26
Income Tax (Transitional Provisions) Act
1997 27
Income Tax Assessment Act
1997 29
Income Tax (Transitional Provisions) Act
1997 33
Taxation Administration Act
1953 34
Part 1—Anti-avoidance rules in relation to exempt
institutions 36
Income Tax Assessment Act
1997 36
Part 2—Miscellaneous consequential and technical
amendments 50
Income Tax Assessment Act
1936 50
Income Tax Assessment Act
1997 58
Taxation Administration Act
1953 62
Taxation Laws Amendment Act (No. 8)
2003 64
Part 3—Application
provisions 65
Part 1—Fire and emergency services
bodies 67
Income Tax Assessment Act
1997 67
Part 2—Other specific gift
recipients 70
Income Tax Assessment Act
1997 70
Income Tax Assessment Act
1997 72
A Bill for an Act to amend the law relating to taxation,
and for related purposes
The Parliament of Australia enacts:
This Act may be cited as the Tax Laws Amendment (2004 Measures
No. 4) Act 2004.
(1) Each provision of this Act specified in column 1 of the table
commences, or is taken to have commenced, in accordance with column 2 of the
table. Any other statement in column 2 has effect according to its
terms.
|
Commencement information |
||
|---|---|---|
|
Column 1 |
Column 2 |
Column 3 |
|
Provision(s) |
Commencement |
Date/Details |
|
1. Sections 1 to 4 and anything in this Act not elsewhere covered by
this table |
The day on which this Act receives the Royal Assent. |
|
|
2. Schedules 1 and 2 |
The day on which this Act receives the Royal Assent. |
|
|
3. Schedule 3, item 1 |
The day on which this Act receives the Royal Assent. |
|
|
4. Schedule 3, items 2 and 3 |
Immediately after the commencement of the provisions covered by table
item 3. |
|
|
5. Schedule 3, item 4 |
Immediately after the commencement of the provisions covered by table
item 4. |
|
|
6. Schedule 3, items 5 to 114 |
The day on which this Act receives the Royal Assent. |
|
|
7. Schedule 4 |
The day on which this Act receives the Royal Assent. However, if the Bill introduced into the Parliament as the Taxation Laws
Amendment Bill (No. 7) 2003: (a) receives the Royal Assent on or before the day on which this Act
receives the Royal Assent; and (b) repeals subsections 30-45(2) and 30-50(2), section 30-65 and
items 13.2.1 and 13.2.5 of the table in section 30-105 of the
Income Tax Assessment Act 1997 on or before the day on which this Act
receives the Royal Assent; the provision(s) do not commence at all. |
|
|
8. Schedule 5 |
The day on which this Act receives the Royal Assent. |
|
Note: This table relates only to the provisions of this Act
as originally passed by the Parliament and assented to. It will not be expanded
to deal with provisions inserted in this Act after assent.
(2) Column 3 of the table contains additional information that is not part
of this Act. Information in this column may be added to or edited in any
published version of this Act.
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 Application
Except as provided otherwise, the amendments made by this Schedule apply on
and after 1 July 2002.
Part 2—Membership
rules and insolvency etc.
Income Tax Assessment Act
1997
2 At the end of section 703-30 (after the
note)
Add:
(3) For the purposes of this section, one entity is not prevented
from being the beneficial owner of a
*membership interest in another entity merely
because the first entity is or becomes:
(a) an externally-administered body corporate within the meaning of the
Corporations Act 2001; or
(b) an entity with a status under a
*foreign law similar to the status of an
externally-administered body corporate under the Corporations Act
2001.
Income Tax Assessment Act
1997
3 Subsection 705-25(5) (note)
Omit “Note”, substitute “Note 1”.
4 At the end of subsection 705-25(5) (after the
note)
Add:
Note 2: The joining entity’s right to receive lease
payments under a finance lease is treated as a retained cost base asset in some
circumstances (see paragraph 705-56(3)(b)).
5 After section 705-55
Insert:
(1) This section applies if, just before the joining time:
(a) the joining entity is the lessor or lessee under a lease of a
*depreciating asset (the underlying
asset) to which Division 40 applies; and
(b) the joining entity classifies the lease, in accordance
with *accounting standards, or statements of
accounting concepts made by the Australian Accounting Standards Board, as a
finance lease.
Joining entity is lessor
(2) If the joining entity is the lessor under the lease and
*holds the underlying asset just before the
joining time, subsection (5) applies, in relation to the joining entity, to
the asset that is the joining entity’s right to receive lease
payments.
Note: In this situation, the underlying asset will have its
tax cost set at the joining time because it would be an asset of the joining
entity at that time if the single entity rule did not apply (see
section 701-10).
(3) If the joining entity is the lessor under the lease and does not
*hold the underlying asset just before the
joining time:
(a) subsection (5) applies, in relation to the joining entity, to the
underlying asset; and
(b) for the purposes of this Division:
(i) the joining entity’s right to receive lease payments is taken to
be a *retained cost base asset; and
(ii) the *tax cost setting amount of that
retained cost base asset is taken to be equal to its
*market value just before the joining
time.
Note: In this situation, the asset that is the joining
entity’s right to receive lease payments will have its tax cost set at the
joining time because it would be an asset of the joining entity at that time if
the single entity rule did not apply (see section 701-10).
Joining entity is lessee
(4) If the joining entity is the lessee under the lease and does not
*hold the underlying asset just before the
joining time:
(a) subsection (5) applies to the underlying asset in relation to the
joining entity; and
(b) the liability that is the lessee’s obligation to make lease
payments is not taken into account under subsection 705-70(1).
Note: If the joining entity is the lessee under the lease
and holds the underlying asset just before the joining time:
(a) the underlying asset will have its tax cost set at the
joining time because it would be an asset of the joining entity at that time if
the single entity rule did not apply (see section 701-10);
and
(b) the liability that is the lessee’s obligation to
make lease payments is taken into account under subsection
705-70(1).
Tax cost of certain assets set at nil
(5) If this subsection applies to an asset, in relation to the joining
entity:
(a) the asset is not taken into account under paragraph
705-35(1)(b) or (c); and
(b) the asset’s *tax cost setting
amount is taken to be nil.
6 At the end of
section 711-30
Add:
(3) However, that amount is the asset’s
*market value at the leaving time if:
(a) the asset (the receivable) is a right to receive lease
payments under a lease; and
(b) the receivables *tax cost was set
when an entity (whether the leaving entity or another entity) became a
*subsidiary member of the old group;
and
(c) the receivable was taken to be a
*retained cost base asset for the purposes of
Division 705 when its tax cost was set, because of paragraph
705-56(3)(b).
7 After subsection 711-45(2)
Insert:
Exclusion where liability is obligation to make finance lease
payments
(2A) An amount is not to be added for an accounting liability that is the
leaving entity’s obligation as lessee to make lease payments under a
lease, if:
(a) subsection 705-56(4) applied in relation to the liability, at a time
when an entity (whether the leaving entity or another entity) became a
*subsidiary member of the old group;
and
(b) the liability was not taken into account under subsection
705-70(1) at that time, because of paragraph 705-56(4)(b).
Part 4—Expenditure
relating to mining or quarrying
Income Tax Assessment Act
1997
8 Section 716-100 (link
note)
Repeal the link note, substitute:
[The next Subdivision is Subdivision 716-E.]
Table of sections
716-300 Prime cost method of working
out decline in value
(1) This section has effect if:
(a) an entity (the joining entity) becomes a
*subsidiary member of a
*consolidated group at a time (the
joining time); and
(b) because of subsection 40-80(1), the joining entity could (or did)
deduct for a period before the joining time the
*cost of a
*depreciating asset that became an asset of the
*head company of the group at the joining time
because section 701-1 (Single entity rule) applied to the joining entity;
and
(c) the joining entity could not deduct an amount under
Subdivision 40-B (except because of subsection 40-80(1)) for the income
year that includes the joining time for that cost.
Note: Subdivision 40-B allows deductions for the
decline in value of depreciating assets. Subsection 40-80(1), which is in that
Subdivision, provides that the decline in value of certain assets used for
exploration and prospecting equals their cost.
(2) Subsection 701-55(2) has effect as if the
*prime cost method for working out the decline
in value of the *depreciating asset applied
just before the joining time.
Note: This may affect both the method of working out the
decline in value of the asset and the asset’s effective
life.
[The next Subdivision is Subdivision 716-G.]
Income Tax (Transitional
Provisions) Act 1997
9 Section 703-30 (link
note)
Repeal the link note, substitute:
[The next Division is Division 705.]
Table of Subdivisions
705-E Expenditure relating to exploration, mining or quarrying
Table of sections
705-300 Application and object of this
Subdivision
705-305 Rules affecting depreciating assets
705-310 Adjustable value of head company’s notional
assets
(1) If an entity (the joining entity) to which
section 40-75 of this Act applied becomes a subsidiary member of a
consolidated group at a time (the joining time), this Subdivision
applies in relation to:
(a) depreciating assets that:
(i) caused section 40-75 of this Act to apply to the joining entity;
and
(ii) became assets of the head company of the group at the joining time
because of section 701-1 (Single entity rule) of the Income Tax
Assessment Act 1997 operating in relation to the joining entity;
and
(b) notional assets that sections 40-35, 40-37, 40-40 and 40-43 of
this Act treat an entity as holding because of expenditure relating to such
depreciating assets;
to affect the operation of Division 40, section 701-55 and
Division 705 of that Act.
(2) The main object of this Subdivision is to ensure that entities are
allowed only an appropriate amount of deductions in connection with such
depreciating assets and such expenditure.
(1) The main object of this section is to ensure that a depreciating
asset’s tax cost is set, and other matters relevant to working out the
deductions of the head company of the consolidated group for the decline in
value of the asset are dealt with, so as to:
(a) ensure that the head company does not get excessive deductions on
account of expenditure (by any entity) relating to the asset; and
(b) reflect the deductions of an entity for a period ending before the
joining time for expenditure relating to the asset; and
(c) ensure that the effective life of the asset for the head company
reflects the rate or rates at which the joining entity was able to deduct
expenditure relating to the asset (whether or not the expenditure formed part of
the cost of the asset).
Prime cost method of working out decline in value of asset
(2) If the joining entity could not deduct an amount under
Subdivision 40-B of the Income Tax Assessment Act 1997 for the
income year that includes the joining time for the decline in value of a
depreciating asset, subsection 701-55(2) of that Act has effect as if the prime
cost method for working out the decline in value of the asset applied just
before the joining time.
Note: This may affect both the method of working out the
decline in value of the asset and the asset’s effective
life.
Adjustable value of asset
(3) Division 705 of the Income Tax Assessment Act 1997 has
effect as if the adjustable value of a depreciating asset just before and at the
joining time were increased by the amount described in subsection (4), if
section 40-35, 40-37, 40-40 or 40-43 treated the joining entity as holding
a notional asset.
Note: This affects not only the adjustable value of the
depreciating asset but also the joining entity’s terminating value for the
asset (which section 705-30 of that Act defines as being equal to the
asset’s adjustable value just before the joining time).
(4) The amount of the increase is so much of the adjustable value of the
notional asset just before the joining time as reasonably relates to the
depreciating asset.
Cost of asset
(5) Division 705 of the Income Tax Assessment Act 1997 has
effect as if the cost of a depreciating asset were increased by expenditure
incurred that did not form part of the asset’s cost worked out under
Division 40 of that Act but would have if it had been incurred just before
the joining time under a contract entered into after 30 June
2001.
Earlier deductions for decline in value of asset
(6) Division 705 of the Income Tax Assessment Act 1997 has
effect as if deductions relating to expenditure described in subsection (5)
were deductions for the decline in value of the depreciating asset.
Example: Such deductions include:
(a) deductions under former Subdivision 330-A, 330-C or
330-H of the Income Tax Assessment Act 1997, or a corresponding previous
law, for the expenditure; and
(b) deductions under Division 40 of that Act for the
decline in value of a notional asset that section 40-35, 40-37, 40-40 or
40-43 of this Act treated an entity as holding because of the
expenditure.
Effective life of asset
(7) If a depreciating asset’s tax cost setting amount does not
exceed the joining entity’s terminating value for the asset,
Division 40 of the Income Tax Assessment Act 1997 has effect as if
the effective life of the asset were such period as is reasonable, having regard
to the following:
(a) the remainder of the effective life of the asset, worked out just
before the joining time;
(b) the remainder of the effective life, worked out just before the
joining time, of each notional asset (which section 40-35, 40-37, 40-40 or
40-43 of this Act treats an entity as holding wholly or partly because of
expenditure relating to the depreciating asset);
(c) any other relevant matters.
Subsection 701-55(2) of that Act has effect subject to this
subsection.
Note 1: The effective life of the depreciating asset was set
on 1 July 2001 by subsection 40-75(4) of this Act, but may have been reset
since under Subdivision 40-B of the Income Tax Assessment Act
1997.
Note 2: The effective life of a notional asset is specified
by whichever one of sections 40-35, 40-37, 40-40 and 40-43 of this Act is
relevant to the notional asset.
Choosing to reduce tax cost setting amount of asset
(8) If:
(a) a depreciating asset’s tax cost setting amount would be greater
than the joining entity’s terminating value for the asset; and
(b) the head company of the consolidated group chooses to apply this
subsection to the asset;
the asset’s tax cost setting amount is reduced so that it equals the
terminating value.
Note 1: A consequence of the choice is that
subsection (7) applies to the asset.
Note 2: The amount of the reduction is not re-allocated
among other assets.
(9) Section 705-55 of the Income Tax Assessment Act 1997 has
effect as if subsection (8) of this section were included in
section 705-45 of that Act.
Note: This affects the order of reductions in the
asset’s tax cost setting amount under subsection (8) of this section
and sections 705-40 and 705-50 of the Income Tax Assessment Act
1997.
Application
(1) If:
(a) section 40-35, 40-37, 40-40 or 40-43 of this Act treats the head
company of the consolidated group as holding a notional asset at the joining
time because expenditure is taken under section 701-5 (Entry history rule)
of the Income Tax Assessment Act 1997 to be expenditure of the head
company; and
(b) section 40-35, 40-37, 40-40 or 40-43 of this Act treated the
joining entity as holding a notional asset just before the joining time because
of the expenditure;
this section affects the adjustable value of the head company’s
notional asset.
Object
(2) The object of this section is to ensure, by reducing the adjustable
value of a notional asset of the head company, that the head company cannot get
both:
(a) a deduction for the notional asset reflecting the amount of the
expenditure relating to depreciating assets; and
(b) a deduction for that amount because of the decline in value of those
depreciating assets.
Reduction at joining time for expenditure on depreciating
assets
(3) The opening adjustable value of the head company’s notional
asset for the income year that includes the joining time is so much of the
adjustable value of the joining entity’s notional asset just before the
joining time as does not reasonably relate to any depreciating asset.
Note: This offsets the increases in adjustable value of the
head company’s depreciating assets under subsection
705-305(3).
[The next Division is Division 707.]
10 Section 707-405 (link
note)
Repeal the link note, substitute:
[The next Division is Division 712.]
Table of Subdivisions
712-E Expenditure relating to exploration, mining or quarrying
Table of sections
712-305 Reducing adjustable value of head company’s
notional asset
(1) This section reduces the adjustable value of a notional asset that
section 40-35, 40-37, 40-38, 40-40 or 40-43 treats the head company of a
consolidated group as holding, if:
(a) an entity (the leaving entity) ceases to be a subsidiary
member of the group at a time (the leaving time); and
(b) that section treats the leaving entity as holding a notional asset
because of section 701-40 (Exit history rule) of the Income Tax
Assessment Act 1997.
Note: Section 701-40 (Exit history rule) of the
Income Tax Assessment Act 1997 treats as expenditure of the leaving
entity certain expenditure incurred before the leaving time in relation to an
asset or business that was an asset or business of the leaving entity at the
leaving time.
(2) The adjustable value of the head company’s notional asset is
reduced at the leaving time by the adjustable value of the leaving
entity’s notional asset at that time.
Part 5—Low-value
and software development pools
Income Tax Assessment Act
1997
11 Before
Subdivision 716-Z
Insert:
Table of sections
Assets in joining entity’s low-value pool
716-330 Head company’s deductions for decline in value
of assets in joining entity’s low-value pool
Entity leaving group with asset allocated to head company’s
low-value pool
716-335 Entity leaving group with asset allocated to head
company’s low-value pool
Depreciating assets arising from expenditure in joining entity’s
software development pool
716-340 Depreciating assets arising from expenditure in
joining entity’s software development pool
Software development pools if entity leaves consolidated
group
716-345 Head company taken not to have incurred
expenditure
(1) This section modifies the operation of sections 40-430, 40-435,
40-440, 40-445, 701-10 and 701-60 and Division 705 for the head company
core purposes mentioned in section 701-1 if:
(a) an entity (the joining entity) becomes a
*subsidiary member of a
*consolidated group at a time (the
joining time); and
(b) there are one or more *depreciating
assets (the previous pool assets) that:
(i) were allocated to the joining entity’s low-value pool;
and
(ii) become assets of the *head company
of the group at the joining time because section 701-1 applies to the
joining entity; and
(c) none of the previous pool assets was an asset to which
Division 58 applied to affect the joining entity’s deductions
relating to the asset.
Note 1: Sections 40-430, 40-435 and 40-440 are relevant
to allocating depreciating assets to a low-value pool and to working out the
decline in value of assets allocated to a low-value pool. Section 40-445
affects the closing pool balance, and may give rise to assessable income, if a
balancing adjustment event happens to such an asset.
Note 2: Section 701-10 provides that, for each asset
the joining entity has at the joining time, the asset’s tax cost is set at
the joining time at the asset’s tax cost setting amount, which is defined
by section 701-60 as the amount worked out under
Division 705.
Note 3: Division 58 is about capital allowances for
depreciating assets previously owned by an exempt entity.
Objects
(2) The main objects of this section are:
(a) to clarify how sections 40-430, 40-435 and 40-440 operate in
relation to the previous pool assets; and
(b) to reduce compliance costs by providing that the
*tax cost is set for all the previous pool
assets in one operation, rather than individually for each such asset.
Time of allocation of assets to head company’s low-value
pool
(3) Sections 40-430, 40-435, 40-440 and 40-445 operate as if the
*head company of the
*consolidated group allocated the previous pool
assets to a low-value pool for the income year that includes the joining time.
Section 701-5 has effect subject to this subsection.
Note 1: Under section 40-435, the head company must
make a reasonable estimate of the taxable use percentage for each
asset.
Note 2: This subsection affects the percentages and amounts
to be taken into account for working out under section 40-440 the decline
in value of assets in the pool and the closing pool balance.
Allocating other low-cost assets to head company’s low-value
pool
(4) Subsection 40-430(1) operates as if the previous pool assets were
*low-cost assets.
Note: This has the effect that the head company must
allocate to the low-value pool each low-cost asset it starts to hold in the
income year that includes the joining time or a later income year, whether or
not the head company starts to hold the asset because of
section 701-1.
If joining time was in first day of joining entity’s income
year
(5) If the joining time was in the first day of the joining entity’s
income year, section 40-440 operates as if:
(a) all the previous pool assets were
*low-value assets; and
(b) the sum of the previous pool assets’
*opening adjustable values for the income year
that includes the joining time equalled the
*tax cost setting amount for the hypothetical
asset worked out on the basis described in subsections (7), (8) and (9) of
this section.
If joining time was not in first day of joining entity’s income
year
(6) If the joining time was not in the first day of the joining
entity’s income year, section 40-440 operates as if:
(a) all the previous pool assets were
*low-cost assets; and
(b) the sum of the previous pool assets’
*costs equalled the total of:
(i) the *tax cost setting amount for the
hypothetical asset worked out on the basis described in subsections (7),
(8) and (9) of this section; and
(ii) the expenditure (if any) that was incurred after the joining time
(but in the income year that includes that time) and included in the second
element of the costs (ignoring this paragraph) of the previous pool
assets.
Tax cost is set for assets collectively not individually
(7) Sections 701-10 and 701-60 and Division 705 operate as if
all the previous pool assets formed a single
*depreciating asset (the hypothetical
asset), and were not separate assets.
Modified operation of Division 705 for hypothetical
asset
(8) Sections 705-40 and 705-57 operate as if the joining
entity’s *terminating value for the
hypothetical asset were the amount worked out using the table:
|
Modification of basis on which sections 705-40 and 705-57
operate |
||
|---|---|---|
|
|
If the joining time is: |
Sections 705-40 and 705-57 operate as if the joining entity’s
terminating value for the hypothetical asset were: |
|
1 |
In the first day of an income year of the joining entity |
The *closing pool balance for the joining
entity’s low-value pool for the previous income year |
|
2 |
In another day |
The *closing pool balance for the joining
entity’s low-value pool for the non-membership period described in
section 701-30 that ends just before the joining time |
Note: Sections 705-40 and 705-57 are about reduction of
an asset’s tax cost setting amount to an amount that may be affected by
the joining entity’s terminating value for the asset.
(9) Division 705 operates in relation to the hypothetical asset as if
section 705-50 had not been enacted.
Note: Section 705-50 is about reduction of an
asset’s tax cost setting amount for over-depreciation of the
asset.
(1) This section sets out rules affecting the
*head company of a
*consolidated group and an entity (the
leaving entity) that ceases to be a
*subsidiary member of the group at a time (the
leaving time) in an income year (the leaving year),
if:
(a) a *depreciating asset becomes an
asset of the leaving entity at the leaving time because section 701-1
(Single entity rule) ceases to apply to the leaving entity; and
(b) the asset was in the head company’s low-value pool.
Note: Section 701-40 (Exit history rule) treats the
asset as having been allocated to the leaving entity’s low-value pool,
with the taxable use percentage estimated by the head company, for the income
year for which the head company allocated the asset to the head company’s
low-value pool.
Objects
(2) The main objects of this section are:
(a) to ensure that the decline in value of assets in the
*head company’s low-value pool and the
decline in value of assets in the leaving entity’s low-value pool are
worked out so that:
(i) for the leaving year, the
*depreciating asset is taken into account in
working out the decline in value of assets in the head company’s
low-value pool only; and
(ii) for later income years, the depreciating asset is taken into account
in working out the decline in value of assets in the leaving
entity’s low-value pool only; and
(b) to specify the *adjustable value of
the depreciating asset just before and at the leaving time.
Reduced decline in value for leaving entity for leaving
year
(3) The decline in value worked out for the leaving year under subsection
40-440(1) for assets in the leaving entity’s low-value pool is reduced by
such amount as is reasonable to prevent duplication of deductions for the
leaving year in respect of the *depreciating
asset by the *head company and the leaving
entity.
Reduced closing pool balance for head company’s pool for leaving
year
(4) The *closing pool balance of the
*head company’s low-value pool for the
leaving year is reduced by so much of the balance as reasonably relates to the
*depreciating asset.
Cost of head company’s membership interests in leaving entity
etc.
(5) Sections 701-15, 701-40 and 701-60 and Division 711 have
effect as if the *adjustable value of the
*depreciating asset for the
*head company just before and at the leaving
time were such amount as is reasonable, having regard to:
(a) the reduction described in subsection (4) of this section;
and
(b) the taxable use percentage estimated for the depreciating asset by the
head company under section 40-435.
Note 1: Section 701-15 provides that, for each
membership interest the head company holds in the leaving entity, the
interest’s tax cost is set just before the leaving time at the
interest’s tax cost setting amount, which is defined by
section 701-60 as the amount worked out under certain sections of
Division 711.
Note 2: Division 711 sets the interest’s tax cost
setting amount by reference to the head company’s terminating value of the
asset, which is to be worked out under section 711-30 by reference to the
adjustable value of the asset for the head company just before the leaving
time.
Note 3: Section 701-40 has the effect that the
adjustable value of the asset for the leaving entity at the leaving time is the
same as the adjustable value of the asset for the head company
then.
(1) This section modifies the basis on which Subdivision 40-B and
sections 40-455, 701-10, 701-55 and 701-60 and Division 705 operate
if:
(a) an entity (the joining entity) becomes a
*subsidiary member of a
*consolidated group at a time (the
joining time); and
(b) the joining entity had incurred before the joining time expenditure
that it allocated to a software development pool; and
(c) some or all of the expenditure is reasonably related to
*in-house software that:
(i) is a *depreciating asset;
and
(ii) became an asset of the *head company
of the consolidated group at the joining time because section 701-1 (Single
entity rule) applied to the joining entity.
Note 1: Subdivision 40-B allows deductions for the
decline in value of a depreciating asset, but only if expenditure on the asset
has not been allocated to a software development pool. Section 40-455
provides for deduction of expenditure allocated to such a pool.
Section 701-5 (Entry history rule) treats the head company as having
incurred the expenditure that was allocated to the pool.
Note 2: Section 701-10 provides that, for each asset
the joining entity has at the joining time, the asset’s tax cost is set at
the joining time at the asset’s tax cost setting amount, which is defined
by section 701-60 as the amount worked out under Division 705, which
in turn depends on the adjustable value of the asset worked out under
section 40-85.
Note 3: Section 701-55 affects matters relevant to
working out the head company’s deductions for the decline in value of
depreciating assets that became assets of the head company at the joining time
because section 701-1 (Single entity rule) applied to the joining
entity.
Note 4: This section operates whether or not the joining
entity’s deductions under section 40-455 for the period before the
joining time for expenditure allocated to the pool total 100% of the expenditure
allocated to the pool.
Object
(2) The main object of this section is to ensure that:
(a) the *head company’s deductions
for the *in-house software:
(i) are not worked out under section 40-455 on the basis of
section 701-5 (Entry history rule) treating the expenditure relating to the
software as being the head company’s expenditure; and
(ii) are instead worked out under Subdivision 40-B, using the
*prime cost method with the
*effective life given by subsection 40-95(7)
and taking account of the *tax cost setting
amount for the software; and
(b) the tax cost setting amount is worked out in a way that takes account
of deductions for the period before the joining time for the expenditure
reasonably related to the in-house software.
Joining entity taken not to have incurred certain
expenditure
(3) Subdivision 40-B and section 40-455 operate for the head
company core purposes mentioned in section 701-1 (Single entity rule) as if
the expenditure reasonably related to the
*in-house software had not been incurred by the
joining entity.
Note 1: This has the effects that:
(a) subsection 40-50(2) does not apply because of
section 701-5 (Entry history rule) to deny the head company deductions
under Subdivision 40-B for the decline in value of the software;
and
(b) the head company cannot deduct the expenditure under
section 40-455 as it operates because of
section 701-5.
Note 2: This does not prevent the head company from
deducting under section 40-455 expenditure that is not reasonably
related to the in-house software and that the head company is treated by
section 701-5 as having incurred and allocated to a software development
pool because the joining entity did.
Prime cost method of working out decline in value of
software
(4) Subsection 701-55(2) operates as if the
*prime cost method of working out the decline
in value of the *in-house software applied just
before the joining time.
Note: This affects the method of working out the decline in
value of the software for the head company of the consolidated
group.
Effective life of software
(5) Subdivision 40-B operates as if the
*effective life of the
*in-house software were the period specified
for in-house software in subsection 40-95(7). Subsection 701-55(2) is subject to
this subsection.
Cost of in-house software
(6) Sections 701-10 and 701-60 and Division 705 (and
section 40-85, so far as it affects that Division) operate as if the
*cost of the
*in-house software were the total amount of the
joining entity’s expenditure that reasonably related to the software and
was allocated to a software development pool.
Earlier decline in value of the in-house software
(7) Sections 701-10 and 701-60 and Division 705 (and
section 40-85, so far as it affects that Division) operate as if the
decline in value, and deductions for the decline in value, of the
*in-house software for a period before the
joining time were the amount worked out under subsection (8).
(8) Work out the amount by:
(a) working out, for each software development pool to which expenditure
relating to the *in-house software was
allocated, the amount of the joining entity’s deductions under
section 40-455 that reasonably relates to the software; and
(b) adding up each of those amounts if there are 2 or more such
pools.
Note: Subsections (6), (7) and (8) can affect the
working out of the tax cost setting amount for the in-house software in these
ways:
(a) one way is by affecting the adjustable value of the
software, which may be worked out under section 40-85 by reference to the
decline in value of the software, and which is relevant to section 705-50
(which reduces the tax cost setting amount for over-depreciated
assets);
(b) another way is by affecting the joining entity’s
terminating value for the software, which section 705-30 defines as being
the adjustable value of the software just before the joining time, and which is
relevant to sections 705-40, 705-50 and 705-57 (which may reduce the tax
cost setting amount for the software);
(c) another way is by affecting section 705-50, whose
operation depends on the decline in value, and deductions for the decline in
value, of the software (among other things).
(1) This section has effect if:
(a) an entity (the leaving entity) ceases to be a
*subsidiary member of a
*consolidated group at a time in an income year
(the leaving year); and
(b) under section 701-40 (Exit history rule), expenditure is taken to
have been allocated by the leaving entity to a software development
pool.
Note: Section 701-40 treats expenditure incurred by the
head company of the consolidated group and allocated by that company to a
software development pool as having been incurred by the leaving entity and
allocated by it to a software development pool.
(2) Work out deductions of the *head
company of the *consolidated group for income
years after the leaving year as if the head company had not incurred the
expenditure.
(3) The leaving entity cannot deduct an amount for the leaving year for
the expenditure it is taken to have allocated to the software development
pool.
[The next Subdivision is Subdivision 716-Z.]
Income Tax (Transitional
Provisions) Act 1997
12 At the end of
section 713-545
Add:
[The next Division is Division 716.]
13 After Division 713
Insert:
Table of Subdivisions
716-G Software development pools
Table of sections
716-340 Expenditure incurred before 1 July 2001 and
allocated to a software pool
Sections 716-340 and 716-345 of the Income Tax Assessment Act
1997 operate in relation to a thing mentioned in column 1 of an item of the
table in the same way as they operate in relation to a thing mentioned in column
2 of the item.
|
Extended operation of sections of the Income Tax Assessment Act
1997 |
||
|---|---|---|
|
|
Column 1 |
Column 2 |
|
1 |
Former section 46-90 of that Act |
Section 40-455 of that Act |
|
2 |
A software pool created under former Subdivision 46-D of that
Act |
A software development pool |
|
3 |
Expenditure in a software pool under former Subdivision 46-D of that
Act |
Expenditure allocated to a software development pool |
|
4 |
Software, expenditure on which was in a software pool under former
Subdivision 46-D of that Act |
In-house software, expenditure on the development of which is allocated to
a software development pool |
Part 6—Notice
requirements for inter-entity loss multiplication rules
Income Tax Assessment Act
1997
14 At the end of subsection
165-115ZC(1)
Add:
Note: Section 165-115ZC of the Income Tax
(Transitional Provisions) Act 1997 affects the operation of this
section.
15 Subsection 165-115ZC(4)
Omit “later”, substitute “latest”.
16 After paragraph
165-115ZC(4)(b)
Insert:
(c) the time (if any) specified by the Commissioner;
17 Subsection 165-115ZC(5)
Omit “6 months after the later”, substitute “6 months
after the latest”.
18 After paragraph
165-115ZC(5)(d)
Insert:
(e) the time (if any) specified by the Commissioner;
19 After subsection
165-115ZC(7)
Insert:
Commissioner’s power to specify a later time for giving
notice
(7A) The Commissioner may, by written notice given to an entity, or
*loss company, that is required to give a
notice under subsection (4) or (5), specify a time later than the
alteration time as the start of the 6 months mentioned in the
subsection.
Commissioner’s power to waive requirement for notice
(7B) The Commissioner may give an entity or
*loss company a written declaration that
subsection (4) or (5) does not apply to require the entity or company to
give a notice relating to the alteration time. If the Commissioner does so, the
subsection does not apply in relation to the alteration time.
Considerations relating to Commissioner’s powers
(7C) In deciding whether to specify a time for the purposes of
subsection (4) or (5) or declare that the subsection does not apply, the
Commissioner must consider:
(a) the consequences of doing so for each entity to which notice must be
given under the subsection (apart from any such declaration); and
(b) any other matters that the Commissioner considers relevant.
20 Application
The amendments of section 165-115ZC of the Income Tax Assessment
Act 1997 made by this Part apply if the alteration time mentioned in that
section is after 31 December 2001.
Income Tax (Transitional
Provisions) Act 1997
21 At the end of
section 165-115ZC
Add:
Special rules for consolidatable groups and potential MEC
groups
(4) Subsections (5) and (6) have effect if:
(a) the alteration time mentioned in section 165-115ZC of the
Income Tax Assessment Act 1997 is after 31 December 2001 and before
1 July 2004; and
(b) apart from this section, subsection 165-115ZC(4) or (5) of that Act
would require an entity (the notifying entity) to give a notice to
another entity (the receiving entity) in relation to the
alteration time; and
(c) just before the alteration time, the notifying entity and the
receiving entity were both members of the same consolidatable group or potential
MEC group.
(5) Subsections 165-115ZC(4) and (5) of the Income Tax Assessment Act
1997 do not apply to the notifying entity if both it and the receiving
entity became members of the same consolidated group or MEC group before
1 July 2004.
(6) Even if subsection (5) does not apply, the notifying entity is
not required to give the notice to the receiving entity before the end of 6
months after the commencement of this subsection.
(7) Subsections (1) and (3) have effect subject to
subsections (5) and (6).
Income Tax Assessment Act
1997
1 Section 10-5 (after the item relating to
partnerships)
Insert:
|
payments to members of copyright collecting societies |
|
|
payments by copyright collecting societies |
15-22 |
2 Section 11-15 (before the item relating to
credit unions)
Insert:
|
copyright collecting societies |
|
|
copyright income |
51-43(2)(a) |
|
non-copyright income up to certain limits |
51-43(2)(b) |
3 At the end of
section 15-20
Add:
(2) Subsection (1) does not apply to an amount of a payment to which
section 15-22 applies.
4 After section 15-20
Insert:
(1) This section, instead of Division 6 of Part III of the
Income Tax Assessment Act 1936, applies to a payment that a
*copyright collecting society, to which
section 51-43 applies, makes to you as a
*member of the society.
(2) Your assessable income includes the amount of the payment, except to
the extent that the payment represents an amount on which the directors of the
society are or have been assessed, and are liable to pay tax, under
section 98, 99 or 99A of the Income Tax Assessment Act
1936.
Note: Section 410-5 of this Act requires a copyright
collecting society to give you a notice at the time of payment.
5 After section 51-40
Insert:
(1) This section applies to a *copyright
collecting society if Division 6 of Part III of the Income Tax
Assessment Act 1936 applies to the income of the society.
(2) The following are exempt from income tax:
(a) *copyright income collected or
*derived by the society in an income
year;
(b) *non-copyright income derived by the
society in an income year to the extent that it does not exceed the lesser
of:
(i) 5% of the total amount of the copyright income and non-copyright
income collected and derived by the society in the income year; and
(ii) $5 million or such other amount as is prescribed by the regulations
for the purposes of this subparagraph.
6 At the end of Part 3-45 (before the link
note)
Add:
[The next Division is Division 410.]
This Division sets out rules that apply whenever a copyright collecting
society to which section 51-43 applies makes a payment to a member of the
society.
Table of sections
Operative provision
410-5 Copyright collecting society must give a notice to a
member of the society
[This is the end of the Guide.]
(1) This section applies to a *copyright
collecting society to which section 51-43 applies.
(2) If the society makes a payment to a
*member of the society, the society must give
the member a notice, in writing, that states:
(a) the name of the society and the member; and
(b) the total amount of the payment; and
(c) the amount of the payment on which the directors of the society are or
have been assessed, and are liable to pay tax, under section 98, 99 or 99A
of the Income Tax Assessment Act 1936; and
(d) the amount of the payment that is to be included in the member’s
assessable income under section 15-22 of this Act.
Note 1: Under section 288-75 in Schedule 1 to the
Taxation Administration Act 1953 a society is liable to an administrative
penalty for failing to give a notice required under this
section.
Note 2: The amount mentioned in paragraph (2)(c) is not
included in the member’s assessable income—see
section 15-22.
(3) The society must give the notice at the time of the payment.
7 Subsection 995-1(1)
Insert:
copyright collecting society means either of the following
bodies:
(a) a body that satisfies all of the following conditions:
(i) a declaration under the Copyright Act 1968 is in force in
respect of the body;
(ii) the body is a company whose
*constitution contains provisions about the
distribution of amounts collected or *derived
by it, including a requirement that a *member
of the society cannot direct the body to pay an amount at a particular
time;
(iii) other conditions prescribed by the regulations (if any) for the
purposes of this subparagraph are met;
(b) a company that satisfies all of the following conditions:
(i) the company is incorporated under a law in force in a State or
Territory relating to companies;
(ii) the company has and maintains the purpose of collective
administration of copyrights;
(iii) if the company has other purposes—these purposes are
incidental to the purpose described in subparagraph (ii);
(iv) the company collects or derives, and distributes,
*copyright income;
(v) the company’s constitution allows any copyright owner, or his or
her agent, to be a member of the society, or allows all copyright owners of a
particular type to be members;
(vi) the company’s constitution prohibits the payment of
*dividends;
(vii) the company’s constitution contains provisions about the
payment, out of amounts collected or derived by it, of the administrative costs
of collecting those amounts;
(viii) the company’s constitution contains provisions about the
distribution of amounts collected or derived by it, including a requirement that
an amount must be paid to a member as soon as is reasonably possible after the
allocation of the amount to the member, as well as a requirement that a member
cannot direct the company to pay an amount at a particular time;
(ix) the company’s constitution, or contracts with members, contain
such other provisions as are prescribed by the regulations (if any), being
provisions necessary to ensure that the interests of members or their agents are
protected adequately;
(x) the company’s constitution requires the company to hold amounts
on trust for copyright owners who are not members, or for members pending the
payment of amounts to them;
(xi) the company’s constitution, or contracts with members, allows
all members to access the company’s records;
(xii) other conditions prescribed by the regulations (if any) for the
purposes of this subparagraph are met.
8 Subsection 995-1(1)
Insert:
copyright income of a
*copyright collecting society means
*ordinary income, or
*statutory income, of the following
kinds:
(a) *royalties, and interest on
royalties, collected or *derived by the
society;
(b) such other amounts relating to copyright that are derived by the
society as are prescribed by the regulations for the purposes of this
paragraph.
9 Subsection 995-1(1)
Insert:
member of a *copyright
collecting society means:
(a) any person who has been admitted as a member under the
society’s *constitution; or
(b) any person who has authorised the society to license the use of his or
her copyright material.
10 Subsection 995-1(1)
Insert:
non-copyright income of a
*copyright collecting society means
*ordinary income and
*statutory income derived by the society, but
does not include *copyright income.
Income Tax (Transitional
Provisions) Act 1997
11 At the end of Part 3-45 (before the link
note)
Add:
[The next Division is Division 410.]
Table of sections
410-1 Application of section 51-43 of the Income Tax
Assessment Act 1997
(1) A copyright collecting society to which section 51-43 of the
Income Tax Assessment Act 1997 applies, may elect that, from 1 July
2004, the section apply to all copyright income, and non-copyright income,
collected or derived by the society on or after 1 July 2004.
(2) A society makes a valid election if:
(a) the election is in writing; and
(b) the election is given to the Commissioner within 28 days after the day
on which this section commences.
Taxation Administration Act
1953
12 At the end of Division 288 of Part 4-25
in Schedule 1 (before the link note)
Add:
A *copyright collecting society is
liable to an administrative penalty of 20 penalty units if the society fails to
give a notice to a *member as required by
section 410-5 of the Income Tax Assessment Act 1997.
Note: See section 4AA of the Crimes Act 1914 for
the current value of a penalty unit.
13 Application
(1) The amendments made by items 1 to 5 and 7 to 10 of this Schedule
apply to copyright income, and non-copyright income, collected or derived by a
copyright collecting society on or after 1 July 2002, unless the society
has made an election in accordance with section 410-1 of the Income Tax
(Transitional Provisions) Act 1997.
Note: If the society has made an election, then from
1 July 2004, the amendments listed above apply to all copyright income, and
non-copyright income, collected or derived by the society on or after
1 July 2004.
(2) The amendments made by items 6 and 12 of this Schedule apply to
payments of copyright income or non-copyright income made by a copyright
collecting society in an income year after the income year in which this item
commences.
Part 1—Anti-avoidance
rules in relation to exempt institutions
Income Tax Assessment Act
1997
1 At the end of
section 207-130
Add:
(7) This section has effect subject to sections 207-119 to
207-136.
2 Section 207-130
Renumber as section 207-115.
3 Section 207-135
Renumber as section 207-117.
4 At the end of
Subdivision 207-E
Add:
For the purposes of this Act:
(a) an entity must not be treated as an
*exempt institution that is eligible for a
refund in relation to a *franked distribution
if section 207-120, 207-122 or 207-124 applies to the entity in relation to
the distribution; and
(b) a beneficiary of a trust must not be treated as an exempt institution
that is eligible for a refund in relation to a franked distribution made in an
income year if section 207-126 applies to the beneficiary in relation to
that income year.
(1) This section applies to an entity (the ineligible
entity) if:
(a) a *franked distribution is made, or
*flows indirectly under subsection 207-50(3) or
(4), to the entity; and
(b) subsection (2) of this section applies because of a
*distribution event in relation to the
distribution.
(2) Subject to subsection (3) and to section 207-128, this
subsection applies if, because of a
*distribution event in relation to the
*franked distribution:
(a) the ineligible entity or another entity:
(i) makes, becomes liable to make, or may reasonably be expected to make
or to become liable to make, a payment to any entity; or
(ii) transfers, becomes liable to transfer, or may reasonably be expected
to transfer or to become liable to transfer, any property to any entity;
or
(iii) incurs, becomes liable to incur, or may reasonably be expected to
incur or to become liable to incur, any other detriment, disadvantage, liability
or obligation; or
(b) if the distribution is made to the ineligible entity—the amount
or value of the benefit derived by the ineligible entity from the distribution
is, will be, or may reasonably be expected to be, less than the amount or value
of the distribution as at the time the distribution is made; or
(c) if the distribution *flows indirectly
to the ineligible entity—the amount or value of the benefit derived by the
ineligible entity from the ineligible entity’s
*trust share amount in relation to the
distribution is, will be, or may reasonably be expected to be, less than the
amount or value of the ineligible entity’s trust share amount in relation
to the distribution as at the time when that amount arises; or
(d) any of the following entities has obtained, will obtain or may
reasonably be expected to obtain, a benefit, advantage, right or
privilege:
(i) the entity making the distribution;
(ii) an entity through which the distribution flows indirectly to
the ineligible entity;
(iii) an *associate of any of those
entities.
Note: For when paragraph (d) is satisfied, see also
subsection 207-132(2).
Exception to paragraph (2)(b) or (c)
(3) Paragraph (2)(b) or (c) does not apply if:
(a) that paragraph would otherwise apply only because of expenses the
ineligible entity has incurred, will incur, or may reasonably be expected to
incur, for the purpose of obtaining the
*franked distribution or
*trust share amount mentioned in that
paragraph; and
(b) the Commissioner considers the expenses to be reasonable.
Trust share amount
(4) An entity’s trust share amount in relation to a
*franked distribution that
*flows indirectly to the entity under
subsection 207-50(3) or (4) is the entity’s share amount that is mentioned
in that subsection.
Distribution event
(5) A distribution event in relation to a
*franked distribution is an act, transaction or
circumstance that has happened, will happen, or may reasonably be expected to
happen, as part of, in relation to or as a result of:
(a) the payment or receipt of the distribution; or
(b) if the distribution *flows indirectly
to an entity under subsection 207-50(3) or (4)—the arising of, or the
distribution or receipt of, the entity’s
*trust share amount in relation to the
distribution; or
(c) an *arrangement entered into in
association with a matter mentioned in paragraph (a) or (b).
This section applies to an entity (the ineligible entity)
to whom a *franked distribution is made, or
*flows indirectly under subsection 207-50(3) or
(4), if:
(a) one of the following is in the form of property other than
money:
(i) if the distribution is made to the ineligible entity—all or part
of the distribution;
(ii) if the distribution flows indirectly to the ineligible entity through
the trustee of a trust under subsection 207-50(3) or (4)—all or a part of
a distribution (the trust distribution) made by the trustee of the
trust that relates to the ineligible entity’s
*trust share amount in relation to the franked
distribution; and
(b) the terms and conditions on which the franked distribution or trust
distribution is made are such that the ineligible entity:
(i) does not receive immediate custody and control of the property;
or
(ii) does not have the unconditional right to retain custody and control
of the property in perpetuity; or
(iii) does not obtain an immediate, indefeasible and unencumbered legal
and equitable title to the property.
Subject to section 207-128, this section applies to an entity (the
ineligible entity) to whom a
*franked distribution is made, or
*flows indirectly under subsection 207-50(3) or
(4), if:
(a) the ineligible entity or another entity has entered into an
*arrangement as part of, or in association
with:
(i) the distribution; or
(ii) if the distribution flows indirectly to the ineligible
entity—the ineligible entity’s
*trust share amount in relation to the
distribution; and
(b) because of the arrangement, the ineligible entity or another entity
has acquired or will acquire (whether directly or indirectly) money or property,
other than money or property comprising the distribution or the ineligible
entity’s trust share amount, from:
(i) the entity making the distribution; or
(ii) an entity through which the distribution flows indirectly to
the ineligible entity; or
(iii) an *associate of any of those
entities (other than the ineligible entity).
(1) This section applies to a beneficiary of a trust in relation to an
income year if:
(a) the sum of the distributions:
(i) made to the beneficiary during the income year by the trustee of the
trust; and
(ii) that relate to the beneficiary’s
*trust share amount in relation to a
*franked distribution made during the income
year;
is less than:
(b) that trust share amount.
Commissioner’s power to treat trust share amount as having been
distributed during the income year
(2) Subsection (1) does not apply if the Commissioner, having regard
to all the circumstances, considers that it would be reasonable to treat the
*trust share amount as having been distributed
to the beneficiary in the income year.
(1) If, apart from this section, paragraph 207-120(2)(a) or (d) or
section 207-124 would apply to an entity (the receiving
entity) to whom a *franked distribution
is made or *flows indirectly, that paragraph or
section is taken not to apply to the receiving entity if:
(a) instead of receiving the distribution, or the
*trust share amount concerned, by a payment of
money, the receiving entity chooses to be issued with:
(i) if the distribution is made to the receiving
entity—*shares in the
*corporate tax entity making the distribution;
or
(ii) if the distribution flows indirectly to the receiving entity—a
fixed interest in the trust in relation to which the trust share amount arises;
and
(b) the choice is genuine and furthers the purpose for which the entity
was established; and
(c) the choice is not made for the purpose, or purposes that include the
purpose, of benefiting the corporate tax entity, trust or any of their
*associates (other than the receiving entity);
and
(d) any benefit derived by the corporate tax entity, trust or any of their
associates (other than the receiving entity) because of that choice is one which
is an ordinary incident of issuing the shares or interests to the receiving
entity or of the receiving entity’s holding of those shares or interests;
and
(e) the parties that were involved in the
*distribution event or
*arrangement concerned deal with one another on
an arm’s length basis in relation to the event or arrangement.
A vested and indefeasible interest constitutes a fixed
interest
(2) The receiving entity’s interest in a trust is a fixed interest
if the interest is a vested and indefeasible interest in the trust’s
capital.
Special rule about whether interests in unit trusts are
defeasible
(3) If:
(a) the trust is a unit trust and the receiving entity holds units in the
unit trust; and
(b) the units are redeemable or further units are able to be issued;
and
(c) the units held by the receiving entity will be redeemed, or any
further units will be issued:
(i) if units in the unit trust are listed for quotation in the official
list of an *approved stock exchange—for
the price at which other units of the same kind in the unit trust are offered
for sale on the exchange at the time of the redemption or issue; or
(ii) if the units are not listed as mentioned in
subparagraph (i)—for their market value at the time of the redemption
or issue;
then the mere fact that the units are redeemable, or that the further units
are able to be issued, does not mean that the receiving entity’s interest,
as a unit holder, in the trust’s capital is defeasible.
Commissioner’s power to treat an interest in a trust as being a
fixed interest
(4) If:
(a) the receiving entity has an interest in the trust’s capital;
and
(b) apart from this subsection, the interest would not be a vested or
indefeasible interest; and
(c) the Commissioner considers that the interest should be treated as
being vested and indefeasible, having regard to:
(i) the circumstances in which the interest is capable of not vesting, or
the defeasance can happen; and
(ii) the likelihood of the interest not vesting or the defeasance
happening; and
(iii) the nature of the trust; and
(iv) any other matter the Commissioner thinks relevant;
the Commissioner may determine that the interest is to be taken to be
vested and indefeasible.
(5) A determination made under subsection (4) has effect according to
its terms.
(1) A *controller (for imputation
purposes) of an entity (the controlled entity) is liable to pay an
amount under this section in respect of a refund paid to the controlled entity
under Division 67 if:
(a) the controlled entity claimed the refund wholly or partly on the basis
that:
(i) the controlled entity was entitled to a
*tax offset under section 207-20, 207-45
or 207-110 in relation to a *franked
distribution; and
(ii) the controlled entity was an *exempt
institution that is eligible for a refund; and
(b) because of the operation of section 207-120, 207-122, 207-124 or
207-126 in respect of a *distribution event or
an *arrangement in relation to the
distribution, the controlled entity is not entitled to the tax offset;
and
(c) the controller or an *associate of
the controller benefited from that event or arrangement; and
(d) some or all of the amount that the controlled entity is liable to pay
in respect of the refund remains unpaid after the day on which the amount
becomes due and payable; and
(e) the Commissioner gives the controller written notice:
(i) stating that the controller is liable to pay an amount under this
section; and
(ii) specifying that amount.
Except as provided for in subsection (5), this subsection does not
affect any liability the controlled entity has in relation to the
refund.
Note 1: Section 207-134 also provides that the
controlled entity’s present entitlement to a trust share amount is
disregarded for the purposes of Division 6 of Part III of the
Income Tax Assessment Act 1936.
Note 2: For when paragraph (c) is satisfied, see also
subsection 207-132(3).
(2) The amount that the *controller (for
imputation purposes) is liable to pay under subsection (1):
(a) is the amount specified under subparagraph (1)(e)(ii);
and
(b) becomes due and payable at the end of the period of 14 days that
starts on the day on which the notice mentioned in paragraph (1)(e) is
given.
(3) The amount that the *controller (for
imputation purposes) is liable to pay under subsection (1) must not exceed
the total amount or value of the benefit that the controller and its
*associates obtained from the
*distribution event or
*arrangement.
(4) The total of:
(a) the amounts that the Commissioner recovers under subsection (1)
in relation to the refund from all of the controlled entity’s
*controllers (for imputation purposes);
and
(b) the amounts that the Commissioner recovers in relation to the refund
from the controlled entity;
must not exceed the amount that the controlled entity was liable to pay as
mentioned in paragraph (1)(d).
Controller of a company
(5) An entity is a controller (for imputation purposes) of a
company if the entity is a *controller of the
company (for CGT purposes).
Controller of an entity other than a company—basic
meaning
(6) Subject to subsections (7) and (8), an entity is a
controller (for imputation purposes) of an entity other than a
company (the controlled entity) if:
(a) a group in relation to the entity has the power, by means of the
exercise of a power of appointment or revocation or otherwise, to obtain
beneficial enjoyment (directly or indirectly) of the capital or income of the
controlled entity; or
(b) a group in relation to the entity is able (directly or indirectly) to
control the application of the capital or income of the controlled entity;
or
(c) a group in relation to the entity is capable, under a
*scheme, of gaining the beneficial enjoyment
mentioned in paragraph (a) or the control mentioned in paragraph (b);
or
(d) the controlled entity or, if the controlled entity is a trust, the
trustee of the trust:
(i) is accustomed; or
(ii) is under an obligation; or
(iii) might reasonably be expected;
to act in accordance with the directions, instructions or wishes of a
group in relation to the entity; or
(e) if the controlled entity is a trust—a group in relation to the
entity is able (directly or indirectly) to remove or appoint the trustee of the
trust; or
(f) a group in relation to the entity has more than a 50% stake in the
income or capital of the controlled entity; or
(g) entities in a group in relation to the entity are the only entities
that, under the terms of:
(i) the constitution of the controlled entity or the terms on which the
controlled entity is established; or
(ii) if the controlled entity is a trust—the terms of the
trust;
can obtain the beneficial enjoyment of the income or capital of the
controlled entity.
Group in relation to an entity
(7) For the purposes of subsection (6), each of the following
constitutes a group in relation to an entity:
(a) the entity acting alone;
(b) an *associate of the entity acting
alone;
(c) the entity and one or more associates of the entity acting
together;
(d) 2 or more associates of the entity acting together.
Commissioner’s power to take an entity not to be a controller (for
imputation purposes)
(8) If:
(a) at a particular time, an entity (the first entity)
would, but for this subsection, be a
*controller (for imputation purposes) of an
entity other than a company (the second entity); and
(b) the Commissioner, having regard to all relevant circumstances,
considers that it is reasonable that the first entity be taken not to be such a
controller of the second entity at the particular time;
the first entity is taken not to be a controller (for imputation
purposes) of the second entity at the particular time.
(9) Without limiting paragraph (8)(b), if the second entity is a
trust, the Commissioner may have regard under that paragraph to the identity of
the beneficiaries of the trust at any time (whether before or after the first
entity began to be a *controller (for
imputation purposes) of the second entity).
(1) This section applies in relation to a benefit (the relevant
benefit) given by an entity to a
*controller (for imputation purposes) of the
entity, or to an *associate of such a
controller, if:
(a) the controller or associate:
(i) makes a *franked distribution to the
entity; or
(ii) is the trustee of the trust in relation to which a
*trust share amount of the entity arises in
relation to a franked distribution that *flows
indirectly to the entity; and
(b) the benefit is, or was, given to the controller or associate at any
time during the period that starts 3 years before, and ends 3 years after, the
distribution is made or the trust share amount arises (as
appropriate).
(2) For the purposes of paragraph 207-120(2)(d), the controller or
*associate is taken to have obtained the
relevant benefit because of a *distribution
event in relation to the *franked distribution
or *trust share amount.
(3) For the purposes of paragraph 207-130(1)(c), and at least to the
extent of the relevant benefit, the controller or
*associate is taken to have benefited from a
*distribution event or
*arrangement that caused section 207-120
to apply in relation to the *franked
distribution or *trust share amount.
Commissioner’s power not to apply subsection (2) or
(3)
(4) Subsection (2) or (3) does not apply in relation to a benefit if
the Commissioner is satisfied, having regard to all the circumstances, that it
would be unreasonable to apply that subsection.
The present entitlement of a beneficiary of a trust to a share of trust
income is disregarded for the purposes of Division 6 of Part III of
the Income Tax Assessment Act 1936 if:
(a) the beneficiary has claimed a *tax
offset under section 207-45 or 207-110 of this Act on the basis that the
beneficiary was an *exempt institution that was
eligible for a refund in relation to a *trust
share amount that is that share of trust income; but
(b) the beneficiary was not entitled to that tax offset because of the
operation of section 207-120, 207-122, 207-124 or 207-126 in respect of a
*distribution event, or an
*arrangement, to which the trust share amount
is related.
Note: This means that the trustee of the trust is liable to
pay income tax on that share of the trust income.
An entity that is dissatisfied with a decision of the Commissioner under
any of the following provisions may object against it in the manner set out in
Part IVC of the Taxation Administration Act 1953:
(a) paragraph 207-120(3)(b);
(b) subsection 207-126(2);
(c) subsection 207-128(4);
(d) paragraph 207-130(1)(e);
(e) paragraph 207-130(8)(b);
(f) subsection 207-132(4).
5 At the end of
Subdivision 975-A
Add:
An entity (the first entity) is a controller (for CGT
purposes) of a company if:
(a) the first entity has an
*associate-inclusive control interest in the
company of at least 50%; or
(b) the first entity has an associate-inclusive control interest in the
company of at least 40% and entities other than the first entity or associates
of the first entity do not control the company; or
(c) the first entity controls the company (alone or with an
*associate).
(1) An entity has an associate-inclusive control interest in
a company in the circumstances set out in Subdivision A of Division 3 of
Part X of the Income Tax Assessment Act 1936.
(2) However, in working out whether an entity has an associate-inclusive
control interest of a particular percentage for the purposes of
section 975-155, there are these modifications to the way Part X of
that Act operates:
(a) that Part is applied to any company, including one acting as a
trustee; and
(b) subsection 349(4) applies in all cases in working out which entity
holds a direct control interest or a control tracing interest equal to 100%;
and
(c) subsections 350(6) and (7) and 355(1) are ignored; and
(d) despite subsection 352(2), an interposed entity may be taken into
account in calculating an indirect control interest if the interposed entity
is:
(i) a company of which the first entity or an
*associate is a controller; or
(ii) a partnership or a trust; and
(e) section 354 applies as if it referred to partnerships rather than
CFP’s; and
(f) section 355 applies as if it referred to trusts rather than
CFT’s.
Note 1: Part X of the Income Tax Assessment Act
1936 defines company to exclude one in the capacity of a
trustee.
Note 2: The terms direct control interest and control
tracing interest are relevant to working out associate-inclusive control
interests in a company: see sections 350, 351, 353, 354 and 355 of that
Act.
Note 3: Under subsection 349(4) of that Act, if 2 or more
entities would have a direct control interest or a control tracing interest in a
company or trust equal to 100%, only one of them holds the
interest.
Note 4: Subsections 350(6) and (7) deal with direct control
interests in a company. They deal with interests held by Australian entities.
Under subsection 355(1), certain entities are taken to hold a control tracing
interest in a trust equal to 100%.
Note 5: Paragraphs (2)(d), (e) and (f) of this section
are necessary because Part X of the Income Tax Assessment Act 1936
applies only to CFE’s (which comprise CFC’s, CFP’s and
CFT’s).
6 Subsection 995-1(1)
Insert:
associate-inclusive control interest in a company has the
meaning given by section 975-160.
7 Subsection 995-1(1) (definition of controller
(for CGT purposes))
Omit “140-20”, substitute “975-155”.
8 Subsection 995-1(1)
Insert:
controller (for imputation purposes) has the meaning given by
subsections 207-130(5) and (6).
9 Subsection 995-1(1)
Insert:
distribution event has the meaning given by subsection
207-120(5).
10 Subsection 995-1(1) (definition of exempt
institution that is eligible for a refund)
Omit “207-130”, substitute “207-115”.
11 Subsection 995-1(1) (at the end of the definition
of exempt institution that is eligible for a refund)
Add:
Note: This definition is affected by sections 207-119
to 207-136.
12 Subsection 995-1(1) (paragraph (d) of the
definition of residency requirement)
Omit “207-135”, substitute “207-117”.
13 Subsection 995-1(1)
Insert:
trust share amount has the meaning given by subsection
207-120(4).
Part 2—Miscellaneous
consequential and technical amendments
Income Tax Assessment Act
1936
14 Subsection 6(1)
Insert:
corporate tax entity has the same meaning as in the Income
Tax Assessment Act 1997.
15 Subsection 6(1)
Insert:
corporate tax rate has the same meaning as in the Income
Tax Assessment Act 1997.
16 Subsection 6(1)
Insert:
distribution, when used in a franking context, has the same
meaning as in the Income Tax Assessment Act 1997.
17 Subsection 6(1)
Insert:
frankable distribution has the same meaning as in the
Income Tax Assessment Act 1997.
18 Subsection 6(1)
Insert:
franking credit has the same meaning as in the Income Tax
Assessment Act 1997.
19 Subsection 6(1)
Insert:
franking debit has the same meaning as in the Income Tax
Assessment Act 1997.
20 Subsection 6(1)
Insert:
franking deficit tax has the same meaning as in the Income
Tax Assessment Act 1997.
21 Subsection 6(1)
Insert:
franking surplus has the same meaning as in the Income Tax
Assessment Act 1997.
22 Subsection 6(1)
Insert:
franks with an exempting credit has the same meaning as in
the Income Tax Assessment Act 1997.
23 Subsection 6(1)
Insert:
over-franking tax has the same meaning as in the Income
Tax Assessment Act 1997.
24 Subsection 6(1)
Insert:
venture capital deficit tax has the same meaning as in the
Income Tax Assessment Act 1997.
25 Section 43A
Repeal the section, substitute:
This Subdivision has effect subject to the provisions of
Division 216 of the Income Tax Assessment Act 1997 (which describes
cum dividend sales in which a distribution to a member of a corporate tax entity
is treated as having been made to someone else).
26 Paragraph 46FB(4)(c)
After “but for”, insert “subsection 46AB(1) or 46AC(2)
or”.
27 Paragraph 102AAM(10)(a)
Omit “general company tax rate (within the meaning of
Part IIIAA)”, substitute “corporate tax rate”.
28 Subparagraph
102AAU(1)(c)(iii)
Omit “so much of a frankable dividend (within the meaning of
Part IIIAA) as has been franked in accordance with section 160AQF or
160AQFA”, substitute “the franked part of a distribution, or the
part of a distribution that has been franked with an exempting
credit”.
29 Subparagraph
102AAU(1)(c)(iv)
Omit “section 160AQT”, substitute “subsection
207-35(1) or (3) of the Income Tax Assessment Act 1997”.
30 Subsection 105A(4AA)
Omit “to the extent that the whole, or a part, of the dividend has
been franked in accordance with section 160AQF”, substitute “to
the extent of the franked part of the dividend”.
31 Paragraph 108(2)(c)
Omit “other than Part IIIAA”, substitute “, other
than Part 3-6 of the Income Tax Assessment Act
1997”.
32 Paragraph 108(2)(d)
Omit “sections 160APP and 160AQT”, substitute
“Part 3-6 of the Income Tax Assessment Act
1997”.
33 At the end of paragraph
108(3)(a)
Add “and”.
34 Paragraph 108(3)(b)
Repeal the paragraph.
35 Section 109B (simplified
outline)
Omit “for reducing the company’s franking account credit (under
section 160AQCNC)”, substitute “for a debit arising in the
company’s franking account (under item 8 of the table in
section 205-30 of the Income Tax Assessment Act
1997)”.
36 Subsection 109Y(2) (subparagraph (b)(i) of
the definition of repayments of non-commercial
loans)
Omit “to the extent that the dividend has not been franked under
section 160AQF”, substitute “to the extent of the unfranked
part of the dividend”.
37 Subsection 109ZC(2)
Omit “except Part IIIAA (which deals with franking of
dividends)”, substitute “, except Part 3-6 of the Income Tax
Assessment Act 1997 (which deals with franking of
distributions)”.
38 Subsection 109ZC(2)
Omit “that has not been franked under section 160AQF or
160AQFA”, substitute “that is not either the franked part of that
dividend, or the part of that dividend that has been franked with an exempting
credit”.
39 Section 121AT (table item 12, column
headed “Event”)
Omit “a class A franking surplus, a class B franking surplus or a
class C franking surplus (all within the meaning of Part IIIAA)”,
substitute “a franking surplus”.
40 Section 121AT (table item 12, column
headed “Modifications”)
Omit “class A franking surplus, class B franking surplus or class C
franking surplus (all within the meaning of Part IIIAA)”, substitute
“franking surplus”.
41 Section 121AT (table item 13, column
headed “Modifications”)
Omit “(within the meaning of Part IIIAA)”.
42 Subsection 121EG(4) (definition of eligible
fraction)
Omit “general company tax rate (within the meaning of
section 160APA)”, substitute “corporate tax
rate”.
43 Paragraph 128B(3)(ga)
Repeal the paragraph, substitute:
(ga) income that consists of:
(i) the franked part of a dividend; or
(ii) in relation to a dividend that is paid by a former exempting entity
(within the meaning of the Income Tax Assessment Act 1997) on a share
acquired under an employee share scheme (within the meaning of that
Act)—the part of the dividend that is franked with an exempting credit;
or
(iii) in relation to a dividend that is paid by a former exempting entity
(within the meaning of the Income Tax Assessment Act 1997) to an eligible
continuing substantial member (within the meaning of that Act)—the part of
the dividend that is franked with an exempting credit;
other than a dividend in respect of which a determination is made under
paragraph 204-30(3)(c) of the Income Tax Assessment Act 1997 or a
dividend or a part of a dividend in respect of which a determination is made
under paragraph 177EA(5)(b) of this Act; or
44 Subsection 128TD(2)
Omit “section 160AQH”, substitute
“section 202-75 of the Income Tax Assessment Act
1997”.
45 Subsection 128TD(3)
Omit “section 160AQH”, substitute “subsection
202-80(2) of the Income Tax Assessment Act 1997”.
46 Subsection 128TE(1)
Omit “section 160AQH”, substitute
“section 202-75 of the Income Tax Assessment Act
1997”.
47 Subsection 128TE(2)
Repeal the subsection.
48 Before paragraph
159GZZZQ(8)(a)
Insert:
(aa) the seller is a corporate tax entity; and
49 Paragraph 159GZZZQ(8)(b)
Omit “a rebatable amount”, substitute “an offsetable
amount”.
Note: The heading to subsection 159GZZZQ(8) is replaced by
the heading “Offsetable amount excluded from reduction where
loss”.
50 Paragraph 159GZZZQ(8)(e)
Omit “rebatable amount”, substitute “offsetable
amount”.
51 Subsection 159GZZZQ(9)
Repeal the subsection, substitute:
Meaning of offsetable amount
(9) For the purposes of subsection (8), if the seller is entitled to
a tax offset under Division 207 of the Income Tax Assessment Act 1997
in the seller’s assessment for a year of income in respect of the
dividend, the dividend consists of an offsetable amount worked out
using the formula:
52 Subsection 160AN(3A)
Omit “Division 2 of Part IIIAA (which deals with franking
credits and debits)”, substitute “Division 205 of the Income
Tax Assessment Act 1997 (which deals with franking
accounts)”.
53 Subsection 170BA(1) (paragraph (b) of the
definition of ruling affected tax)
Repeal the paragraph, substitute:
(b) franking deficit tax; or
(ba) venture capital deficit tax; or
(bb) over-franking tax; or
54 Paragraph 276(4)(b)
Repeal the paragraph, substitute:
(b) the amount of the tax offsets (if any) to which the trustee of the
fund, or the RSA provider, is entitled under Part 3-6 of the Income Tax
Assessment Act 1997 in relation to the notice year; and
55 Paragraph 365(3)(b)
Omit “frankable dividend, within the meaning of Part IIIAA, that
has been franked in accordance with section 160AQF or 160AQFA”,
substitute “frankable distribution that has been franked in accordance
with section 202-5 of the Income Tax Assessment Act 1997, or that
has been franked with an exempting credit in accordance with section 208-60
of that Act”.
56 Paragraph 389(b)
Omit “Part IIIAA”, substitute “Part 3-6 of the
Income Tax Assessment Act 1997”.
57 Paragraph 402(2)(b)
Repeal the paragraph, substitute:
(b) so much of a frankable distribution, paid to the eligible CFC in the
eligible period, as is either the franked part of the distribution, or the part
of the distribution that has been franked with an exempting credit;
58 Paragraph 436(1)(d)
Repeal the paragraph, substitute:
(d) so much of a frankable distribution as is either the franked part of
the distribution, or the part of the distribution that has been franked with an
exempting credit;
59 Subsection 57-120(1) in
Schedule 2D
Omit “class A franking surplus, a class B franking surplus or a class
C franking surplus”, substitute “franking surplus”.
60 Paragraph 57-120(3)(a) in
Schedule 2D
Omit “class A franking debits, class B franking debits or class C
franking debits”, substitute “franking debits”.
61 Subparagraph 57-120(3)(c)(i) in
Schedule 2D
Repeal the subparagraph, substitute:
(i) there was a franking surplus of the transition taxpayer that was less
than the total of the pre-transition time components of all of the debits;
or
62 Subparagraph 57-120(3)(c)(ii) in
Schedule 2D
Omit “class A franking surplus, there was no class B franking surplus
or there was no class C franking surplus”, substitute “franking
surplus”.
63 Paragraph 57-120(3)(d) in
Schedule 2D
Omit “or surpluses concerned”.
64 Paragraph 57-120(3)(e) in
Schedule 2D
Omit “of the class or classes concerned”.
65 Paragraph 57-120(4)(a) in
Schedule 2D
Omit “class A franking debits, class B franking debits or class C
franking debits”, substitute “franking debits”.
66 Subparagraph 57-120(4)(c)(i) in
Schedule 2D
Repeal the subparagraph, substitute:
(i) there was a franking surplus of the subsidiary that was less than the
total of the pre-transition time components of all of the debits; or
67 Subparagraph 57-120(4)(c)(ii) in
Schedule 2D
Omit “class A franking surplus, there was no class B franking surplus
or there was no class C franking surplus”, substitute “franking
surplus”.
68 Paragraph 57-120(4)(d) in
Schedule 2D
Omit “or surpluses concerned”.
69 Paragraph 57-120(4)(e) in
Schedule 2D
Omit “of the class or classes concerned”.
70 Subsection 57-120(5) in
Schedule 2D
Repeal the subsection.
71 Subsection 326-120(1) in
Schedule 2H
Omit “class C”.
72 Subsection 326-130(2) in Schedule 2H
(definition of value of franking surplus)
Omit “class C”.
73 Subsection 326-170(4) in
Schedule 2H
Omit “class C”.
74 Subsection 326-170(5) in
Schedule 2H
Omit “class C”.
Income Tax Assessment Act
1997
75 Section 10-5 (table item headed
“dividends”)
Omit:
|
franked dividends, credits on |
160AQT |
substitute:
|
franked dividends, credits on |
207-20(1), 207-35(1), 207-35(3) |
76 Section 12-5 (table item headed
“dividends”)
Omit:
|
franking credits, companies and non-residents |
160AR, 160ARD |
substitute:
|
franking credits, companies and non-residents |
207-95(2), 207-95(3), 220-405(3) |
77 Section 12-5 (table item headed “tax
avoidance schemes”)
Omit:
|
dividend stripping |
46A, 177E |
substitute:
|
dividend stripping |
177E |
78 Section 12-5 (table item headed “tax
avoidance schemes”)
After: