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This is a Bill, not an Act. For current law, see the Acts databases.
2004
The Parliament of
the
Commonwealth of
Australia
HOUSE OF
REPRESENTATIVES
Presented and read a first
time
Tax
Laws Amendment (2004 Measures No. 7) Bill
2004
No. ,
2004
(Treasury)
A Bill
for an Act to amend the law relating to taxation, and for related
purposes
Contents
Income Tax Assessment Act
1997 5
Taxation Administration Act
1953 13
Income Tax Assessment Act
1997 15
Income Tax (Transitional Provisions) Act
1997 15
Income Tax Assessment Act
1936 18
Income Tax Assessment Act
1997 24
Fringe Benefits Tax Assessment Act
1986 26
Petroleum Resource Rent Tax Assessment Act
1987 27
Part 1—Application 34
Part 2—Amount of certain liabilities for purpose of calculating
allocable cost amount on
exit 35
Income Tax Assessment Act
1997 35
Part 3—Ensuring no double reduction in working out step 3 of
allocable cost amount on
entry 36
Income Tax Assessment Act
1997 36
Income Tax (Transitional Provisions) Act
1997 36
Part 4—Bad
debts 37
Division 1—Main
amendment 37
Income Tax Assessment Act
1997 37
Division 2—Consequential
amendments 43
Income Tax Assessment Act
1936 43
Income Tax Assessment Act
1997 44
Income Tax (Transitional Provisions) Act
1997 45
Part 5—Insurance
companies 46
Income Tax Assessment Act
1997 46
Income Tax (Transitional Provisions) Act
1997 66
Income Tax Assessment Act
1997 69
Income Tax Assessment Act
1936 73
Part 1—Amendment commencing on 29 June
2004 75
Income Tax Assessment Act
1936 75
Part 2—Amendments commencing on Royal
Assent 76
Income Tax Assessment Act
1936 76
Part 1—Technical corrections and amendments commencing on Royal
Assent 78
A New Tax System (Goods and Services Tax) Act
1999 78
A New Tax System (Wine Equalisation Tax) Act
1999 79
Fringe Benefits Tax Assessment Act
1986 79
Income Tax Assessment Act
1936 80
Income Tax Assessment Act
1997 83
Income Tax (Transitional Provisions) Act
1997 103
New Business Tax System (Consolidation and Other Measures) Act
2003 104
Petroleum Resource Rent Tax Assessment Act
1987 104
Product Grants and Benefits Administration Act
2000 105
Superannuation Guarantee (Administration) Act
1992 105
Taxation Administration Act
1953 105
Taxation Laws Amendment Act (No. 5)
2002 106
Venture Capital Act
2002 106
Part 2—Technical corrections and amendments commencing otherwise
than on Royal Assent 107
A New Tax System (Pay As You Go) Act
1999 107
Energy Grants (Credits) Scheme (Consequential Amendments) Act
2003 107
Fringe Benefits Tax Assessment Act
1986 107
Income Tax Assessment Act
1997 107
New Business Tax System (Consolidation) Act (No. 1)
2002 110
New Business Tax System (Consolidation and Other Measures) Act
2003 110
Taxation Laws Amendment (Company Law Review) Act
1998 110
Taxation Laws Amendment (Research and Development) Act
2001 111
Tax Laws Amendment (2004 Measures No. 2) Act
2004 111
Part 3—Removal of link
notes 112
Income Tax Assessment Act
1936 112
Income Tax Assessment Act
1997 112
Income Tax (Transitional Provisions) Act
1997 112
Taxation Administration Act
1953 112
Venture Capital Act
2002 112
Income Tax Assessment Act
1936 114
Income Tax Assessment Act
1997 114
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. 7) 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.
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.
Income Tax Assessment Act
1997
1 Section 13-1 (after table item headed
“eligible termination payments (ETPs)”)
Insert:
|
entrepreneurs’ tax offset |
|
|
see simplified tax system |
|
2 Section 13-1 (table item headed
“partnerships”)
After “dividends”, insert “and simplified tax
system”.
3 Section 13-1 (after table item headed
“sickness benefits”)
Insert:
|
simplified tax system |
|
|
25% entrepreneurs’ tax offset...................... |
Subdivision 61-J |
4 Section 13-1 (table item headed
“trusts”)
After “dividends”, insert “and simplified tax
system”.
5 After Subdivision 61-I
Insert:
This Subdivision provides a 25% tax offset on your income tax liability
related to the business income of a business in the simplified tax system with
annual group turnover of less than $75,000.
Your entitlement to the offset varies depending on what kind of entity you
are. The amount of your offset varies depending on whether the annual group
turnover is $50,000 or less or is more than $50,000.
You may be entitled to more than 1 tax offset. For example, if you are an
individual STS taxpayer running your own business, you may be entitled to a tax
offset under section 61-505. If you are also a beneficiary of a trust that
is an STS taxpayer, you may be entitled to a tax offset under
section 61-520.
Table of sections
Operative provisions
61-505 25% entrepreneurs’ tax offset: individual or
company
61-510 25% entrepreneurs’ tax offset: partner in a
partnership
61-515 25% entrepreneurs’ tax offset: trustee of a
trust
61-520 25% entrepreneurs’ tax offset: beneficiary of a
trust
61-525 Meaning of net STS income and STS annual
turnover
Entitlement
(1) You are entitled to a *tax offset for
an income year if:
(a) you are an individual or a company; and
(b) you are an *STS taxpayer for the
year; and
(c) your *STS group turnover for the year
is less than $75,000; and
(d) you have *net STS income for the
year.
Amount
(2) The amount of your *tax offset is
worked out in this way:
Method statement
Step 1. Work out your taxable income for the income year.
Step 2. Work out 25% of your basic income tax liability for the year
(as worked out in step 2 of the method statement in subsection
4-10(3)).
Step 3. Work out the percentage (the STS percentage)
using the formula:
If that percentage is more than 100%, the STS percentage is
100%.
Step 4. If your *STS group turnover
for the year is $50,000 or less, multiply the amount at step 2 by the STS
percentage: the result is the amount of your
*tax offset.
Step 5. If your *STS group turnover
for the year is more than $50,000, work out the fraction (the STS
phase-out fraction) using the formula:
The amount of your *tax offset is worked
out using the formula:
Example: A company runs a local sports business. The company
is an STS taxpayer for the year. The company’s STS group turnover for the
year is $50,000, the company’s net STS income for the year is $40,000 and
the company’s taxable income for the year is $80,000.
The company is entitled to a tax offset.
The amount of the offset is worked out in this
way:
The step 1 amount is $80,000.
The step 2 amount is $6,000: 25% of the company’s
basic income tax liability of $24,000 ($80,000 multiplied by the 30% company tax
rate).
The step 3 STS percentage is:
The amount of the company’s tax offset (step 4)
is:
Entitlement
(1) You are entitled to a *tax offset for
an income year if:
(a) you are a partner in a partnership during the year; and
(b) the partnership is an *STS taxpayer
for the year; and
(c) the partnership’s *STS group
turnover for the year is less than $75,000; and
(d) the partnership has *net STS income
for the year; and
(e) your assessable income for the year includes a share (your net
STS income share) of that net STS income.
Amount
(2) The amount of your *tax offset is
worked out in this way:
Method statement
Step 1. Work out your taxable income for the income year.
Step 2. Work out 25% of your basic income tax liability for the year
(as worked out in step 2 of the method statement in subsection
4-10(3)).
Step 3. Work out the percentage (the STS percentage)
using the formula:
If that percentage is more than 100%, the STS percentage is
100%.
Step 4. If the partnership’s
*STS group turnover for the year is $50,000 or
less, multiply the amount at step 2 by the STS percentage: the result is the
amount of your *tax offset.
Step 5. If the partnership’s
*STS group turnover for the year is more than
$50,000, work out the fraction (the STS phase-out fraction) using
the formula:
The amount of your *tax offset is worked
out using the formula:
Entitlement
(1) You are entitled to a *tax offset for
an income year if:
(a) you are a trustee of a trust during the year; and
(b) the trust is an *STS taxpayer for the
year; and
(c) the trust’s *STS group turnover
for the year is less than $75,000; and
(d) the trust has *net STS income for the
year; and
(e) you are liable to be assessed under section 98, 99 or 99A of the
Income Tax Assessment Act 1936 on a share (your net STS income
share) of that net STS income.
Amount
(2) The amount of your *tax offset is
worked out in this way:
Method statement
Step 1. Work out the *net income of
the trust for the income year.
Step 2. Work out 25% of the amount of income tax you are liable to
pay for the year on that *net income (apart
from any *tax offsets).
Step 3. Work out the percentage (the STS percentage)
using the formula:
If that percentage is more than 100%, the STS percentage is
100%.
Step 4. If the trust’s *STS
group turnover for the year is $50,000 or less, multiply the amount at step 2 by
the STS percentage: the result is the amount of your
*tax offset.
Step 5. If the trust’s *STS
group turnover for the year is more than $50,000, work out the fraction (the
STS phase-out fraction) using the formula:
The amount of your *tax offset is worked
out using the formula:
Entitlement
(1) You are entitled to a *tax offset for
an income year if:
(a) you are a beneficiary of a trust during the year; and
(b) the trust is an *STS taxpayer for the
year; and
(c) the trust’s *STS group turnover
for the year is less than $75,000; and
(d) the trust has *net STS income for the
year; and
(e) your assessable income for the year includes a share (your net
STS income share) of that net STS income.
Amount
(2) The amount of your *tax offset is
worked out in this way:
Method statement
Step 1. Work out your taxable income for the income year.
Step 2. Work out 25% of your basic income tax liability for the year
(as worked out in step 2 of the method statement in subsection
4-10(3)).
Step 3. Work out the percentage (the STS percentage)
using the formula:
If that percentage is more than 100%, the STS percentage is
100%.
Step 4. If the trust’s *STS
group turnover for the year is $50,000 or less, multiply the amount at step 2 by
the STS percentage: the result is the amount of your
*tax offset.
Step 5. If the trust’s *STS
group turnover for the year is more than $50,000, work out the fraction (the
STS phase-out fraction) using the formula:
The amount of your *tax offset is worked
out using the formula:
Net STS income
(1) An entity’s net STS income for an income year is
the amount by which the entity’s *STS
annual turnover for the year is more than the sum of the entity’s
deductions attributable to that turnover.
STS annual turnover
(2) An entity’s STS annual turnover for an income year
is the sum of the *value of the business
supplies the entity made in the year.
(3) To the extent that the *taxable
supplies an entity makes in an income year includes
*gambling supplies, use an amount equal to 11
times the entity’s *global GST amount for
those supplies rather than the *value of the
business supplies in working out the entity’s
*STS annual turnover.
(4) In working out the *value of the
business supplies made by an entity, disregard:
(a) any *supply made to the extent that
the consideration for the supply is a payment or a supply by an insurer in
settlement of a claim under an insurance policy; and
(b) to the extent that a supply is constituted by a loan—any
repayment of principal, and any obligation to repay principal.
6 At the end of
section 328-5
Add:
Note: If you choose to become an STS taxpayer, you may be
entitled to the 25% entrepreneurs’ tax offset: see
Subdivision 61-J.
7 Subsection 328-365(1) (note)
Omit “Note”, substitute “Note 1”.
8 At the end of subsection
328-365(1)
Add:
Note 2: If you choose to become an STS taxpayer, you may be
entitled to the 25% entrepreneurs’ tax offset: see
Subdivision 61-J.
9 Subsection 995-1(1)
Insert:
net STS income has the meaning given by
section 61-525.
10 Subsection 995-1(1)
Insert:
STS annual turnover has the meaning given by
section 61-525.
11 Application
The amendments made by items 1 to 10 apply to assessments for the
first income year starting on or after 1 July 2005 and later income
years.
Taxation Administration Act
1953
12 Section 45-340 in Schedule 1 (before
paragraph (a) of step 1 of the method statement)
Insert:
(aaa) Subdivision 61-J of the Income Tax Assessment Act 1997
(the 25% entrepreneurs’ tax offset); or
13 Application
The amendment made by item 12 applies in relation to the calculation
of an entity’s adjusted tax:
(a) for a base year that is the first income year starting on or after
1 July 2005 or is a later income year; and
(b) only for the purposes of a PAYG instalment period that includes, or
starts after, the day on which this Act receives the Royal Assent.
Income Tax Assessment Act
1997
1 Subsection 6-5(4) (note)
Repeal the note.
2 Subsection 8-1(3) (note 1)
Omit “Note 1”, substitute “Note”.
3 Subsection 8-1(3) (note 2)
Repeal the note.
4 Subsection 70-15(3) (note 1)
Omit “Note 1”, substitute “Note”.
5 Subsection 70-15(3) (note 2)
Repeal the note.
6 Section 328-5
Omit “3”.
7 Section 328-5
Omit:
• you use a cash accounting system for ordinary income, general
deductions and deductions for tax-related expenses and repairs; and
8 Section 328-10
Repeal the section.
9 Subdivision 328-C
Repeal the Subdivision.
Income Tax (Transitional
Provisions) Act 1997
10 Before Division 330
Insert:
Table of sections
328-115 When you stop using the STS accounting
method
328-120 Continuing to use the STS accounting
method
328-125 Meaning of STS accounting
method
328-440 Becoming an STS taxpayer after stopping to be
one
(1) This section sets out what happens to your ordinary income and general
deductions, and deductions under section 25-5 or 25-10 of the Income Tax
Assessment Act 1997, if:
(a) you are an STS taxpayer for an income year and for the following
income year (the changeover year); and
(b) you were using the STS accounting method for the income year before
the changeover year; and
(c) you change to an accruals accounting method for the changeover
year.
(2) This section also sets out what happens to your ordinary income and
general deductions, and deductions under section 25-5 or 25-10 of the
Income Tax Assessment Act 1997, if:
(a) you stop being an STS taxpayer for an income year (also the
changeover year); and
(b) you were using the STS accounting method for the income year before
the changeover year; and
(c) you change to an accruals accounting method for the changeover
year.
(3) Any ordinary income that, apart from paragraph 328-105(1)(a) of the
Income Tax Assessment Act 1997, you would have derived before the
changeover year (while you were an STS taxpayer) and you have not included in
your assessable income because you have not received it is included in your
assessable income for the changeover year.
(4) Any general deductions, and deductions under section 25-5 or
25-10 of the Income Tax Assessment Act 1997, that, apart from paragraph
328-105(1)(b) of that Act, you would have incurred before the changeover year
(while you were an STS taxpayer) and that you have not deducted because you have
not paid them can be deducted for the changeover year.
If you were an STS taxpayer for your first income year that started
before 1 July 2005, you can continue to use the STS accounting method for
your first income year starting on or after 1 July 2005 and later income
years while you continue to be an STS taxpayer.
In sections 328-115 and 328-120, STS accounting method
means the accounting method that was required by the Income Tax Assessment
Act 1997 to be used by STS taxpayers for the 2004-05 income year.
Subsection 328-440(3) of the Income Tax Assessment Act 1997 does
not apply to you, during the period of 5 years starting on 1 July 2005, if
you chose to stop being an STS taxpayer for an income year before your first
income year starting on or after 1 July 2005.
11 Application
The amendments made by this Schedule apply to assessments for the first
income year starting on or after 1 July 2005 and later income
years.
Income Tax Assessment Act
1936
1 Section 139A (after table item dealing with
Subdivision D)
Insert:
|
DA |
Takeovers and restructures |
2 Subsection 139C(4)
After “The taxpayer does not”, insert “(except for the
purposes of Subdivision DA)”.
3 Paragraph 139CA(2)(b)
Before “the later of”, insert “subject to
subsection (4),”.
4 At the end of
section 139CA
Add:
(4) Paragraph (2)(b) does not apply in relation to a share that,
because of section 139DQ, is treated, for the purposes of this Division, as
if it were a continuation of a share acquired under an employee share
scheme.
Note: Subdivision DA can affect whether the taxpayer is
treated as having disposed of a share or ceased employment.
5 Paragraphs 139CB(1)(c) and
(d)
Before “if the right is exercised”, insert “subject to
subsection (3),”.
6 After paragraph 139CB(1)(d)
Insert:
(da) if subsection (3) applies—the time when the taxpayer
disposes of the share referred to in paragraph (3)(b);
7 At the end of
section 139CB
Add:
Note: Subdivision DA can affect whether the taxpayer is
treated as having disposed of a right or ceased employment.
(3) Paragraphs (1)(c) and (d) do not apply in relation to a right
if:
(a) a share has been or is acquired as a result of the exercise of the
right; and
(b) because of section 139DQ, another share is treated, for the
purposes of this Division, as if it were a continuation of that share.
8 At the end of
section 139CC
Add:
Note: Section 139DS can affect the amount of
consideration that the taxpayer is treated as having paid or
given.
9 After subsection 139DD(2)
Insert:
(2A) To avoid doubt, the taxpayer does not lose the right if, because of
section 139DQ, another right is treated, for the purposes of this Division,
as if it were a continuation of that right.
10 After subsection 139DD(3)
Insert:
(3A) To avoid doubt, the company does not cease to be the employer of the
taxpayer or a holding company of the employer of the taxpayer if, because of
section 139DQ, the taxpayer’s employment by another company is
treated, for the purposes of this Division, as if it were a continuation of that
employment.
11 After Subdivision D of Division 13A of
Part III
Insert:
The object of this Subdivision is to allow this Division to continue to
apply, in appropriate circumstances, to 100% takeovers or restructures of
companies that have employee share schemes.
Treating acquisitions as continuations of existing shares
etc.
(1) To the extent that:
(a) a taxpayer acquires:
(i) shares in a company (the new company) that can
reasonably be regarded as matching shares in another company (the old
company) that the taxpayer had acquired under an employee share scheme;
or
(ii) rights in a company (the new company) that can
reasonably be regarded as matching rights in another company (the old
company) that the taxpayer had acquired under an employee share scheme;
and
(b) the acquisition occurs in connection with a 100% takeover, or a
restructure, of the old company; and
(c) as a result of the takeover or restructure, the taxpayer ceased to
hold the shares or rights in the old company;
then, if the conditions in section 139DR are met, the matching shares
or rights are treated, for the purposes of this Division, as if they were a
continuation of the shares or rights in the old company.
Note: In determining to what extent something can reasonably
be regarded as matching shares or rights in the old company, one of the factors
to consider is the respective market values of that thing and of those shares or
rights.
Treating acquisitions as disposals of existing shares etc.
(2) However, to the extent that, in connection with the takeover or
restructure, the taxpayer acquires anything that:
(a) can reasonably be regarded as matching shares or rights in the old
company that the taxpayer had acquired under an employee share scheme;
but
(b) is not a matching share or right to which subsection (1)
applies;
the taxpayer is treated, for the purposes of this Division, as having
disposed of shares, or disposed of rights (other than by exercising them), that
the taxpayer held, under an employee share scheme, in the old company
immediately before the takeover or restructure.
Treating new employment as continuation of existing
employment
(3) If subsection (1) applies, any employment of the taxpayer
in:
(a) the new company; or
(b) a holding company of the new company; or
(c) a subsidiary of the new company or of a holding company of the new
company;
is treated, for the purposes of this Division, as a continuation of the
employment in respect of which he or she acquired the shares or rights in the
old company or in a subsidiary of the old company.
(1) The first condition is that, immediately before the takeover or
restructure, the taxpayer held shares or rights in the old company under an
employee share scheme.
(2) The second condition is that, at or about the time the taxpayer
acquires the matching shares or rights, the taxpayer is an employee
of:
(a) the new company; or
(b) a holding company of the new company; or
(c) a subsidiary of the new company or of a holding company of the new
company.
(3) The third condition is that:
(a) to the extent that the matching shares or rights are shares, they are
ordinary shares; or
(b) to the extent that the matching shares or rights are rights, they are
rights to acquire ordinary shares.
(4) The fourth condition is that, if subsection 139DQ(1) did not apply,
the cessation time, for the shares or rights in the old company to which the
matching shares or rights relate, would occur as a result of the takeover or
restructure.
(5) The fifth condition is that, at the time the taxpayer acquires the
matching shares or rights, the taxpayer does not hold a legal or beneficial
interest in more than 5% of the shares of the new company.
(6) The sixth condition is that, at that time, the taxpayer is not in a
position to cast, or control the casting of, more than 5% of the maximum number
of votes that may be cast at a general meeting of the new company.
(1) If:
(a) subsection 139DQ(1) applies to shares or rights that the taxpayer has
acquired; and
(b) the taxpayer had paid or given consideration (the original
consideration) for an acquisition, under an employee share scheme, of
any of the shares or rights in the old company (the original shares or
rights);
the taxpayer is treated as having paid or given, for any of the
apportionable assets for the original shares or rights, consideration of an
amount worked out by spreading the original consideration proportionately among
all the apportionable assets according to their market values immediately after
the takeover or restructure.
Note: Subsection 139FA(4) alters the meaning of market value
of a share or right for the purposes of this section.
(2) The apportionable assets for the original shares or
rights are:
(a) all matching shares or rights held by the taxpayer that are treated
because of this Division as a continuation of the original shares or rights;
and
(b) anything else that the taxpayer acquired in connection with the
takeover or restructure and that can reasonably be regarded as matching the
original shares or rights; and
(c) in the case of a restructure—any shares or rights in the old
company that the taxpayer held immediately before, and continues to hold
immediately after, the restructure and that can reasonably be regarded as
matching the original shares or rights.
12 At the end of
section 139FA
Add:
(4) This section applies for the purposes of section 139DS as if
references in this section to the one week period up to and including that day
were references to the period consisting of that day.
13 Section 139GC
Omit “Corporations Law”, substitute
“Corporations Act 2001”.
14 After section 139GC
Insert:
The expression subsidiary has the same meaning as in
the Corporations Act 2001.
A 100% takeover of a company by another company is an
arrangement that is intended to result in the company becoming a 100% subsidiary
of the other company, or of a holding company or subsidiary of the other
company.
A restructure of a company is a change in the ownership, or
the structure of the ownership, of the company as a result of which some or all
shares or rights held in the company under an employee share scheme immediately
before the change:
(a) are replaced; or
(b) could reasonably be regarded as having been replaced;
wholly or partly by shares or rights in one or more other
companies.
15 Section 139GH (before the table item dealing
with Acquiring a share or right)
Insert:
|
100% takeover |
139GCB |
16 Section 139GH (at the end of the
table)
Add:
|
Restructure |
139GCC |
|
Subsidiary |
139GCA |
Income Tax Assessment Act
1997
17 Subsection 130-80(1)
Repeal the subsection, substitute:
(1) This section sets out what happens if you:
(a) *acquire a
*share or right at a discount (within the
meaning of Subdivision C of Division 13A of Part III of the Income
Tax Assessment Act 1936) under an *employee
share scheme; or
(b) acquire a share or right that, because of section 139DQ of that
Act, is treated, for the purposes of Division 13A of Part III of that
Act, as if it were a continuation of a share or right acquired under an employee
share scheme.
18 After subsection 130-83(1)
Insert:
(1A) If:
(a) a *CGT event happens in relation to
the *share or right (the original share
or right); and
(b) it happens in connection with an acquisition (within the meaning of
Subdivision C of Division 13A of Part III of the Income Tax
Assessment Act 1936) of another share or right (the matching share or
right); and
(c) under section 139DQ of the Income Tax Assessment Act 1936
the matching share or right is treated, for the purposes of Division 13A of
Part III of that Act, as if it were a continuation of the original share or
right;
any *capital gain or
*capital loss you make from the CGT event is
disregarded.
19 Section 130-90
(heading)
Repeal the heading, substitute:
20 Subsection 130-90(3)
Repeal the subsection, substitute:
(3) Either:
(a) the individual, *associate or
affiliate company must have acquired the *share
or right under an *employee share scheme;
or
(b) the share or right must, because of section 139DQ of the
Income Tax Assessment Act 1936, be a share or right that is treated, for
the purposes of Division 13A of Part III of that Act, as if it were a
continuation of a share or right acquired under an employee share
scheme.
21 At the end of
Subdivision 130-D
Add:
If:
(a) a *CGT event happens in relation to a
*share or right (the original share or
right); and
(b) it happens in connection with an acquisition (within the meaning of
Subdivision C of Division 13A of Part III of the Income Tax
Assessment Act 1936) of another share or right (the matching share or
right) by the beneficiary of an
*employee share trust; and
(c) under section 139DQ of the Income Tax Assessment Act 1936
the matching share or right is treated, for the purposes of Division 13A of
Part III of that Act, as if it were a continuation of the original share or
right;
any *capital gain or
*capital loss the trustee of the employee share
trust makes from the CGT event is disregarded.
22 Application
(1) The amendments made by this Schedule apply, and are taken to have
applied, to acquisitions of shares or rights on or after 1 July
2004.
(2) In this item:
acquisition, of a share or right, has the same meaning as in
Division 13A of Part III of the Income Tax Assessment Act
1936.
Fringe Benefits Tax
Assessment Act 1986
1 Paragraph 58Q(1)(c) (formula)
Repeal the formula, substitute:
2 Paragraph 58Q(1)(d) (formula)
Repeal the formula, substitute:
3 Application
The amendments made by this Schedule apply to FBT years beginning on or
after 1 April 2005.
Petroleum Resource Rent Tax
Assessment Act 1987
1 Section 2
Insert:
designated frontier area means that block or those blocks
that constitute both:
(a) an area or part of an area:
(i) specified in section 36A; or
(ii) specified in an instrument made under subsection 36B(1);
and
(b) an exploration permit area.
2 Section 2
Insert:
designated frontier expenditure, in relation to a petroleum
project and a financial year, means exploration expenditure that is actually
incurred:
(a) by a person in that year where the eligible exploration or recovery
area in relation to the project is a designated frontier area; and
(b) during the original period of the exploration permit concerned (before
the permit is first renewed or ceases to be in force);
other than exploration expenditure that is incurred in evaluating or
delineating a petroleum pool (within the meaning of the Petroleum (Submerged
Lands) Act 1967) that has been discovered in a designated frontier
area.
3 Section 2
Insert:
uplifted frontier expenditure has the meaning given by
section 36C.
4 After section 36
Insert:
For the purposes of the definition of designated frontier
area, the following areas are specified:
(a) Area T04-5, as first gazetted in the Tasmanian Government
Gazette on 5 May 2004 under subsection 20(1) of the Petroleum
(Submerged Lands) Act 1967;
(b) Areas W04-2, W04-4, W04-15 and W04-16, as first gazetted in the
Western Australia Government Gazette on 30 March 2004 under
subsection 20(1) of the Petroleum (Submerged Lands) Act 1967;
(c) Area NT04-3, as first gazetted in the Northern Territory
Government Gazette on 14 April 2004 under subsection 20(1) of the
Petroleum (Submerged Lands) Act 1967.
Note: An amount of exploration expenditure incurred in
respect of an area that is specified under this section might be increased by
150% (before the GDP factor or the augmented bond rate is applied to the amount
under the Schedule): see section 36C.
(1) For the purposes of the definition of designated frontier
area, the Minister administering the Petroleum (Submerged Lands) Act
1967 may designate, in writing, up to (and including) 20% of potential
exploration permit areas as frontier areas.
Note: An amount of exploration expenditure incurred in
respect of an area that is specified under this section might be increased by
150% (before the GDP factor or the augmented bond rate is applied to the amount
under the Schedule): see section 36C.
(2) The Minister must not specify new areas for a calendar year after
2008.
(3) The Minister must publish an instrument made under subsection (1)
in the Gazette.
(4) An instrument made under subsection (1) is not a legislative
instrument for the purposes of the Legislative Instruments Act
2003.
(5) The Minister may, by signed instrument, delegate his or her power
under subsection (1) to an SES employee or an acting SES employee in the
Minister’s Department.
Note: The expressions SES employee and
acting SES employee are defined in section 17AA of the
Acts Interpretation Act 1901.
(6) In this section:
potential exploration permit area means an area or areas
constituted by a block or blocks in respect of which applications for
exploration permits have been invited, but not yet granted, under
Division 2 of Part III of the Petroleum (Submerged Lands) Act
1967.
For the purposes of this Act, the amount of uplifted frontier
expenditure that a person is taken to have incurred in a financial year
in relation to a petroleum project is worked out as follows:
5 Subsection 45C(9)
Omit “, within 60 days of being given the notice, lodge with the
Commissioner a written objection against the decision setting out fully and in
detail the grounds on which the person relies”, substitute “object
against the decision in the manner set out in Part IVC of the Taxation
Administration Act 1953”.
6 Subsection 45C(10)
Repeal the subsection.
7 Clause 1 of the Schedule (definition of
incurred exploration expenditure amount)
Repeal the definition, substitute:
incurred exploration expenditure amount, in relation to a
petroleum project that is not a combined project and in relation to a financial
year, means the sum of the following:
(a) any amounts of exploration expenditure (other than designated frontier
expenditure) actually incurred by the person in the financial year in relation
to the project;
(b) any amounts of uplifted frontier expenditure that the person is taken
by section 36C to have incurred in the financial year in relation to the
project;
(c) any amounts of expenditure that the person is taken by subparagraph
48(1)(a)(ia) or paragraph 48A(5)(c) to have incurred in the financial year in
relation to the project.
Note: The effect of subsections 35A(2), 35B(2) and 45D(3)
must be taken into account when working out an incurred exploration expenditure
amount.
8 Clause 1 of the Schedule
Insert:
incurred exploration expenditure amount, in relation to a
petroleum project that is a combined project and in relation to a financial
year, means the sum of the following:
(a) any amounts of:
(i) exploration expenditure (other than designated frontier expenditure)
actually incurred by the person; and
(ii) uplifted frontier expenditure that the person is taken by
section 36C to have incurred;
in the financial year in relation to the project (not being amounts
incurred before the project combination certificate in relation to the project
came into force);
(b) any amounts of expenditure that the person is taken by subparagraph
48(1)(a)(ia) or paragraph 48A(5)(c) to have incurred in the financial year in
relation to the project;
(c) if the project combination certificate came into force during the
financial year:
(i) any amounts of exploration expenditure (other than designated frontier
expenditure) actually incurred by the person in the financial year;
and
(ii) any amounts of uplifted frontier expenditure that the person is taken
by section 36C to have incurred in the financial year; and
(iii) any amounts of exploration expenditure that the person is taken by
section 48 or 48A to have incurred in the financial year;
in relation to the pre-combination projects.
Note: The effect of subsections 35A(2), 35B(2) and 45D(3)
must be taken into account when working out an incurred exploration expenditure
amount.
9 Paragraph 15(1)(a) of the
Schedule
After “incurred exploration expenditure”, insert “, or is
taken to have incurred uplifted frontier expenditure,”.
10 Subclause 15(1) of the
Schedule
Omit “all of the exploration expenditure is non-transferable
expenditure”, substitute “the total of the amounts of exploration
expenditure (other than designated frontier expenditure), and uplifted frontier
expenditure, is taken to be non-transferable expenditure”.
11 Paragraph 15(2)(b) of the
Schedule
Repeal the paragraph, substitute:
(b) the total of:
(i) any amounts of exploration expenditure (other than designated frontier
expenditure) actually incurred by the person; and
(ii) any amounts of uplifted frontier expenditure taken to be incurred by
the person in respect of designated frontier expenditure actually incurred by
the person;
in relation to the notional project in the financial year exceeds the
excess referred to in paragraph (a) by an amount (the
non-transferable amount);
12 Subclause 15(2) of the
Schedule
Omit “so much of the exploration expenditure as equals the
non-transferable amount is non-transferable expenditure”, substitute
“so much of the expenditure as equals the non-transferable amount is taken
to be non-transferable expenditure”.
13 Paragraph 15(3)(b) of the
Schedule
Omit “the exploration expenditure incurred”, substitute
“any exploration expenditure (other than designated frontier expenditure)
incurred, or any uplifted frontier expenditure taken to be
incurred,”.
14 Paragraph 15(4)(c) of the
Schedule
Repeal the paragraph, substitute:
(c) add amounts in accordance with the following rules:
(i) start with the oldest amount of any exploration expenditure (other
than designated frontier expenditure) incurred, or any uplifted frontier
expenditure taken to be incurred, by the person in the financial year;
(ii) add to that, in order starting with the next oldest amount, each of
the other amounts incurred, or taken to be incurred, by the person in the
financial year;
(iii) if adding an amount of expenditure would make the total exceed the
non-transferable amount, add only so much of the amount as makes the total equal
the non-transferable amount and do not add any later amount of
expenditure;
15 Paragraph 15(4)(d) of the
Schedule
Omit “subparagraphs (c)(i) and (ii)”, substitute
“paragraph (c)”.
16 Paragraph 16(c) of the
Schedule
Repeal the paragraph, substitute:
(c) the total of:
(i) any amounts of exploration expenditure (other than designated frontier
expenditure) actually incurred by the person; and
(ii) any amounts of uplifted frontier expenditure taken to be incurred by
the person in respect of designated frontier expenditure actually incurred by
the person;
in relation to the notional project during the period starting on
1 July 1990 and ending at the end of the assessable year;
17 Application
(1) The amendments made by this Schedule (other than items 5 and 6)
apply in respect of any exploration expenditure incurred (whether before or
after this Schedule commences) where the eligible exploration or recovery area
is a designated frontier area.
(2) The amendments made by items 5 and 6 apply in respect of any
objection made (whether before or after that item commences) that has not yet
been finally determined or otherwise disposed of.
1 Application
The amendments made by this Schedule apply on and after 1 July
2002.
Part 2—Amount
of certain liabilities for purpose of calculating allocable cost amount on
exit
Income Tax Assessment Act
1997
2 At the end of
section 711-45
Add:
Adjustment where amount of liability differed for purpose of calculating
allocable cost amount on entry
(8) If:
(a) a leaving entity’s liability mentioned in any preceding
subsection was taken into account in working out the
*allocable cost amount for a
*subsidiary member (whether or not the leaving
entity) of the old group in accordance with Division 705 (the entry
ACA); and
(b) the amount (the entry amount) of the liability that was
so taken into account is different from the amount (the exit
amount) of the liability taken into account in applying the subsection;
and
(c) the entry ACA was different from what it would have been if the exit
amount, instead of the entry amount, had been taken into account in working it
out;
then, for the purpose of applying the subsection, the liability is taken to
be of an amount equal to the entry amount.
Part 3—Ensuring
no double reduction in working out step 3 of allocable cost amount on
entry
Income Tax Assessment Act
1997
3 Subsection 705-90(6)
Repeal the subsection, substitute:
Undistributed profits must have accrued to joined group
(6) Next, work out the extent to which the undistributed profits that
satisfy the requirements of subsection (3) accrued to the joined group
before the joining time (subsection (7) states what it means for a profit
to accrue to the joined group before the joining time). The result is the step 3
amount.
Income Tax (Transitional
Provisions) Act 1997
4 Paragraph 701-30(2)(a)
Omit “, and paragraph (6)(b),”.
Income Tax Assessment Act
1997
5 At the end of
Division 709
Add:
An entity can deduct a bad debt that:
(a) has for a period been owed to a member of a consolidated group;
and
(b) has for another period been owed to an entity that was not a member of
that group;
only if each entity that has been owed the debt for such a period could
have deducted the debt had it been written off as bad at the end of the period.
This applies even if the debt is owed to the same entity for different
periods.
Table of sections
Application and object
709-205 Application of this Subdivision
709-210 Object of this Subdivision
Limit on deduction of bad debt
709-215 Limit on deduction of bad
debt
(1) This Subdivision affects whether an entity (the
claimant) that is or has been a
*member of a
*consolidated group and writes off a debt, or
part of a debt, as bad may deduct the debt or part if the conditions in
subsection (2) exist.
(2) The conditions are that, in the time starting when the debt was
incurred (whether to the claimant or another entity) and ending when the
claimant wrote off the debt or part:
(a) the debt was owed to an entity (whether the claimant or another
entity) for a period (a debt test period) when the entity was a
*member of a
*consolidated group; and
(b) the debt was owed to an entity (whether the claimant or another
entity) for a period (also a debt test period) when the entity was
a not a member of that group.
Note 1: The debt must have been owed to the claimant for at
least one of the debt test periods for the claimant to have been able to write
it off.
Note 2: One effect of section 701-1 (Single entity
rule) is that a debt is taken to be owed to the head company of a consolidated
group while the debt is owed to a subsidiary member of the
group.
(3) Ignore section 701-5 (Entry history rule) and section 701-40
(Exit history rule) in identifying a debt test period.
Note: Subsection (3) does not affect
sections 701-5 and 701-40 so far as they operate to treat the debt, or part
of the debt, as having been included in the claimant’s assessable income.
That inclusion is generally a condition under section 25-35 for the
claimant to be able to deduct the debt.
(4) This Subdivision does not apply in relation to a debt merely because
it is assigned:
(a) from an entity that is a *member of a
*consolidated group to an entity that is not a
member of that group; or
(b) from an entity that is not a member of a consolidated group to an
entity that is a member of a consolidated group; or
(c) from an entity that is a member of a consolidated group to an entity
that is a member of another consolidated group.
This subsection has effect despite subsections (1) and (2).
Note: There is not an assignment of a debt from one entity
to another merely because section 701-1 (Single entity rule) starts or
ceases to apply in relation to the entities so that the debt ceases to be a debt
owed to one entity and becomes a debt owed to the other entity.
The main object of this Subdivision is to ensure that the claimant can
deduct the debt, or part of it, only if each entity that was owed the debt for a
debt test period could have deducted the debt if it had been written off as bad
at the end of the period.
(1) The claimant can deduct the debt, or part of the debt, if, and only
if:
(a) section 8-1 or 25-35 permits the deduction (ignoring subsection
25-35(5) and the provisions mentioned in that subsection); and
(b) the condition in subsection (2) is met for each debt test
period.
(2) The condition is that the entity that was owed the debt for the debt
test period could have deducted the debt for an income year (the debt test
income year) starting and ending at the times identified in
subsection (3) if:
(a) the entity had written off the debt as bad at the end of the period;
and
(b) these provisions (the modified provisions) had effect as
described in this section:
(i) sections 165-123 and 165-126 (which are about conditions that
must be met for a company to be able to deduct a bad debt);
(ii) sections 266-35, 266-85, 266-120, 266-160 and 267-25 in
Schedule 2F to the Income Tax Assessment Act 1936 (which are about
conditions that must be met for certain kinds of trusts to be able to deduct a
bad debt);
(iii) other provisions of this Act so far as they relate to a section
listed in subparagraph (i) or (ii); and
(c) these provisions did not apply:
(i) subsections 165-120(2) and (3);
(ii) section 267-65 in Schedule 2F to the Income Tax
Assessment Act 1936.
Note 1: Some of the other provisions of this Act that relate
to a section listed in subparagraph (2)(b)(i) are sections 165-120,
165-129 and 165-132 and Subdivision 166-C.
Note 2: Some of the other provisions of this Act that relate
to a section listed in subparagraph (2)(b)(ii) are sections 266-40,
266-45, 266-90, 266-125, 266-165, 267-30, 267-35, 267-40 and 267-45 in
Schedule 2F to the Income Tax Assessment Act 1936.
Debt test income year
(3) The table shows when the debt test income year starts and
ends.
|
Start and end of debt test income year |
|||
|---|---|---|---|
|
|
If: |
The start of the debt test income year is: |
The end of the debt test income year is: |
|
1 |
Both these conditions are met: (a) the entity that is owed the debt for the debt test period is the
claimant; (b) the period ends at the time (the write-off time) the
claimant actually writes off the debt or part of the debt |
The later of these times (or either of them if they are the
same): (a) the start of the income year in which the write-off time
occurs; (b) the start of the debt test period |
The end of the income year in which the write-off time occurs |
|
2 |
Either: (a) the entity that is owed the debt for the debt test period is not
the claimant; or (b) that entity is the claimant but that period ends before the claimant
actually writes off the debt or part of the debt |
The later of these times (or either of them if they are the
same): (a) 12 months before the end of the debt test period; (b) the start of the debt test period |
The end of the debt test period |
Continuity periods, ownership test periods and test
periods
(4) For the purposes of subsection (2), the modified provisions have
effect as if:
(a) the *first continuity period started
at the start time shown in the table and ended at the start of the debt test
income year; and
(b) the *second continuity period were
the debt test income year or, for the purposes of section 165-123 and
Subdivision 166-C defining periods by reference to the second continuity
period, the period:
(i) starting at the start of the debt test income year; and
(ii) ending at the end time shown in the table; and
(c) each section listed in subparagraph (2)(b)(ii) specified that the
test period identified in the section:
(i) started at the start time shown in the table; and
(ii) ended at the end time shown in the table.
|
Start time and end time |
|||
|---|---|---|---|
|
|
If: |
The start time is: |
The end time is: |
|
1 |
All these conditions are met: (a) the entity that is owed the debt for the debt test period is the
claimant; (b) the period ends at the time (the write-off time) the
claimant actually writes off the debt or part of the debt; (c) the claimant is the *head company of a
*consolidated group at the write-off
time |
The start of the debt test period |
The end of the income year in which the write-off time occurs |
|
2 |
All these conditions are met: (a) the entity that is owed the debt for the debt test period is the
claimant; (b) the period ends at the time (the write-off time) the
claimant actually writes off the debt or part of the debt; (c) the claimant is not the *head
company of a *consolidated group at the
write-off time |
Just before the start of the debt test period |
The end of the income year in which the write-off time occurs |
|
3 |
The debt test period: (a) starts at a time other than a time when the entity that is owed the
debt for the period ceases to be a *member of a
*consolidated group; and (b) ends when the entity becomes a member of such a group; (whether or not the entity was the *head
company of another such group during the period) |
The start of the debt test period |
Just after the end of the debt test period |
|
4 |
Both these conditions are met: (a) the entity that is owed the debt for the debt test period is the
*head company of a
*consolidated group; (b) the period ends when: |
The start of the debt test period |
The end of the debt test period |
|
5 |
The debt test period: (a) starts when the entity that is owed the debt for the period ceases to
be a *member of a
*consolidated group; and (b) ends later when the entity becomes a member of a consolidated
group |
Just before the start of the debt test period |
Just after the end of the debt test period |
(5) For the purposes of subsection (2), the modified provisions have
effect as if section 267-25 in Schedule 2F to the Income Tax
Assessment Act 1936 applied in relation to debts whether they were incurred
in the income year or an earlier income year.
Test time for same business test under
section 165-126
(6) For the purposes of subsection (2), the modified provisions have
effect as if subsection 165-126(2) specified that the test time were the later
of these times (or either of them if they are the same):
(a) the first time at which it is not practicable to show that the company
will meet the conditions in section 165-123 (as modified by this
section);
(b) the time just after the start of the debt test period.
Business at and just after the end of the debt test period
(7) If:
(a) the debt test period ends when the entity that was owed the debt for
the period becomes a *member of a
*consolidated group; and
(b) under the modified provisions, the
*business that the entity carried on at or just
after the end of the period is relevant to the question whether the entity could
have deducted the debt as described in subsection (2);
those provisions have effect for the purposes of that subsection as if the
entity carried on at those times the business it carried on just before the end
of the period.
Division 2—Consequential
amendments
Income Tax Assessment Act
1936
6 At the end of subsection 266-35(1) in
Schedule 2F
Add:
Note: Subdivision 709-D of the Income Tax Assessment
Act 1997 modifies how this section operates in relation to a trust that used
to be a member of a consolidated group and that writes off as bad a debt that
used to be owed to a member of the group.
7 At the end of subsection 266-85(3) in
Schedule 2F
Add:
Note: Subdivision 709-D of the Income Tax Assessment
Act 1997 modifies how this section operates in relation to a trust that used
to be a member of a consolidated group and that writes off as bad a debt that
used to be owed to a member of the group.
8 At the end of subsection 266-120(1) in
Schedule 2F
Add:
Note: Subdivision 709-D of the Income Tax Assessment
Act 1997 modifies how this section operates in relation to a trust that used
to be a member of a consolidated group and that writes off as bad a debt that
used to be owed to a member of the group.
9 At the end of subsection 266-160(2) in
Schedule 2F
Add:
Note: Subdivision 709-D of the Income Tax Assessment
Act 1997 modifies how this section operates in relation to a trust that used
to be a member of a consolidated group and that writes off as bad a debt that
used to be owed to a member of the group.
10 At the end of subsection 267-25(1) in
Schedule 2F
Add:
Note: Subdivision 709-D of the Income Tax Assessment
Act 1997 affects the application of this section to a trust that used to be
a member of a consolidated group and that writes off as bad a debt that used to
be owed to a member of the group.
11 At the end of subsection 267-65(1) in
Schedule 2F
Add:
Note: Subdivision 709-D of the Income Tax Assessment
Act 1997 modifies how this section operates in relation to a trust that used
to be a member of a consolidated group and that writes off as bad a debt that
used to be owed to a member of the group.
Income Tax Assessment Act
1997
12 Section 12-5 (table item headed “bad
debts”)
After:
|
debt/equity swaps |
63E, 63F |
insert:
|
deduction of a debt that used to be owed to a member of a consolidated
group by an entity that used to be a member of the group |
Subdivision 709-D |
13 Subsection 25-35(5) (at the end of the
table)
Add:
|
6 |
An entity that used to be a member of a consolidated group can deduct a bad
debt that used to be owed to a member of the group only if certain conditions
are met |
Subdivision 709-D |
14 At the end of subsection
165-120(1)
Add:
Note 3: Subdivision 709-D modifies how this Subdivision
operates in relation to a company that used to be a member of a consolidated
group and that writes off as bad a debt that used to be owed to a member of the
group.
15 Subsection 995-1(1) (definition of test
time)
After “707-135,”, insert “709-215,”.
Income Tax (Transitional
Provisions) Act 1997
16 After Division 707
Insert:
Table of Subdivisions
709-D Deducting bad debts
Table of sections
709-200 Application of Subdivision 709-D of the
Income Tax Assessment Act 1997
Subdivision 709-D of the Income Tax Assessment Act 1997
applies on and after 1 July 2002.
Income Tax Assessment Act
1997
17 At the end of
section 67-25
Add:
Life insurance company’s subsidiary joining consolidated
group
(5) The *tax offset available under
subsection 713-545(5) is subject to the refundable tax offset rules.
18 Subsection 320-175(2)
(notes)
Repeal the notes, substitute:
Note 1: The time when a life insurance company joins or
leaves a consolidated group is also a valuation time: see sections 713-525
and 713-585.
Note 2: A life insurance company that fails to comply with
this section is liable to an administrative penalty: see section 288-70 in
Schedule 1 to the Taxation Administration Act 1953.
19 Subsection 320-230(2)
(notes)
Repeal the notes, substitute:
Note 1: The time when a life insurance company joins or
leaves a consolidated group is also a valuation time: see sections 713-525
and 713-585.
Note 2: A life insurance company that fails to comply with
this section is liable to an administrative penalty: see section 288-70 in
Schedule 1 to the Taxation Administration Act 1953.
20 Group heading before
section 713-505
Repeal the heading, substitute:
21 Section 713-510
Repeal the section, substitute:
(1) An entity cannot be a *subsidiary
member of a *consolidated group or
*consolidatable group of which a
*life insurance company is a
*member if:
(a) the life insurance company owns, either directly or indirectly through
one or more interposed entities, all the
*membership interests in the entity and
either:
(i) some, but not all, of the membership interests described in
subsection (3) (the key interests) are
*virtual PST assets of the life insurance
company; or
(ii) some, but not all, of the key interests are
*segregated exempt assets of the life insurance
company; or
(b) the life insurance company owns, either directly or indirectly through
one or more interposed entities, only some of the membership interests in the
entity and any of the key interests are virtual PST assets or segregated exempt
assets of the life insurance company.
Note: The entity could, however, be a member of another
consolidated group or consolidatable group.
(2) An entity cannot continue to be a
*subsidiary member of a
*consolidated group of which a
*life insurance company is a
*member if:
(a) the life insurance company owns, either directly or indirectly through
one or more interposed entities, all the
*membership interests in the entity and, had
the entity not been a subsidiary member of the group, either:
(i) some, but not all, of the membership interests described in
subsection (3) (the key interests) would be
*virtual PST assets of the life insurance
company; or
(ii) some, but not all, of the key interests would be
*segregated exempt assets of the life insurance
company; or
(b) the life insurance company owns, either directly or indirectly through
one or more interposed entities, only some of the membership interests in the
entity and, had the entity not been a subsidiary member of the group, any of the
key interests would be virtual PST assets or segregated exempt assets of the
life insurance company.
(3) The key interests are the *membership
interests the *life insurance company owns
directly in:
(a) the entity; or
(b) an interposed entity.
(1) This section affects how paragraph 320-15(1)(h) and
section 320-85 apply if:
(a) a *life insurance company becomes a
*subsidiary member of a
*consolidated group at a time (the
joining time); and
(b) just before the joining time, the life insurance company had one or
more liabilities under the *net risk components
of life insurance policies.
Note: Paragraph 320-15(1)(h) and section 320-85 both
operate on the basis of a comparison of the value of the company’s
liabilities under the net risk components of life insurance policies at the end
of the current year with the value of those liabilities at the end of the
previous year, so that:
(a) that paragraph includes an amount in the company’s
assessable income for the current year if the value at the end of the current
year is less than the value at the end of the previous income year;
and
(b) that section allows a deduction for the current year if
the value at the end of the current year is more than the value at the end of
the previous income year.
(2) The object of this section is to ensure that the
*head company of the
*consolidated group bears the income tax
consequences relating to a change in *value of
the liabilities only after the joining time.
Note: The life insurance company bears the income tax
consequences relating to a change in value of the liabilities before the joining
time, because section 701-30 ensures that paragraph 320-15(1)(h) and
section 320-85 apply in relation to a part of the income year before that
time when the company was not a subsidiary member of a consolidated group as if
that part were an income year.
(3) Paragraph 320-15(1)(h) and section 320-85 apply for the head
company core purposes set out in section 701-1 (Single entity rule) as if
the *value of the liabilities at the end of the
last income year ending before the joining time were the value of the
liabilities (for the *life insurance company)
just before the joining time.
22 Before section 713-515
Insert:
23 Section 713-515
(heading)
Repeal the heading, substitute:
24 Section 713-520
(heading)
Repeal the heading, substitute:
25 Sections 713-525 and
713-530
Repeal the sections, substitute:
Division 320 has effect as if the time when a
*life insurance company becomes a
*subsidiary member of a
*consolidated group were a
*valuation time for the purposes of
sections 320-175 and 320-230.
Note: This means that there must be a valuation of the
virtual PST assets and virtual PST liabilities under section 320-175 (with
the consequences set out in section 320-180), and a valuation of the
segregated exempt assets and exempt life insurance policy liabilities under
section 320-230 (with the consequences set out in section 320-235), as
at that time.
(1) This section applies if:
(a) a *life insurance company becomes a
*member of a
*consolidated group at a time (the
joining time); and
(b) just before the joining time, the life insurance company had
either:
(i) a *tax loss of the
*complying superannuation class; or
(ii) a *net capital loss from
*virtual PST assets.
(2) This Act operates (except so far as the contrary intention appears)
for the purposes of income years ending after the joining time as if:
(a) the *head company of the
*consolidated group had made the loss for the
income year in which the joining time occurs; and
(b) the *life insurance company had not
made the loss for the income year for which it made the loss.
(3) The *head company is not prevented
from *utilising the loss for the income year in
which the joining time occurs merely because this Act operates as if the head
company had made the loss for that year.
(4) Division 707 does not apply in relation to the
*net capital loss or the
*tax loss at the joining time.
(1) This section applies if:
(a) a *life insurance company becomes a
*member of a
*consolidated group at a time (the
joining time); and
(b) at the joining time, the life insurance company owns, either directly
or indirectly through one or more interposed entities, all the
*membership interests in yet another entity
(the life insurance subsidiary) that becomes a
*subsidiary member of the group at that time;
and
(c) all the following membership interests are
*virtual PST assets of the life insurance
company:
(i) the membership interests (if any) that the life insurance company owns
directly in the life insurance subsidiary;
(ii) the membership interests (if any) that the life insurance company
owns directly in the interposed entities; and
(d) the *head company of the group makes
a *tax loss or
*net capital loss under Subdivision 707-A
because of a transfer from the life insurance subsidiary.
(2) This Act operates for the purposes of income years ending after the
transfer as if:
(a) the *tax loss were of the
*complying superannuation class; or
(b) the *net capital loss were from
*virtual PST assets.
(3) Subdivisions 707-B, 707-C and 707-D do not affect the
*utilisation of the loss by the
*head company of the
*consolidated group.
(1) This section applies if:
(a) a *life insurance company becomes a
*member of a
*consolidated group at a time (the
joining time); and
(b) at the joining time, the life insurance company owns, either directly
or indirectly through one or more interposed entities, all the
*membership interests in yet another entity
(the life insurance subsidiary) that becomes a
*subsidiary member of the group at that time;
and
(c) all the following membership interests are
*segregated exempt assets of the life insurance
company:
(i) the membership interests (if any) that the life insurance company owns
directly in the life insurance subsidiary;
(ii) the membership interests (if any) that the life insurance company
owns directly in the interposed entities.
(2) A *tax loss or
*net capital loss of the life insurance
subsidiary for an income year ending before the joining time cannot be
*utilised by the life insurance subsidiary for
an income year ending after that time.
Note: This prevents the loss from being transferred to the
head company of the consolidated group under Subdivision 707-A (because it
means the life insurance subsidiary could not have utilised the loss for the
trial year). As a result, section 707-150 prevents any other entity from
utilising the loss for an income year ending after the joining
time.
(1) This section applies if:
(a) a *life insurance company becomes a
*member of a
*consolidated group at a time (the
joining time); and
(b) at the joining time, the life insurance company owns, either directly
or indirectly through one or more interposed entities,
*membership interests in yet another entity
(the life insurance subsidiary) that becomes a
*subsidiary member of the group at that time;
and
(c) the life insurance subsidiary’s
*franking account is in surplus just before the
joining time.
(2) Paragraph 709-60(2)(b) does not apply in relation to the life
insurance subsidiary.
(3) A *franking credit arises at the
joining time in the *franking account of the
*head company of the group. The amount of the
credit is the amount worked out under subsection (4).
(4) The amount is equal to the amount of the
*franking credit that would arise in the
*life insurance company’s
*franking account just before the joining time
under item 5 of the table in subsection 219-15(2) if:
(a) the life insurance subsidiary made a
*franked distribution to the life insurance
company just before the joining time; and
(b) the amount of the franking credit on the distribution were equal to
the surplus mentioned in paragraph (1)(c).
(5) The *head company of the group is
entitled to a *tax offset for the income year
in which the joining time occurs. The amount of the tax offset is:
(a) if all the *membership interests (if
any) that the *life insurance company owns
directly in the life insurance subsidiary, and all the membership interests (if
any) that the life insurance company owns directly in interposed entities, are
*segregated exempt assets of the life insurance
company—the surplus mentioned in paragraph (1)(c), reduced by the
amount worked out under subsection (4); or
(b) if all the membership interests (if any) that the life insurance
company owns directly in the life insurance subsidiary, and all the membership
interests (if any) that the life insurance company owns directly in interposed
entities, are *virtual PST assets of the life
insurance company—the amount worked out under subsection (6);
or
(c) otherwise—nil.
(6) The amount is worked out using the following formula (or is nil if it
would otherwise be negative):
where:
complying superannuation class tax rate means the rate of tax
in respect of the *complying superannuation
class of the taxable income of a *life
insurance company for the income year in which the joining time occurs (see
paragraph 23A(b) of the Income Tax Rates Act 1986).
ordinary class tax rate means the rate of tax in respect of
the *ordinary class of the taxable income of a
life insurance company for the income year in which the joining time occurs (see
subparagraph 23A(a)(ii) of the Income Tax Rates Act 1986).
Sections 709-70 and 709-75 do not apply in relation to a
*subsidiary member of a
*consolidated group if:
(a) the subsidiary member is a *life
insurance company; or
(b) a life insurance company that is a
*member of the group owns
*membership interests, either directly or
indirectly through one or more interposed entities, in the subsidiary
member.
Conditions for sections 713-555 and 713-560 to apply
(1) Sections 713-555 and 713-560 apply only if both the conditions in
subsections (2) and (3) are met.
Note: Each of those sections sets out extra conditions that
must also be met for the section to apply.
(2) The first condition is that there is a time (the fusion
time) when it starts to be the case that both these entities (the
fused entities) are *members of a
single *consolidated group:
(a) a *life insurance company;
(b) an entity (the policyholder) holding an
*exempt life insurance policy (the fused
entities’ policy) that:
(i) was issued when the policyholder and the life insurance company were
not both members of a single consolidated group; and
(ii) provided for the life insurance company to pay an
*immediate annuity to the
policyholder.
(3) The second condition is that the
*head company of the
*consolidated group determines the following
amounts:
(a) the total *transfer value of the head
company’s *segregated exempt
assets;
(b) the amount of the head company’s
*exempt life insurance policy
liabilities;
as at a time (the determination time) that is the fusion time
or, if the head company does not determine those amounts as at the fusion time,
the first time after the fusion time as at which the head company determines
those amounts.
Note: If the life insurance company becomes a subsidiary
member of the consolidated group, that company’s segregated exempt assets
become segregated exempt assets of the head company of the group because of
section 701-5 (Entry history rule) and section 713-505 (Head company
treated as a life insurance company).
Object of sections 713-555 and 713-560
(4) The object of sections 713-555 and 713-560 is to ensure that the
*head company of the
*consolidated group:
(a) does not have excessive amounts included in its assessable income
because section 701-1 (Single entity rule) treats the fused entities as one
so liabilities under the fused entities’ policy do not contribute to the
amount of the head company’s *exempt life
insurance policy liabilities as at the determination time; and
(b) has amounts included in its assessable income, or is allowed
deductions, to reflect what would have happened to the fused entities if they
had not both been *members of the group at any
time between the fusion time and the determination time when they were both
members of the group.
Application
(1) This section applies if:
(a) as at the determination time, the total
*transfer value of the
*segregated exempt assets of the
*head company of the
*consolidated group exceeds the amount of that
company’s *exempt life insurance policy
liabilities, wholly or partly because:
(i) those assets include assets out of which exempt life insurance policy
liabilities attributable to the fused entities’ policy were to have been
discharged; and
(ii) while both the fused entities are members of the group, the liability
to pay the *annuity is taken not to exist for
the head company core purposes set out in section 701-1 (Single entity
rule), because one or more applications of that section treat the fused entities
as one entity; and
(b) because of that excess, the head company transfers under subsection
320-235(1) or 320-250(2), from its segregated exempt assets, assets (the
policy assets) whose total transfer value equals the amount of the
excess attributable to the matters described in subparagraphs (a)(i) and
(ii).
However, this section does not apply if the policyholder ceases to be a
*member of the consolidated group between the
fusion time and the determination time.
Note: Subsections 320-235(1) and 320-250(2) require a life insurance company to transfer assets from its segregated exempt assets if, at certain times, the total transfer value of the segregated exempt assets exceeds the amount of the company’s exempt life insurance policy liabi