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This is a Bill, not an Act. For current law, see the Acts databases.
1998
The Parliament of
the
Commonwealth of
Australia
HOUSE OF
REPRESENTATIVES
Presented and read a first
time
Taxation Laws
Amendment Bill (No. 2) 1998
No. ,
1998
(Treasury)
A Bill
for an Act to amend the law about income tax, and for related
purposes
ISBN: 0642 37757X
Contents
Part 1—Specific past rollover scheme
amendment 3
Income Tax Assessment Act
1936 3
Part 2—General on-going rollover etc. scheme
amendments 9
Income Tax Assessment Act
1936 9
Fringe Benefits Tax Assessment Act
1986 13
Part 1—Amendment of the Fringe Benefits Tax Assessment Act
1986 14
Part 2—Amendment of the Income Tax Assessment Act
1936 18
Part 3—Amendment of the Income Tax Assessment Act
1997 19
Part
4—Application 20
Income Tax Assessment Act
1997 21
Income Tax Assessment Act
1936 23
Income Tax Assessment Act
1936 26
Part 1—Amendment of the Income Tax Assessment Act
1936 29
Part 2—Amendment of the Income Tax Assessment Act
1997 38
Part 3—Amendment of the Taxation Laws Amendment (Landcare and Water
Facility Tax Offset) Act
1998 45
Income Tax Assessment Act
1936 46
Income Tax Assessment Act
1936 49
Income Tax Assessment Act
1936 55
Income Tax Assessment Act
1936 62
Part 1—Fringe Benefits Tax Assessment Act
1986 63
Part 2—Application and
transitional 71
A Bill for an Act to amend the law about income tax, and
for related purposes
The Parliament of Australia enacts:
This Act may be cited as the Taxation Laws Amendment Act
(No. 2) 1998.
(1) Subject to subsection (2), this Act commences on the day on which it
receives the Royal Assent.
(2) Part
3 of Schedule 7 is taken to have commenced immediately after the commencement of
section 2 of the Taxation Laws Amendment (Landcare and Water Facility Tax
Offset) Act 1998.
Subject to section 2, each Act that is specified in a Schedule to this
Act is amended or repealed as set out in the applicable items in the Schedule
concerned, and any other item in a Schedule to this Act has effect according to
its terms.
Section 170 of the Income Tax Assessment Act 1936 does not prevent
the amendment of an assessment made before the commencement of this section for
the purposes of giving effect to this Act.
Part
1—Specific past rollover
scheme amendment
Income
Tax Assessment Act 1936
Insert:
Operative provision—first case
(1) Subject to subsection (3), if a company has incurred or incurs any
eligible rollover losses and paragraphs (2)(a) and (b) do not apply:
(a) if:
(i) any of the eligible rollover losses was incurred in the 1995-96 year
of income or an earlier year of income; and
(ii) the company incurred a net capital loss in the 1995-96 year of
income; and
(iii) there are one or more unused amounts for that year of income in
respect of the eligible rollover losses;
the net capital loss is reduced by the sum of the unused amounts;
and
(b) if:
(i) any of the eligible rollover losses was incurred or is incurred in the
1996-97 year of income or any later year of income; and
(ii) assuming section 160ZZO had not applied to the rollover disposal
mentioned in paragraph (4)(a), the eligible rollover loss would have been a
lesser amount or there would have been no eligible rollover loss;
the eligible rollover loss is reduced so that it equals the lesser
amount, or is reduced to nil, as the case requires.
Note: The expressions eligible rollover loss,
net capital loss and unused amount are defined in
subsections (4), (8) and (6) respectively.
Operative provision—second case
(2) Subject to subsection (3), if:
(a) a company has incurred any eligible rollover losses in the 1996-97
year of income or an earlier year of income; and
(b) the company furnished its return for the 1996-97 year of income before
3 pm, by legal time in the Australian Capital Territory, on 29 April
1997;
the following apply:
(c) if:
(i) the company incurred a net capital loss in the 1995-96 year of income;
and
(ii) there are one or more unused amounts for that year of income in
respect of the eligible rollover losses; and
(iii) if, in the company’s return for the 1996-97 year of income,
Step 4 in subsection 160ZC(1) was applied in working out whether a net capital
gain accrued to the company in respect of that year of income—there is
some of the net capital loss incurred in the 1995-96 year of income that has not
been applied in accordance with Step 4;
then, for the purpose of any application of Step 4 in working out whether
a net capital gain accrued to the company in respect of the 1997-98 or any later
year of income, the net capital loss incurred in the 1995-96 year of income, or
so much of the net capital loss as was not applied as mentioned in subparagraph
(iii), is reduced by the sum of the unused amounts; and
(d) if the company incurred a net capital loss in the 1996-97 year of
income and any of the eligible rollover losses was also incurred in that year of
income—the net capital loss is reduced by the unused amount, for that year
of income, in respect of the eligible rollover losses incurred in that year of
income.
Commissioner to reduce amount under subsection (1) or (2)
(3) If:
(a) the whole or part of the net capital loss of the company, or of an
eligible rollover loss of the company, is reduced under subsection (1) or (2);
and
(b) the Commissioner, on application by the company, determines that it is
fair and reasonable that the amount should not be so reduced, or should be
reduced by a lesser amount, having regard to the following:
(i) whether the company has disposed of, or is likely to dispose of, the
interest, right or debt mentioned in paragraph (4)(c);
(ii) the extent to which any eligible rollover losses incurred by the
company are related, directly or indirectly, to any other capital losses
incurred, or that may be incurred, by the company or any other company that is
related to the company;
(iii) the respective amounts of the losses mentioned in subparagraph
(ii);
(iv) the content and timing of any information provided to the
Commissioner by the company in the application or otherwise;
(v) any other matter that the Commissioner considers relevant;
the amount is not so reduced, or is reduced by the lesser amount.
Eligible rollover loss
(4) A capital loss incurred by a company (the loss company)
in a year of income in respect of the disposal (the loss disposal)
of an asset is an eligible rollover loss if:
(a) the loss company acquired the asset from another company (the
transferor) and section 160ZZO applied to the disposal (the
rollover disposal) constituting the acquisition by the loss
company; and
(b) if section 160ZZO had not applied to the rollover disposal, there
would have been no capital loss or a smaller capital loss; and
(c) when the rollover disposal took place, the loss company:
(i) had an interest (see subsection (7)) either directly, or indirectly
through successive interests in interposed companies, in the transferor;
or
(ii) was owed a debt by the transferor or had a right to acquire an
interest in the transferor; or
(iii) had an interest either directly, or indirectly through successive
interests in interposed companies, in a company, partnership or trust to which
the transferor owed a debt or that had a right to acquire an interest in the
transferor; and
(d) the loss company:
(i) acquired the interest mentioned in subparagraph (c)(i) or (iii) or the
right mentioned in subparagraph (c)(ii); or
(ii) began to be owed the debt mentioned in subparagraph
(c)(ii);
after 19 September 1985; and
(e) immediately after the rollover disposal, the market value of the
interest, right or debt was less than its reduced cost base or what would be its
reduced cost base if the interest, right or debt were an asset to whose disposal
this Part applied; and
(f) the rollover disposal took place before 3 pm, by legal time in
the Australian Capital Territory, on 29 April 1997; and
(g) the loss disposal took place no more than 5 years after the rollover
disposal.
Exclusion for small businesses and manufacturing business
assets
(5) However, a capital loss is not an eligible rollover loss
if:
(a) the requirement in subsection 160ZZPP(4) (which relates to the net
value of the transferee’s assets etc.) would be satisfied at the time of
the loss disposal, assuming the loss company were the taxpayer mentioned in that
section; or
(b) the asset is plant, machinery, or a building, used in a manufacturing
business:
(i) by the transferor immediately before the rollover disposal;
and
(ii) by the loss company for a period of at least 12 months that commences
immediately after the rollover disposal.
Unused amount of all eligible rollover losses incurred in a particular
year of income
(6) The unused amount, for a year of income (the test
year), of all of the eligible rollover losses incurred by a company in a
particular year of income (being the test year or an earlier year of income)
is:
(a) if the company did not incur a net capital loss in the test
year—nil; or
(b) if the test year is the one in which the company incurred the eligible
rollover losses, and the company incurred a net capital loss in that year of
income—the amount by which:
(i) the net capital loss;
exceeds:
(ii) the amount that would be the net capital loss assuming section 160ZZO
had not applied to any of the rollover disposals concerned or, if there would be
no net capital loss on that assumption, nil; or
(c) if the test year is after the one in which the company incurred the
eligible rollover losses, and the company incurred a net capital loss in the
test year—the amount worked out by reducing the unused amount, for the
previous year of income, of the eligible rollover losses by the amount
calculated using the formula:
Note 1: If the test year is e.g. 2 years after the year of
income in which the eligible rollover losses were incurred, it will be necessary
first to apply subsection (6) to work out the unused amount for the year in
which the losses were incurred, then to work out the unused amount for the next
year of income and finally to work out the unused amount for the test year. This
will involve applying more than one of the paragraphs in the
subsection.
Note 2: The operative provisions (subsections (1) and (2))
refer to the sum of the unused amounts, for e.g. 1995-96, in relation to
eligible rollover losses. To work out the sum, it is first necessary to apply
subsection (6) separately to the eligible rollover losses incurred in each year
of income in order to work out, for 1995-96, the unused amount of each, and then
to add together all of the unused amounts.
Interest
(7) In this section:
interest means a share in a company or an interest in the
income or capital of a partnership or trust.
Net capital loss
(8) For the purposes of this section, a
company’s net capital loss is worked out after applying
section 160ZP if:
(a) the agreement mentioned in that section was made; and
(b) the gain year mentioned in that section ended;
before 3 pm, by legal time in the Australian Capital Territory, on 29 April
1997. Otherwise it is worked out before applying section 160ZP.
160ZP transfer amount
(9) For the purposes of this section, if a company’s net capital
loss for a year of income is worked out in accordance with subsection (8) after
applying section 160ZP, the company has a 160ZP transfer amount
for the year of income equal to the sum of the amounts by which its net capital
loss for the year of income is deemed to be reduced under subsection
160ZP(7).
Part
2—General on-going rollover
etc. scheme amendments
Income
Tax Assessment Act 1936
Insert:
capital loss has the same meaning as in Part IIIA.
Insert:
or (ba) a capital loss being incurred by the taxpayer during a year of
income where the whole or a part of that capital loss would not have been, or
might reasonably be expected not to have been, incurred by the taxpayer during
the year of income if the scheme had not been entered into or carried
out;
4 At the end of
subsection 177C(1)
Add:
; and (e) in a case to which paragraph (ba) applies—the amount of
the whole of the capital loss or of the part of the capital loss, as the case
may be, referred to in that paragraph.
After “Act”, insert “other than section 160ZP or
160ZZO”.
6 At the end of
subsection 177C(2)
Add:
; or (c) a capital loss being incurred by the taxpayer during a year of
income the whole or part of which would not have been, or might reasonably be
expected not to have been, incurred by the taxpayer during the year of income if
the scheme had not been entered into or carried out where:
(i) the incurring of the capital loss by the taxpayer is attributable to
the making of a declaration, election or selection, the giving of a notice or
the exercise of an option by any person, being a declaration, election,
selection, notice or option expressly provided for by this Act other than
section 160ZP or 160ZZO; and
(ii) the scheme was not entered into or carried out by any person for the
purpose of creating any circumstance or state of affairs the existence of which
is necessary to enable the declaration, election, selection, notice or option to
be made, given or exercised, as the case may be.
7 After subsection 177C(2)
Insert:
(2A) A reference in this Part to the obtaining by a taxpayer of a tax
benefit in connection with a scheme is to be read as not including a reference
to:
(a) the assessable income of the taxpayer of a year of income not
including an amount that would have been included, or might reasonably be
expected to have been included, in the assessable income of the taxpayer of that
year of income if the scheme had not been entered into or carried out
where:
(i) the non-inclusion of the amount in the assessable income of the
taxpayer is attributable to the making of an agreement under section 160ZP or an
election under section 160ZZO; and
(ii) the scheme consisted solely of the making of the agreement or
election; or
(b) a capital loss being incurred by the taxpayer during a year of income
the whole or part of which would not have been, or might reasonably be expected
not to have been, incurred by the taxpayer during the year of income if the
scheme had not been entered into or carried out where:
(i) the incurring of the capital loss by the taxpayer is attributable to
the making of an agreement under section 160ZP or an election under section
160ZZO; and
(ii) the scheme consisted solely of the making of the agreement or
election.
Repeal the subsection, substitute:
(3) For the purposes of subparagraph (2)(a)(i), (b)(i) or (c)(i) or
(2A)(a)(i) or (b)(i):
(a) the non-inclusion of an amount in the assessable income of a taxpayer;
or
(b) the allowance of a deduction to a taxpayer; or
(c) the incurring of a capital loss by a taxpayer;
is taken to be attributable to the making of a declaration, election,
agreement or selection, the giving of a notice or the exercise of an option
where, if the declaration, election, agreement, selection, notice or option had
not been made, given or exercised, as the case may be:
(d) the amount would have been included in that assessable income;
or
(e) the deduction would not have been allowable; or
(f) the capital loss would not have been incurred.
Insert:
or (c) in the case of a tax benefit that is referable to a capital loss or
a part of a capital loss being incurred by the taxpayer during a year of
income—determine that the whole or a part of the capital loss or of the
part of the capital loss, as the case may be, was not incurred by the taxpayer
during that year of income;
After “under”, insert “paragraph (1)(c)
or”.
After “and”, insert “, in the case of a determination
under subsection (2A),”.
After “under”, insert “paragraph (1)(c)
or”.
Insert:
or (c) if, in the opinion of the Commissioner:
(i) a capital loss would have been incurred by the relevant taxpayer
during a year of income if the scheme had not been entered into or carried out,
being a capital loss that was not incurred or would not, but for this
subsection, be incurred, as the case may be, by the relevant taxpayer during
that year of income; and
(ii) it is fair and reasonable that the capital loss or a part of that
capital loss should be incurred by the relevant taxpayer during that year of
income;
determine that the capital loss or the part, as the case may be, should
be incurred by the relevant taxpayer during that year of income;
The amendments made by this Part apply in relation to schemes entered into
after 3 pm, by legal time in the Australian Capital Territory, on 29 April
1997.
Fringe
Benefits Tax Assessment Act 1986
1 At the end of Division 13 of Part
III
Add:
(1) Where:
(a) a benefit is provided in, or in respect of, a year of tax in respect
of the employment of an employee of an employer; and
(b) the benefit is in respect of participation in an approved student
exchange program by the employee or an associate of the employee; and
(c) the employer or an associate of the employer did not select, or take
part in the selection of, the employee or associate as a participant in the
program;
the benefit is an exempt benefit in relation to the year of tax.
(2) An approved student exchange program is a student
exchange program run by a body that is registered as a student exchange body
with the relevant State or Territory body in accordance with the National
Guidelines for Student Exchange that are published by the National Co-ordinating
Committee for International Secondary Student Exchange.
2 Application
The amendment made by this Schedule applies to the year of tax commencing
on 1 April 1996 and all later years of tax.
Part
1—Amendment of the Fringe
Benefits Tax Assessment Act 1986
Insert:
Exemption
(1) A car parking benefit provided in an FBT year in respect of the
employment of an employee is an exempt benefit if:
(a) the car is not parked at a commercial parking station; and
(b) the employer of the employee is not a public company (see subsection
(3)), or a subsidiary of a public company (see subsection (3)), in relation to
the day on which the benefit is provided; and
(c) the employer is not a government body; and
(d) the sum of the employer’s ordinary income and statutory income
for the year of income ending most recently before the start of the FBT year is
less than $10 million.
New employers
(2) However, if the employer:
(a) in the case of a tax-exempt employer (see subsection (3))—did
not start to carry out operations or activities; or
(b) in any other case—did not start to carry out business
operations;
until after the start of the year of income mentioned in paragraph (1)(d),
then:
(c) paragraph (1)(d) does not apply; and
(d) the employer must make a reasonable estimate of the amount that would
be the sum of the employer’s ordinary income and statutory income for the
year of income (the business start-up year) in which the employer
did start those operations or activities, or those business operations;
and
(e) that estimate is to be made on the assumption that the employer had
started the operations or activities, or the business operations, at the start
of the business start-up year; and
(f) the benefit is an exempt benefit only if that estimate is less than
$10 million.
Definitions
(3) In this section:
ordinary income has the same meaning as in the Income Tax
Assessment Act 1997.
public company means a company covered by paragraph
103A(2)(a) of the Income Tax Assessment Act 1936, but reading the
reference in that paragraph to the last day of the year of income as a reference
to the day on which the benefit is provided.
statutory income has the same meaning as in the Income Tax
Assessment Act 1997.
subsidiary of a public company means a subsidiary of a public
company within the meaning of subsection 103A(4) of the Income Tax Assessment
Act 1936, but reading:
(a) a reference in section 103A of that Act to a year of income as a
reference to the day on which the benefit is provided; and
(b) a reference in that section to a public company as a reference to a
public company within the meaning of this section.
tax-exempt employer means an employer all of whose income is
wholly exempt from income tax.
Repeal the subsection, substitute:
(1) Any benefit arising from taxi travel by an employee is an exempt
benefit if the travel is a single taxi trip beginning or ending at the
employee’s place of work.
Insert:
If:
(a) under subsection 58GA(2), an employer makes an estimate of an amount;
and
(b) the amount of the estimate is less than $10 million; and
(c) the estimate is not a reasonable estimate;
then:
(d) the Commissioner may make a reasonable estimate of that amount (taking
into account the assumption in paragraph 58GA(2)(e)); and
(e) if the amount of that reasonable estimate is $10 million or
more—the employer is liable to pay, by way of penalty, additional tax
equal to double the amount of the tax payable in respect of the
benefit.
4 Subsection 136(1)
(at the end of paragraphs (c) and (e) of the definition of
fringe benefit)
Add “or”.
5 Subsection 136(1)
(paragraph (e) of the definition of
fringe benefit)
After “arrangement”, insert “covered by paragraph (a) of
the definition of arrangement”.
6 Subsection 136(1)
(after paragraph (e) of the definition of
fringe benefit)
Insert:
(ea) a person other than the employer or an associate of the employer, if
the employer or an associate of the employer:
(i) participates in or facilitates the provision or receipt of the
benefit; or
(ii) participates in, facilitates or promotes a scheme or plan involving
the provision of the benefit;
and the employer or associate knows, or ought reasonably to know, that
the employer or associate is doing so;
7 Subsection 136(1)
(at the end of paragraphs (f) to (m) (inclusive) of the definition of
fringe benefit)
Add “or”.
Part
2—Amendment of the Income
Tax Assessment Act 1936
Repeal the section.
Repeal the Division.
Repeal the subsection.
Part
3—Amendment of the Income
Tax Assessment Act 1997
11 Section 12-5
(list entry relating to car parking)
Repeal the entry, substitute:
|
car parking |
|
|
employee’s car parking expenses, no deduction for |
51AGA |
(1) The amendments made by items 1, 2 and 3 apply to assessments of the
fringe benefits taxable amount of an employer of the FBT year beginning on 1
April 1997 and of all later years.
(2) The amendments made by items 4, 5 and 6 apply to assessments of the
fringe benefits taxable amount of an employer of the FBT year beginning on 1
April 1998 and of all later years.
(3) The repeals made by items 9, 10 and 11 apply in relation to expenditure
to the extent to which it is incurred in respect of the provision of car parking
facilities for a car on a day on or after 1 July 1997.
Income
Tax Assessment Act 1997
1 At the end of Division 65
Add:
(1) If during the *current
year:
(a) you became bankrupt; or
(b) you were released from debts under a law relating to
bankruptcy;
you cannot apply a *tax offset that you
have carried forward from an earlier income year in working out the tax offset
for the current year or a later income year.
(2) Subsection (1) applies even though your bankruptcy is annulled
if:
(a) the annulment happens under section 74 of the Bankruptcy Act
1966 because your creditors have accepted your proposal for a composition or
scheme of arrangement; and
(b) under the composition or scheme of arrangement concerned, you were,
will be or may be released from debts from which you would have been released if
instead you had been discharged from the bankruptcy.
(1) If:
(a) you pay an amount in the *current
year for a debt that you incurred in an earlier income year; and
(b) you have a *tax offset referred to in
section 65-50 for that earlier income year;
you can deduct the amount paid, but only to the extent that it does not
exceed so much of the debt as the Commissioner is satisfied was taken into
account in calculating the amount of the tax offset.
(2) The total of the following amounts cannot exceed the total of the
expenditure that the Commissioner is satisfied was taken into account in
calculating the amount of the *tax offset that
you are unable to apply because of section 66-50:
(a) your deductions under subsection (1) for amounts paid in the
*current year or an earlier income year for
debts incurred in the income year for which you have the tax offset;
and
(b) the expenditure that the Commissioner is satisfied was taken into
account in calculating any amounts of the tax offset that, apart from section
65-50, would have been applied in reducing your
*net exempt income for the current year or
earlier income years.
2 Application
The amendment made by this Schedule applies to assessments for the 1997-98
income year and later income years.
Income
Tax Assessment Act 1936
1 Section 221AZH
(paragraph (a) of the definition of
final
instalment)
Repeal the paragraph, substitute:
(a) for a small taxpayer—the second instalment specified in Table 1
in subsection 221AZK(2) or the single instalment specified in subsection
221AZK(3A) (as the case requires);
2 Section 221AZH
(definition of large
taxpayer)
After “of section”, insert “221AZKA or”.
3 Section 221AZH
(definition of medium
taxpayer)
Omit “to section”, substitute “to sections 221AZKA
and”.
4 Section 221AZH
(definition of medium
taxpayer)
After “section 221AZK”, insert “or because of section
221AZKA”.
Insert:
reckoning day means:
(a) where:
(i) the current year is the 1997-98 year of income or a later year of
income; and
(ii) on or before the first day of month 9, the taxpayer has not lodged an
estimate of the likely tax for the current year or a return for the previous
year;
the earlier of the day on which the taxpayer first lodges a return for
the previous year and the 15th day of month 9; or
(b) in any other case—the first day of month 9.
6 Section 221AZH
(definition of small
taxpayer)
After “means”, insert “, subject to section
221AZKA,”.
Omit “An instalment taxpayer”, substitute “Subject to
subsection (3A), an instalment taxpayer”.
8 Subsection
221AZK(2) (heading to second column of table)
Omit “first day of month 9”, substitute
“reckoning day”.
9 Subsection
221AZK(2) (heading to third column of table)
Omit “due on first day of”, substitute “due
on”.
10 Subsection
221AZK(2) (table row relating to small companies)
Repeal the row, substitute:
|
Small |
less than $8,000 |
15th day of month 18 |
100% of likely tax for current year |
|
|
|
15th day of month 21 |
assessed tax for current year, less previous instalment for current
year |
11 Subsection
221AZK(2) (table rows relating to medium and large
companies)
Before “month” (wherever occurring), insert “1st day
of”.
Repeal the paragraph, substitute:
(a) a taxpayer is classified as small, medium or large according to the
taxpayer’s likely tax for the current year, calculated at the end of the
reckoning day;
Note: Sections 221AZKA and 221AZMA can change a
taxpayer’s classification.
Insert:
(3A) A small taxpayer whose assessed tax for the current year is more than
$300,000 must pay an instalment on the first day of month 18 equal to 100% of
the assessed tax for the current year.
Omit “first day of month 9” (wherever occurring), substitute
“reckoning day”.
Omit “first day of month 11”, substitute “end of 2 months
after that day”.
(1) The amendments made by items 2, 3, 4 and 6 have the same application as
they would have had if they had been included in Division 1C of Part VI of the
Income Tax Assessment Act 1936 as originally inserted by section 54 of
the Taxation Laws Amendment Act (No. 2) 1993.
(2) The amendments made by the remaining items of this Schedule apply for
the 1996-97 year of income and all later years of income.
Income
Tax Assessment Act 1936
Insert:
standard component has the same meaning as in Division 8 of
Part III.
2 After paragraph
160APHB(1)(b)
Insert:
(ba) how much of the company tax assessed to a life assurance company for
a year of income is attributable to the standard component;
(bb) how much of an amount of a reduction or increase in the company tax
of a life assurance company for a year of income is attributable to the standard
component;
3 After paragraph
160APHB(2)(b)
Insert:
Note: The general fund component is made up of the standard
component and the RSA component.
Omit “General fund” (wherever occurring), substitute
“Standard”.
Omit “general fund” (wherever occurring), substitute
“standard”.
Omit “General fund” (wherever occurring), substitute
“Standard”.
Omit “general fund”, substitute
“standard”.
Omit “General fund” (wherever occurring), substitute
“Standard”.
Omit “general fund”, substitute
“standard”.
Omit “General fund” (wherever occurring), substitute
“Standard”.
Omit “general fund” (wherever occurring), substitute
“standard”.
Omit “General fund” (wherever occurring), substitute
“Standard”.
Omit “general fund” (wherever occurring), substitute
“standard”.
14 At the end of
subsections 160APVH(2) and (5)
Add:
; (c) the assumption that the reference to standard component in the
provision concerned were a reference to general fund component.
Omit “General fund” (wherever occurring), substitute
“Standard”.
Omit “general fund” (wherever occurring), substitute
“standard”.
Omit “General fund” (wherever occurring), substitute
“Standard”.
Omit “general fund” (wherever occurring), substitute
“standard”.
Omit “General fund” (wherever occurring), substitute
“Standard”.
Omit “general fund” (wherever occurring), substitute
“standard”.
Omit “General fund” (wherever occurring), substitute
“Standard”.
Omit “general fund”, substitute
“standard”.
Omit “General fund” (wherever occurring), substitute
“Standard”.
Omit “general fund”, substitute
“standard”.
Omit “General fund” (wherever occurring), substitute
“Standard”.
Omit “general fund”, substitute
“standard”.
27 At the end of
subsections 160AQCN(2) and (2AB)
Add:
; (c) the assumption that the reference to standard component in the
provision concerned were a reference to general fund component.
The amendments made by this Schedule apply to any franking credits or
franking debits arising after the day on which the Bill that became the
Taxation Laws Amendment Act (No. 2) 1998 was introduced into the House of
Representatives.
Part
1—Amendment of the Income
Tax Assessment Act 1936
1 At the end of
subsection 160AY(3)
Add:
The indexed cost base and the cost base are also adjusted to take account
of certain deductions and balancing adjustments (see sections 160ZJA and
160ZJB).
2 Section 160AZA
(table item dealing with cost base)
After “160ZH”, insert “, 160ZJA”.
3 Section 160AZA
(table item dealing with indexed cost base)
After “160ZJ”, insert “, 160ZJB”.
4 At the end of
subsection 160ZH(1)
Add:
Note: Section 160ZJA affects the meaning of the amount of
any consideration or the amount of any expenditure.
5 At the end of
subsection 160ZH(2)
Add:
Note: Section 160ZJB affects the meaning of the amount of
any consideration or the amount of any expenditure.
6 At the end of
subsection 160ZH(3)
Add:
Note: Section 160ZK affects the meaning of the reduced
amount of any consideration, the reduced amount of incidental costs, or the
reduced amount of any expenditure.
Insert:
(1) A reference in subsection 160ZH(1) to the amount of any consideration
or the amount of any expenditure, in respect of an asset (other than the
taxpayer’s interest in a partnership asset of a partnership in which the
taxpayer is a partner) is a reference to the sum of:
(a) the amount of the consideration or the amount of the expenditure, as
the case may be (as worked out under section 160ZH); and
(b) any amount that is included in the assessable income of the taxpayer
of any year of income by virtue of a provision of this Act other than this Part
the effect of which is to reverse a deduction covered by paragraph (c) or
subparagraph (d)(iii);
reduced by:
(c) any part of the consideration or of the expenditure that has been
allowed or is allowable as a deduction to the taxpayer in respect of any year of
income; and
(d) for the purpose of the reference in paragraphs 160ZH(1)(a), (c) and
(d):
(i) any amount of expenditure in relation to the asset that, apart from
subsections 124ZB(4) and 124ZG(5), would have been allowed or allowable under
Division 10C or 10D of Part III as a deduction to the taxpayer, after the
acquisition of the asset, in respect of any year of income; and
(ii) any amount that, apart from subsection 388-55(3) of the Income Tax
Assessment Act 1997, would have been allowed or allowable under Subdivision
387-A or 387-B of that Act as a deduction to the taxpayer, after the acquisition
of the asset, in respect of any year of income; and
(iii) any amount of expenditure that, apart from paragraph 43-70(2)(h) of
the Income Tax Assessment Act 1997, would have been allowed or allowable
under Division 43 of that Act as a deduction to the taxpayer, after the
acquisition of the asset, in respect of any year of income; and
(iv) any other expenditure that is capital expenditure by the taxpayer or
any other person in respect of the asset that has been allowed or is allowable
as a deduction to the taxpayer, after the acquisition of the asset, in respect
of any year of income.
(2) The reference in paragraph (1)(b) to an amount that is included in the
assessable income of a taxpayer includes a reference to an amount:
(a) that is taken by subsection 60(1A) of this Act to be so included for
the asset for the purposes of subsection 60(1); or
(b) that is treated as being deducted for depreciation of another asset
under section 42-285 or 42-290 of the Income Tax Assessment Act 1997;
or
(c) that, apart from roll-over relief under sections 58, 73E, 122JAA,
122JG, 123BBA, 123BF, 124AMAA, 124GA, 124JD and 124PA, would have been included
in assessable income; or
(d) that, apart from Subdivision 41-A of the Income Tax Assessment Act
1997 (Common rule 1—roll-over relief for related entities), would have
been included in assessable income.
(3) A reference in subsection 160ZH(1) to the amount of any consideration
or the amount of any expenditure, in respect of an asset (the
taxpayer’s asset), being a taxpayer’s interest in a
partnership asset of a partnership in which the taxpayer is a partner, is a
reference to the sum of:
(a) the amount of the consideration or the amount of the expenditure, as
the case may be (as worked out under section 160ZH); and
(b) any amount that is included in the assessable income of the
partnership or of the taxpayer of any year of income by virtue of a provision of
this Act other than this Part the effect of which is to reverse a deduction
covered by paragraph (c) or subparagraph (d)(iii);
reduced by:
(c) any part of the consideration or of the expenditure that has been
allowed or is allowable as a deduction to the partnership or the taxpayer in
respect of any year of income; and
(d) for the purpose of the reference in paragraphs 160ZH(1)(a), (c) and
(d):
(i) any amount of expenditure in relation to the asset that, apart from
subsections 124ZB(4) and 124ZG(5), would have been allowed or allowable under
Division 10C or 10D of Part III as a deduction to the partnership or the
taxpayer, after the acquisition of the asset, in respect of any year of income;
and
(ii) any amount that, apart from subsection 388-55(3) of the Income Tax
Assessment Act 1997, would have been allowed or allowable under Subdivision
387-A or 387-B of that Act as a deduction to the partnership or the taxpayer,
after the acquisition of the asset, in respect of any year of income;
and
(iii) any amount of expenditure that, apart from paragraph 43-70(2)(h) of
the Income Tax Assessment Act 1997, would have been allowed or allowable
under Division 43 of that Act as a deduction to the taxpayer, after the
acquisition of the asset, in respect of any year of income; and
(iv) any other expenditure that is capital expenditure by the partnership,
taxpayer or any other person in respect of the asset that has been allowed or is
allowable as a deduction to the partnership or the taxpayer, after the
acquisition of the asset, in respect of any year of income.
(4) The reference in paragraph (3)(b) to an amount that is included in the
assessable income of the partnership or the taxpayer includes a reference to an
amount:
(a) that is taken by subsection 60(1A) of this Act to be so included for
the asset for the purposes of subsection 60(1); or
(b) that is treated as being deducted for depreciation of another asset
under section 42-285 or 42-290 of the Income Tax Assessment Act 1997;
or
(c) that, apart from roll-over relief under sections 58, 73E, 122JAA,
122JG, 123BBA, 123BF, 124AMAA, 124GA, 124JD and 124PA, would have been included
in assessable income; or
(d) that, apart from Subdivision 41-A of the Income Tax Assessment Act
1997 (Common rule 1—roll-over relief for related entities), would have
been included in assessable income.
(1) A reference in subsection 160ZH(2) to the indexed amount of any
consideration or the indexed amount of any expenditure, in respect of an asset
(other than the taxpayer’s interest in a partnership asset of a
partnership in which the taxpayer is a partner) is a reference to the sum
of:
(a) the indexed amount of the consideration or the indexed amount of the
expenditure (as worked out under sections 160ZH and 160ZJ), as the case may be;
and
(b) any amount that is included in the assessable income of the taxpayer
of any year of income by virtue of a provision of this Act other than this Part
the effect of which is to reverse a deduction covered by paragraph (c) or
subparagraph (d)(iii);
reduced by:
(c) any part of the consideration or of the expenditure that has been
allowed or is allowable as a deduction to the taxpayer in respect of any year of
income; and
(d) for the purpose of the reference in paragraphs 160ZH(2)(a), (c) and
(d):
(i) any amount of expenditure in relation to the asset that, apart from
subsections 124ZB(4) and 124ZG(5), would have been allowed or allowable under
Division 10C or 10D of Part III as a deduction to the taxpayer, after the
acquisition of the asset, in respect of any year of income; and
(ii) any amount that, apart from subsection 388-55(3) of the Income Tax
Assessment Act 1997, would have been allowed or allowable under Subdivision
387-A or 387-B of that Act as a deduction to the taxpayer, after the acquisition
of the asset, in respect of any year of income; and
(iii) any amount of expenditure that, apart from paragraph 43-70(2)(h) of
the Income Tax Assessment Act 1997, would have been allowed or allowable
under Division 43 of that Act as a deduction to the taxpayer, after the
acquisition of the asset, in respect of any year of income; and
(iv) any other expenditure that is capital expenditure by the taxpayer or
any other person in respect of the asset that has been allowed or is allowable
as a deduction to the taxpayer, after the acquisition of the asset, in respect
of any year of income.
(2) The reference in paragraph (1)(b) to an amount that is included in the
assessable income of a taxpayer includes a reference to an amount:
(a) that is taken by subsection 60(1A) of this Act to be so included for
the asset for the purposes of subsection 60(1); or
(b) that is treated as being deducted for depreciation of another asset
under section 42-285 or 42-290 of the Income Tax Assessment Act 1997;
or
(c) that, apart from roll-over relief under sections 58, 73E, 122JAA,
122JG, 123BBA, 123BF, 124AMAA, 124GA, 124JD, and 124PA, would have been included
in assessable income; or
(d) that, apart from Subdivision 41-A of the Income Tax Assessment Act
1997 (Common rule 1—roll over relief for related entities), would have
been included in assessable income.
(3) A reference in subsection 160ZH(2) to the indexed amount of any
consideration or the indexed amount of any expenditure, in respect of an asset
(the taxpayer’s asset), being a taxpayer’s interest in
a partnership asset of a partnership in which the taxpayer is a partner, is a
reference to the sum of:
(a) the indexed amount of the consideration or the indexed amount of the
expenditure (as worked out under sections 160ZH and 160ZJ), as the case may be;
and
(b) any amount that is included in the assessable income of the
partnership or of the taxpayer of any year of income by virtue of a provision of
this Act other than this Part the effect of which is to reverse a deduction
covered by paragraph (c) or subparagraph (d)(iii);
reduced by:
(c) any part of the consideration or of the expenditure that has been
allowed or is allowable as a deduction to the partnership or the taxpayer in
respect of any year of income; and
(d) for the purpose of the reference in paragraphs 160ZH(2)(a), (c) and
(d):
(i) any amount of expenditure in relation to the asset that, apart from
subsections 124ZB(4) and 124ZG(5), would have been allowed or allowable under
Division 10C or 10D of Part III as a deduction to the partnership or the
taxpayer, after the acquisition of the asset, in respect of any year of income;
and
(ii) any amount that, apart from subsection 388-55(3) of the Income Tax
Assessment Act 1997, would have been allowed or allowable under Subdivision
387-A or 387-B of that Act as a deduction to the partnership or the taxpayer,
after the acquisition of the asset, in respect of any year of income;
and
(iii) any amount of expenditure that, apart from paragraph 43-70(2)(h) of
the Income Tax Assessment Act 1997, would have been allowed or allowable
under Division 43 of that Act as a deduction to the taxpayer, after the
acquisition of the asset, in respect of any year of income; and
(iv) any other expenditure that is capital expenditure by the partnership,
taxpayer or any other person in respect of the asset that has been allowed or is
allowable as a deduction to the partnership or the taxpayer, after the
acquisition of the asset, in respect of any year of income.
(4) The reference in paragraph (3)(b) to an amount that is included in the
assessable income of the partnership or the taxpayer includes a reference to an
amount:
(a) that is taken by subsection 60(1A) of this Act to be so included for
the asset for the purposes of subsection 60(1); or
(b) that is treated as being deducted for depreciation of another asset
under section 42-285 or 42-290 of the Income Tax Assessment Act 1997;
or
(c) that, apart from roll-over relief under sections 58, 73E, 122JAA,
122JG, 123BBA, 123BF, 124AMAA, 124GA, 124JD and 124PA, would have been included
in assessable income; or
(d) that, apart from Subdivision 41-A of the Income Tax Assessment Act
1997 (Common rule 1—roll-over relief for related entities), would have
been included in assessable income.
(1) The amendments made by this Part apply to assets acquired after 7.30
pm, by legal time in the Australian Capital Territory, on 13 May 1997.
(2) However, the amendments made by this Part do not apply to expenditure
incurred before 1 July 1999 in respect of an asset (the deemed
asset) where:
(a) the deemed asset is taken to be a separate asset from another asset
(the underlying asset) for the purposes of Part IIIA of the
Income Tax Assessment Act 1936 under section 160P of that Act;
and
(b) the underlying asset is land or a building that was acquired by the
taxpayer at or before 7.30 pm, by legal time in the Australian Capital
Territory, on 13 May 1997; and
(c) the deemed asset is acquired by the taxpayer after 7.30 pm, by legal
time in the Australian Capital Territory, on 13 May 1997 but before 1 July
1999.
(3) Subparagraphs 160ZJA(1)(d)(i) to (iii) and (3)(d)(i) to (iii) and
160ZJB(1)(d)(i) to (iii) and (3)(d)(i) to (iii) of the Income Tax Assessment
Act 1936 (which relate to eligible heritage conservation expenditure and
landcare and water facility expenditure) do not apply to expenditure incurred
before the day on which the Bill that became the Taxation Laws Amendment Act
(No. 2) 1998 was introduced into the House of Representatives.
(4) For the purposes of a taxpayer’s assessment for the year of
income in which 13 May 1997 occurred, a reference in the amendments made by this
Schedule to a deduction does not include a reference to a deduction to the
extent that it could reasonably be regarded as arising, or relating to a period,
before 7.30 pm, by legal time in the Australian Capital Territory, on 13 May
1997.
Part
2—Amendment of the Income
Tax Assessment Act 1997
9 Subsections 110-25(7) and
(8)
Repeal the subsections.
10 Section 110-30
Repeal the section.
11 At the end of Subdivision
110-A
Add:
(1) This section prevents some expenditure from forming part of the
*cost base of a
*CGT asset
*acquired at or before 7.30 pm, by legal time
in the Australian Capital Territory, on 13 May 1997. (The expenditure mentioned
in this section can include giving property: see section 103-5.)
(2) Expenditure does not form part of the second or third element
of the cost base to the extent that you have deducted or can
deduct it.
(3) Expenditure does not form part of any element of the cost
base to the extent of any amount you have received as
*recoupment of it, except so far as the amount
is included in your assessable income.
(1) This section prevents some expenditure from forming part of the
*cost base of your interest in a
*CGT asset of a partnership if you
*acquired the interest at or before 7.30 pm, by
legal time in the Australian Capital Territory, on 13 May 1997. (The expenditure
mentioned in this section can include giving property: see section
103-5.)
(2) Expenditure does not form part of the second or third element
of the cost base to the extent that you, or a partnership in which
you are or were a partner, have deducted or can deduct it.
(3) Expenditure does not form part of any element of the cost
base to the extent of any amount that you, or a partnership in which you
are or were a partner, have received as
*recoupment of the expenditure, except so far
as the amount is included in your assessable income or the partnership’s
assessable income.
(1) This section prevents some expenditure from forming part of the
*cost base of a
*CGT asset
*acquired after 7.30 pm, by legal time in the
Australian Capital Territory, on 13 May 1997. (The expenditure mentioned in this
section can include giving property: see section 103-5.)
Deductible expenditure
(2) Expenditure does not form part of the cost base
to the extent that you have deducted or can deduct it for an income year, except
so far as:
(a) the deduction has been reversed by an amount being included in your
assessable income for an income year by a provision of this Act (outside this
Part and Part 3-3); or
Note: Division 20 contains some of the provisions that
reverse deductions. Section 20-5 lists some others.
(b) the deduction would have been so reversed apart from a provision
listed in the table (relief from including a balancing charge in your assessable
income).
Note: In the table, provisions of the Income Tax
Assessment Act 1997 are identified in normal text. The other provisions,
in bold, are provisions of the Income Tax Assessment Act
1936.
|
Provisions for relief from including a balancing charge in your
assessable income |
||
|---|---|---|
|
Item |
Provision |
Subject matter |
|
1 |
Subdivision 41-A |
Common rule 1—roll-over relief for related entities |
|
2 |
section 42-285 or 42-290 |
Depreciation of *plant |
|
3 |
section 58 |
Depreciation of plant |
|
4 |
subsection 59(2A) or (2D) |
Depreciation of plant |
|
5 |
section 73E |
Research and development activity expenditure |
|
6 |
section 122JAA |
General mining expenditure |
|
7 |
section 122JG |
Quarrying expenditure |
|
8 |
section 123BBA |
Expenditure on transport of minerals |
|
9 |
section 123BF |
Expenditure on transport of quarry materials |
|
10 |
section 124AMAA |
Expenditure on prospecting and mining for petroleum |
|
11 |
section 124GA |
Expenditure on forestry roads |
|
12 |
section 124JD |
Expenditure on timber mill buildings |
|
13 |
section 124PA |
Expenditure on industrial property |
Recouped expenditure
(3) Expenditure does not form part of the cost base
to the extent of any amount you have received as
*recoupment of it, except so far as the amount
is included in your assessable income.
Capital expenditure by previous owner that you can deduct after
acquisition
(4) The cost base is reduced to the extent that you have
deducted or can deduct for an income year capital expenditure incurred by
another entity in respect of the *CGT asset.
(This rule does not apply so far as the deduction is covered by paragraph (2)(a)
or (b).)
Example: Under Division 43 you can deduct expenditure
incurred by a previous owner of capital works you own.
Landcare and water facility expenditure giving rise to a tax
offset
(5) Expenditure does not form part of the cost base
to the extent that you choose a *tax offset for
it under section 388-55 (about the landcare and water facility tax offset)
instead of deducting it.
Heritage conservation expenditure giving rise to a tax
offset
(6) Expenditure does not form part of the cost base
to the extent that:
(a) it is eligible heritage conservation expenditure (as determined under
section 159UO of the Income Tax Assessment Act 1936); and
(b) you could have deducted it for an income year under any of these
Divisions (about capital works):
(i) Division 43 of this Act;
(ii) Division 10C or 10D of Part III of that Act;
but for the exclusions in paragraph 43-70(2)(h) of this Act and
subsections 124ZB(4) and 124ZG(5) of that Act.
Note: Because eligible heritage conservation expenditure is
the subject of a tax offset, it is also not deductible.
(1) This section prevents some expenditure from forming part of the
*cost base of your interest in a
*CGT asset of a partnership if you
*acquired the interest after 7.30 pm, by legal
time in the Australian Capital Territory, on 13 May 1997. (The expenditure
mentioned in this section can include giving property: see section
103-5.)
Deductible expenditure
(2) Expenditure does not form part of the cost base
to the extent that you, or a partnership in which you are or were a partner,
have deducted or can deduct it for an income year, except so far as:
(a) the deduction has been reversed by an amount being included in your
assessable income for an income year, or in the assessable income of a
partnership in which you are or were a partner, by a provision of this Act
(outside this Part and Part 3-3); or
Note: Division 20 contains some of the provisions that
reverse deductions. Section 20-5 lists some others.
(b) the deduction would have been so reversed apart from a provision
listed in the table in subsection 110-45(2) (relief from including a balancing
charge in your assessable income).
Recouped expenditure
(3) Expenditure does not form part of the cost base
to the extent of any amount that you, or a partnership in which you are or were
a partner, have received as *recoupment of it,
except so far as the amount is included in your assessable income or the
partnership’s assessable income.
Capital expenditure by previous owner of the asset
(4) The cost base is reduced to the extent that you, or a
partnership in which you are or were a partner, have deducted or can deduct for
an income year capital expenditure incurred by another entity in respect of the
*CGT asset. (This rule does not apply so far as
the deduction is covered by paragraph (2)(a) or (b).)
Example: Under Division 43 an entity can deduct expenditure
incurred by a previous owner of capital works that the entity
owns.
Landcare and water facility expenditure giving rise to a tax
offset
(5) Expenditure does not form part of the cost base
to the extent that you choose a *tax offset for
it under section 388-55 (about the landcare and water facility tax offset)
instead of deducting it.
Heritage conservation expenditure giving rise to a tax
offset
(6) Expenditure does not form part of the cost base
to the extent that:
(a) it is eligible heritage conservation expenditure (as determined under
section 159UO of the Income Tax Assessment Act 1936); and
(b) you, or a partnership in which you are or were a partner, could have
deducted it for an income year under any of these Divisions (about capital
works):
(i) Division 43 of this Act;
(ii) Division 10C or 10D of Part III of that Act;
but for the exclusions in paragraph 43-70(2)(h) of this Act and
subsections 124ZB(4) and 124ZG(5) of that Act.
Note: Because eligible heritage conservation expenditure is
the subject of a tax offset, it is also not deductible.
(1) Subsection 110-45(2), (4), (5) or (6) or 110-50(2), (4), (5) or (6)
does not prevent expenditure from forming part of the first, fourth or fifth
element of the cost base to the extent that the deduction
mentioned in that subsection could reasonably be regarded as arising before 7.30
pm, by legal time in the Australian Capital Territory, on 13 May 1997, or as
relating to a period before that time.
(2) Subsections 110-45(5) and (6) and 110-50(5) and (6) do not apply to
expenditure incurred before the day on which the Bill that became the
Taxation Laws Amendment Act (No. 2) 1998 was introduced into the House of
Representatives.
Special rule for
the period from 7.30 pm on 13 May 1997 to 30 June 1999
(3) If:
(a) an entity *acquired land or a
building (the original asset) at or before 7.30 pm, by
legal time in the Australian Capital Territory, on 13 May 1997; and
(b) after that time but before 1 July 1999, the entity
*acquires a
*CGT asset (the separate asset)
that section 160P of the Income Tax Assessment Act 1936 would have
treated as a separate CGT asset from the original asset;
section 110-40 or 110-43 (as appropriate) applies (instead of section
110-45 or 110-50) to expenditure incurred before 1 July 1999 in respect of the
separate asset.
12 After subsection
110-55(6)
Insert:
(6A) Expenditure does not form part of the reduced cost
base to the extent that you choose a
*tax offset for it under section 388-55 (about
the landcare and water facility tax offset) instead of deducting it.
13 After subsection
110-60(4)
Insert:
(4A) Expenditure does not form part of an entity’s
reduced cost base for its interest in a
*CGT asset of a partnership to the extent that
the entity chooses a *tax offset for the
expenditure under section 388-55 (about the landcare and water facility tax
offset) instead of deducting it.
14 Application
(1) The amendments made by this Part apply to assessments for the 1998-99
income year and later income years.
(2) However, the amendments made by items 12 and 13 do not apply to
expenditure incurred before the day on which the Bill that became the
Taxation Laws Amendment Act (No. 2) 1998 was introduced into the House of
Representatives.
Part
3—Amendment of the Taxation
Laws Amendment (Landcare and Water Facility Tax Offset) Act
1998
15 Subsection 2(2)
Repeal the subsection.
16 Items 14 to 17 of Schedule
1
Repeal the items.
Income
Tax Assessment Act 1936
Repeal the subsections, substitute:
(2) Despite anything in subsection (1), the passive income of a life
assurance company of a statutory accounting period is calculated using the
formula:
where:
adjusted passive income means the amount that, apart from
this subsection, would be the passive income of the company of the statutory
accounting period.
total assets means the average of the total assets of the
company for the statutory accounting period.
untainted average calculated liabilities means so much of the
total average calculated liabilities of the company for the statutory accounting
period as is referable to life assurance policies that do not give rise to
tainted services income of the company of any statutory accounting
period.
(3) In subsection (2):
total average calculated liabilities has the same meaning as
in Division 8 of Part III.
(4) Despite anything in subsection (1), the passive income of a general
insurance company of a statutory accounting period is worked out using the
formula:
where:
adjusted passive income means the amount that, apart from
this subsection, would be the passive income of the company of the statutory
accounting period.
net assets means the excess at the end of the statutory
accounting period of the total assets of the company over the total liabilities
of the company.
outstanding claims means the amount that the company would,
at the end of the statutory accounting period, based on proper and reasonable
estimates, need to set aside and invest in order to meet liabilities of the
company that have arisen or will arise:
(a) under general insurance policies (including reinsurance policies, but
not including life assurance policies); and
(b) in respect of events that occurred during or before the
period.
solvency amount is the amount worked out under subsection
(5).
tainted outstanding claims means so much of the outstanding
claims of the company at the end of the statutory accounting period as is
referable to general insurance policies that give rise to tainted services
income of the company of any statutory accounting period.
total assets means the total assets of the company at the end
of the statutory accounting period.
(5) In subsection (4):
solvency amount is the amount worked out using the
formula:
where:
maximum event retention means the amount that, at the end of
the statutory accounting period, the company has determined is the maximum that
would be payable to the owners of policies as a result of the happening of any
one event. The amount must be worked out on the basis of a reasonable and proper
estimate.
minimum solvency means the greater of:
(a) 20% of the company’s premium income (within the meaning of the
Insurance Act 1973) during the statutory accounting period; and
(b) 15% of the company’s outstanding claims as at the end of the
statutory accounting period.
outstanding claims means the amount that the company would,
at the end of the statutory accounting period, based on proper and reasonable
estimates, need to set aside and invest in order to meet liabilities of the
company that have arisen or will arise:
(a) under general insurance policies (including reinsurance policies, but
not including life assurance policies); and
(b) in respect of events that occurred during or before the
period.
tainted outstanding claims means so much of the outstanding
claims of the company at the end of the statutory accounting period as is
referable to general insurance policies that give rise to tainted services
income of the company of any statutory accounting period.
The amendment made by this Schedule applies in calculating passive income
that is derived on or after 1 July 1997.
Income
Tax Assessment Act 1936
1 Subsection 110(1)
Insert:
significant event, in relation to any of the insurance funds
maintained by a life assurance company, means any happening or circumstance that
causes an abnormal change in the amount of the company’s liabilities in
respect of policies included in the fund concerned.
2 Subsection 112A(1)
Omit all the words after “formula”, substitute:
where:
average calculated liabilities (all resident policies) means
the average calculated liabilities of the company for the year of income for
policies of all categories (other than eligible non-resident policies) included
in the fund.
average calculated liabilities (exempt policies) means the
average calculated liabilities of the company for the year of income for exempt
policies (other than eligible non-resident policies) included in the
fund.
3 Subsection 112A(3)
Repeal the subsection, substitute:
(3) Subsection (2) does not apply in relation to a fund if less than
one-third of the average calculated liabilities of the company for the year of
income for policies of all categories (other than eligible non-resident
policies) included in the fund relates to Australian policies.
4 Subsection 112C(2)
Omit all the words after “exempt from tax:”,
substitute:
where:
average calculated liabilities (all policies) means the
average calculated liabilities of the company for the year of income for
policies of all categories that:
(a) are included in the fund; and
(b) were issued in the course of carrying on the PE business.
average calculated liabilities (eligible non-resident
policies) means the average calculated liabilities of the company for
the year of income for eligible non-resident policies that:
(a) are included in the fund; and
(b) were issued in the course of carrying on the PE business.
5 Subsection 114(1)
Omit all the words before paragraph (a), substitute:
If an actuarial valuation of liabilities of a life assurance company is
made as at a particular time, the company’s calculated liabilities at that
time are:
6 Subsection 114(2)
Repeal the subsection, substitute:
(2) If:
(a) it is necessary to work out a life assurance company’s
calculated liabilities as at a particular time (the relevant
time); and
(b) no actuarial valuation of liabilities of the company as at the
relevant time is made;
the calculated liabilities at that time are the amount worked out by using
the formula:
where:
current value of assets means the value of all the
company’s assets at the relevant time.
previous actuarial valuation of liabilities means the last
actuarial valuation of liabilities of the company made before the relevant
time.
previous value of assets means the value of all the
company’s assets when the last actuarial valuation of liabilities of the
company before the relevant time was made.
7 After section 114
Insert:
(1) The average calculated liabilities of a life assurance company for a
category of policies for a year of income is worked out under this
section.
(2) First, divide the year of income into periods as follows:
(a) the first period starts at the start of the year of income;
(b) each later period starts immediately after the last day of the
previous period;
(c) each period (except the last) ends immediately before the first day on
which a significant event occurs in relation to the insurance fund in which
policies of the category are included;
(d) the last period ends at the end of the year of income.
(3) Second, the average calculated liabilities of the company for the
category of policies for each period is the amount worked out by using the
formula:
where:
calculated liabilities (end of period) means the calculated
liabilities of the company for the category of policies at the end of the
period.
calculated liabilities (start of period) means the calculated
liabilities of the company for the category of policies:
(a) if the period is the first period—at the start of the period;
or
(b) otherwise—on the day after the occurrence of the significant
event that caused the immediately preceding period to end.
days in period means the number of days in the
period.
days in year of income means the number of days in the year
of income.
(4) Third, the average calculated liabilities of the company for the
category of policies for the year of income is the sum of the amounts of the
average calculated liabilities of the company for the category of policies for
all the periods into which the year of income is divided.
The total average calculated liabilities of a life assurance company for
a year of income is the sum of the average calculated liabilities of the company
for each category of policies for the year of income.
8 Subsection 116CB(2)
Omit all the words after “formula:”, substitute:
where:
average calculated liabilities (all non-exempt resident
policies) means the average calculated liabilities of the company for
the year of income for policies of all categories (other than exempt policies or
eligible non-resident policies) included in the fund in which the asset was
included immediately before disposal.
average calculated liabilities (category of policies) means
the average calculated liabilities of the company for the year of income for
policies of the category concerned that are included in the fund in which the
asset was included immediately before disposal.
core amount means the core amount.
9 Subsection 116CE(5)
Omit all the words after “formula:”, substitute:
where:
average calculated liabilities (all non-exempt resident
policies) means the average calculated liabilities of the company for
the year of income for policies of all categories (other than exempt policies or
eligible non-resident policies) included in the fund.
average calculated liabilities (category of policies) means
the average calculated liabilities of the company for the year of income for
policies of the category concerned that are included in the fund.
income means the amount of the assessable income to be
allocated.
10 Application
(1) The amendments made by this Schedule apply to a life assurance company
in respect of the first year of income starting on or after 29 April 1997 and
all later years of income.
(2) The amendments made by this Schedule also apply to a life assurance
company in respect of the year of income that immediately preceded the first
year of income referred to in subsection (1) if, and only if:
(a) that immediately preceding year of income ended on or after 29 April
1997; and
(b) a significant event in relation to any of the insurance funds
maintained by the company occurred during the part of that year of income
occurring on and after that date.
Income
Tax Assessment Act 1936
1 At the end of section 61
Add:
(2) This section has effect subject to section 61A.
2 After section 61
Insert:
Entities to which section applies
(1) If:
(a) at a particular time, all of the income of a taxpayer is wholly exempt
from income tax; and
(b) immediately after that time, the taxpayer’s income becomes to
any extent assessable income;
then:
(c) the taxpayer is a transition taxpayer; and
(d) the time when the taxpayer’s income becomes to that extent
assessable is the transition time; and
(e) the year of income in which the transition time occurs is the
transition year for the taxpayer.
Deduction for depreciation
(2) A deduction allowable to the transition taxpayer for any period after
the transition time for depreciation under this Subdivision in respect of a unit
of property that was owned by the transition taxpayer at the transition time is
to be worked out in accordance with subsections (3) to (9).
Ownership of unit
(3) If the unit was acquired by the transition taxpayer from an exempt
government entity:
(a) assume that the transition taxpayer acquired the unit at the time when
it was acquired or constructed by the entity; or
(b) where the unit had, before its acquisition by the transition taxpayer,
been successively owned by 2 or more exempt government entities—assume
that the transition taxpayer acquired the unit at the time when it was acquired
or constructed by the first of those entities that owned the unit.
Cost of the unit
(4) If the unit was acquired by the transition taxpayer from an exempt
government entity, assume that the cost of the unit to the transition taxpayer
is:
(a) subject to paragraph (b)—the amount that was the cost of the
unit to the other entity; or
(b) where the unit had, before its acquisition by the transition taxpayer,
been successively owned by 2 or more exempt government entities—the amount
that was the cost of the unit to the first of those entities that owned the
unit.
Effective life of unit
(5) Assume that the effective life of the unit is the period that would
have been calculated to be its effective life at the time:
(a) if subsection (3) does not apply—when the unit was acquired or
constructed by the transition taxpayer; or
(b) if subsection (3) applies—when the unit is assumed under that
subsection to have been acquired by the transition taxpayer.
Elections under section 54A
(6) For the purpose of calculating the assumed effective life of the unit
under subsection (5), if the transition taxpayer could have made an election
under subsection 54A(1) at a particular time during the period for which the
transition taxpayer owned, or is to be assumed to have owned, the unit, assume
that the transition taxpayer made the election at that time.
Use of unit for producing assessable income
(7) Assume that the unit had, at all times during the period beginning
when it was acquired or constructed, or is assumed to have been acquired, by the
transition taxpayer and ending immediately before the transition time, been used
wholly for the purpose of producing assessable income by the transition
taxpayer, and assume that deductions for depreciation in respect of the unit had
been allowed to the transition taxpayer during that period.
Method of depreciation
(8) Assume that the method of depreciation selected by the transition
taxpayer in relation to the unit in:
(a) the transition year; or
(b) if the transition taxpayer does not claim depreciation for the
transition year—the first year of income after the transition year in
which the transition taxpayer claims depreciation;
was also used in each year of income before the transition year by the
transition taxpayer.
Application of other sections in calculating depreciation
rates
(9) In calculating the rate of depreciation in relation to the unit in
each year of income before the transition year:
(a) if section 57AG of this Act as in force at any time before its repeal
had applied in respect of that year of income—that section is to be taken
into account; and
(b) if section 57AL of this Act as in force at any time before its repeal
had applied in respect of that year of income—that section is to be
disregarded.
Balancing adjustments on disposal
(10) If the transition taxpayer disposes of a unit of property that was
owned by the transition taxpayer at the transition time, subsections (11) and
(12) apply but subsections 59(1) and (2) do not apply.
Including an amount in assessable income
(11) If the consideration receivable in respect of the disposal exceeds
the unit’s depreciated value, the transition taxpayer’s assessable
income is to include the lesser of:
(a) the sum of the amounts that have been allowed or are allowable as
deductions for depreciation of the unit; and
(b) the amount by which that consideration exceeds the unit’s
depreciated value.
Deducting an amount
(12) If the consideration receivable in respect of the disposal is less
than the unit’s notional depreciated value, an amount worked out by using
the following formula is an allowable deduction to the transition
taxpayer:
where:
actual deductions means the sum of the amounts that have been
allowed or are allowable to the transition taxpayer as deductions for
depreciation of the unit.
difference means the difference between the consideration
receivable in respect of the disposal of the unit and the unit’s notional
depreciated value.
notional deductions means the sum of:
(a) the amounts in respect of which deductions for depreciation are
assumed under subsection (7) to have been allowed to the transition taxpayer in
respect of the unit; and
Note: Subsections (3) to (6), (8) and (9) have effect for
the purpose of determining the amounts referred to in paragraph (a) (for
example, section 57AG as previously in force at any time is to be taken into
account in calculating the rate of depreciation at that time).
(b) if there was any period after the transition time in which the unit
was used, or installed ready for use, but was not used wholly for the purpose of
producing assessable income—the further amounts in respect of which
deductions for depreciation could have been allowed to the transition taxpayer
in respect of the unit if it had been used wholly for the purpose of producing
assessable income during that period.
Note: If neither subsection (11) nor (12) applies in respect
of the unit, no amount is to be included in the transition taxpayer’s
assessable income, and no deduction is allowable to the transition taxpayer, as
a result of the disposal.
Definitions
(13) In this section:
consideration receivable in respect of the disposal of a unit
of property has the same meaning as in section 59.
depreciated value of a unit of property is:
(a) if the unit was acquired by the transition taxpayer from a person
other than an exempt government entity or was constructed by the transition
taxpayer—its cost to the transition taxpayer; or
(b) if the unit was acquired by the transition taxpayer from an exempt
government entity—the amount assumed under subsection (4) to be its cost
to the transition taxpayer;
less the sum of the amounts in respect of which deductions for depreciation
have been allowed or are allowable to the transition taxpayer in respect of the
unit.
exempt government entity means:
(a) the Commonwealth, a State or a Territory; or
(b) an STB, within the meaning of Division 1AB, that is exempt from tax
under that Division; or
(c) any municipal corporation or other local governing body, or any public authority, to which paragraph 23(d) applies.