(3) Items 1, 2 and 86 of Schedule 2 commence on the later of the following days:
(a) the day on which this Act receives the Royal Assent; or
(b) the day on which the Taxation Laws Amendment Act (No. 3) 1995 receives the Royal Assent.
(4) Part 3 of Schedule 4 commences on 1 March 1996.
Schedules
3. The Acts specified in the Schedules to this Act are amended in accordance with the applicable items in the Schedules, and the other items in the Schedules have effect according to their terms.
Amendment of income tax assessments
4. 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 purpose of giving effect to this Act.
—————
SCHEDULE 1 Section 3
AMENDMENTS OF THE INCOME TAX ASSESSMENT ACT 1936 RELATING TO CAPITAL GAINS TAX
PART 1—AMENDMENTS RELATING TO DIVISION 19A OF PART IIIA
1. Subsection 160Z(5):
Omit “subsection 160ZZRE(3)”, substitute “subsection 160ZZRDJ(3) or (4), 160ZZRDM(2) or (5), or 160ZZRE(3)",
2. Before section 160ZZRA:
Insert in Division 19A:
“Subdivision A—Outline and interpretation
Outline of Division
“160ZZRAAA. (1)
This Division adjusts the cost bases of shares and loans in certain cases where assets are transferred between companies under common ownership and the transfer is likely to reduce the value of the share or loan. |
● There are detailed rules for the circumstances in which adjustments are made and the amount of those adjustments. |
● The rules that apply to most depreciable assets are different from the rules that apply to transfers of other assets. |
● Taxpayers are able to group certain assets before applying this Division. In some cases, this will result in no adjustment being required and in some other cases it will result in a lesser reduction being required. Taxpayers may also choose to group certain assets for administrative convenience. |
“(2) The following chart shows the operative provisions that will apply to particular assets:
SCHEDULE 1—continued
3. Section 160ZZRA (definition of indexed threshold amount):
Omit “section 160ZZRD”, substitute “subsection 160ZZRE(1B).”.
4. Section 160ZZRA:
Insert:
“original cost, of an asset to a taxpayer, means the consideration for the last acquisition of the asset by the taxpayer,
written down value, for an asset of a taxpayer at a particular time, means the greater of:
(a) the depreciated value of that asset at that time as recorded in the books of the taxpayer; and
(b) the depreciated value of the asset, within the meaning of section 62, at that time.”.
5. After section 160ZZRB:
Insert:
Cost base etc. of certain assets
“160ZZRBA. For the purpose of this Division, the cost base, the indexed cost base and the reduced cost base, at a particular time, of an asset to which subsection 160M(6) applies are taken to be equal to the market value of the asset at that time.
Meaning of indexed common ownership market value
“160ZZRBB.(1) The indexed common ownership market value of an asset is worked out by multiplying the market value of the asset at the common ownership time by the following indexation factor:
“(2) The indexation factor is to be worked out to 3 decimal places, but increased by 0.001 if the 4th decimal place is 5 or more.
“(3) Calculations under subsection (1):
(a) are to be made using only the index numbers published in terms of the most recently published reference base for the Consumer Price Index; and
(b) are to disregard indexation numbers that are published in substitution for previously published index numbers (except where the substituted numbers are published to take account of changes in the reference base).
SCHEDULE 1—continued
“(4) In this section:
CPI quarter means a period of 3 months ending on 31 March, 30 June, 30 September or 31 December.
index number means the All Groups Consumer Price Index Number (being the weighted average of the 8 capital cities) published by the Australian Statistician.”.
6. After section 160ZZRC:
Insert:
"Subdivision B—Application of Division".
7. Subsection 160ZZRD(2):
Omit the subsection.
8. After section 160ZZRD:
Insert:
How Division applies to grouped assets
“160ZZRDA.(1) Subdivision C sets out how this Division applies to groups of assets and to assets that are in a group of assets.
“(2) Subdivision C applies Subdivisions D and E to the assets as a group. Those Subdivisions do not have any other operation in relation to an asset included in a group of assets.
How Division applies to depreciable assets
“160ZZRDB. (1) Subdivision D only applies to the disposal of the first asset if:
(a) the asset is a depreciable asset; and
(b) the consideration for the disposal of the asset is less than the written down value of the asset at the time of the disposal; and
(c) the market value of the asset is not more than 10% greater than the written down value of the asset at the time of the disposal; and
(d) the original cost of the asset to the transferor was less than $1 million; and
(e) the asset is not a building.
Note 1: Written down value and original cost are defined in section 160ZZRA.
Note 2: Subdivision D also applies to some depreciable assets as part of depreciable asset groups as a result of Subdivision C.
“(2) Subdivision E does not have any operation in relation to an asset to which Subdivision D applies.
SCHEDULE 1—continued
Application of Subdivision E
“160ZZRDC. Subdivision E applies in relation to assets that are covered by this Division but not by Subdivision C or D.
Note: Subdivision E also applies to some assets as part of pre-common ownership groups or post-common ownership groups as a result of Subdivision C.
Application of Subdivision F
“160ZZRDD. Subdivision F only applies to the disposal of an asset if Subdivision C, D or E applied in relation to that disposal.
“Subdivision C—Grouped assets
Transferor may elect to group assets
Reason for grouping
“160ZZRDE.(1) Grouping provides taxpayers with a simplified method of applying this Division to 2 or more assets that are transferred from the transferor to the transferee. It may also reduce the cases in which adjustments have to be made to cost bases of shares or loans under this Division and may reduce the amount of those adjustments.
The 3 kinds of groups
“(2) There are 3 kinds of groups:
(a) a depreciable property group (see section 160ZZRDF); and
(b) a pre-common ownership group (see section 160ZZRDG); and
(c) a post-common ownership group (see section 160ZZRDH).
The groups are mutually exclusive. An asset that could be included in the depreciable property group can not be included in either of the other groups.
“(3) The transferor may elect to allocate assets to which this Division applies that are transferred to a transferee to groups of assets. All of the assets in a group must be disposed of to the same transferee in the same year of income of the transferor.
“(4) An election under subsection (3) must be made in writing on or before the lodgment of the transferor’s return for the year of income in which the relevant disposals occurred. The Commissioner may allow the election to be made at a later time.
Depreciable property groups
Assets that may be in depreciable property group
“160ZZRDF.(1) An asset can be allocated to a depreciable property group if:
(a) the asset is a depreciable asset; and
SCHEDULE 1—continued
(b) the asset is the first asset to be allocated to the group or is disposed of to the transferee in the same year of income of the transferor as the year in which other assets in the group are disposed of; and
(c) the original cost of the asset to the transferor was less than $1 million; and
(d) the asset is not a building.
How and when Subdivision D applies to depreciable property groups
“(2) Subdivision D applies in a way specified in subsection (3) to all of the assets in a depreciable property group if:
(a) the sum of the consideration for the disposal of the assets in the group is less than the sum of the written down values of the assets in the group; and
(b) the sum of the market values of the assets in the group is not more than 10% greater than the sum of the written down values of the assets in the group.
The written down value and the market value of each asset is to be worked out when that asset is disposed of by the transferor.
“(3) Subdivision D applies to all of the assets in a depreciable property group as if all of the grouped assets were one asset that:
(a) was disposed of at the earliest first asset disposal time for any asset in the group; and
(b) was disposed of for consideration equal to the sum of the consideration for the disposal of each of the assets; and
(c) had a written down value equal to the sum of the written down values of each of the assets.
In calculating the sums of written down values, the written down value of each asset at the first asset disposal time for that asset is to be used.
Pre-common ownership groups
Assets that may be in pre-common ownership group
“160ZZRDG.(1) An asset can be allocated to a pre-common ownership group if:
(a) the asset was acquired by the transferor before the time at which the transferor and the transferee last came under common ownership; and
(b) the asset is the first asset to be allocated to the group or is disposed of to the transferee in the same year of income of the transferor as the year in which that asset is disposed of; and
SCHEDULE 1—continued
(c) the original cost of the asset to the transferor was less than $1 million; and
(d) the asset is not land or a building.
How and when section 160ZZRF applies to pre-common ownership groups
“(2) Section 160ZZRF applies to all of the assets in a pre-common ownership group in the way specified in subsection (3) if the sum of the consideration for the disposal of the assets in the group is less than the sum of the indexed common ownership market values of the assets in the group.
“(3) Section 160ZZRF applies as if all of the grouped assets were one asset that:
(a) was acquired on or after 20 September 1985; and
(b) was disposed of at the earliest first asset disposal time for any asset in the group; and
(c) was disposed of for consideration equal to the sum of the consideration for the disposal of each of the assets; and
(d) had a market value at the common ownership time equal to the sum of the market values of the assets at that time.
In applying section 160ZZRF to the grouped assets the matters in subsection (6) of that section must be used to determine what amount is reasonable.
Post-common ownership groups
Assets that may be in post-common ownership group
“160ZZRDH.(1) An asset can be allocated to a post-common ownership group if:
(a) the asset was acquired by the transferor at or after the time at which the transferor and the transferee last came under common ownership; and
(b) the asset was last acquired by the transferor on or after 20 September 1985; and
(c) the asset is the first asset to be allocated to the group or is disposed of to the transferee in the same year of income of the transferor as the year in which the first asset is disposed of; and
(d) the original cost of the asset to the transferor was less than $1 million; and
(e) the asset is not land or a building.
SCHEDULE 1—continued
How and when section 160ZZRE applies to post-common ownership groups
“(2) Section 160ZZRE applies to all of the assets in a post-common ownership group in the way specified in subsection (3) if the sum of the consideration for the disposal of the assets in the group is less than the sum of the indexed threshold amount of each asset in the group. The indexed threshold amount of each asset is to be worked out when that asset is disposed of by the transferor.
“(3) Section 160ZZRE applies as if all of the grouped assets were one asset that:
(a) was acquired by the transferor on or after 20 September 1985; and
(b) was disposed of at the earliest first asset disposal time for any asset in the group; and
(c) was disposed of for consideration equal to the sum of the consideration for the disposal of each of the assets; and
(d) had an indexed threshold amount equal to the sum of the indexed threshold amount for each of the assets; and
(e) had a reduced threshold amount equal to the sum of the reduced threshold amounts for each of the assets.
In calculating the sums of reduced threshold amounts, or indexed threshold amounts, the reduced threshold amount, or indexed threshold amount, of each asset at the first asset disposal time for that asset is to be used.
Shares or loans created after first asset in group is disposed of
“ 160ZZRDI.(1) This section applies if a share in the transferor, or a loan to the transferor, comes into existence after the first time (the adjustment time) in a year of income at which an asset in the group is disposed of by the transferor but before the last time in the year of income at which such an asset is actually disposed of.
“(2) This section does not apply to a share that is issued to replace a share that is, or is to be, cancelled.
“(3) This Division applies as if:
(a) the share or loan had been in existence immediately before the adjustment time; and
(b) the share or loan had all the same attributes at that time as it had immediately after it came into existence.
SCHEDULE 1—continued
“Subdivision D—Depreciable assets
Shares in, and loans to, transferor—depreciable assets—deemed disposal
“160ZZRDJ.(1) This section applies to each share in the transferor acquired by a taxpayer (the second taxpayer) on or after 20 September 1985 that is held by the second taxpayer at the first asset disposal time.
“(2) For each share to which this section applies, the second taxpayer is taken to have disposed of the share at the first asset disposal time for a consideration equal to the indexed cost base to the second taxpayer of the share.
“(3) For the purpose of ascertaining whether a capital gain accrued to the second taxpayer in the event of a subsequent disposal of the share by the second taxpayer, the second taxpayer is taken to have immediately re-acquired the share for a consideration equal to the indexed cost base to the second taxpayer of the share, reduced by the share reduction amount (see subsection (5)).
“(4) For the purpose of ascertaining whether the second taxpayer incurred a capital loss in the event of a subsequent disposal of the share by the second taxpayer, the second taxpayer is taken to have immediately re-acquired the share for a consideration equal to the reduced cost base to the second taxpayer of the share, reduced by the share reduction amount (see subsection (5)).
“(5) The share reduction amount is worked out, immediately before the first asset disposal time, using the formula:
“(6) If the second taxpayer or another taxpayer disposed of a share (otherwise than because of the application of this section) within 12 months after the taxpayer acquired the share (otherwise than because of the application of this section), subsections (2) and (3) have effect as if the references to the indexed cost base to the taxpayer in respect of the share were a reference to the cost base to the taxpayer in respect of the share.
Shares of different classes
“160ZZRDK. If:
SCHEDULE 1—continued
(a) at the first asset disposal time, a taxpayer (the second taxpayer) held a share of a particular class in the transferor that was acquired by the second taxpayer on or after 20 September 1985 (the post-CGT share); and
(b) at the first asset disposal time, the second taxpayer or another taxpayer held a share of another class in the transferor; and
(c) the application of section 160ZZRDJ to the post-CGT share would be unreasonable;
then, that section does not apply to the post-CGT share and the cost base, the indexed cost base or the reduced cost base of the post-CGT share to the second taxpayer is instead reduced by such amount (if any) as is reasonable having regard to:
(d) the circumstances in which the post-CGT share was acquired by the second taxpayer; and
(e) the extent (if any) to which the market value of the post-CGT share was reduced as a result of the disposal of the first asset at the first asset disposal time.
Loans to transferor—depreciable assets
“160ZZRDL. (1) Section 160ZZRDM applies to a loan to the transferor acquired by a taxpayer (the second taxpayer) if the 3 conditions below are satisfied.
“(2) The first condition is that the loan was acquired by the second taxpayer on or after 20 September 1985 and is held by the second taxpayer at the first asset disposal time.
“(3) The second condition is that:
(a) the parties to the loan were not dealing with each other at arm’s length in relation to the loan; or
(b) the value of the loan was reduced as a result of the disposal of the first asset.
“(4) The third condition is that:
(a) one or more shares in the transferor (the excess shares) are taken, because of section 160ZZRDJ or 160ZZRDK, to have a cost base, indexed cost base or reduced cost base of nil immediately after the first asset disposal time; or
(b) at the first asset disposal time, there were no shares in the transferor that were acquired (by the second taxpayer or otherwise) on or after 20 September 1985.
SCHEDULE 1—continued
Loans to transferor—depreciable assets—deemed disposal
“160ZZRDM.(1) If this section applies (see section 160ZZRDL), the second taxpayer is taken to have disposed of the loan at the first asset disposal time for a consideration equal to the indexed cost base to the second taxpayer of the loan.
“(2) For the purpose of ascertaining whether a capital gain accrued to the second taxpayer in the event of a subsequent disposal of the loan by the second taxpayer, the second taxpayer is taken to have immediately re-acquired the loan for a consideration equal to the indexed cost base to the second taxpayer of the loan, reduced by the reduction (capital gain) amount.
“(3) The reduction (capital gain) amount is worked out, immediately before the first asset disposal time, using the formula:
“(4) The total excess share reduction (capital gain) amount is:
(a) if paragraph 160ZZRDL(4)(a) applies—so much of the total share reduction amounts for the excess shares as was not applied in making reductions to the indexed cost bases of the excess shares in accordance with subsection 160ZZRDJ(3) or section 160ZZRDK; or
(b) if paragraph 160ZZRDL(4)(b) applies—the amount worked out using the formula:
“(5) For the purpose of ascertaining whether a capital loss accrued to the second taxpayer in the event of a subsequent disposal of the loan by the second taxpayer, the second taxpayer is taken to have immediately re-acquired the loan for a consideration equal to the reduced cost base to the second taxpayer of the loan, reduced by the reduction (capital loss) amount.
“(6) The reduction (capital loss) amount is worked out, immediately before the first asset disposal time, using the formula:
SCHEDULE 1—continued
“(7) The total excess share reduction (capital loss) amount is:
(a) if paragraph 160ZZRDL(4)(a) applies—so much of the total share reduction amounts for the excess shares as was not applied in making reductions to the reduced cost bases of the excess shares in accordance with subsection 160ZZRDJ(4) or section 160ZZRDK; or
(b) if paragraph 160ZZRDL(4)(b) applies and the written down value of the first asset exceeds the consideration in respect of the disposal of the first asset—the amount of the excess; or
(c) in any other case—0.
“(8) If the second taxpayer or another taxpayer disposed of a loan (otherwise than because of the application of this section) within 12 months after the taxpayer acquired the loan (otherwise than because of the application of this section), subsections (1) and (2) have effect as if the references to the indexed cost base to the taxpayer in respect of the loan were a reference to the cost base to the taxpayer in respect of the loan.
More than one loan
“160ZZRDN. If:
(a) at the first asset disposal time, a taxpayer (the second taxpayer) held a loan to the transferor that was acquired by the second taxpayer on or after 20 September 1985 (the post-CGT loan); and
(b) at the first asset disposal time, the second taxpayer or another taxpayer held:
(i) a share in the transferor that was acquired by that taxpayer before 20 September 1985; or
(ii) another loan to the transferor; and
(c) the application of section 160ZZRDM to the post-CGT loan would be unreasonable;
then, that section does not apply to the post-CGT loan and the cost base, the indexed cost base or the reduced cost base of the post-CGT loan to the second taxpayer is instead reduced by such amount (if any) as is reasonable having regard to:
(d) the circumstances in which the post-CGT loan was acquired by the second taxpayer; and
(e) the extent (if any) to which the market value of the post-CGT loan was reduced as a result of the disposal of the first asset at the first asset disposal time.
SCHEDULE 1—continued
“Subdivision E—Other assets”
9. After subsection 160ZZRE (1A):
Insert:
“(1B) This section only applies if the consideration for the disposal of the first asset is less than the indexed threshold amount being the lesser of:
(a) the indexed cost base to the transferor of the first asset, or the amount that would have been the indexed cost base if this Part had applied in respect of the disposal of the first asset; and
(b) the market value of the first asset immediately before the first asset disposal time.”.
10. Subparagraph 160ZZRE(6)(b)(i):
Before “held” insert “or another taxpayer”.
11. Subparagraph 160ZZRE (6)(b)(i):
Omit “by the second taxpayer”, substitute “by that taxpayer”.
12. Sub-subparagraph 160ZZRE (6)(b)(ii)(A):
Omit all of the words after “disposal time,”, substitute “shares in the transferor belonging to 2 or more classes were in existence;”.
13. Sub-subparagraph 160ZZRE (6)(b)(ii)(B):
Omit all of the words after “disposal time,”, substitute “at least one other loan to the transferor was held by the second taxpayer, a company related to the transferor, or a person mentioned in paragraph 160ZZRB(b) in relation to the transferor; and”.
14. Subsections 160ZZRF (2) and (3):
Omit all of the words and paragraphs after “as is reasonable”.
15. Section 160ZZRF:
Add at the end:
“(4) The second taxpayer must choose whether to use the matters set out in subsection (5) or the matters set out in subsection (6) to determine what amount is reasonable.
“(5) The matters in this subsection are:
(a) the circumstances in which the share or the loan was acquired by the second taxpayer; and
(b) the extent (if any) to which the market value of the share or the loan was reduced as a result of the disposal of the first asset at the first asset disposal time; and
SCHEDULE 1—continued
(c) the extent (if any) to which any consideration paid or given by the second taxpayer for the acquisition of the share or the loan was attributable to the first asset.
“(6) The matters in this subsection are:
(a) the indexed common ownership market value of the first asset (see section 160ZZRBB); and
(b) the amount of the consideration for the disposal of the first asset to the transferee.”.
16. After section 160ZZRFA:
Insert:
“Subdivision F—Other adjustments”.
17. Paragraph 160ZZRH(d):
Omit all of the words after “under”, substitute “Subdivision C, D or E; and”.
18. Section 160ZZRH:
Add at the end:
“(2) The total of increases made under subsection (1) in relation to the first asset is not to exceed the total of adjustments made in relation to that asset under Subdivisions C, D and E.”.
19. Application of amendments
The amendments made by this Part apply to disposals after 7.30 p.m., by legal time in the Australian Capital Territory, on 9 May 1995.
SCHEDULE 1—continued
PART 2—OTHER AMENDMENTS RELATING TO CAPITAL
GAINS TAX
20. Section 160AZA (Sub Index—Roll-overs):
After the entry for “Strata title conversion” insert:
“Trusts—change in trust deed 160ZZPJ”.
21. After subsection 160B(1):
Insert:
“(1A) Subsections (2) and (2A) define listed personal-use asset for the purposes of this Part.”.
22. Subsection 160B(2):
Omit “$100”, substitute “$500”.
23. After subsection 160B(2):
Insert:
“(2A) An interest in an asset is also a listed personal-use asset if the interest is covered by subparagraph (2)(a)(vii) and the market value of the asset at the time when the interest is acquired is more than $500.”.
24. Subsection 160B(4):
Omit “non-listed” (wherever occurring).
25. Subsection 160Z(10):
Omit “or paragraph 99B(2)(d) or (e)”, substitute “, paragraph 99B(2)(d) or (e) or section 128D”.
26. Subsection 160ZA(7):
Add at the end “This subsection is subject to subsection (7A).”.
27. After subsection 160ZA(7):
Insert:
“(7A) Subsection (7) does not apply in relation to a dividend that is exempt from tax under section 23AJ to the extent that the dividend is:
(a) debited against a share capital account; or
(b) debited against a share premium account; or
(c) debited against a reserve to the extent that it consists of profits from the revaluation of assets of a company that have not been disposed of by the company; or
SCHEDULE 1—continued
(d) attributable, either directly or indirectly, to amounts that were transferred from an account or reserve of the company paying the dividend where the account or reserve is covered by one of the above paragraphs.
An account continues to be a share premium account for the purposes of this subsection even if, because the thing mentioned in paragraph (a) or (b) of the definition of share premium account in subsection 6(1) happens, it ceases to be a share premium account for other purposes of this Act.”.
28. Subsection 160ZA(8):
Omit the subsection, substitute:
“(8) For the purposes of subsection (4), if an eligible termination payment (within the meaning of Subdivision AA of Division 2 of Part III) is to be included in part in the assessable income of a taxpayer, then the whole of the payment is taken to be so included.”.
29. Section 160ZE:
Omit “5,000” (wherever occurring), substitute “10,000”.
30. Section 160ZG:
Omit “5,000” (wherever occurring), substitute “10,000”.
31.Paragraph I60ZZO(l)(d):
Omit the paragraph, substitute:
“(d) either:
(i) subsection (1AA) (disposals giving rise to capital losses) applies to the disposal; or
(ii) the transferor and the transferee have elected that this section is to apply in relation to the disposal;”.
32. After subsection 160ZZO(1):
Insert:
“(1AA) This subsection applies to a disposal if:
(a) assuming this Part applied to the disposal, the disposal would give rise to a capital loss; and
(b) the disposal is not covered by an election under subsection (1AB).
“(1AB) The transferor and the transferee may make an election under this subsection in relation to a disposal if the transferor and the transferee intend that, before the end of the year of income of the transferor after the year in which the disposal takes place, they will cease to be related and that the transferor, together with related companies of the transferor, will cease to hold 50% or more of the shares in the transferee.
SCHEDULE 1—continued
“(1AC) If a transferor and a transferee make an election under subsection (1AB) and the transferor, together with related companies of the transferor, does not cease to hold 50% or more of shares in the transferee before the end of the year of income of the transferor after the year in which the disposal occurs, no capital loss is taken to have arisen in relation to the disposal of the asset by the transferor.
“(1AD) No capital loss is taken to have arisen in relation to the disposal of the asset by the transferor if:
(a) the transferor and transferee make an election under subsection (1AB); and
(b) at any time in the 4 year period after the disposal of the asset, the asset is held by the transferor or a company that is related to the transferor or a company where, at that time, the transferor, together with other companies related to the transferor, holds 50% or more of the shares in the company.
Paragraph (b) does not apply in relation to the asset being held by the transferee in the period between the time when the asset is disposed of by the transferor and the time when the transferor, together with related companies of the transferor, ceases to hold 50% or more of the shares in the transferee. ”.
33. After subsection 160ZZO)(2D):
Insert:
“(3) An election under this section must be made in writing on or before the date of lodgment of the transferor’s return for the year of income in which the disposal took place. The Commissioner may allow the election to be made at a later time.
“(4) If:
(a) subsection (1AA) applies to a disposal (the first disposal) of an asset; and
(b) the asset is an interest in a CFC or a FIF; and
(c) the consideration in respect of the first disposal is reduced under section 461 or 613;
then:
(d) for the purpose of determining if a capital gain arises in respect of the subsequent disposal of the asset by the transferee, the indexed cost base of the asset to the transferee is to be increased, at the time of the subsequent disposal, by so much of the attribution surplus as was taken into account under paragraph 461(1)(c) or 613(1)(c) in relation to the first disposal; and
SCHEDULE 1—continued
(e) for the purpose of determining if a capital loss arises in respect of the subsequent disposal of the asset by the transferee, the reduced cost base of the asset to the transferee is to be increased, at the time of the subsequent disposal, by so much of the attribution surplus as was taken into account under paragraph 461(1)(c) or 613(1)(c) in relation to the first disposal.
“(5) In subsection (4):
attribution surplus means an attribution surplus under Part X or Part XI.
CFC has the same meaning as in Part X.
FIF has the same meaning as in Part XI.”.
34. Subsection 160ZZO)(9A):
After “paragraph (1)(bb)” insert “or subsection (1AC) or (1AD)”.
35. Before section 160ZZQ:
Insert in Division 17:
Changes in trust deeds
When section applies
“160ZZPJ. (1) This section applies to an asset that is disposed of as a result of the trust deed of a trust (the first trust) being amended or replaced where:
(a) immediately before the disposal the asset is held by the first trust; and
(b) immediately after the disposal the asset is held by a trust (the second trust) (which may or may not be the first trust); and
(c) the assets held by, and the members of, the first trust immediately before the disposal are identical to the assets held by, and the members of, the second trust immediately after the disposal; and
(d) either:
(i) the first trust is a complying ADF or a complying superannuation fund and the deed was amended or replaced to comply with the Superannuation Industry (Supervision) Act 1993; or
(ii) the first trust is a complying ADF and the deed was amended or replaced so that it became a complying superannuation fund.
Part does not apply to disposal
“(2) This Part (other than this section) does not apply in respect of the disposal of the asset.
SCHEDULE 1—continued
Asset last acquired before 20 September 1985
“(3) If the day (the last acquisition day) on which the last acquisition of the asset by the first trust before the disposal occurred was before 20 September 1985, the acquisition of the asset by the second trust is taken to have occurred before that day.
Asset last acquired on or after 20 September 1985
“(4) Subsections (5) to (8) apply if the last acquisition day was on or after 20 September 1985.
Trust to have acquired asset
“(5) The second trust is taken to have acquired the asset at the time of the disposal.
Calculating future capital gains
“(6) For the purpose of ascertaining if a capital gain accrued to the second trust in the event of a subsequent disposal of the asset by the second trust, the second trust is taken to have paid, as consideration for the acquisition of the asset, the amount that would have been the indexed cost base to the first trust of the asset for the purposes of this Part if this Part had applied to the disposal of the asset by the first trust.
Calculating future capital losses
“(7) For the purpose of ascertaining if the second trust incurred a capital loss in the event of a subsequent disposal of the asset by the second trust, the second trust is taken to have paid, as consideration for the acquisition of the asset, the amount that would have been the reduced cost base to the first trust of the asset for the purposes of this Part if this Part had applied to the disposal of the asset by the first trust.
Disposals within 12 months
“(8) If the asset is disposed of by the second trust within 12 months after the last acquisition day, the reference in subsection (6) to the indexed cost base to the second trust of the asset is to be read as a reference to the cost base to the second trust of the asset.
Interpretation
“(9) In this section, complying ADF and complying superannuation fund have the same meaning as in subsection 267(1).”.
36. Application of amendments to sections 160B, 160ZE and 160ZG
(1) Subject to subitem (2), the amendments made by item 24 apply to disposals of assets after 7.30 p.m. on 9 May 1995.
(2) The amendments made by item 24 and subitem (1) are to be disregarded in determining the application of Part IIIA of the Principal Act in relation to the disposal of assets before 7.30 p.m. on 9 May 1995.
SCHEDULE 1—continued
(3) The amendment made by item 24 applies to articles acquired after the commencement of this item.
37. Application of amendment to subsection 160Z(10)
(1) Subject to subitem (2), the amendments made by item 25 apply to disposals of assets on or after 20 September 1985.
(2) The amendments made by item 25 do not apply to a taxpayer in relation to a transaction that is part of an arrangement if:
(a) the arrangement is covered by a ruling issued before 7.30 p.m. on 9 May 1995 under Part IVAA of the Taxation Administration Act 1953; and
(b) the transaction had been commenced to be carried out before 7.30 p.m. on 9 May 1995.
(3) A reference in this item to 7.30 p.m. is a reference to 7.30 p.m. by legal time in the Australian Capital Territory.
38. Application of amendments to section 160ZA
The amendments made by items 26, 27, 33 and 28 apply to disposals occurring after 7.30 p.m., by legal time in the Australian Capital Territory, on 9 May 1995.
39. Application of amendments to section 160ZZO
The amendments made by items 31, 32 and 34 apply to disposals occurring after 7.30 p.m., by legal time in the Australian Capital Territory, on 9 May 1995.
40. Application of new section 160ZZPJ
The amendments made by items 20 and 35 apply to disposals of assets occurring on or after 12 January 1994.
——————————————
SCHEDULE 2 Section 3
AMENDMENTS OF THE INCOME TAX ASSESSMENT ACT 1936 RELATING TO DIVIDEND IMPUTATION
1. Paragraph 46L(3)(b):
Omit “paragraph 160AQF(1)(c) or (1AA)(c)”, substitute “paragraph 160AQF(l)(c), (1AA)(c) or
(1 AAA)(c)".
2. Subparagraph 46L(4)(a)(ii):
Omit “paragraph 160AQF(1)(c) or (1AA)(c)”, substitute “paragraph 160AQF(1)(c), (1AA)(c) or (1AAA)(c)”.
3. Section 160APA (after paragraph (ba) of the definition of applicable general company tax rate):
Insert:
“(baa) in relation to the liability of a company to pay class C franking deficit tax or a class C deficit deferral tax—36%;”.
4. Section 160APA (definition of applicable general company tax rate):
Add at the end:
“or (cb) in relation to:
(i) the payment of a class C franked dividend to a shareholder in a company; or
(ii) a trust amount or partnership amount that relates, directly or indirectly, to the payment of a class C franked dividend to a shareholder in a company;
36%.”.
5. Section 160APA (definition of deficit deferral amount):
Omit all the words after “(see subsection 160AQJA(2))”, substitute “, a class B deficit deferral amount (see subsection 160AQJB(2)) or a class C deficit deferral amount (see subsection 160AQJC(2)).”.
6. Section 160APA (definition of deficit deferral tax):
Omit “or class B deficit deferral tax;”, substitute “, class B deficit deferral tax or class C deficit deferral tax.”.
7. Section 160APA (definition of estimated debit):
Omit “or an estimated class B debit;”, substitute “, an estimated class B debit or an estimated class C debit.”.
8. Section 160APA (definition of estimated debit determination):
Omit “or an estimated class B debit determination;”, substitute “, an estimated class B debit determination or an estimated class C debit determination.”.
SCHEDULE 2—continued
9. Section 160APA (definition of franking account assessment):
Omit “or a class B franking account assessment;”, substitute “, a class B franking account assessment or a class C franking account assessment.”.
10. Section 160APA (definition of franking credit):
Omit “or a class B franking credit;”, substitute “, a class B franking credit or a class C franking credit.”.
11. Section 160APA (definition of franking debit):
Omit “or a class B franking debit;”, substitute “, a class B franking debit or a class C franking debit.”.
12. Section 160APA (definition of franking deficit tax):
Omit “, or class B franking deficit tax;”, substitute “, class B franking deficit tax or class C franking deficit tax.”.
13. Section 160APA (definition of franking percentage):
Omit the definition, substitute:
“franking percentage means:
(a) in relation to a franked dividend—the sum of:
(i) the class A franking percentage of the dividend; and
(ii) the class B franking percentage of the dividend; and
(iii) the class C franking percentage of the dividend; or
(b) in relation to an unfranked dividend—0%.”.
14. Section 160APA:
Insert the following definitions:
“class C deficit deferral tax means tax payable in accordance with section 160AQJC.
class C flow-on franking amount means an amount that would be a flow-on franking amount if:
(a) a reference in the definition of flow-on franking amount to a franked dividend were, by express provision, confined to a class C franked dividend; and
(b) a reference in that definition to the flow-on franking amount were, by express provision, confined to a class C flow-on franking amount.
class C franked amount, in relation to a dividend, means so much of the dividend as has been franked in accordance with subsection 160AQF(1AAA).
SCHEDULE 2—continued
class C franked dividend means a dividend the whole or a part of which has been franked in accordance with subsection 160AQF(1AAA).
class C franking account assessment means the ascertainment of the class C franking account balance and of any class C franking deficit tax payable.
class C franking account balance, in relation to a company, means:
(a) if the company has a class C franking surplus—the amount of that surplus; or
(b) if the company has a class C franking deficit—the amount of that deficit; or
(c) in any other case—nil.
class C franking deficit means a deficit calculated under subsection 160APJ(4).
class C franking deficit tax means tax payable in accordance with subsection 160AQJ(1B).
class C franking percentage means:
(a) in relation to a class C franked dividend—the percentage specified in the declaration made under subsection 160AQF(1AAA) in relation to the dividend; or
(b) in relation to a dividend (including a dividend that is not a frankable dividend) no part of which has been franked in accordance with subsection 160AQF(1AAA)—0%.
class C franking surplus means a surplus calculated under subsection 160APJ(1B).
class C potential rebate amount means an amount that would be a potential rebate amount if:
(a) each reference in the definition of potential rebate amount to a franked dividend were, by express provision, confined to a class C franked dividend; and
(b) each reference in that definition to a flow-on franking amount were, by express provision, confined to a class C flow-on franking amount; and
(c) each reference in that definition to a potential rebate amount were, by express provision, confined to a class C potential rebate amount.
class C conversion time has the meaning given by section 160ASF.
estimated class C debit means an estimated class C debit specified in an estimated class C debit determination.
estimated class C debit determination means a determination made by the Commissioner under subsection 160AQDAA(1).”,
SCHEDULE 2—continued
15. After section 160APA:
Insert:
Reduction of adjusted amount
“160APAAA.(1) In working out the adjusted amount of an amount (the basic amount), the basic amount is reduced by any reduction amount that arises in relation to the basic amount.
“(2) The reduction amount in relation to a basic amount that is attributable to a payment of tax is the whole, or any part, of the payment that arises as a result of the application or operation of:
(a) subsection 136AD(1), (2) or (3) or 136AE(1), (2) or (3); or
(b) paragraph 1 or 2 of Article 9 of the Vietnamese agreement or a provision of any other double taxation agreement that corresponds to either of those paragraphs.
“(3) The reduction amount in relation to a basic amount that is attributable to:
(a) an amount received as a refund of a payment of tax; or
(b) an amount credited under paragraph 221AZM(1)(a) or (c) against a liability of the company; or
(c) an amount applied by the Commissioner against a liability of the company; or
(d) a reduction mentioned in section 160APZ;
is the whole, or any part, of the amount or reduction that is attributable to a payment, or a part of a payment, of tax in relation to which subsection (2) gave rise to a reduction amount.
“(4) In this section:
double taxation agreement means an agreement within the meaning of the International Tax Agreements Act 1953.
the Vietnamese agreement has the same meaning as in the International Tax Agreements Act 1953”.
16. After section 160APB:
Insert:
References to franking year
“160APBA. A reference in this Part to a franking year preceded by a figure referring to 2 years (for example 1995-96 franking year) is a reference to the franking year of the company:
SCHEDULE 2—continued
(a) if the franking year of the company is covered by paragraph (a) or (b) of the definition of franking year—that begins on or after 1 January in the first year referred to in the figure but before 1 January in the second year referred to in that figure; or
(b) if the franking year of the company is covered by paragraph (c) of that definition—that begins on 1 July of the first year referred to in the figure.”.
17. After subsection 160APJ(1A):
Insert:
“(1B) The class C franking surplus of a company at a particular time in a franking year is the amount by which the total of the class C franking credits of the company arising in the franking year and before that time exceeds the total of the class C franking debits of the company arising in the franking year and before that time.”.
18. Section 160APJ:
Add at the end:
“(4) The class C franking deficit of a company at a particular time in a franking year is the amount by which the total of the class C franking debits of the company arising in the franking year and before that time exceeds the total of the class C franking credits of the company arising in the franking year and before that time.”.
19. Section 160APL:
Add at the end:
“(3) If a company has a class C franking surplus at the end of a franking year, there arises at the beginning of the next franking year a class C franking credit of the company equal to that class C franking surplus.”.
20. Section 160APM:
Repeal the section, substitute:
Payment of company tax instalment
“160APM. If, on a particular day, a company tax instalment payable under section 221AZK is paid in respect of a year of income, there arises on that day whichever of the following is applicable:
(a) if the year of income is the 1994-95 year of income—a class B franking credit of the company equal to the adjusted amount in relation to the amount paid;
SCHEDULE 2—continued
(b) if the year of income is the 1995-96 year of income or a later year of income—a class C franking credit of the company equal to the adjusted amount in relation to the amount paid.”.
21. Section 160APMAA:
Repeal the section, substitute:
Payment of additional amount on upwards estimate
“160APMAA. If, on a particular day, an amount payable under subsection 221 AZR(1) is paid in respect of a year of income, there arises on that day whichever of the following is applicable:
(a) if the year of income is the 1994-95 year of income—a class B franking credit of the company equal to the adjusted amount in relation to the amount paid;
(b) if the year of income is the 1995-96 year of income or a later year of income—a class C franking credit of the company equal to the adjusted amount in relation to the amount paid.”.
22. Section 160APMAB:
Add at the end:
“(3) If a company receives a refund in relation to which a class C deficit deferral amount arises (see subsection 160AQJC(2)) on a particular day, a class C franking credit of the company equal to the adjusted amount in relation to the class C deficit deferral tax payable in relation to the refund (see subsection 160AQJC(3)) arises on that day.”.
23. Paragraph 160APMD(d):
Omit “a later year of income”, substitute “the 1994-95 year of income”.
24. Section 160APMD:
Add at the end:
“; (e) if the year of income is the 1995-96 year of income or a later year of income—a class C franking credit of the company equal to the adjusted amount in relation to the amount of that payment.”.
25. After subsection 160APP(1A):
Insert:
“(1B) Subject to this section, if:
(a) on a particular day, a class C franked dividend is paid to a shareholder being a company; and
SCHEDULE 2—continued
(b) the company is a resident at the time the dividend is paid; there arises on that day a class C franking credit of the company equal to the class C franked amount of the dividend.”.
26. Subsection 160APP(3):
Omit “subsection (1) or (1A)”, substitute “subsection (1), (1A) or (1B)”.
27. Subsection 160APP(3) (definition of FC):
Omit “subsections (1) and (1A)”, substitute “subsections (1), (1A) and (1B)”.
28. Subsection 160APP(5):
Omit “subsection (1) or (1A)”, substitute “subsection (1), (1A) or (1B)”.
29. After subsection 160APQ(1A):
Insert:
“(2) Subject to this section, if:
(a) a trust amount or partnership amount is included in, or a partnership amount is allowed as a deduction from, the assessable income of a company; and
(b) there is a class C flow-on franking amount in relation to the trust amount or the partnership amount;
there arises, at the end of the year of income of the trustee or partnership to which the trust amount or partnership amount relates, a class C franking credit of the company equal to the amount worked out using the formula:
where:
Potential rebate amount means the class C potential rebate amount in relation to the trust amount or partnership amount.
Company tax rate means the applicable general company tax rate.”.
30. Subsection 160APQ(3):
Omit “subsection (1) or (1A)”, substitute “subsection (1), (1A) or (2)”.
31. Paragraph 160APQA(d):
Omit “a later year of income”, substitute “the 1994-95 year of income”.
SCHEDULE 2—continued
32. Section 160APQA:
Add at the end:
“; (e) if the offset relates to company tax for the 1995-96 year of income or a later year of income—a class C franking credit of the company equal to the adjusted amount in relation to the amount of the payment.”.
33. Paragraph 160APQB(d):
Omit “a later year of income”, substitute “the 1994-95 year of income”.
34. Section 160APQB:
Add at the end:
“; (e) if the year of income is the 1995-96 year of income or a later year of income—a class C franking credit of the company equal to the adjusted amount in relation to the amount of that payment.”.
35. Section 160APU:
Add at the end:
“(3) On the day on which the termination time in relation to an estimated class C debit of a company occurs, there arises a class C franking credit of the company equal to the estimated class C debit.”
36. Section 160APV:
Add at the end:
“(3) If, on a particular day, the Commissioner serves on a company a notice of an estimated class C debit determination that is in substitution for an earlier determination, there arises on that day a class C franking credit of the company equal to the amount of the class C franking debit that arose because of the earlier determination.”.
37. After subsection 160APVA(1):
Insert:
“(1A) If:
(a) on a particular day, a class C franking debit of a life assurance company arises under section 160APY in relation to a refund received by the company in respect of an instalment for a year of income (the current year of income); and
(b) a notice of an original company tax assessment for the current year of income has not been served, or been taken to have been served, on the company on or before that day;
SCHEDULE 2—continued
then a class C franking credit of the company worked out under subsection (2) of this section arises on that day.”.
38. After subsection 160APVA(3):
Insert:
“(3A) If:
(a) on a particular day a class C franking debit of a life assurance company arises:
(i) under section 160APY in relation to a refund received by the company in respect of an instalment for a year of income (the current year of income); or
(ii) under section 160APYA in relation to a refund received by the company, or an amount credited against a liability of the company, in respect of an instalment for a year of income (also the current year of income); and
(b) either:
(i) before that day, a notice of an original company tax assessment for the current year of income has been served, or is taken to have been served, on the company; or
(ii) on or after that day, a notice of an original company tax assessment for the current year of income is served, or taken to be served, on the company;
then a class C franking credit of the company worked out under subsection (4) of this section arises on the later of the particular day and the day on which the notice is served or taken to be served.”.
39. Section 160APVB:
Add at the end:
“(2) If:
(a) on a particular day, a class C franking debit of a life assurance company arises under subsection 160AQCCA(1A) in relation to:
(i) an instalment that the company is required to pay under section 221AZK in respect of a year of income (the current year of income); or
(ii) an amount that the company is required to pay under subsection 221 AZR(l) in respect of a year of income (also the current year of income); and
(b) on or after that day, a notice of an original company tax assessment for the current year of income is served, or taken to be served, on the company;
SCHEDULE 2—continued
then a class C franking credit of the company equal to the amount of the class C franking debit arises on the day on which the notice is served, or taken to be served.”.
Note: The heading to section 160APVB is altered by inserting “or 160AQCCA(1A)" after “subsection 160AQCCA(1)”.
40. Paragraph 160APVBA(l)(b):
Omit “a later year of income”, substitute “the 1994-95 year of income”.
41. Subsection 160APVBA(1):
Add at the end:
“; (c) if the year of income is the 1995-96 year of income or a later year of income—a class C franking credit of the company worked out under subsection (2) of this section.”.
42. Subsection 160APVBA(2) (paragraph (b) of the definition of Statutory factor):
After “class B franking credit” insert “or a class C franking credit”.
43. Paragraph 160APVBB(1)(b):
Omit “a later year of income”, substitute “the 1994-95 year of income”.
44. Subsection 160APVBB(1):
Add at the end:
“; (c) if the year of income is the 1995-96 year of income or a later year of income—a class C franking credit of the company worked out under subsection (2) of this section.”.
45. Subsection 160APVBB(2) (paragraph (b) of the definition of Statutory factor):
After “class B franking credit” insert “or a class C franking credit”.
46. Section 160APVD:
Add at the end:
“(3) If, on a particular day, a class C franking debit of a life assurance company arises under section 160APZ in relation to a reduction in the company tax of the company for a year of income, there arises on that day a class C franking credit of the company equal to the adjusted amount in relation to the amount worked out using the formula:
SCHEDULE 2—continued
where:
Statutory factor means 1.0.
Overall reduction means the amount of the reduction.
Non-fund component of reduction means so much of the amount of the reduction as is attributable to the non-fund component.”.
47. Paragraph 160APVH(3)(a):
After “of that subsection” insert or under subsection 160AQCN(2AA) because of paragraph (a) of that subsection,”.
48. Section 160APVH:
Add at the end:
“(4) If, on a particular day, a class C franking debit of a life assurance company arises under any of the following provisions:
(a) subsection 160AQCCA(1A);
(b) subsection 160AQCCA(3A);
(c) section 160AQCK;
(d) section 160AQCL;
there arises on that day a class A franking credit of the company equal to the amount that would have been the amount of that class C franking debit if the assumptions set out in subsection (5) were made.
“(5) The assumptions are as follows:
(a) the assumption that the class C franking debit had been calculated using a statutory factor of 0.2 instead of 1.0;
(b) the assumption that the class C franking debit had been calculated by reference to the special life company tax rate for the year of tax concerned instead of by reference to the general company tax rate for the year of tax concerned.”.
49. After subsection 160APX(1A):
Insert:
“(1B) If:
(a) the class C required franking amount for a frankable dividend paid by a company on a particular day is not less than 10% of the amount of the dividend; and
(b) that class C required franking amount exceeds the class C franked amount of the dividend;
there arises on that day a class C franking debit of the company equal to the excess referred to in paragraph (b).”.
SCHEDULE 2—continued
50. Section 160APY:
Repeal the section, substitute:
Refunds of company tax instalment
“160APY. If a company y receives an amount as a refund under subsection 221AZL(2) or 221AZQ(1):
(a) if the refund is in respect of the 1994-95 year of income—a class B franking debit of the company equal to the adjusted amount in relation to the amount received arises on the day on which the company receives the amount; or
(b) if the refund is in respect of the 1995-96 year of income or a later year of income—a class C franking debit of the company equal to the adjusted amount in relation to the amount received arises on the day on which the company receives the amount.”.
51. Section 160APYA:
Repeal the section, substitute:
Refunds of company tax
“160APYA. If:
(a) a company makes a payment covered by section 160APM or 160APMAA in respect of a year of income; and
(b) either:
(i) the company receives an amount as a refund of that payment (not being a refund covered by section 160APY); or
(ii) the Commissioner credits the payment under paragraph 221 AZM(1)(b) or (c) against a liability of the company; and
(c) the amount refunded or credited, as the case may be, is not attributable to a reduction of company tax covered by section 160APZ;
then:
(d) if the payment is in respect of the 1994-95 year of income—a class B franking debit of the company equal to the adjusted amount in relation to the amount received or credited arises on the day on which the company receives the refund or on the day on which that payment is credited; or
(e) if the payment is in respect of the 1995-96 year of income or a later year of income—a class C franking debit of the company equal to the adjusted amount in relation to the amount received or credited arises on the day on which the company receives the refund or on the day on which that payment is credited.”.
SCHEDULE 2—continued
52. Paragraph 160APYBA(e):
Omit “a later year of income”, substitute “the 1994-95 year of income”.
53. Section 160APYBA:
Add at the end:
“; (f) if the payment mentioned in paragraph (a) is in respect of the 1995-96 year of income or a later year of income—a class C franking debit of the company equal to the adjusted amount in relation to the amount received or applied, as the case requires.”.
54. Paragraph 160APYBB(d):
Omit “a later year of income”, substitute “the 1994-95 year of income”.
55. Section 160APYBB:
Add at the end:
“; (e) if the foreign tax credit was allowable in respect of tax paid or payable by the company in respect of income derived in the 1995-96 year of income or a later year of income—the class C franking debit of the company equal to the adjusted amount in relation to the amount paid or applied, as the case requires.”.
56. Paragraph 160APZ(d):
Omit “a later year of income”, substitute “the 1994-95 year of income”.
57. Section 160APZ:
Add at the end:
“; (e) if the year of income is the 1995-96 year of income or a later year of income—a class C franking debit of the company equal to the adjusted amount in relation to the amount of the reduction.”.
58. Section 160AQB:
Add at the end:
“(3) If, on a particular day, a company pays a class C franked dividend, there arises on that day a class C franking debit of the company equal to the class C franked amount of the dividend.”.
59. Section 160AQC:
Add at the end:
“(3) If, on a particular day, the Commissioner serves on a company notice of an estimated class C debit determination, there arises on that day a class C franking debit of the company equal to the estimated class C debit specified in the notice.”.
SCHEDULE 2—continued
60. Section 160AQCA:
Add at the end:
“(3) If:
(a) a class C franking credit of a life assurance company arose under section 160APP or 160APQ at a particular time during a year of income of the company; and
(b) after that time and during the year of income:
(i) if section 160APP applied—the asset of the company from which the dividend referred to in subsection (1B) of that section was derived; or
(ii) if section 160APQ applied—the asset of the company to which the trust amount or partnership amount referred to in subsection (2) of that section is attributable;
becomes part of the insurance funds of the company;
there arises, on the day on which the asset becomes part of the insurance funds, a class C franking debit of the company equal to the class C franking credit.".
61 Subsection 160AQCB(1):
Add at the end:
“; and (e) a class C franking debit of the debit company equal to the amount worked out using the following formula, as reduced by the amount (if any) of the class C franking debit of the company arising under section 160AQB in respect of the payment of the scheme dividend:
where:
Scheme dividend means the amount of the scheme dividend.
Substituted class C franking percentage means the actual or proposed class C franking percentage, or the greatest actual or proposed class C franking percentage, of the substituted dividends.”.
62 Subsection 160AQCB(2):
Add at the end:
“; and (e) a class C franking debit of the debit company equal to the actual or proposed class C franked amount, or the sum of the actual or proposed class C franked amounts, of the substituted dividends.”.
SCHEDULE 2—continued
63. Subsection 160AQCB(3):
Add at the end:
“; and (e) a class C franking debit of the debit company equal to the amount worked out using the formula:
where:
Linked dividend means the amount of the linked dividend. Substituted class C franking percentage means the actual or proposed class C franking percentage, or the greatest actual or proposed class C franking percentage, of the substituted dividends.”.
64. Paragraph 160AQCB(4)(a):
Omit “on a particular day after 30 June 1990, a company (in this subsection called the “debit company”) pays”, substitute “a company (the debit company) pays, on a particular day after 30 June 1990 and before the day on which the class C conversion time of the company occurs,”.
65. After subsection 160AQCB(4):
Insert:
“(4A) If:
(a) a company (the debit company) pays, on a particular day on or after the day on which the class C conversion time of the company occurs, one or more franked dividends (the scheme dividends) to one or more shareholders in the debit company; and
(b) the scheme dividends were paid:
(i) under a dividend streaming arrangement in relation to the debit company; and
(ii) in substitution, in whole or in part, for the payment, or proposed payment, by another company of one or more unfranked dividends (the substituted dividends) to one or more shareholders in that other company;
there arises on that day a class C franking debit of the debit company equal to the sum of the following amounts:
(c) to the extent that the substituted dividends comprise the whole or a part of a common issue of shares covered by paragraph (c) of the definition of dividend in subsection 6(1)—the sum of the actual or proposed amounts of the dividends to which that common issue relates;
SCHEDULE 2—continued
(d) to the extent that the substituted dividends:
(i) do not consist of shares issued by the other company; and
(ii) comprise the whole or a part of a common series of distributions covered by paragraph (a) of the definition of dividend in subsection 6(1);
the sum of the actual or proposed amounts of the dividends to which those distributions relate;
(e) to the extent that paragraph (d) of this subsection does not apply and the substituted dividends comprise the whole or a part of a common series of credits covered by paragraph (b) of the definition of dividend in subsection 6(1)—the sum of the actual or proposed amounts of the dividends to which those credits relate.”.
66. Subsection 160AQCC(4):
Omit “subsection 160AQDB(2)”, substitute “subsection 160AQDB(2) or 160AQDB(3)”.
67. Section 160AQCC:
Add at the end:
“(5) There arises on the day of an on-market purchase by a company of a share a class C franking debit of the company equal to the amount calculated under subsection (6).
“(6) The amount is the amount that would be calculated under subsection 160AQDB(4) or 160AQDB(5) (whichever is applicable) as the class C required franking amount for a dividend paid on that day to a shareholder in the company if that and any other on-market purchase by the company had been an off-market purchase.”.
68. After subsection 160AQCCA(1):
Insert:
“(1A) If:
(a) on a particular day, a class C franking credit of a life assurance company arises:
(i) under section 160APM in relation to an instalment that the company is required to pay under section 221AZK in respect of a year of income (the current year of income); or
(ii)under section 160APMAA in relation to an amount that the company is required to pay under subsection 221AZR(1) in respect of a year of income (also the current year of income); and
SCHEDULE 2—continued
(b) a notice of an original company tax assessment for the current year of income has not been served, or been taken to have been served, on the company on or before that day;
then a class C franking debit of the company worked out under subsection (2) of this section arises on that day.”.
69. After subsection 160AQCCA(3):
Insert:
“(3A) If:
(a) on a particular day, a class C franking credit of a life assurance company arises under:
(i) section 160APM in relation to an instalment that the company is required to pay under section 221AZK in respect of a year of income (the current year of income); or
(ii) under section 160APMAA in relation to an amount that the company is required to pay under subsection 221AZR(1) in respect of a year of income (also the current year of income); and
(b) either:
(i) before that day, a notice of an original company tax assessment for the current year of income has been served, or is taken to have been served, on the company; or
(ii) on or after that day, a notice of an original company tax assessment for the current year of income is served, or taken to be served, on the company;
then a class C franking debit of the company worked out under subsection (4) of this section arises on the later of the particular day and the day on which the notice is served or taken to be served.”.
70. Section 160AQCCB:
Add at the end:
“(2) If:
(a) on a particular day, a class C franking credit of a life assurance company arises under subsection 160APVA(1A) in relation to a refund received by the company in respect of an instalment for a year of income (the current year of income); and
(b) on or after that day, a notice of an original company tax assessment for the current year of income is served, or taken to be served, on the company;
SCHEDULE 2—continued
then a class C franking debit of the company equal to the amount of the class C franking credit arises on the day on which the notice is served, or taken to be served.”.
Note: The heading to section 160AQCCB is altered by inserting “or 160APVA(1A)’’ after “subsection 160APVA(1)”.
71. Paragraph 160AQCK(l)(b):
Omit “a later year of income”, substitute “the 1994-95 year of income ”.
72. Subsection 160AQCK(1):
Add at the end:
(a) if the year of income is the 1995-96 year of income or a later year of income—a class C franking debit of the company worked out under subsection (2) of this section.”.
73. Subsection 160AQCK(2) (paragraph (b) of the definition of Statutory factor):
After “class B franking debit” insert “or a class C franking debit”.
74. Paragraph 160AQCL(l)(b):
Omit “a later year of income”, substitute “the 1994-95 year of income”.
75. Subsection 160AQCL(1):
Add at the end:
(a) if the year of income is the 1995-96 year of income or a later year of income—a class C franking debit of the company worked out under subsection (2) of this section.”.
76. Subsection 160AQCL(2) (paragraph (b) of the definition of Statutory factor):
After “class B franking debit” insert “or a class C franking debit”.
77. After subsection 160AQCN(2):
Insert:
Life assurance companies—statutory fund component
“(2AA) If, on a particular day, a class C franking credit of a company arises under any of the following provisions:
(a) subsection 160APVA(1A);
(b) subsection 160APVA(3A);
(c) section 160APVBA;
SCHEDULE 2—continued
(d) section 160APVBB;
(e) subsection 160APVD(3);
there arises on that day a class A franking debit of the company equal to the amount that would have been the amount of that class C franking credit if the assumptions set out in subsection (2AB) were made.
‘‘(2AB) The assumptions are as follows:
(a) the assumption that the class C franking credit had been calculated using a statutory factor of 0.2 instead of 1.0;
(b) the assumption that the class C franking credit had been calculated by reference to the special life company tax rate for the year of tax concerned instead of by reference to the general company tax rate for the year of tax concerned.”.
78. Paragraph 160AQCN(2A)(a):
After “of that subsection” insert or under subsection 160APVH(4) because of paragraph (a) of that subsection,”.
79. After section 160AQDA:
Insert:
Determination of estimated class C debit
“160AQDAA.(1) If a company:
(a) has taken liability reduction action; or
(b) has paid a company tax instalment; the company may lodge an application with the Commissioner for:
(c) the determination of an estimated class C debit in relation to the liability reduction action or the company tax instalment; or
(d) the determination of such an estimated class C debit in substitution for an earlier determination.
"(2) An estimated class C debit in relation to a company tax instalment must relate to the refund of that instalment under section 221AZL or 221AZQ.
“(3) The application must:
(a) be made before the termination time; and
(b) be in the approved form; and
(c) specify the amount of the estimated class C debit applied for.
“(4) The Commissioner:
(a) may determine an estimated class C debit not greater than the amount specified in the application; and
SCHEDULE 2—continued
(b) must serve notice of any such determination on the company.
“(5) If:
(a) a company lodges an application with the Commissioner on a particular day (the application day); and
(b) at the end of the 21st day after the application day, the Commissioner has neither:
(i) served notice of an estimated class C debit determination on the company; nor
(ii) refused to make an estimated class C debit determination; the Commissioner is taken, on the 22nd day after the application day, to have:
(c) determined an estimated class C debit in accordance with the application; and
(d) served notice of the determination on the company.
“(6) A notice of an estimated class C debit determination has no effect if it is served after the termination time.”.
80. Subsection 160AQDB(2):
After “For the purposes of this Part,” insert “if the beginning of the reckoning day is before the company’s class C conversion time,”.
81. Subsection 160AQDB(2):
Omit “a company”, substitute “the company”.
82. Section 160AQDB:
Add at the end:
“(3) For the purposes of this Part, if the beginning of the reckoning day is after the company’s class C conversion time, the class B required franking amount for a dividend paid to a shareholder in the company is nil.
“(4) For the purposes of this Part, if the beginning of the reckoning day is after the company’s class C conversion time, the class C required franking amount for a dividend paid to a shareholder in the company is worked out using the formula:
where:
Gross required franking amount means the required franking amount for the dividend.
SCHEDULE 2—continued
Class A required franking amount means the class A required franking amount for the dividend.
“(5) For the purposes of this Part, if the beginning of the reckoning day is before the company’s class C conversion time, the class C required franking amount for a dividend paid to a shareholder in the company is nil.”.
83. Subsection 160AQE(2) (sub-subparagraph (a)(i)(A) of the definition of SD):
Omit “subsection 160ACQB(4) (which deals”, substitute “subsection 160AQCB(4) or (4A) (which deal”.
84. Subsection 160AQE(6):
Add at the end:
“; and (c) the class C franking surplus (if any) of the company as at that time.”.
85. After subsection 160AQF(1AA):
Insert:
“(1AAA) If:
(a) a frankable dividend (the current dividend) is paid to a shareholder in a company; and
(b) the company is a resident at the time of payment; and
(c) if the current dividend is paid under a resolution:
(i) before the reckoning day for the current dividend, the company makes a declaration that each dividend to which the resolution relates is a class C franked dividend to the extent of a percentage (not exceeding 100%) specified in the declaration in relation to the dividend; and
(ii) the percentage so specified is the same for each of the dividends to which the resolution relates; and
(d) if the current dividend is not paid under a resolution—the company makes a declaration before the reckoning day for the current dividend that the current dividend is a class C franked dividend to the extent of a percentage (not exceeding 100%) specified in the declaration;
the current dividend is taken to have been class C franked to the extent of the amount worked out using the formula:
SCHEDULE 2—continued
where:
Current dividend means the amount of the current dividend.
Specified percentage means the percentage specified in the declaration in relation to the dividend.”.
86. Subsection 160AQF(1AAA):
Add at the end:
“Note: Because of subsection 46L(3) and paragraph 46L(4)(a), paragraph (c) of this subsection does not apply to dividends that are taken by subsection 46L(3) or paragraph 46L(4)(a) not to be frankable dividends.”.
87. After subsection 160AQF(1AB):
Insert:
“(1AC) Despite subsections (1) and (1AAA), a dividend is taken not to have been class A franked or class C franked if the sum of:
(a) the class A franked amount of the dividend; and
(b) the class C franked amount of the dividend;
exceeds the amount of the dividend.”.
88. Subparagraph 160AQH(b)(i):
Omit the subparagraph, substitute:
“(i) the class A franked amount of the dividend (if any), the class B franked amount of the dividend (if any) and the class C franked amount of the dividend (if any); and”.
89. Subparagraph 160AQH(b)(ii):
Omit “and the class B franked amount of the dividend”, substitute “(if any), the class B franked amount of the dividend (if any) and the class C franked amount of the dividend (if any)”.
90. After subparagraph 160AQH(b)(iv):
Insert:
“(iva) if the dividend is a class C franked dividend—the amount worked out in relation to the dividend using the formula in subsection 160AQT(1AB) (whether or not that subsection applies to the dividend); and”.
91. Subparagraph 160AQH(b)(v):
Omit “subparagraphs (iii) and (iv)”, substitute “subparagraphs (iii), (iv) and (iva)”.
SCHEDULE 2—continued
92. After subsection 160AQJ(1A):
Insert:
“(1B) If a company has a class C franking deficit at the end of a franking year, the company is liable to pay tax equal to the amount worked out using the formula:
where:
Franking deficit means the amount of the class C franking deficit.
Company tax rate means the applicable general company tax rate.”.
93. Paragraph 160AQJB(1)(a):
Omit “a year of income”, substitute “the 1994-95 year of income”.
94. After section 160AQJB:
Insert in Subdivision BA of Division 5 of Part IIIAA:
Class C deficit deferral tax
“160AQJC.(1) If:
(a) during a franking year (the first franking year) a company pays one or more instalments under section 221AZK for the 1995-96 year of income or a later year of income; and
(b) at a particular time during the next franking year (the second franking year) the company receives a refund of the whole or a part of the instalment, or one or more of the instalments, under section 221AZL or 221AZQ; and
(c) assuming that the refund, together with any previous refund of one or more instalments for the year of income, had been received by the company on the last day of the first franking year, the company would have had a class C franking deficit, or an increased class C franking deficit, at the end of the first franking year;
a class C deficit deferral amount (defined in subsection (2)) arises in relation to the company and the refund.
“(2) The class C deficit deferral amount is the amount of the class C franking deficit, or the amount of the increase in the class C franking deficit, referred to in paragraph (1)(c).
“(3) If a class C deficit deferral amount arises in relation to a company and a refund, the company is liable to pay class C deficit deferral tax in relation to the refund. The amount of the tax is the gross class C deficit
SCHEDULE 2—continued
deferral amount (see subsection (4)) reduced by any class C deficit deferral tax already payable by the company in relation to refunds received in the second franking year.
“(4) The gross class C deficit deferral amount is worked out using the formula:
“(5) If an amount is paid under subsection 221AZR(1) in the same year as the instalment mentioned in that subsection, then, for the purposes of this section, the amount is to be treated as being part of the instalment.”.
95. After subparagraph 160AQK(1)(a)(ii):
Insert:
“(iia) class C franking deficit tax for a franking year; or”.
96. After subparagraph 160AQK(1)(a)(iv):
Insert:
“or (v) class C deficit deferral tax in relation to the refund of one or more instalments paid during a franking year;”.
97. Paragraph 160AQK(1)(c):
After “the class B franking deficit tax,” insert “the class C franking deficit tax,”.
98. Paragraph 160AQK(1)(c):
Omit “and the class B deficit deferral tax”, substitute “, the class B deficit deferral tax and the class C deficit deferral tax”.
99. After subsection 160AQT(1AA):
Insert:
“(1AB) If:
(a) a class C franked dividend is paid in a year of income to a shareholder in a company; and
(b) the shareholder is:
(i) a natural person who is a resident at the time of payment of the dividend; or
(ii) a trustee; or
(iii) a partnership; or
(iv) a registered organisation; and
(c) the dividend is not exempt income of the shareholder; and
SCHEDULE 2—continued
(d) the dividend was not paid as part of a dividend stripping operation; the assessable income of the shareholder of the year of income includes the amount worked out using the formula:
where:
Franked amount means the class C franked amount of the dividend.
Company tax rate means the applicable general company tax rate.”.
100. After subsection 160AQT(1B):
Insert:
“(1C) If:
(a) a class C franked dividend is paid in a year of income to a shareholder in a company; and
(b) the shareholder is a life assurance company; and
(c)the dividend is not exempt income of the shareholder; and
(d) the dividend was not paid as part of a dividend stripping operation; and
(e) the assets of the shareholder from which the dividend was derived were included in insurance funds of the shareholder at any time during the period:
(i) starting at the beginning of the year of income of the shareholder in which the dividend was paid; and
(ii) ending at the time the dividend was paid;
the assessable income of the shareholder of the year of income includes the amount worked out using the formula:
where:
Franked amount means the class C franked amount of the dividend.
Company tax rate means the applicable general company tax rate.”.
101. Paragraph 160AQX(c):
Omit “is either or both”, substitute “are one or more”.
102. Paragraph 160AQX(c):
Add at the end:
“(iii) a class C flow-on franking amount in relation to the trust amount;”.
SCHEDULE 2—continued
103. After paragraph 160AQX(e):
Insert:
“(ea) if only subparagraph (c)(iii) applies—the class C potential rebate amount in relation to the trust amount;”.
104. Paragraph 160AQX(f):
Omit “both”.
105. Section 160AQX:
Add at the end:
“; (g) if subparagraphs (c)(i) and (iii) apply—the sum of:
(i) the class A potential rebate amount in relation to the trust amount; and
(ii) the class C potential rebate amount in relation to the trust amount;
(h) if subparagraphs (c)(ii) and (iii) apply—the sum of:
(i) the class B potential rebate amount in relation to the trust amount; and
(ii) the class C potential rebate amount in relation to the trust amount;
(i) if subparagraphs (c)(i), (ii) and (iii) apply—the sum of:
(i) the class A potential rebate amount in relation to the trust amount; and
(ii) the class B potential rebate amount in relation to the trust amount; and
(iii) the class C potential rebate amount in relation to the trust amount.”.
106. Paragraph 160AQY(b):
Omit “is either or both”, substitute “are one or more”.
107. Paragraph 160AQY(b):
Add at the end:
“(iii) a class C flow-on franking amount in relation to the trust amount;”.
108. After paragraph 160AQY(d):
Insert:
“(da) if only subparagraph (b)(iii) applies—the class C potential rebate amount in relation to the trust amount;”.
SCHEDULE 2—continued
109. Paragraph 160AQY(e):
Omit “both”.
110. Section 160AQY:
Add at the end:
“; (f) if subparagraphs (b)(i) and (iii) apply—the sum of:
(i) the class A potential rebate amount in relation to the trust amount; and
(ii) the class C potential rebate amount in relation to the trust amount;
(g) if subparagraphs (b)(ii) and (iii) apply—the sum of:
(i) the class B potential rebate amount in relation to the trust amount; and
(ii) the class C potential rebate amount in relation to the trust amount;
(h) if subparagraphs (b)(i), (ii) and (iii) apply—the sum of:
(i) the class A potential rebate amount in relation to the trust amount; and
(ii) the class B potential rebate amount in relation to the trust amount; and
(iii) the class C potential rebate amount in relation to the trust amount.”.
111. Paragraph 160AQYA(l)(c):
Omit “is either or both”, substitute “are one or more”.
112. Paragraph 160AQYA(l)(c):
Add at the end:
“(iii) a class C flow-on franking amount in relation to the trust amount;”.
113. After paragraph 160AQYA(1)(e):
Insert:
“(ea) if only subparagraph (c)(iii) applies—the class C potential rebate amount in relation to the trust amount;”.
114. Paragraph 160AQYA(1)(f):
Omit “both”.
SCHEDULE 2—continued
115. Subsection 160AQYA(1):
Add at the end:
“;(g) if subparagraphs (c)(i) and (iii) apply—the sum of:
(i) the class A potential rebate amount in relation to the trust amount; and
(ii) the class C potential rebate amount in relation to the trust amount;
(h) if subparagraphs (c)(ii) and (iii) apply—the sum of:
(i) the class B potential rebate amount in relation to the trust amount; and
(ii) the class C potential rebate amount in relation to the trust amount;
(i) if subparagraphs (c)(i), (ii) and (iii) apply—the sum of:
(i) the class A potential rebate amount in relation to the trust amount; and
(ii) the class B potential rebate amount in relation to the trust amount; and
(iii) the class C potential rebate amount in relation to the trust amount.”.
116. Paragraph 160AQYA(2)(c):
Omit “is either or both”, substitute “are one or more”.
117. Paragraph 160AQYA(2)(c):
Add at the end:
“(iii) a class C flow-on franking amount in relation to the partnership amount;”.
118. After paragraph 160AQYA(2)(e):
Insert:
“(ea) if only subparagraph (c)(iii) applies—the class C potential rebate amount in relation to the partnership amount;”.
119. Paragraph 160AQYA(2)(f):
Omit “both”.
120. Subsection 160AQYA(2):
Add at the end:
“; (g) if subparagraphs (c)(i) and (iii) apply—the sum of:
(i) the class A potential rebate amount in relation to the partnership amount; and
SCHEDULE 2—continued
(ii) the class C potential rebate amount in relation to the partnership amount;
(h) if subparagraphs (c)(ii) and (iii) apply—the sum of:
(i) the class B potential rebate amount in relation to the partnership amount; and
(ii) the class C potential rebate amount in relation to the partnership amount;
(i) if subparagraphs (c)(i), (ii) and (iii) apply—the sum of:
(i) the class A potential rebate amount in relation to the partnership amount; and
(ii) the class B potential rebate amount in relation to the partnership amount; and
(iii) the class C potential rebate amount in relation to the partnership amount.”.
121. Paragraph 160AQZ(c):
Omit “is either or both”, substitute “are one or more”.
122. Paragraph 160AQZ(c):
Add at the end:
“(iii) a class C flow-on franking amount in relation to the partnership amount;”.
123. After paragraph 160AQZ(e):
Insert:
“(ea) if only subparagraph (c)(iii) applies—the class C potential rebate amount in relation to the partnership amount;”.
124. Paragraph 160AQZ(f):
Omit “both”.
125. Section 160AQZ:
Add at the end:
“; (g) if subparagraphs (c)(i) and (iii) apply—the sum of:
(i) the class A potential rebate amount in relation to the partnership amount; and
(ii) the class C potential rebate amount in relation to the partnership amount;
(h) if subparagraphs (c)(ii) and (iii) apply—the sum of:
(i) the class B potential rebate amount in relation to the partnership amount; and
SCHEDULE 2—continued
(ii) the class C potential rebate amount in relation to the partnership amount;
(i) if subparagraphs (c)(i), (ii) and (iii) apply—the sum of:
(i) the class A potential rebate amount in relation to the partnership amount; and
(ii) the class B potential rebate amount in relation to the partnership amount; and
(iii) the class C potential rebate amount in relation to the partnership amount.”.
126. Section 160AQZA:
Repeal the section, substitute:
Franking rebate for certain life assurance companies
“160AQZA.(1) If:
(a) a class A franking credit of a taxpayer arises or, but for section 160APKA would arise, under subsection 160APQ(1) in respect of:
(i) a trust amount or partnership amount that is included in; or
(ii) a partnership amount that is allowed as a deduction from; the assessable income of the taxpayer of a year of income; and
(b) subsection 160APQ(3) applies or, but for section 160APKA, it would apply;
the taxpayer is entitled to a rebate of tax in the taxpayer’s assessment in respect of income of the year of income of an amount equal to the class A potential rebate amount in relation to the trust amount or partnership amount.
“(2) If:
(a) a class B franking credit of a taxpayer arises or, but for section 160APKA would arise, under subsection 160APQ(1A) in respect of:
(i) a trust amount or partnership amount that is included in; or
(ii) a partnership amount that is allowed as a deduction from;
the assessable income of the taxpayer of a year of income; and
(b) subsection 160APQ(3) applies or, but for section 160APKA, it would apply;
the taxpayer is entitled to a rebate of tax in the taxpayer’s assessment in respect of income of the year of income of an amount equal to the class B potential rebate amount in relation to the trust amount or partnership amount.
SCHEDULE 2—continued
“(3) If:
(a) a class C franking credit of a taxpayer arises or, but for section 160APKA would arise, under subsection 160APQ(2) in respect of:
(i) a trust amount or partnership amount that is included in; or
(ii) a partnership amount that is allowed as a deduction from; the assessable income of the taxpayer of a year of income; and
(b) subsection 160APQ(3) applies or, but for section 160APKA, it would apply;
the taxpayer is entitled to a rebate of tax in the taxpayer’s assessment in respect of income of the year of income of an amount equal to the class C potential rebate amount in relation to the trust amount or partnership amount.”.
127. After paragraph 160AR(1)(b):
Insert:
“and (c) subsection 160APQ(3) does not apply;”.
128. After paragraph 160AR(1A)(b):
Insert:
“and (c) subsection 160APQ(3) does not apply;”.
129. After subsection 160AR(1A):
Insert:
“(1B) If:
(a) a trust amount is included in the assessable income of a company of a year of income; and
(b) a class C franking credit arises under section 160APQ in relation to the trust amount; and
(c) subsection 160APQ(3) does not apply;
an amount equal to so much of the class C potential rebate amount in relation to the trust amount as does not exceed the trust amount is allowable as a deduction from the assessable income of the company of the year of income.”.
130. After paragraph 160AR(2)(b):
Insert:
“and (c) subsection 160APQ(3) does not apply;”.
131. After paragraph 160AR(3)(b):
Insert:
“and (c) subsection 160APQ(3) does not apply;”.
SCHEDULE 2—continued
132. Section 160AR:
Add at the end:
“(4) If:
(a) a partnership amount is included in, or allowable as a deduction from, the assessable income of a company of a year of income; and
(b) a class C franking credit arises under section 160APQ in relation to the partnership amount; and
(c) subsection 160APQ(3) does not apply;
the class C potential rebate amount in relation to the partnership amount is allowable as a deduction from the assessable income of the company of the year of income.”.
133. Paragraph 160ARA(e):
Omit the paragraph, substitute:
“(e) the amount that would be the potential rebate amount in relation to the trust amount if section 128D did not apply.”.
134. Section 160ARB:
Omit “sum of the class A potential rebate amount and the class B potential amount”, substitute “potential rebate amount”.
135. Section 160ARC:
Add at the end:
“(3) If:
(a) a trustee is liable to be assessed under subsection 98(3) on a trust amount; and
(b) there is a class C flow-on franking amount in relation to the trust amount;
the trust amount is to be reduced by so much of the class C potential rebate amount in relation to the trust amount as does not exceed the trust amount.”.
136. Section 160ARD:
Omit “sum of the class A potential rebate amount and the class B potential amount”, substitute “potential rebate amount”.
137. Section 160AREA:
Omit “or a class B deficit deferral amount (see subsection 160AQJB(2))”, substitute “, a class B deficit deferral amount (see subsection 160AQJB(2)) or a class C deficit deferral amount (see subsection 160AQJC(2))”.
SCHEDULE 2—continued
138 Section 160ARH:
Add at the end:
“(3) If:
(a) at a particular time (the return time), a return (the first return) under this Part in relation to a company in relation to a franking year is lodged; and
(b) before the return time, no return has been lodged, and no class C franking account assessment has been made, in relation to the company in relation to the franking year;
the following provisions have effect:
(c) the Commissioner is taken at the return time to have made an assessment (the deemed assessment) of:
(i) the class C franking account balance of the company for the franking year; and
(ii) any class C franking deficit tax payable by the company for the franking year;
being those respective amounts as specified in the first return;
(d) the first return is taken to be a notice of the deemed assessment and to be signed by the Commissioner;
(e) the notice referred to in paragraph (d) is taken to have been served on the company at the return time.”.
139. After subsection 160ARJ(1A):
Insert:
“(1B) The Commissioner may at any time make an assessment of the class C franking account balance of a company at a particular time during a franking year and, if the company has a class C franking deficit at that time, of the class C franking deficit tax payable by the company.”.
140. Subsection 160ARJ(2):
Omit “subsection (1) or (1A)”, substitute “subsection (1), (1A) or (1B)”.
141. After subsection 160ARK(2):
Insert:
“(2A) If a company has not lodged a return in respect of a franking year, the Commissioner may make an assessment of:
(a) the class C franking account balance of the company at the end of the franking year; and
SCHEDULE 2—continued
(b) any class C franking deficit tax payable by the company for the franking year.”.
142. Subparagraphs 160ARN(10)(a)(i) and (ii):
Omit the subparagraphs, substitute:
“(i) increasing a class A franking surplus, a class B franking surplus or a class C franking surplus (including an increase from a nil class A franking account balance, a nil class B franking account balance or a nil class C franking account balance);
(ii) reducing a class A franking deficit, a class B franking deficit or a class C franking deficit (including a reduction resulting in a nil class A franking account balance, a nil class B franking account balance or a nil class C franking account balance) and the franking deficit tax payable in respect of the franking deficit;”.
143. Subparagraphs 160ARN(10)(b)(i) and (ii):
Omit the subparagraphs, substitute:
“(i) reducing a class A franking surplus, a class B franking surplus or a class C franking surplus (including a reduction resulting in a nil class A franking account balance, a nil class B franking account balance or a nil class C franking account balance);
(ii) increasing a class A franking deficit, a class B franking deficit or a class C franking deficit (including an increase from a nil class A franking account balance, a nil class B franking account balance or a nil class C franking account balance) and the franking deficit tax payable in respect of the franking deficit; and”.
144. Subsection 160ARXA(1) (definition of deficit deferral tax shortfall):
Omit “or class B deficit deferral tax shortfall;”, substitute “, class B deficit deferral tax shortfall or class C deficit deferral tax shortfall.”.
145. Subsection 160ARXA(1) (subparagraph (a)(ii) of the definition of franking tax shortfall):
Omit “; and”, substitute “; or”.
146. Subsection 160ARXA(1) (paragraph (a) of the definition of franking tax shortfall):
Add at the end:
“(iii) the class C franking tax shortfall in relation to the company and the franking year; and”.
SCHEDULE 2—continued
147. Subsection 160ARXA(1) (paragraph (b) of the definition of franking tax shortfall):
Add at the end:
“or (iii) the class C deficit deferral tax shortfall in relation to the company and the refund.”.
148. Subsection 160ARXA(1) (definition of statement deficit deferral tax):
Omit “or class B statement deficit deferral tax;”, substitute “, class B statement deficit deferral tax or class C statement deficit deferral tax.”.
149. Subsection 160ARXA(1) (definition of statement franking tax):
Add at the end:
“or (c) the class C statement franking tax in relation to the company, the franking year and the time.”.
150. Subsection 160ARXA(1):
Insert the following definitions:
‘‘ class C deficit deferral tax shortfall, in relation to a company and a refund, means any amount by which the company’s class C statement deficit deferral tax for that refund at the time at which it was lowest is less than the company’s class C proper deficit deferral tax for that refund.
class C franking tax shortfall, in relation to a company and a franking year, means the amount (if any) by which the company’s class C statement franking tax for that year at the time at which it was lowest is less than the company’s class C proper franking tax for that year.
class C proper deficit deferral tax, in relation to a company and a refund, means the class C deficit deferral tax properly payable by the company in relation to the refund.
class C proper franking tax, in relation to a company and a franking year, means the class C franking deficit tax properly payable by the company in respect of that year.
class C statement deficit deferral tax, in relation to a company, a refund and a time, means the class C deficit deferral tax that would have been payable by the company in relation to the refund if the tax were assessed at that time taking into account taxation statements by the company.
class C statement franking tax, in relation to a company, a franking year and a time, means the class C franking deficit tax that would have been payable by the company in respect of that year if the tax were assessed at that time taking into account taxation statements by the company.”.
SCHEDULE 2—continued
151. Section 160ARX:
Add at the end:
“(3) If:
(a) the class C franking deficit of a company at the end of a franking year is more than 10% of the total of the class C franking credits arising during the franking year; and
(b) the class C franked amount of a dividend paid during the franking year to a shareholder in the company exceeded the class C required franking amount for that dividend;
the company is liable to pay, by way of penalty, additional tax equal to 30% of the class C franking deficit tax that is payable by the company for the franking year.”.
152. After section 160ARYB:
Insert:
Class C deficit deferral tax—penalty
“160ARYC. A company is liable to pay, by way of penalty, additional tax equal to 30% of the class C deficit deferral tax that is payable by the company in relation to a refund if the class C deficit deferral amount that arises under subsection 160AQJC(2) in relation to the refund is greater than the amount worked out using the formula:
”,
153. Subsection 160ARZ(1):
Add at the end:
“; and (c) the class C franking deficit tax (if any) payable by the company for the franking year.”.
154. After sub-subparagraph 160ARZD(1)(c)(ii)(B):
Insert:
“(BA) if the shortfall is a class C franking tax shortfall—the class C franking deficit tax that would have been payable by the company for that year if the tax were assessed on the basis of the company’s return under subsection 160ARE(1) or 160ARF(1) in relation to that year;”.
155. Sub-subparagraph 160ARZD(1)(c)(ii)(D):
Omit “and”.
SCHEDULE 2—continued
156. Subparagraph 160ARZD(1)(c)(ii):
Add at the end:
“(E) if the shortfall is a class C deficit deferral tax shortfall—the class C deficit deferral tax that would have been payable by the company in relation to that refund if the tax were assessed on the basis of the company’s return under section 160AREA in relation to that refund; and”.
157. Paragraph 160ASC(b):
Omit “or the class B franking account balance”, substitute “, the class B franking account balance or the class C franking account balance”.
158. After Division 12 of Part IIIAA:
Insert:
“Division 13—Transitional provisions arising from the introduction of class C franking credits and class C franking debits
Class C conversion time of a company
“160ASF.(1) The class C conversion time of a company is the earliest of the following times:
(a) the time when the first class C franking credit of the company arises;
(b) the time immediately before the end of the 1995-96 franking year of the company;
(c) the nominated class C conversion time (see subsection (2)).
“(2) A company may, at any time before the earlier of the times mentioned in paragraphs (1)(a) and (b), make an irrevocable written election that that time, or a time that is after that time, is that company’s nominated class C conversion time.
Conversion of class A franking account balance to class C franking account balance
Conversion of class A franking surplus
“160ASG.(1) If, at a company’s class C conversion time:
(a) the company is not a life assurance company; and
(b) the company has a class A franking surplus;
then, immediately after the company’s class C conversion time:
(c) a class A franking debit of the company arises equal to that class A franking surplus; and
(d) a class C franking credit of the company also arises that is worked out using the formula:
SCHEDULE 2—continued
Conversion of class A franking deficit
“(2) If, at a company’s class C conversion time:
(a) the company is not a life assurance company; and
(b) the company has a class A franking deficit;
then, immediately after the company’s class C conversion time:
(c) a class A franking credit of the company arises equal to that class A franking deficit; and
(d) a class C franking debit of the company also arises that is worked out using the formula:
Conversion of class B franking account balance to class C franking account balance
Conversion of class B franking surplus
“ 160ASH.(1) If a company has a class B franking surplus at the class C conversion time then, immediately after that time:
(a) a class B franking debit of the company arises equal to that class B franking surplus; and
(b) a class C franking credit of the company also arises that is worked out using the formula:
Conversion of class B franking deficit
“(2) If a company has a class B franking deficit at the class C conversion time then, immediately after that time:
(a) a class B franking credit of the company arises equal to that class B franking deficit; and
(b) a class C franking debit of the company also arises that is worked out using the formula:
Changes to franking account balances after a company’s class C conversion time
Class A franking credit arising after class C conversion time
“160ASI.(1) If, at a particular time after a company’s class C conversion time:
(a) the company is not a life assurance company; and
(b) a class A franking credit of the company arises under this Part (apart from under this section, subsection 160ASG(2), subsection 160ASJ(2) or subsection 160ASK(1));
SCHEDULE 2—continued
then, at that time:
(c) a class A franking debit arises equal to the amount of the class A franking credit; and
(d) a class C franking credit also arises equal to the amount worked out using the formula:
Class A franking debit arising after class C conversion time
“(2) If, at a particular time after a company’s class C conversion time:
(a) the company is not a life assurance company; and
(b) a class A franking debit of the company arises under this Part (apart from under this section, subsection 160AQB(1), subsection 160ASG(1), subsection 160ASJ(1) or subsection 160ASK(1));
then, at that time:
(c) a class A franking credit arises equal to the amount of the class A franking debit; and
(d) a class C franking debit also arises equal to the amount worked out using the formula:
Class B franking credit arising after class C conversion time
“(3) If, at a particular time after a company’s class C conversion time, a class B franking credit of a company arises under this Part (apart from under this section, subsection 160ASH(2) or subsection 160ASK(2)):
(a) a class B franking debit arises at that time equal to the amount of the class B franking credit; and
(b) a class C franking credit also arises at that time equal to the amount worked out using the formula:
Class B franking debit arising after class C conversion time under provisions other than subsection 160AQB(2)
“(4) If, at a particular time after a company’s class C conversion time, a class B franking debit of a company arises under this Part (apart from under this section, subsection 160AQB(2), subsection 160ASH(1) or subsection 160ASK(2)):
(a) a class B franking credit arises at that time equal to the amount of the class B franking debit; and
SCHEDULE 2—continued
(b) a class C franking debit also arises at that time equal to the amount worked out using the formula:
Note: Subsection (5) deals with class B debits arising from the payment of class B franked dividends.
Class B franking debit arising under subsection 160AQB(2) after class C conversion time
“(5) If, at a particular time after the company’s class C conversion time, a class B franking debit of a company arises under subsection 160AQB(2) (and subsection 160ASK(2) does not apply), a class B franking credit and a class C franking debit of the company each equal to the amount of the class B franking debit arise at that time.
Provisions relating to companies that cease to be life assurance companies
Conversion of class A franking surplus
“160ASJ.(1) If:
(a) a company is a life assurance company at the company’s class C conversion time; and
(b) at a particular time (the transition time) after the company’s class C conversion time, the company ceases to be a life assurance company (other than by ceasing to be a company); and
(c) at the transition time the company has a class A franking surplus; then, immediately after the transition time:
(d) a class A franking debit of the company equal to that class A franking surplus arises; and
(e) a class C franking credit of the company also arises that is worked out using the formula:
Conversion of class A franking deficit
“(2) If:
(a) a company is a life assurance company at the company’s class C conversion time; and
(b) at a particular time (the transition time) after the company’s class C conversion time, the company ceases to be a life assurance company (other than by ceasing to be a company); and
(c) at the transition time the company has a class A franking deficit;
SCHEDULE 2—continued
then, immediately after the transition time:
(d) a class A franking credit of the company arises equal to that class A franking deficit; and
(e) a class C franking debit of the company also arises that is worked out using the formula:
Provisions relating to companies with class A or class B required franking amounts
Class A required franking amounts
“160ASK.(1) If:
(a) a company, other than a life assurance company, pays a dividend at a particular time after the class C conversion time of the company; and
(b) the beginning of the reckoning day for the dividend is before the class C conversion time for the company; and
(c) a class A franking debit arises from the payment of the dividend;
then, at that time:
(d) a class A franking credit arises equal to the amount of the class A franking debit; and
(e) a class C franking debit also arises that is worked out using the formula:
Class B required franking amounts
“(2) If:
(a) a company pays a dividend at a particular time after the class C conversion time of the company; and
(b) the beginning of the reckoning day for the dividend is before the class C conversion time for the company; and
(c) a class B franking debit arises from the payment of the dividend;
then, at that time:
(d) a class B franking credit arises equal to the amount of the class B franking debit; and
(e) a class C franking debit also arises that is worked out using the formula:
SCHEDULE 2—continued
Required franking amounts in certain cases covered by subsection 160AQE(2)
When section applies
“160ASL.(1) This section applies in relation to a dividend paid by a company to a shareholder if:
(a) the beginning of the reckoning day for the dividend is after the company’s class C conversion time; and
(b) the dividend is the current dividend under subsection 160AQE(2); and
(c) the beginning of the reckoning day for the earlier dividend mentioned in that subsection is before the company’s class C conversion time.
Effect on required franking amount—companies other than life assurance companies
“(2) If the company is not a life assurance company at the beginning of the reckoning day for the current dividend then, for the purposes of the definition of RFS in subsection 160AQE(2):
(a) the amount that will be the franked amount in relation to the earlier dividend is taken to be the amount worked out using the formula:
(b) the required franking amount in relation to the earlier dividend is taken to be the amount worked out using the formula:
Effect on required franking amount—life assurance companies
“(3) If the company is a life assurance company at the beginning of the reckoning day for the current dividend then, for the purposes of the definition of RFS in subsection 160AQE(2):
SCHEDULE 2—continued
(a) the amount that will be the franked amount in relation to the earlier dividend is taken to be the amount worked out using the formula:
(b) the required franking amount in relation to the earlier dividend is taken to be the amount worked out using the formula:
Required franking amounts in certain cases covered by subsection 160AQE(3)
When section applies
“160ASM.(1) This section applies in relation to a dividend paid by a company to a shareholder if:
(a) the beginning of the reckoning day for the dividend is after the company’s class C conversion time; and
(b) the dividend is the current dividend under subsection 160AQE(3); and
(c) the beginning of the earlier reckoning day mentioned in that subsection is before the company’s class C conversion time.
Effect on required franking amount—companies other than life assurance companies
“(2) If the company is not a life assurance company at the beginning of the reckoning day for the current dividend then, for the purposes of the definition of EFA in subsection 160AQE(3), the amount that is the franked amount in relation to the earlier franked dividend is taken to be the amount worked out using the formula:
SCHEDULE 2—continued
Effect on required franking amount—life assurance companies
“(3) If the company is a life assurance company at the beginning of the reckoning day for the current dividend then, for the purposes of the definition of EFA in subsection 160AQE(3), the amount that is the franked amount in relation to the earlier dividend is taken to be the amount worked out using the formula:
Variation of certain declarations under section 160AQF
“160ASN.(1) A declaration that is made before a company’s class C conversion time in relation to a dividend, or dividends, paid by the company where the beginning of the reckoning day for at least one of the dividends is after that time may, despite subsection 160AQF(2), be varied, before the reckoning day, to take account of the introduction of class C franking credits and debits.
“(2) If:
(a) a company pays more than one dividend under a resolution; and
(b) the beginning of the reckoning day for at least one of the dividends is before the class C conversion time for the company; and
(c) the beginning of the reckoning day for at least one of the dividends is after the class C conversion time for the company; and
(d) the franked amount of each of the dividends covered by paragraph is substantially similar (taking into account the different classes of franking credits) to the franked amount of each of the dividends covered by paragraph (c);
the company is taken, for the purposes of subparagraphs 160AQF(1)(c)(ii), (1AA)(c)(ii) and (1AAA)(c)(ii) to have specified the same percentage for each of the dividends to which the resolution relates.”.
159. Transitional
Liability to franking deficit tax
(1) A company is taken to be liable to pay tax under subsection 160AQJ(1) of the Income Tax Assessment Act 1936 in respect of its 1995-96 franking year if:
(a) at the company’s class C conversion time the company is not a life assurance company; and
SCHEDULE 2—continued
(b) at the company’s class C conversion time the company has a class A franking deficit; and
(c) the company would, on the assumption that the amendments made by this Schedule did not apply in respect of the company for its 1995-96 franking year, have been liable to pay tax under subsection 160AQJ(1) of the Income Tax Assessment Act 1936.
(2) If a company is taken to be liable to pay tax as a result of the application of subsection (1), a class C franking credit of the company arises at the end of the company’s 1995-96 franking year worked out using the formula:
Liability to penalty for over-franking
(3) A company is taken to be liable to pay tax under subsection 160ARX(1) of the Income Tax Assessment Act 1936 in respect of its 1995-96 franking year if:
(a) at the company’s class C conversion time the company is not a life assurance company; and
(b) at the company’s class C conversion time the company has a class A franking deficit; and
(c) the company would, on the assumption that the amendments made by this Schedule did not apply in respect of the company for its 1995-96 franking year, have been liable to pay tax under subsection 160ARX(1) of the Income Tax Assessment Act 1936.
160. Application
(1) The amendments made by item 15 apply to basic amounts that are attributable to payments of tax that become payable as a result of assessments issued after 7.30 p.m. by legal time in the Australian Capital Territory on 9 May 1995.
(2) The amendment made by item 126 applies in relation to:
(a) dividends paid to a shareholder in a company during the company’s 1993-94 franking year or an earlier franking year as if subsections 160AQZA(2) and (3) of the Income Tax Assessment Act 1936 were omitted and all references to class A (wherever occurring) were omitted from subsection (1) of that section; and
(b) dividends paid to a shareholder in a company during the company’s 1994-95 franking year as if subsection 160AQZA(3) of the Income Tax Assessment Act 1936 were omitted; and
(c) dividends paid to a shareholder in a company during the company’s 1995-96 franking year or a later franking year.
SCHEDULE 2—continued
(3) Subject to subitem (5), the amendments made by items 127 and 130 apply in relation to a trust amount or partnership amount received during the first franking year of the company that commences after 6 December 1990 and each later franking year.
(4) Subject to subitem (5), the amendments made by items 128 and 131 apply in relation to a trust amount or partnership amount received during the company’s 1994-95 franking year and each later franking year.
(5) If in relation to a year of income which commenced after 6 December 1990:
(a) a company furnished a return of income, or applied to have an assessment amended, before 28 September 1995; and
(b) the return or application (as the case may be) includes a claim for a deduction under section 160AR in relation to a trust amount or partnership amount to which subsection 160APQ(3) applies;
then the amendments made by items 127, 128, 130 and 131 do not apply in relation to any trust amount or partnership amount received by the company before 28 September 1995 and to which subsection 160APQ(3) applies
———————
SCHEDULE 3 Section 3
AMENDMENTS OF THE INCOME TAX ASSESSMENT ACT 1936 RELATING TO DEMUTUALISATION OF INSURANCE COMPANIES AND AFFILIATES
1. After Division 9 of Part III:
Insert the following Division:
“Division 9AA—Demutualisation1 of insurance companies and affiliates
“Subdivision A—What this Division is about
What this Division is about
“121AA.
Basically, if an insurance company demutualises and its policyholders or members dispose of their listed shares in the company, for tax purposes the acquisition cost of the shares is based on the lesser of: |
(a) the embedded value or net tangible asset value of the company; and |
(b) the value of the company based on the total first trading day price of all shares in the company. |
Other tax consequences result from disposals of other interests and from other events in connection with the demutualisation. |
“Subdivision B—Key concepts and related definitions
Insurance company definitions
“121 AB.(l) A mutual insurance company is an insurance company:
(a) whose profits are divisible only among its policyholders; or
(b) that satisfies all of the following conditions:
(i) it is limited by guarantee;
(ii) it did not divide its profits among its members during the 10 years ending on 9 May 1995;
(iii) on a winding-up, its profits are not divisible among its members.
“(2) An insurance company is a life insurance company or a general insurance company.
“(3) A life insurance company is a company registered under the Life Insurance Act 1995.
SCHEDULE 3—continued
“(4) A general insurance company is a company whose sole or principal business is insurance business within the meaning of subsection 3(1) of the Insurance Act 1973, but does not include a life insurance company.
Mutual affiliate company
“121AC. A mutual affiliate company is a company that satisfies the following conditions:
(a) it is limited by guarantee;
(b) it is not an insurance company;
(c) at least 75% of the policyholders of a mutual insurance company are members of it;
(d) it did not divide its profits among its members during the 10 years ending on 9 May 1995;
(e) on a winding-up, its profits are not divisible among its members in their capacity as such.
Demutualisation and demutualisation resolution day
“121AD.(l) A mutual insurance company demutualises if it ceases to be a mutual insurance company:
(a) in any case—other than by ceasing to be an insurance company; or
(b) if it is a life insurance company—because the whole of its life insurance business is transferred to another company under a scheme confirmed by the Federal Court of Australia.
“(2) A mutual affiliate company demutualises if it ceases to be a mutual affiliate company other than by ceasing to be a company.
“(3) The demutualisation resolution day, in relation to the demutualisation of a company, is:
(a) if paragraph (b) does not apply—the day on which the resolution to proceed with the demutualisation is passed; or
(b) if paragraph (l)(b) applies to the demutualisation—the day on which the transfer of the whole of the company’s life insurance business takes place.
Demutualisation methods, the policyholder/member group and the listing period
Demutualisation methods 1 to 6
“121AE.(1) There are 6 methods by which the demutualisation of a mutual insurance company, where a mutual affiliate company is not also
SCHEDULE 3—continued
demutualised, may be implemented that are relevant for the purposes of this Division. They are described in sections 121AF to 121AK as demutualisation methods 1 to 6.
Demutualisation method 7
“(2) There is one method by which the demutualisation of both a mutual insurance company and a mutual affiliate company may be implemented that is relevant for the purposes of this Division. It is described in section 121AL as demutualisation method 7.
Demutualisation methods
“(3) Each of the methods described in sections 121AF to 121AL is a demutualisation method.
Policyholder/member group
“(4) The policyholder/member group, in relation to the demutualisation of a mutual insurance company under any of demutualisation methods 1 to 6, consists of the following persons:
(a) in the case of a mutual insurance company covered by paragraph 121AB(1)(a)—policyholders (other than trustees covered by paragraph (d) or (e)) in the company immediately before the demutualisation;
(b) in the case of any other mutual insurance company—members (other than trustees covered by paragraph (d) or (e)) of the company immediately before the demutualisation;
(c) in any case—any of the following who, in connection with the demutualisation, are entitled to the same rights to shares or the proceeds of the sale of shares as the policyholders (in a paragraph (a) case) or the members (in a paragraph (b) case):
(i) employees of the company or a wholly-owned subsidiary of the company;
(ii) persons who ceased to be such policyholders or members before the demutualisation;
(iii) charities;
(iv) persons who are entitled to the rights because of the death of the policyholders or members;
(d) in any case—each person who satisfies the following requirements:
(i) the person is a member of a regulated superannuation fund (as defined by section 19 of the Superannuation Industry (Supervision) Act 1993), other than a standard employer-sponsored member (as defined by subsection 16(5) of that Act);
SCHEDULE 3—continued
(ii) the trustee of the fund holds a policy or policies in the mutual insurance company;
(iii) the trustee of the fund is a company that is a wholly-owned subsidiary of the mutual insurance company;
(iv) the person’s benefits in the fund consist solely of the proceeds of the policy or policies;
(v) in connection with the demutualisation, the person, rather than the trustee, has the right to shares or the proceeds of the sale of shares in respect of the policy or policies held by the trustee;
(e) in any case—each person who satisfies the following requirements:
(i) the person is the member of a single-member superannuation fund;
(ii) the trustee of the fund holds a policy or policies in the mutual insurance company;
(iii) in connection with the demutualisation, the person, rather than the trustee, has the right to shares or the proceeds of the sale of shares in respect of the policy or policies held by the trustee.
“(5) The policyholder/member group, in relation to the demutualisation of a mutual insurance company and a mutual affiliate company under demutualisation method 7, consists of the following persons:
(a) if the mutual insurance company is covered by paragraph 121AB(1)(a)—policyholders (other than trustees covered by paragraph (e) or (f)) in the mutual insurance company immediately before the demutualisation;
(b) in the case of any other mutual insurance company—members (other than trustees covered by paragraph (e) or (f)) of the company immediately before the demutualisation;
(c) members (other than trustees covered by paragraph (e) or (f)) of the mutual affiliate company immediately before the demutualisation;
(d) any of the following who, in connection with the demutualisation, are entitled to the same rights to shares or the proceeds of the sale of shares as the members:
(i) employees of the mutual insurance company, the mutual affiliate company or a wholly-owned subsidiary of either company;
(ii) persons who ceased to be such members before the demutualisation;
(iii) charities;
SCHEDULE 3—continued
(iv) persons who are entitled to the rights because of the death of members;
(e) in any case—each person who satisfies the following requirements:
(i) the person is a member of a regulated superannuation fund (as defined by section 19 of the Superannuation Industry (Supervision) Act 1993), other than a standard employer-sponsored member (as defined by subsection 16(5) of that Act);
(ii) the trustee of the fund holds a policy or policies in the mutual insurance company;
(iii) the trustee of the fund is a company that is a wholly-owned subsidiary of the mutual insurance company;
(iv) the person’s benefits in the fund consist of the proceeds of the policy or policies;
(v) in connection with the demutualisation, the person, rather than the trustee, has the right to shares or the proceeds of the sale of shares in respect of the policy or policies held by the trustee;
(f) in any case—each person who satisfies the following requirements:
(i) the person is the member of a single-member superannuation fund;
(ii) the trustee of the fund holds a policy or policies in the mutual insurance company;
(iii) in connection with the demutualisation, the person, rather than the trustee, has the right to shares or the proceeds of the sale of shares in respect of the policy or policies held by the trustee.
“(6) The listing period is the period ending 2 years after the demutualisation resolution day, or at such later time as the Commissioner, before the end of the 2 years, allows.
Replacement of policyholders by persons exercising certain rights
“121AEA. If, as a result of the exercise of any power under the articles of association of an insurance company, persons are entitled to exercise rights in place of policyholders, then, to the extent that the Commissioner considers it appropriate, the persons are treated for the purposes of this Division as replacing the policyholders.
Demutualisation method 1
“121AF.(1) Under demutualisation method 1, in connection with the implementation of the demutualisation:
(a) all membership rights in the mutual insurance company are extinguished; and
SCHEDULE 3—continued
(b) shares (the ordinary shares) of only one class in the mutual insurance company are issued to each person in the policyholder/member group; and
(c) the ordinary shares are listed within the listing period.
Note: Other things may also happen in connection with the implementation of the demutualisation.
“(2) The following diagram shows, where this demutualisation method is used, the issue of the shares to the policyholder/member group
SCHEDULE 3—continued
Demutualisation method 1
Mutual insurance company |
|
Ordinary shares |
|
Policyholder/member group |
SCHEDULE 3—continued
1. Subsection 170(10):
Omit “or 105AB”, substitute “, 105AB or 121AT”.
2. Application
The amendments made by this Schedule apply to mutual insurance companies and mutual affiliate companies that existed at 7.30 p.m., by legal time in the Australian Capital Territory, on 9 May 1995.
———————
SCHEDULE 4 Section 3
VARIOUS AMENDMENTS OF THE INCOME TAX ASSESSMENT ACT 1936
PART 1—ESTABLISHMENT COSTS OF HORTICULTURAL PLANTS
1. After section 124ZZD:
Insert:
“Division 10F—Deduction for capital expenditure incurred in establishing horticultural plants
“Subdivision A—Simplified outline
Simplified outline
“124ZZE. The following is a simplified outline of this Division:
SCHEDULE 4—continued
● A taxpayer can get a deduction for capital expenditure (establishment expenditure) incurred in establishing a horticultural plant, so long as: (a) the taxpayer owns the plant; and (b) the taxpayer uses the plant for the purpose of producing assessable income; and (c) the taxpayer uses the plant in a business of horticulture; and (d) the expenditure is not otherwise deductible; and (e) the expenditure is incurred on or after 10 May 1995. ● A taxpayer can get a deduction for the establishment expenditure even if it was incurred by a previous owner of the plant. ● If the effective life of a plant is less than 3 years, a taxpayer can get a deduction for 100% of the establishment expenditure in the year when the plant is first used: (a) for the purpose of producing assessable income; and (b) in a business of horticulture. ● If the effective life of a plant is 3 or more years, a taxpayer can get an annual deduction for the establishment expenditure, worked out on a prime cost basis. The deduction is available only during the plant’s maximum write-off period. ● A taxpayer can get a special deduction if a plant with an effective life of 3 or more years is destroyed before the end of the plant’s maximum write-off period. ● A taxpayer cannot get a deduction for recouped expenditure. ● If the ownership of a plant is transferred, the transferor may be required to give the transferee information that will help the transferee calculate his or her deduction. |
SCHEDULE 4—continued
124ZZF. When can a taxpayer get a 100% deduction for establishment expenditure?
124ZZG. When can a taxpayer get an annual deduction for establishment expenditure?
124ZZH. How much can be deducted each year?
124ZZI. What is the annual write-off rate and the maximum write-off period?
124ZZJ. What counts as establishment expenditure for a plant?
124ZZK. What is the effective life of a plant?
124ZZL. Commissioner may make determination specifying effective lives of plants
124ZZM. Special deduction for destruction of plants
124ZZN. No deduction if expenditure recouped
124ZZO. Transfer of ownership of plants—transferor to give tax information to transferee
124ZZP. Section 124ZZO obligations—treatment of partnerships
124ZZQ. Owner includes lessee or licensee
124ZZR. Definitions
“Subdivision B—100% deduction where the effective life of a plant is less than 3 years
When can a taxpayer get a 100% deduction for establishment expenditure?
“124ZZF. If:
(a) there is an amount of establishment expenditure for a horticultural plant; and
(b) the number of years in the effective life of the plant is less than 3; and
(c) at a particular time during a year of income, a taxpayer became the first entity to use the plant, or to hold the plant ready for use:
(i) for the purpose of producing assessable income; and
(ii) in a business of horticulture; and
(d) the taxpayer owned the plant at that time;
100% of the establishment expenditure is allowable as a deduction to the taxpayer for the year of income.
Note 1: Establishment expenditure is defined by section 124ZZJ.
Note 2: Effective life is defined by section 124ZZK.
Note 3: Ownership is given an extended meaning in relation to leases and licences by section 124ZZQ.
Note 4: Entity is defined by section 124ZZR.
SCHEDULE 4—continued
“Subdivision C—Annual deduction where the effective life of a plant is 3 or more years
When can a taxpayer get an annual deduction for establishment expenditure?
“124ZZG. If:
(a) there is an amount of establishment expenditure for a horticultural plant; and
(b) the number of years in the effective life of the plant is 3 or more; and
(c) at a particular time during a year of income, a taxpayer used the plant, or held the plant ready for use:
(i) for the purpose of producing assessable income; and
(ii) in a business of horticulture; and
(d) the taxpayer owned the plant at that time; and
(e) that time is within the maximum write-off period for the plant;
the amount worked out under section 124ZZH is allowable as a deduction to the taxpayer for the year of income.
Note 1: Establishment expenditure is defined by section 124ZZJ.
Note 2: Effective life is defined by section 124ZZK.
Note 3: Ownership is given an extended meaning in relation to leases and licences by section 124ZZQ.
Note 4: Maximum write-off period is defined by section 124ZZI.
How much can be deducted each year?
“ 124ZZH. The amount of the section 124ZZG deduction is worked out using the following formula:
where:
Annual write-off rate is worked out under section 124ZZI.
Write-off days in year means the number of whole days in the year of income, where all of the following conditions are satisfied:
(a) throughout that day, the taxpayer used the plant, or held the plant ready for use:
(i) for the purpose of producing assessable income; and
(ii) in a business of horticulture;
(b) the taxpayer owned the plant throughout that day;
(c) that day is within the maximum write-off period for the plant (worked out under section 124ZZI).
SCHEDULE 4—continued
Days in year means the number of days in the year of income.
Establishment expenditure means the amount of establishment expenditure for the plant (worked out under section 124ZZJ).
What is the annual write-off rate and the maximum write-off period?
“124ZZI. Use the following table to work out the annual write-off rate and the maximum write-off period for a plant. The maximum write-off period for a plant begins at the time when the plant first became capable of being used:
(a) for the purpose of producing assessable income; and
(b) in a business of horticulture.
Years in effective life of plant | Annual write-off rate | Maximum write-off period |
3 to fewer than 5 | 0.40 | 2 years and 183 days |
5 to fewer than 62/3 | 0.27 | 3 years and 257 days |
62/3 to fewer than 10 | 0.20 | 5 years |
10 to fewer than 13 | 0.17 | 5 years and 323 days |
13 to fewer than 30 | 0.13 | 7 years and 253 days |
30 or more | 0.07 | 14 years and 105 days |
Note: Effective life is defined by section 124ZZK.
“Subdivision D—Establishment expenditure for a plant
What counts as. establishment expenditure for a plant?
Basic definition
“124ZZJ.(1) For the purposes of this Division, if:
(a) an entity has incurred expenditure of a capital nature wholly or partly in respect of the establishment of a horticultural plant in Australia for use in a business of horticulture; and
(b) the expenditure was incurred on or after 10 May 1995;
so much of the amount of the expenditure as is attributable to the establishment of the plant is taken to be an amount of establishment expenditure for the plant.
Note: Entity is defined by section 124ZZR.
SCHEDULE 4—-continued
Exclusion of drainage and land-clearance costs
“(2) A reference in this section to capital expenditure in respect of the establishment of a horticultural plant does not include a reference to expenditure incurred in:
(a) draining swamp or low-lying land; or
(b) clearing land.
Exclusion of otherwise deductible costs
“(3) Expenditure is taken not to be establishment expenditure in respect of the establishment of a horticultural plant to the extent to which a deduction is allowable in respect of that expenditure under a provision of this Act other than section 124ZZF or 124ZZG.
Exclusion of depreciable costs
“(4) Expenditure is taken not to be establishment expenditure in respect of the establishment of a horticultural plant to the extent to which the expenditure is taken into account in calculating an amount of depreciation that is allowable as a deduction.
Exclusion of qualifying expenditure with the meaning of Division 10D
“(5) Expenditure is taken not to be establishment expenditure in respect of the establishment of a horticultural plant to the extent to which the expenditure is qualifying expenditure within the meaning of Division 10D (which deals with buildings and structural improvements).
“Subdivision E—Effective lives of plants
What is the effective life of a plant?
“124ZZK.(1) For the purposes of this Division, the effective life of a plant depends on whether the original taxpayer elects to adopt the period specified in the Commissioner’s determination under section 124ZZL. For this purpose, an entity is the original taxpayer in relation to a plant if the entity owned the plant at the time when the plant first became capable of being used:
(a) for the purpose of producing assessable income; and
(b) in a business of horticulture.
Note: Under section 124ZZL, the Commissioner may make a determination specifying periods that taxpayers may elect to adopt as the effective lives of horticultural plants owned by them.
Original taxpayer may elect to adopt the period specified in the Commissioner’s determination
“(2) If:
(a) there is in force a determination by the Commissioner under section 124ZZL which specifies a period that a taxpayer may elect to adopt as the effective life of the plant; and
SCHEDULE 4—continued
(b) the original taxpayer makes a written election to adopt that period; the effective life of the plant is that period.
Effective life if original taxpayer does not elect to adopt the period specified in the Commissioner’s determination
“(3) If the original taxpayer does not elect to adopt the period specified in the Commissioner’s determination, the effective life of the plant is the period, worked out as at the time when the plant first became capable of being used:
(a) for the purpose of producing assessable income; and
(b) in a business of horticulture;
during which it would be reasonable to expect that the plant would be capable of being used:
(c) for the purpose of producing assessable income; and
(d) in a business of horticulture.
Election is irrevocable
“(4) An election under this section is irrevocable.
Commissioner may make determination specifying effective lives of plants
Commissioner's determination
“124ZZL.(1) The Commissioner may, by writing:
(a) make a determination specifying periods that taxpayers may elect to adopt as the effective lives of horticultural plants owned by them; and
(b) revoke or vary such a determination.
Period may be specified unconditionally
“(2) A period may be specified unconditionally.
Specification of period may be conditional
“(3) A period, or 2 or more different periods, may be specified in relation to particular kinds of plants subject to one or more specified conditions being satisfied as at the time when the plant first became capable of being used:
(a) for the purpose of producing assessable income; and
(b) in a business of horticulture.
Determination to be available for sale to the public
“(4) A determination, or a variation or a revocation of a determination, must be made available for sale to the public.
SCHEDULE 4—continued
When determination may be retrospective
“(5) A determination, or a variation or a revocation of a determination, may be expressed to apply in relation to a plant that first became capable of being used:
(a) for the purpose of producing assessable income; and
(b) in a business of horticulture;
before the determination, variation or revocation, as the case may be, was made if, and only if:
(c) in the case of a determination or a variation of a determination—the specified period is the first period applicable to plants of that kind; or
(d) in any case—the retrospectivity works to the advantage of taxpayers in calculating the effective lives of plants of that kind.
“Subdivision F—Special deduction for destruction of plants
Special deduction for destruction of plants
“124ZZM.(1) This section applies if:
(a) there is an amount of establishment expenditure for a horticultural plant; and
(b) during a year of income, the plant is destroyed; and
(c) immediately before the destruction, a taxpayer owned the plant and used it in a business of horticulture for the purpose of producing assessable income; and
(d) the number of years in the effective life of the plant is 3 or more.
Note: Effective life is defined by section 124ZZK.
Deduction if taxpayer receives an amount in respect of the destruction
“(2) If:
(a) an amount (the recoverable amount) was or is received or receivable by the taxpayer (under a policy of insurance or otherwise) in respect of the destruction; and
(b) the amount worked out using the formula set out in subsection (4) exceeds the recoverable amount;
the excess is allowable as a deduction to the taxpayer for the year of income.
Deduction if taxpayer does not receive an amount in respect of the destruction
“ (3) If no amount was or is received or receivable by the taxpayer (under a policy of insurance or otherwise) in respect of the destruction, the amount worked out using the formula set out in subsection (4) is allowable as a deduction to the taxpayer for the year of income.
SCHEDULE 4—continued
Formula
“(4) The formula mentioned in subsections (2) and (3) is:
where:
Establishment expenditure means the amount of the establishment expenditure for the plant.
Notional deductions mean the deduction, or the total of the deductions, that would have been allowable to the taxpayer under section 124ZZG for the establishment expenditure if it were assumed that, at all times during the period:
(a) beginning when the plant first became capable of being used:
(i) for the purpose of producing assessable income; and
(ii) in a business of horticulture; and
(b) ending when the plant was destroyed;
the taxpayer had owned the plant and had used it:
(c) for the purpose of producing assessable income; and
(d) in a business of horticulture.
“Subdivision G—No deduction if expenditure recouped
No deduction if expenditure recouped
“124ZZN.(1) This Division does not apply, and is taken never to have applied, to expenditure incurred by an entity if:
(a) the entity, whether before or after the commencement of this section, receives, or becomes entitled to receive, a recoupment of, or grant in respect of, the expenditure; and
(b) the amount of the recoupment or the grant is not, and will not be, included in the entity’s assessable income of any year of income.
Dissection of amounts
“(2) For the purposes of subsection (1), if a person receives, or becomes entitled to receive, an amount that constitutes to an unspecified extent a recoupment of, or a grant in respect of, expenditure, then so much of that amount as is reasonable is taken to be a recoupment of, or grant in respect of, that expenditure, as the case requires.
Amendment of assessments
“(3) Section 170 does not prevent the amendment of an assessment at any time for the purpose of giving effect to this section.
SCHEDULE 4—continued
“Subdivision H—Transfer of ownership of plants—transferor to give tax information to transferee
Transfer of ownership of plants—transferor to give tax information to transferee
“124ZZO.(l) This section applies if:
(a) the ownership of one or more horticultural plants is or was transferred from an entity (the transferor) to another entity (the transferee); and
(b) there is an amount of establishment expenditure for each of the plants.
Transferee may ask transferor for tax information
“(2) The transferee may, by written notice given to the transferor, require the transferor to give to the transferee, within the period specified in the notice, any or all of the following information:
(a) the amount of the establishment expenditure for each of the plants;
(b) the effective lives of each of the plants;
(c) whether the transferor made an election under section 124ZZK in relation to any of the plants;
(d) the beginning of the maximum write-off periods for each of the plants.
The period specified in the notice must be at least 60 days. The notice must be given within 60 days after the transfer, or within 60 days after the commencement of this section, whichever comes last.
Transferee may only give one notice
“(3) The transferee must not give more than one notice under subsection (2) in relation to a particular transfer.
Offence
“(4) An entity must not, without reasonable excuse, intentionally or recklessly refuse or fail to comply with a notice under subsection (2).
Penalty: 10 penalty units.
Notice to set out the effect of subsection (4)
“(5) A notice under subsection (2) must set out the effect of subsection (4).
Application
“(6) This section applies to a transfer that occurs on or after 10 May 1995.
SCHEDULE 4—continued
Section 124ZZO obligations—treatment of partnerships
Obligations
“124ZZP,(1) Section 124ZZO applies to a partnership as if the partnership were a person, but it applies with the following changes:
(a) obligations that would be imposed on the partnership are imposed instead on each partner, but may be discharged by any of the partners;
(b) any offence against that section that would otherwise be committed by the partnership is taken to have been committed by each partner who:
(i) aided, abetted, counseled or procured the relevant act or omission; or
(ii) was in any way knowingly concerned in, or party to, the relevant act or omission (whether directly or indirectly and whether by any act or omission of the partner).
Giving of notices
“(2) For the purposes of section 124ZZO, if a document is given to a partner of a partnership, the document is taken to have been given to the partnership.
“Subdivision I—Interpretation
Owner includes lessee or licensee
Crown lease
“124ZZQ.(1) For the purposes of this Division, if:
(a) a taxpayer is the lessee of land under a Crown lease (within the meaning of section 54AA); and
(b) a plant is affixed to the land; and
(c) the taxpayer or another entity planted the plant; and
(d) apart from this section, the taxpayer is not the owner of the plant; and
(e) the Crown lease enables the taxpayer to carry on a business of horticulture on the land; and
(f) if there is a holder of a lesser interest or licence in relation to the land—the holder does not carry on a business of horticulture on the land;
the taxpayer is taken to be the owner of the plant instead of any other entity.
Ordinary lease
“(2) For the purposes of this Division, if:
(a) a taxpayer is the lessee of land under a lease other than a Crown lease (within the meaning of section 54AA); and
SCHEDULE 4—continued
(b) a plant is affixed to the land; and
(c) the taxpayer or another entity planted the plant; and
(d) apart from this section, the taxpayer is not the owner of the plant; and
(e) the lease enables the taxpayer to carry on a business of horticulture on the land; and
(f) if there is a holder of a lesser interest or licence in relation to the land—the holder does not carry on a business of horticulture on the land;
the taxpayer is taken to be the owner of the plant instead of any other entity.
Licence
“(3) For the purposes of this Division, if:
(a) a taxpayer holds a licence in relation to land; and
(b) a plant is affixed to the land; and
(c) the taxpayer or another entity planted the plant; and
(d) apart from this section, the taxpayer is not the owner of the plant; and
(e) the license enables the taxpayer to carry on a business of horticulture on the land;
the taxpayer is taken to be the owner of the plant instead of any other entity.
Definition
“(4) In this section:
lease includes sublease.
Definitions
“124ZZR. In this Division:
annual write-off rate has the meaning given by section 124ZZI.
effective life has the meaning given by section 124ZZK.
entity means any of the following:
(a) a company;
(b) a partnership;
(c) a person in a capacity of trustee;
(d) any other person.
establishment expenditure has the meaning given by section 124ZZJ.
maximum write-off period has the meaning given by section 124ZZI.
owner has a meaning affected by section 124ZZQ.
plant means any live member of the plant kingdom, and includes fungi.
producing assessable income includes gaining assessable income.”.
SCHEDULE 4—continued
PART 2—FORESTRY
2. After subsection 36(7):
Insert:
“(7A) If:
(a) a taxpayer has acquired land carrying trees; and
(b) part of the price paid for the land was attributable to the trees; and
(c) the taxpayer tended the trees for the purposes of sale; and
(d) the trees were held by the taxpayer in connection with timber operations (within the meaning of Division 10A) for the purpose of gaining or producing assessable income; and
(e) after 9 May 1995, the taxpayer disposed of the trees (by sale, gift or otherwise); and
(f) the trees were assets of a business which is or was carried on by the taxpayer; and
(g) the disposal was not in the ordinary course of carrying on that business;
the sum of the following amounts is allowable as a deduction to the taxpayer for the year of income in which the disposal occurred:
(h) so much of the price paid by the taxpayer for the land as is attributable to the trees;
(i) so much of any other expenditure of a capital nature incurred by the taxpayer as is attributable to the acquisition of the trees.
“(7B) Paragraph (7A)(i) does not apply to an amount that has been allowed, or is allowable, as a deduction to the taxpayer for any year of income under a provision of this Act other than subsection (7A).
“(7C) For the purposes of subsection (7A), if:
(a) the taxpayer acquired the land in a transaction where the parties did not deal with each other at arm’s length in relation to the transaction; and
(b) the price paid by the taxpayer for the land was greater than was reasonable;
the price paid by the taxpayer for the land is taken to be the amount that would have been reasonable if the parties had dealt with each other at arm’s length.
“(7D) For the purposes of subsection (7A), if:
(a) the taxpayer has incurred expenditure covered by paragraph (7A)(i) in connection with a transaction where the parties did not deal with each other at arm’s length in relation to the transaction; and
SCHEDULE 4—continued
(b) the amount of the expenditure was greater than was reasonable;
the amount of the expenditure is taken to be the amount that would have been reasonable if the parties had dealt with each other at arm’s length.”.
3. Section 124J:
Add at the end:
“(2) For the purposes of subsection (1), if:
(a) the taxpayer acquired the land or the right, as the case may be, in a transaction where the parties did not deal with each other at arm’s length in relation to the transaction; and
(b) the price paid by the taxpayer for the land or the right, as the case may be, was greater than was reasonable;
the price paid by the taxpayer for the land or the right, as the case may be, is taken to be the amount that would have been reasonable if the parties had dealt with each other at arm’s length.”.
4. Application—section 124J
The amendment of section 124J of the Income Tax Assessment Act 1936 made by this Part applies in relation to timber felled after 28 September 1995.
SCHEDULE 4—continued
PART 3—REGISTER OF APPROVED OCCUPATIONAL CLOTHING
5. Subsections 51AL(5) to (22) (inclusive):
Omit “TCFDA” (wherever occurring), substitute “Industry Secretary”.
Note 1: The heading to subsection 51AL(13) of the Income Tax Assessment Act 1936 is altered by omitting “TCFDA's" and substituting “Industry Secretary's”.
Note 2: The heading to subsection 51AL(14) of the Income Tax Assessment Act 1936 is altered by omitting "TCFDA" and substituting “Industry Secretary”.
6. Subsection 51AL(23):
Omit the subsection, substitute:
Delegation by Industry Secretary
“(23) The Industry Secretary may, by writing, delegate any or all of his or her functions and powers under this section to a person who holds or performs the duties of:
(a) a Senior Executive Service office in the Industry Department; or
(b) a Senior Officer Grade A, B or C office in the Industry Department.”.
7. Subsection 51AL(24):
Omit “TCFDA”, substitute “Industry Secretary”.
Note: The heading to subsection 51AL(24) of the Income Tax Assessment Act 1936 is altered by omitting “TCFDA" and substituting “Industry Secretary".
8. Subsection 51AL(26) (definition of TCFDA):
Omit the definition.
9. Subsection 51AL(26):
Insert:
“Industry Department means the Department of Industry, Science and Technology.
Industry Secretary means the Secretary to the Industry Department.
Senior Executive Service office has the same meaning as in the Public Service Act 1922.".
10. Transitional—acts of the Textiles, Clothing and Footwear Development Authority etc.
(1) This item applies to anything done by or in relation to the Textiles, Clothing and Footwear Development Authority before the commencement of this item under or in connection with section 51AL of the Income Tax Assessment Act 1936.
SCHEDULE 4—continued
(2) The following Acts have effect as if the thing had been done by or in relation to the Industry Secretary under or in connection with that section:
(a) the Income Tax Assessment Act 1936;
(b) the Administrative Decisions (Judicial Review) Act 1977;
(c) the Administrative Appeals Tribunal Act 1975.
11. Transitional—pending proceedings
(1) This item applies to proceedings to which the Textiles, Clothing and Footwear Development Authority was a party and that:
(a) arose out of section 51AL of the Income Tax Assessment Act 1936; and
(b) were pending in any court or tribunal immediately before the commencement of this item.
(2) The Industry Secretary is, by force of this item, substituted for the Authority as a party to the proceedings.
12. Transitional—records of the Textiles, Clothing and Footwear Development Authority
(1) This item applies to any records or documents that:
(a) were in the possession of the Textiles, Clothing and Footwear Development Authority immediately before the commencement of this item; and
(b) relate to section 51AL of the Income Tax Assessment Act 1936.
(2) The records and documents are to be transferred to the Industry Secretary.
SCHEDULE 4—continued
PART 4—RESEARCH AND DEVELOPMENT
13. Section 73CB:
Repeal the section, substitute:
Expenditure incurred to tax-exempt bodies
“73CB.(1) In this section:
agreement means any agreement, arrangement, understanding or scheme, whether formal or informal, whether express or implied, and whether or not intended to be enforceable by legal proceedings.
Australian government means the Commonwealth, a State or a Territory.
Australian governmental authority means an authority of the Commonwealth, of a State or of a Territory.
tax-exempt entity means a person, a body or association of persons (whether incorporated or unincorporated), or a fund, that is not liable to income tax and, without limiting the generality of the above, includes an Australian government and an Australian governmental authority that is not liable to income tax.
“(2) For the purposes of this section:
(a) a body is taken to be an authority of the Commonwealth if:
(i) the Commonwealth has a controlling interest in the body; or
(ii) the Commonwealth has an interest in the body and the only other persons having an interest in the body are Australian governments or Australian governmental authorities; and
(b) a body is taken to be an authority of a State if:
(i) the State has a controlling interest in the body; or
(ii) the State has an interest in the body and the only other persons having an interest in the body are Australian governments or Australian governmental authorities; and
(c) a body is taken to be an authority of a Territory if:
(i) the Territory has a controlling interest in the body; or
(ii) the Territory has an interest in the body and the only other persons having an interest in the body are Australian governments or Australian governmental authorities.
“(3) For the purposes of this section, but without limiting the meaning of the expression associate:
(a) the Commonwealth is taken to be an associate of each authority of the Commonwealth; and
(b) an authority of the Commonwealth is taken to be an associate of each other authority of the Commonwealth; and
SCHEDULE 4—continued
(c) a State is taken to be an associate of each authority of the State; and
(d) an authority of a State is taken to be an associate of each other authority of the State; and
(e) a Territory is taken to be an associate of each authority of the Territory; and
(f) an authority of a Territory is taken to be an associate of each other authority of the Territory.
“(4) For the purposes of interpretation, this section is to be construed as if it were part of section 73B.
“(5) If:
(a) an eligible company incurs expenditure to a tax-exempt entity, or an associate of a tax-exempt entity, in connection with research and development activities carried out on behalf of the company; and
(b) when the expenditure was incurred, the company was not at risk in respect of the whole of the expenditure or was not at risk in respect of a part of the expenditure; and
(c) at the time when the expenditure was incurred, the tax-exempt entity or associate, as the case requires, was not entered on the Register of Commercial Government Bodies kept under section 39HA of the Industry Research and Development Act 1986;
a deduction is not allowable to the company under section 73B for any part of the expenditure.
“(6) For the purposes of the application of this section in relation to any expenditure incurred by a company, the company is taken to have not been at risk in respect of the expenditure at the time when the expenditure was incurred if, in the Commissioner’s opinion, the company or any associate of the company could reasonably have expected at that time to receive, as the direct or indirect result of the incurring of the expenditure or any part of the expenditure, any consideration because of:
(a) any act that occurred, transaction or agreement that was entered into, or circumstance that existed, before or at that time; or
(b) any act that was likely to occur, any transaction or agreement that was likely to be entered into, or any circumstance that was likely to exist, after that time.”.
14. Application
(1) Subject to subitem (2), the section inserted by item 13 applies to expenditure incurred at or after 7.30 p.m. by legal time in the Australian Capital Territory on 9 May 1995.
SCHEDULE 4—continued
(2) The section inserted by item 13 does not apply, and the section repealed by that item continues to apply despite its repeal, to expenditure incurred before 7.30 p.m. by legal time in the Australian Capital Territory on 9 May 1995.
(3) The section inserted by item 13 does not apply, and the section repealed by that item applies despite its repeal, to expenditure incurred at or after 7.30 p.m. (the start time) by legal time in the Australian Capital Territory on 9 May 1995:
(a) that was or is incurred in accordance with the terms of a finance scheme, where:
(i) the scheme was approved by the Industry Research and Development Board before the start time; or
(ii) the scheme was considered by the Board before the start time, and its decision on the scheme was deferred until after that time; or
(iii) the Board decided before the start time not to approve the scheme and either:
(A) the time for applying to the Administrative Appeals Tribunal for a review of that decision had not expired before the start time; or
(B) an application for review of the decision by the Tribunal had been made before the start time, but the Tribunal had not made its decision on the application before that time; and
(b) that was or is incurred under a contract evidenced in writing that was entered into on or before 30 June 1996; and
(c) in respect of which the eligible company that incurred the expenditure had been jointly registered with one or more eligible companies by the Industry Research and Development Board on or before 30 June 1996.
——————
SCHEDULE 5 Section 3
AMENDMENTS OF THE SALES TAX (EXEMPTIONS AND CLASSIFICATIONS) ACT 1992
1.Object
The object of the amendments made by this Schedule is to provide a sales tax exemption for certain beverages consisting principally of rice milk.
2. Schedule 1, Table of Contents, Item 71:
Add at the end “and rice milk”.
3. Item 71 of Schedule 1:
Omit the Item, substitute:
“Item 71: [Soy milk and rice milk]
Beverages consisting principally of:
(a) soy milk; or
(b) rice milk;
but not including goods covered by Item 12 in Schedule 2.”.
4. Subitem 12(2) of Schedule 2:
Add at the end “or rice milk”.
5. Application of amendments
The amendments made by this Schedule apply to dealings with goods that occur on or after 28 September 1995.
——————
SCHEDULE 6 Section 3
AMENDMENT OF THE TAXATION LAWS AMENDMENT ACT 1993
1. Section 47:
Omit “created after 25 June 1992”, substitute “by a taxpayer in the taxpayer’s 1990-91 income year or a later year of income.”.
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[Minister's second reading speech made in—
House of Representatives on 24 October 1995 Senate on l3 November 1995]
