An Act to consolidate and amend the law relating to the
imposition assessment and collection of a tax upon incomes
Part I—Preliminary
1
Short title [see
Note 1]
This Act may be cited as the Income
Tax Assessment Act 1936.
6
Interpretation
(1AA) So far as a provision of the Income Tax
Assessment Act 1936 gives an expression a particular meaning, the provision
does not also have effect for the purposes of the Income Tax
Assessment Act 1997 (the 1997 Act), or for the purposes of
Schedule 1 to the Taxation Administration Act 1953, except as
provided in the 1997 Act or in that Schedule.
(1) In this
Act, unless the contrary intention appears:
100% subsidiary has the same meaning as in
the Income Tax Assessment Act 1997.
accrued leave transfer payment has the
meaning given by section 6G.
adjusted fringe benefits total of a taxpayer
for a year of income is the amount worked out using the formula:
where:
FBT rate is the rate of tax set by the Fringe
Benefits Tax Act 1986 for the FBT year (as defined in the Fringe
Benefits Tax Assessment Act 1986) beginning on the 1 April just before
the start of the year of income.
AFOF means an Australian venture capital fund
of funds within the meaning of subsection 118‑410(3) of the Income Tax
Assessment Act 1997.
agent includes:
(a) every person who in Australia, for
or on behalf of any person out of Australia holds or has the control, receipt
or disposal of any money belonging to that person; and
(b) every person declared by the
Commissioner to be an agent or the sole agent of any person for any of the
purposes of this Act.
allowable deduction means a deduction
allowable under this Act.
amount paid‑up on a share means the
amount (if any), including any premium, paid on that share.
amount unpaid on a share means the amount (if
any) unpaid on that share.
apportionable deductions has the meaning
given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
approved form has the meaning given by
section 388‑50 in Schedule 1 to the Taxation Administration
Act 1953.
assessable income has the meaning given by
subsection 995‑1(1) of the Income Tax Assessment Act 1997.
assessment means:
(a) the ascertainment of the amount of
taxable income (or that there is no taxable income) and of the tax payable on
that taxable income (or that no tax is payable); or
Note 1: A taxpayer does not have a taxable income if the
taxpayer’s deductions equal or exceed the taxpayer’s assessable income: see
subsection 4‑15(1) of the Income Tax Assessment Act 1997.
Note 2: A taxpayer may have no tax payable on an amount of
taxable income if that income is below the tax‑free threshold or if the
taxpayer’s tax offsets reduce the taxpayer’s basic income tax liability to nil.
(b) for a taxpayer being the trustee
of a unit trust that is a corporate unit trust within the meaning of section 102J—the
ascertainment of the net income of the trust as defined by section 102D
(or that there is no net income) and of the tax payable on that net income (or
that no tax is payable); or
(c) for a taxpayer being the trustee
of a unit trust that is a public trading trust within the meaning of section 102R—the
ascertainment of the net income of the trust as defined by section 102M
(or that there is no net income) and of the tax payable on that net income (or
that no tax is payable); or
(d) for any other taxpayer that is the
trustee of a trust estate but excluding a taxpayer that is the trustee of a
complying superannuation fund, a non‑complying superannuation fund, a
complying approved deposit fund, a non‑complying approved deposit fund or
a pooled superannuation trust—the ascertainment of so much of the net income of
the trust estate as is net income in respect of which the trustee is liable to
pay tax (or that there is no net income in respect of which the trustee is so
liable) and of the tax payable on that net income (or that no tax is payable);
or
(e) the ascertainment of the amount of
interest payable under section 102AAM (about distributions from non‑resident
trust estates); or
(f) the ascertainment of an amount of
additional tax under section 128TE; or
(g) the ascertainment of an amount of
tax under section 159GZZZZH; or
(h) the ascertainment of the amount of
income tax payable on the no‑TFN contributions income as defined by
section 295‑610 of the Income Tax Assessment Act 1997 (or
that no tax is payable); or
(i) the ascertainment of an amount of
FHSA misuse tax (within the meaning of the Income Tax Assessment Act 1997)
(or that no tax is payable).
Australian superannuation fund has the
meaning given by subsection 995‑1(1) of the Income Tax Assessment Act
1997.
bank or banker includes, but is
not limited to, a body corporate that is an ADI (authorised deposit‑taking
institution) for the purposes of the Banking Act 1959.
base interest rate has the meaning given by
subsection 995‑1(1) of the Income Tax Assessment Act 1997.
business has the meaning given by subsection
995‑1(1) of the Income Tax Assessment Act 1997.
capital gain has the same meaning as in the Income
Tax Assessment Act 1997.
capital loss has the same meaning as in the Income
Tax Assessment Act 1997.
capital proceeds has the same meaning as in
the Income Tax Assessment Act 1997.
CGT asset has the same meaning as in the Income
Tax Assessment Act 1997.
CGT event has the same meaning as in the Income
Tax Assessment Act 1997.
child has the meaning given by subsection 995‑1(1)
of the Income Tax Assessment Act 1997.
Commissioner means the Commissioner of
Taxation.
Commonwealth education or training payment has
the meaning given by subsection 995‑1(1) of the Income Tax Assessment
Act 1997.
Commonwealth securities means bonds,
debentures, stock or other securities issued under an Act, but does not
include:
(a) securities (not being securities
to which paragraph (b) applies) issued in respect of a loan raised outside
Australia unless there is in force a declaration by the Treasurer, published in
the Gazette, that those securities shall be Commonwealth securities for
the purposes of this Act; or
(b) securities issued after 12 April 1976 by a bank.
company has the meaning given by subsection
995‑1(1) of the Income Tax Assessment Act 1997.
complying approved deposit fund has the
meaning given by subsection 995‑1(1) of the Income Tax Assessment Act
1997.
complying superannuation fund has the meaning
given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
consolidated group has the same meaning as in
the Income Tax Assessment Act 1997.
constituent document, in relation to a
company, means the memorandum and articles of association of the company, or
any rules or other document constituting the company or governing its
activities.
corporate tax entity has the same meaning as
in the Income Tax Assessment Act 1997.
corporate tax rate has the same meaning as in
the Income Tax Assessment Act 1997.
cost base of a CGT asset has the same meaning
as in the Income Tax Assessment Act 1997.
creditable acquisition has the meaning given
by section 195‑1 of the GST Act.
debenture, in relation to a company, includes
debenture stock, bonds, notes and any other securities of the company, whether
constituting a charge on the assets of the company or not.
debt interest has the same meaning as in the Income
Tax Assessment Act 1997.
demerged entity has the meaning given by
section 125‑70 of the Income Tax Assessment Act 1997.
demerger has the meaning given by section 125‑70
of the Income Tax Assessment Act 1997.
demerger allocation means:
(a) the total market value of the
allocation represented by the ownership interests issued by the demerged entity
in itself under a demerger to the owners of ownership interests in the head
entity of the demerger group; or
(b) the total market value of the
allocation represented by the ownership interests disposed of by a member of a
demerger group under a demerger to the owners of ownership interests in the
head entity; or
(c) the total of both of those market
values.
demerger dividend means that part of a
demerger allocation that is assessable as a dividend under subsection 44(1) or
that would be so assessable apart from subsections 44(3) and (4).
demerger group has the meaning given by
section 125‑65 of the Income Tax Assessment Act 1997.
demerger subsidiary has the meaning given by
section 125‑65 of the Income Tax Assessment Act 1997.
demerging entity has the meaning given by
section 125‑70 of the Income Tax Assessment Act 1997.
depreciating asset has the same meaning as in
the Income Tax Assessment Act 1997.
Deputy Commissioner means a Deputy
Commissioner of Taxation.
distribution, when used in a franking
context, has the same meaning as in the Income Tax Assessment Act 1997.
dividend includes:
(a) any distribution made by a company
to any of its shareholders, whether in money or other property; and
(b) any amount credited by a company
to any of its shareholders as shareholders;
but does not include:
(d) moneys paid or credited by a
company to a shareholder or any other property distributed by a company to
shareholders (not being moneys or other property to which this paragraph, by
reason of subsection (4), does not apply or moneys paid or credited, or
property distributed for the redemption or cancellation of a redeemable
preference share), where the amount of the moneys paid or credited, or the
amount of the value of the property, is debited against an amount standing to
the credit of the share capital account of the company; or
(e) moneys paid or credited, or
property distributed, by a company for the redemption or cancellation of a
redeemable preference share if:
(i) the company gives the
holder of the share a notice when it redeems or cancels the share; and
(ii) the notice specifies
the amount paid‑up on the share immediately before the cancellation or
redemption; and
(iii) the amount is debited
to the company’s share capital account;
except to the extent that the
amount of those moneys or the value of that property, as the case may be, is
greater than the amount specified in the notice as the amount paid‑up on
the share; or
(f) a reversionary bonus on a life
assurance policy.
Division 230 financial arrangement has
the same meaning as in the Income Tax Assessment Act 1997.
dual resident investment company has the
meaning given by section 6F.
employment termination payment has the same
meaning as in the Income Tax Assessment Act 1997.
equity holder has the same meaning as in the Income
Tax Assessment Act 1997.
equity interest has the same meaning as in
the Income Tax Assessment Act 1997.
ESVCLP means an early stage venture capital
limited partnership within the meaning of subsection 118‑407(4) of the Income
Tax Assessment Act 1997.
exempt entity has the same meaning as in the Income
Tax Assessment Act 1997.
exempt income has the meaning given by
section 6‑20 of the Income Tax Assessment Act 1997.
FHSA has the meaning given by the First
Home Saver Accounts Act 2008.
FHSA trust has the meaning given by the First
Home Saver Accounts Act 2008.
foreign superannuation fund has the meaning
given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
frankable distribution has the same meaning
as in the Income Tax Assessment Act 1997.
franked part of a distribution has the same
meaning as in the Income Tax Assessment Act 1997.
franking credit has the same meaning as in
the Income Tax Assessment Act 1997.
franking debit has the same meaning as in the
Income Tax Assessment Act 1997.
franking deficit tax has the same meaning as
in the Income Tax Assessment Act 1997.
franking surplus has the same meaning as in
the Income Tax Assessment Act 1997.
franks with an exempting credit has the same
meaning as in the Income Tax Assessment Act 1997.
friendly society has the meaning given by
subsection 995‑1(1) of the Income Tax Assessment Act 1997.
friendly society dispensary means an approved
pharmaceutical chemist within the meaning of Part VII of the National
Health Act 1953, being a friendly society, or a friendly society body,
within the meaning of that Part.
fringe benefit has the meaning given by
subsection 995‑1(1) of the Income Tax Assessment Act 1997.
full self‑assessment
taxpayer, for a year of income (the current year), means
any of the following:
(a) a company;
(b) the trustee of a trust that is a
corporate unit trust in relation to the current year for the purposes of
Division 6B of Part III;
(c) the trustee of a trust that is a
public trading trust in relation to the current year for the purposes of
Division 6C of Part III;
(d) the trustee of a complying
approved deposit fund or a non‑complying approved deposit fund in relation
to the current year;
(e) the trustee of a complying
superannuation fund or a non‑complying superannuation fund in relation to
the current year;
(f) the trustee of a pooled
superannuation trust in relation to the current year.
Note: A corporate limited partnership is taken to be
a company under section 94J, so it will fall within paragraph (a) of
this definition.
fund payment has the same meaning as in the Income
Tax Assessment Act 1997.
general insurance company has the same
meaning as in the Income Tax Assessment Act 1997.
general insurance policy has the same meaning
as in the Income Tax Assessment Act 1997.
general interest charge means the charge
worked out under Part IIA of the Taxation Administration Act 1953.
general partner has the meaning given by
subsection 995‑1(1) of the Income Tax Assessment Act 1997.
GST Act means the A New Tax System (Goods
and Services Tax) Act 1999.
head company of a consolidated group or a MEC
group has the same meaning as in the Income Tax Assessment Act 1997.
head entity of a demerger group has the
meaning given by section 125‑65 of the Income Tax Assessment Act
1997.
hold, in relation to an RSA, has the same
meaning as in the Retirement Savings Accounts Act 1997.
holder, in relation to an RSA, has the same
meaning as in the Retirement Savings Accounts Act 1997.
income from personal exertion or income
derived from personal exertion means income consisting of earnings,
salaries, wages, commissions, fees, bonuses, pensions, superannuation
allowances, retiring allowances and retiring gratuities, allowances and
gratuities received in the capacity of employee or in relation to any services
rendered, the proceeds of any business carried on by the taxpayer either alone
or as a partner with any other person, any amount received as a bounty or
subsidy in carrying on a business, any amount that is included in the
assessable income of the taxpayer by reason of section 393‑15 of
Schedule 2G, the income from any property where that income forms part of
the emoluments of any office or employment of profit held by the taxpayer, and
any profit arising from the sale by the taxpayer of any property acquired by
him for the purpose of profit‑making by sale or from the carrying on or
carrying out of any profit‑making undertaking or scheme, but does not
include:
(a) interest, unless the taxpayer’s
principal business consists of the lending of money, or unless the interest is
received in respect of a debt due to the taxpayer for goods supplied or
services rendered by him in the course of his business; or
(b) rents, dividends or non‑share
dividends.
income from property or income derived
from property means all income not being income from personal exertion.
income tax or tax means income
tax imposed as such by any Act, as assessed under this Act, but, except in
section 260, does not include mining withholding tax or withholding tax.
insurance business has the same meaning as in
the Insurance Act 1973.
insurance funds, in relation to a company,
means all the Australian statutory funds of the company and all other funds
maintained by the company in respect of the life assurance business of the
company.
interest income, in relation to a taxpayer,
means income consisting of interest, or a payment in the nature of interest, in
respect of:
(a) money lent, advanced or deposited;
or
(b) credit given; or
(c) any other form of debt or
liability;
whether security is given or not, other than:
(d) an amount to the extent to which
it is a return on an equity interest in a company; or
(e) interest derived by the taxpayer
from a transaction directly related to the active conduct of a trade or
business; or
(f) interest derived by the taxpayer
from carrying on a banking business or any other business whose income is
principally derived from the lending of money; or
(g) interest received by the taxpayer
during a year of income from a foreign company, where:
(i) at any time during the
year of income, the taxpayer had (or would have had, if the taxpayer were a
company and a resident), a voting interest, within the meaning of
section 334A, amounting to at least 10% of the voting power, within the
meaning of that section, in that company; and
(ii) during the year of
income or the preceding year of income, the company has not derived an amount
of interest income exceeding 10% of the total profits derived by the company
during the same year.
international tax sharing treaty:
(a) means an agreement between
Australia and another country under which Australia and the other country share
tax revenues from activities undertaken in an area identified by or under the
agreement; and
(b) does not include an agreement
within the meaning of the International Tax Agreements Act 1953.
life assurance company has the meaning given
to life insurance company by the Income Tax Assessment Act
1997.
life assurance policy has the meaning given
to life insurance policy by the Income Tax Assessment Act 1997.
life assurance premium has the meaning given
to life insurance premium by the Income Tax Assessment Act
1997.
limited partner has the same meaning as in
the Income Tax Assessment Act 1997.
limited partnership has the same meaning as
in the Income Tax Assessment Act 1997.
liquidator means the person who, whether or
not appointed as liquidator, is the person required by law to carry out the
winding‑up of a company.
loss year has the same meaning as in the Income
Tax Assessment Act 1997.
managed investment trust has the same meaning
as in the Income Tax Assessment Act 1997.
MEC group has the same meaning as in the Income
Tax Assessment Act 1997.
member of a consolidated group or MEC group
has the same meaning as in the Income Tax Assessment Act 1997.
minerals has the meaning given by subsection
995‑1(1) of the Income Tax Assessment Act 1997.
mining withholding tax means income tax
payable in accordance with section 128V.
mortgage includes any charge, lien or
encumbrance to secure the repayment of money.
mutual life assurance company means a life
assurance company the profits of which are divisible only among the policy
holders.
natural resource has the meaning given by
subsection 995‑1(1) of the Income Tax Assessment Act 1997.
net capital gain has the same meaning as in
the Income Tax Assessment Act 1997.
net capital loss has the same meaning as in
the Income Tax Assessment Act 1997.
net GST has the meaning given by section 995‑1
of the Income Tax Assessment Act 1997.
net input tax credit has the meaning given by
section 995‑1 of the Income Tax Assessment Act 1997.
non‑assessable non‑exempt income
has the meaning given by the Income Tax Assessment Act 1997.
non‑complying approved deposit fund has
the meaning given by subsection 995‑1(1) of the Income Tax Assessment
Act 1997.
non‑complying superannuation fund has
the meaning given by subsection 995‑1(1) of the Income Tax Assessment
Act 1997.
non‑entity joint venture has the
meaning given by subsection 995‑1(1) of the Income Tax Assessment Act
1997.
non‑equity share has the same meaning
as in the Income Tax Assessment Act 1997.
non‑resident means a person who is not
a resident of Australia.
non‑share capital account has the same
meaning as in the Income Tax Assessment Act 1997.
non‑share capital return has the same
meaning as in the Income Tax Assessment Act 1997.
non‑share distribution has the same
meaning as in the Income Tax Assessment Act 1997.
non‑share dividend has the same meaning
as in the Income Tax Assessment Act 1997.
non‑share equity interest has the same
meaning as in the Income Tax Assessment Act 1997.
ordinary class has the same meaning as in the
Income Tax Assessment Act 1997.
ordinary income has the same meaning as in
the Income Tax Assessment Act 1997.
outstanding claims at the end of a year of
income under general insurance policies issued by a general insurance company
has the same meaning as in the Income Tax Assessment Act 1997.
over‑franking tax has the same meaning
as in the Income Tax Assessment Act 1997.
ownership interest has the meaning given by
section 125‑60 of the Income Tax Assessment Act 1997.
paid in relation to dividends or non‑share
dividends includes credited or distributed.
paid‑up share capital of a company
means the amount standing to the credit of the company’s share capital account
reduced by the amount (if any) that represents amounts unpaid on shares.
parent has the meaning given by subsection
995‑1(1) of the Income Tax Assessment Act 1997.
part of a distribution that is franked with an
exempting credit has the same meaning as in the Income Tax
Assessment Act 1997.
part of a distribution that is franked with a venture
capital credit has the same meaning as in the Income Tax Assessment
Act 1997.
partnership has the same meaning as in the Income
Tax Assessment Act 1997.
passive commodity gain, in relation to a
taxpayer, in relation to a year of income, means a gain realised by the
taxpayer in a year of income from disposing of a forward contract or a futures
contract, or a right or option in respect of a forward contract or a futures
contract, in respect of any thing (a commodity):
(a) that is capable of delivery under
an agreement for its delivery; and
(b) that is not an instrument creating
or evidencing a chose in action;
unless the contract, right or option relates to the
carrying on by the taxpayer of a business:
(c) of producing or processing the
commodity; or
(d) that involves the use of the
commodity as a raw material in a production process.
passive income,
in relation to a taxpayer, in relation to a year of income means:
(a) dividends (within the meaning of
this section) and non‑share dividends paid to the taxpayer in the year of
income; or
(b) unit trust dividends (within the
meaning of Division 6B or 6C) paid to the taxpayer in the year of income;
or
(c) a distribution made to the
taxpayer in the year of income that is taken to be a dividend because of
section 47; or
(d) an amount that is taken to be a
dividend paid to the taxpayer in the year of income because of section 47A
or 108 or Division 7A of Part III; or
(e) interest income derived by the
taxpayer in the year of income; or
(f) annuities derived by the taxpayer
in the year of income; or
(g) income derived by the taxpayer by
way of rent (within the meaning of Part X) in the year of income; or
(h) royalties derived by the taxpayer
in the year of income; or
(i) an amount derived by the taxpayer
in the year of income as consideration for the assignment, in whole or in part,
of any copyright, patent, design, trade mark or other like property or right;
or
(j) profits of a capital nature that
accrued to the taxpayer in the year of income; or
(k) passive commodity gains that
accrued to the taxpayer in the year of income; or
(l) an amount included in the
assessable income of the taxpayer of the year of income under
section 102AAZD, 456, 457, 459A or 529;
but does not include:
(m) an amount that arose from an asset
necessarily held by the taxpayer in connection with an insurance business
actively carried on by the taxpayer; or
(n) an amount included in the
taxpayer’s assessable income under Division 13A.
PDF (pooled development fund) means a company
that is a PDF within the meaning of the Pooled Development Funds Act 1992,
but does not include such a company in the capacity of a trustee.
PDF component, in relation to a company that
becomes a PDF during the year of income and is still a PDF at the end of the
year of income, means:
(a) in a case where the amount that,
if:
(i) the period beginning
at the start of the year of income and ending immediately before the company
becomes a PDF were a year of income of the company; and
(ii) the period (the
PDF notional year) beginning when the company becomes a PDF and ending
at the end of the year of income were a year of income of the company; and
(iii) paragraph (c) of
the definition of taxable income were omitted;
would be the company’s taxable
income of the PDF notional year is $1 or more—that amount; or
(b) otherwise—a nil amount.
permanent establishment, in relation to a
person (including the Commonwealth, a State or an authority of the Commonwealth
or a State), means a place at or through which the person carries on any
business and, without limiting the generality of the foregoing, includes:
(a) a place where the person is
carrying on business through an agent;
(b) a place where the person has, is
using or is installing substantial equipment or substantial machinery;
(c) a place where the person is
engaged in a construction project; and
(d) where the person is engaged in
selling goods manufactured, assembled, processed, packed or distributed by
another person for, or at or to the order of, the first‑mentioned person
and either of those persons participates in the management, control or capital
of the other person or another person participates in the management, control
or capital of both of those persons—the place where the goods are manufactured,
assembled, processed, packed or distributed;
but does not include:
(e) a place where the person is
engaged in business dealings through a bona fide commission agent or
broker who, in relation to those dealings, acts in the ordinary course of his
business as a commission agent or broker and does not receive remuneration
otherwise than at a rate customary in relation to dealings of that kind, not
being a place where the person otherwise carries on business;
(f) a place where the person is
carrying on business through an agent:
(i) who does not have, or
does not habitually exercise, a general authority to negotiate and conclude
contracts on behalf of the person; or
(ii) whose authority
extends to filling orders on behalf of the person from a stock of goods or
merchandise situated in the country where the place is located, but who does
not regularly exercise that authority;
not being a place where the
person otherwise carries on business; or
(g) a place of business maintained by
the person solely for the purpose of purchasing goods or merchandise.
person includes a company.
pooled superannuation trust has the meaning
given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
prescribed dual resident means a company that
satisfies either of the following conditions:
(a) the first condition is that:
(i) the company is a
resident of Australia within the meaning of subsection 6(1); and
(ii) there is an agreement
(within the meaning of the International Tax Agreements Act 1953) in
force in respect of a foreign country; and
(iii) the agreement contains
a provision that is expressed to apply where, apart from the provision, the
company would, for the purposes of the agreement, be both a resident of
Australia and a resident of the foreign country; and
(iv) that provision has the
effect that the company is, for the purposes of the agreement, a resident
solely of the foreign country;
(b) the
alternative condition is that the company:
(i) is
a resident of Australia within the meaning of subsection 6(1) for no other
reason than that it carries on business in Australia and has its central
management and control in Australia; and
(ii) it is also a resident
of another country; and
(iii) its central management
and control is in another country.
primary production business has the meaning
given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
private company, in relation to a year of
income, means a company that is a private company in relation to that year of
income for the purposes of Division 7 of Part III.
proclaimed superannuation standards day means
1 July 1990.
provider, in relation to an RSA, has the same
meaning as in the Retirement Savings Accounts Act 1997.
prudential standards has the same meaning as
in the Income Tax Assessment Act 1997.
rebate income of an individual for a year of income
is the sum of:
(a) the individual’s taxable income
for the year of income; and
(b) the individual’s reportable
superannuation contributions for the year of income; and
(c) the individual’s total net
investment loss for the year of income; and
(d) the individual’s adjusted fringe
benefits total for the year of income.
recognised small credit union has the meaning
given by section 6H.
recognised medium credit union has the
meaning given by section 6H.
recognised large credit union has the meaning
given by section 6H.
reduced cost base of a CGT asset has the same
meaning as in the Income Tax Assessment Act 1997.
registered tax agent has the meaning given by
section 251A.
relative has the meaning given by subsection
995‑1(1) of the Income Tax Assessment Act 1997.
reportable fringe benefits total has the same
meaning as in the Fringe Benefits Tax Assessment Act 1986.
reportable superannuation contributions has
the same meaning as in the Income Tax Assessment Act 1997.
resident or resident of Australia
means:
(a) a person, other than a company,
who resides in Australia and includes a person:
(i) whose domicile is in Australia,
unless the Commissioner is satisfied that his permanent place of abode is
outside Australia;
(ii) who has actually been
in Australia, continuously or intermittently, during more than one‑half
of the year of income, unless the Commissioner is satisfied that his usual
place of abode is outside Australia and that he does not intend to take up
residence in Australia; or
(iii) who is:
(A) a member
of the superannuation scheme established by deed under the Superannuation
Act 1990; or
(B) an
eligible employee for the purposes of the Superannuation Act 1976; or
(C) the
spouse, or a child under 16, of a person covered by sub-subparagraph (A)
or (B); and
(b) a company which is incorporated in
Australia, or which, not being incorporated in Australia, carries on business
in Australia, and has either its central management and control in Australia,
or its voting power controlled by shareholders who are residents of Australia.
resident trust for CGT purposes has the same
meaning as in the Income Tax Assessment Act 1997.
return on a debt interest or equity interest
has the same meaning as in the Income Tax Assessment Act 1997.
return of income means a return of income, or
of profits or gains of a capital nature, or of both income and such profits or
gains.
royalty or royalties includes
any amount paid or credited, however described or computed, and whether the
payment or credit is periodical or not, to the extent to which it is paid or
credited, as the case may be, as consideration for:
(a) the use of, or the right to use,
any copyright, patent, design or model, plan, secret formula or process,
trademark, or other like property or right;
(b) the use of, or the right to use,
any industrial, commercial or scientific equipment;
(c) the supply of scientific,
technical, industrial or commercial knowledge or information;
(d) the supply of any assistance that
is ancillary and subsidiary to, and is furnished as a means of enabling the
application or enjoyment of, any such property or right as is mentioned in paragraph (a),
any such equipment as is mentioned in paragraph (b) or any such knowledge
or information as is mentioned in paragraph (c);
(da) the reception of, or the right to
receive, visual images or sounds, or both, transmitted to the public by:
(i) satellite; or
(ii) cable, optic fibre or
similar technology;
(db) the use in connection with
television broadcasting or radio broadcasting, or the right to use in
connection with television broadcasting or radio broadcasting, visual images or
sounds, or both, transmitted by:
(i) satellite; or
(ii) cable, optic fibre or
similar technology;
(dc) the use of, or the right to use,
some or all of the part of the spectrum (within the meaning of the Radiocommunications
Act 1992) specified in a spectrum licence issued under that Act;
(e) the use of, or the right to use:
(i) motion picture films;
(ii) films or video tapes
for use in connexion with television; or
(iii) tapes for use in
connexion with radio broadcasting; or
(f) a total or partial forbearance in
respect of:
(i) the use of, or the
granting of the right to use, any such property or right as is mentioned in paragraph (a)
or any such equipment as is mentioned in paragraph (b);
(ii) the supply of any such
knowledge or information as is mentioned in paragraph (c) or of any such
assistance as is mentioned in paragraph (d);
(iia) the reception of, or
the granting of the right to receive, any such visual images or sounds as are
mentioned in paragraph (da);
(iib) the use of, or the
granting of the right to use, any such visual images or sounds as are mentioned
in paragraph (db);
(iic) the use of, or the
granting of the right to use, some or all of such part of the spectrum
specified in a spectrum licence as is mentioned in paragraph (dc); or
(iii) the use of, or the
granting of the right to use, any such property as is mentioned in paragraph (e).
RSA has the same meaning as in the Retirement
Savings Accounts Act 1997.
RSA provider has the same meaning as in the Retirement
Savings Accounts Act 1997.
Second Commissioner means a Second
Commissioner of Taxation.
share in a company has the meaning given by
subsection 995‑1(1) of the Income Tax Assessment Act 1997.
share capital account has the same meaning as
in the Income Tax Assessment Act 1997.
shareholder includes member or stockholder.
shareholders’ funds has the same meaning as
in the Life Insurance Act 1995.
shortfall interest charge means the charge
worked out under Division 280 in Schedule 1 to the Taxation
Administration Act 1953.
small business entity has the meaning given
by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
spouse has the meaning given by subsection
995‑1(1) of the Income Tax Assessment Act 1997.
subsidiary member of a consolidated group or
a MEC group has the same meaning as in the Income Tax Assessment Act 1997.
superannuation benefits means individual
personal benefits, pensions or retiring allowances.
superannuation fund means:
(a) a scheme for the payment of
superannuation benefits upon retirement or death; or
(b) a superannuation fund within the
definition of superannuation fund in section 10 of the Superannuation
Industry (Supervision) Act 1993.
superannuation fund for foreign residents has
the meaning given by subsection 995‑1(1) of the Income Tax Assessment
Act 1997.
superannuation lump sum has the same meaning
as in the Income Tax Assessment Act 1997.
tainted, in relation to a company’s share
capital account, has the same meaning as in the Income Tax Assessment Act
1997.
taxable Australian property has the same
meaning as in the Income Tax Assessment Act 1997.
taxable income has the same meaning as in
the Income Tax Assessment Act 1997.
taxable supply has the meaning given by
section 195‑1 of the GST Act.
tax cost is set has the same meaning as in
the Income Tax Assessment Act 1997.
tax loss has the same meaning as in the Income
Tax Assessment Act 1997.
taxpayer means a person deriving income or
deriving profits or gains of a capital nature.
this Act includes:
(a) the Income Tax Assessment Act
1997; and
(b) Part IVC of the Taxation
Administration Act 1953, so far as that Part relates to:
(i) this Act or the Income
Tax Assessment Act 1997; or
(ii) Schedule 1 to the
Taxation Administration Act 1953; and
(c) Schedule 1 to the Taxation
Administration Act 1953.
Note: Subsection (1AA) of this section prevents
definitions in the Income Tax Assessment Act 1936 from affecting the
interpretation of the Income Tax Assessment Act 1997.
Timor Sea Treaty means the Treaty defined by
subsection 5(1) of the Petroleum (Timor Sea Treaty) Act 2003.
total net investment loss has the same
meaning as in the Income Tax Assessment Act 1997.
trading stock has the meaning given by
section 70‑10 of the Income Tax Assessment Act 1997.
Tribunal means the Administrative Appeals
Tribunal.
trustee in addition to every person appointed
or constituted trustee by act of parties, by order, or declaration of a court,
or by operation of law, includes:
(a) an executor or administrator,
guardian, committee, receiver, or liquidator; and
(b) every person having or taking upon
himself the administration or control of income affected by any express or
implied trust, or acting in any fiduciary capacity, or having the possession,
control or management of the income of a person under any legal or other
disability;
unfranked part of a distribution has the same
meaning as in the Income Tax Assessment Act 1997.
value of the outstanding claims liability of
a general insurance company under general insurance policies has the meaning
given by section 321‑20 in Schedule 2J.
value of the outstanding claims liability of
a company for workers’ compensation claims has the meaning given by section 323‑15
in Schedule 2J.
value of the unearned premium reserve of a
general insurance company under general insurance policies has the meaning
given by section 321‑60 in Schedule 2J.
VCLP means a venture capital limited
partnership within the meaning of subsection 118‑405(2) of the Income
Tax Assessment Act 1997.
VCMP means a venture capital management
partnership.
venture capital deficit tax has the same
meaning as in the Income Tax Assessment Act 1997.
venture capital management partnership has
the meaning given by subsection 94D(3).
withholding tax has the same meaning as in
the Income Tax Assessment Act 1997.
work and income support related withholding payments
and benefits means:
(a) payments from which an amount:
(i) must be withheld under
a provision of Subdivision 12‑B (other than section 12‑55),
12‑C or 12‑D or Division 13 in Schedule 1 to the Taxation
Administration Act 1953 (even if the amount is not withheld); or
(ii) would be required to
be withheld under a provision mentioned in subparagraph (i) (other than section 12‑55)
apart from subsection 12‑1(1A) in Schedule 1 to that Act; and
(b) amounts included in a person’s
assessable income under section 86‑15 of the Income Tax
Assessment Act 1997 in respect of which an amount must be paid under
Division 13 in Schedule 1 to the Taxation Administration Act 1953
(even if the amount is not paid); and
(c) non‑cash benefits in
relation to which the provider of the benefit must pay an amount to the
Commissioner under Division 14 in Schedule 1 to the Taxation
Administration Act 1953 (even if the amount is not paid).
Note: The payments covered by paragraph (a)
are: payments to employees and company directors, payments to office holders,
return to work payments, payments under labour hire arrangements, payments of annuities,
superannuation benefits, employment termination payments, payments for unused
leave, benefit payments, compensation payments and payments specified by
regulations.
year of income means an income year as
defined in subsection 995‑1(1) of the Income Tax Assessment Act 1997.
year of tax means the financial year for
which income tax is levied.
(1A) Unless the contrary intention appears, a
reference in this Act to a failure to do an act or thing includes a reference
to a refusal to do the act or thing.
(2AA) A reference in this Act to an accounting
period adopted in lieu of a year of income includes a reference to an
accounting period:
(a) that commences or ends under
section 18A; and
(b) that would, but for that section,
form part of an accounting period so adopted.
(2AB) The Commissioner may, by legislative
instrument, make a determination modifying the operation of one or more
provisions of this Act in relation to limited partnerships whose accounting
periods commence or end under section 18A of the Income Tax Assessment
Act 1936.
(2AC) A determination can only be made under subsection (2AB)
in order to take account of the fact that such accounting periods are of less
than 12 months’ duration.
(3) The express references in this Act to
companies do not imply that references to persons do not include references to
companies.
(4) Paragraph (d) of the definition of dividend
in subsection (1) does not apply if, under an arrangement:
(a) a person pays or credits any money
or gives property to the company and the company credits its share capital
account with the amount of the money or the value of the property; and
(b) the company pays or credits any
money, or distributes property to another person, and debits its share capital
account with the amount of the money or the value of the property so paid,
credited or distributed.
(6) Where a place is, by virtue of paragraph (d)
of the definition of permanent establishment in subsection (1),
a permanent establishment of a person, the person shall, for the purposes of
this Act, be deemed to be carrying on at or through that permanent
establishment the business of selling the goods manufactured, assembled,
processed, packed or distributed by the other person at the place that is that
permanent establishment.
6AA
Certain sea installations and offshore areas to be treated as part of Australia
(1) For all purposes of this Act related
directly or indirectly to:
(a) the exploration for minerals in,
or the exploitation of the natural resources (being minerals) of:
(i) an eligible external
Territory; or
(ii) a Petroleum Act
offshore area; or
(iii) an Installations Act
adjacent area by means of a sea installation installed in that area;
whether the exploration or
exploitation is by the taxpayer concerned or by another person;
(b) the carrying on of an environment
related activity in:
(i) an eligible external
Territory; or
(ii) a Petroleum Act
offshore area; or
(iii) an Installations Act
adjacent area by means of a sea installation installed in that area;
whether the activity is carried
on by the taxpayer concerned or by another person; or
(c) acts, matters, circumstances and
things touching, concerning, arising out of or connected with any such
exploration, exploitation or environment related activity;
including purposes in relation to the application of this
Act in respect of income or profits derived from any such exploration,
exploitation, environment related activity, act, matter, circumstance or thing,
or in respect of dividends paid wholly or partly out of any such profits, the
provisions of this Act have effect, subject to this section, as if:
(d) the whole of each eligible
external Territory and each Petroleum Act offshore area were, and at all times
had been, a part of Australia;
(e) each sea installation, when
installed in the Installations Act adjacent area, were a part of Australia; and
(f) the Papua New Guinea offshore
area were, and at all times had been, a part of Papua New Guinea.
(2) Where a company carries on business that:
(a) consists of exploration or
exploitation, or an environment related activity, of a kind referred to in subsection (1);
or
(b) arises out of or is connected with
any such exploration, exploitation or environment related activity (whether by
that company or by another person);
the company shall, for the purposes of the definition of
resident or resident of Australia in
subsection 6(1), be deemed to be carrying on business in Australia.
(4) For the
purposes of this section:
(a) eligible external Territory
means the area, whether land or water, within the territorial limits of:
(i) the Territory of Ashmore
and Cartier Islands;
(ii) the Coral Sea Islands Territory;
or
(iii) the Territory of Heard
and McDonald Islands;
and includes the space above and
below that area;
(b) environment related activity
has the same meaning as in the Sea Installations Act 1987; and
(c) Installations Act adjacent
area means an area that is an adjacent area for the purposes of the Sea
Installations Act 1987;
(e) Petroleum Act offshore area
means:
(i) an area that is an
offshore area for the purposes of the Offshore Petroleum and Greenhouse Gas
Storage Act 2006; and
(ii) the Joint Petroleum
Development Area within the meaning of the Petroleum (Timor Sea
Treaty) Act 2003.
(5) Where, if the definition of sea
installation in subsection 4(1) of the Sea Installations Act 1987:
(a) extended to include:
(i) resources industry
fixed structures and resources industry mobile units, within the meaning of
subsections 4(2) and (3) of that Act;
(ii) partly constructed
structures (including pipelines) or vessels that, when completed, are intended
to be, or could be, structures or units referred to in subparagraph (i);
and
(iii) the remains of
structures (including pipelines) or vessels that have been structures, units or
vessels referred to in subparagraph (i) or (ii); and
(b) did not include fishing boats,
fishing equipment and pearling vessels;
a structure or vessel, or structures or vessels, would, by
section 6 of that Act, be deemed for the purposes of that Act to be a sea
installation installed in a particular area, the structure or vessel, or the
structures or vessels, shall be taken for the purposes of this section to be a
sea installation installed in that area.
6A
Provisions relating to cessation of superannuation benefits
(1) For the purposes of this Act:
(a) a right of a person or of his
dependants to receive superannuation benefits from a fund shall be deemed to
have ceased at a particular time (whether before or after the commencement of
this section) if, by virtue of the terms and conditions applicable to the fund
at that time, a right (including a contingent right) of the person, or of his
dependants, as the case may be, to an amount that has accrued or could accrue
from the fund ceased at that time otherwise than by payment of that amount to,
or for the benefit of, the person or his dependants or by the transfer of that
amount to another fund in which, as a result of the transfer, the person
acquires, or his dependants acquire, as the case may be, a fully‑secured
right (including a contingent right) to receive superannuation benefits, being
a right that is not less valuable than the first‑mentioned right; and
(b) where a right of a person or of
his dependants to receive superannuation benefits from a fund has ceased at any
time (whether before or after the commencement of this section)—the amount of
those benefits shall be deemed to have been so much of the amount that was
included in the fund at that time for the purpose of making provision for
superannuation benefits for the person or his dependants as was not required
for the purpose of providing for the person or his dependants superannuation
benefits (including benefits payable at that time) the right to receive which
had not ceased at or before that time.
(2) For the purposes of this Act, where a
right of a person or of his dependants to receive superannuation benefits from
a fund has ceased at any time (whether before or after the commencement of this
section) and, at that time, a specific part of the amount of the fund was not
appropriated for the purpose of making provision for superannuation benefits
for the person or his dependants:
(a) an amount determined by the
Commissioner shall be deemed to have been included in the fund at that time for
that purpose;
(b) any payment made out of the fund
at that time or at a later time to the person or his dependants shall be deemed
to have been an application at the time at which, and for the purpose for
which, the payment was made of so much of the amount determined by the
Commissioner in pursuance of paragraph (a) as is equal to the amount of
the payment; and
(c) except to the extent to which the
amount determined by the Commissioner in pursuance of paragraph (a) is to
be so deemed to have been applied by a payment out of the fund, that amount
shall be deemed to have been applied in the year of income of the fund in which
the right ceased, to such extent, if any, as the Commissioner determines, for
the purpose of making provision for the superannuation benefits that other
persons or their dependants had rights to receive from the fund.
6AB
Foreign income and foreign tax
(1) A reference in this Act to foreign income
is a reference to income (including superannuation lump sums and employment
termination payments) derived from sources in a foreign country or foreign
countries, and includes a reference to an amount included in assessable income
under section 102AAZD, 456, 457, 459A or 529 of this Act, or section 305‑70
of the Income Tax Assessment Act 1997.
(1C) A reference in this Act to foreign income
includes a reference to an amount included in assessable income under:
(a) Division 301 of the Income
Tax Assessment Act 1997 in its application under section 301‑5
of the Income Tax (Transitional Provisions) Act 1997; or
(b) Division 302 of the Income
Tax Assessment Act 1997 in its application under section 302‑5
of the Income Tax (Transitional Provisions) Act 1997.
(2) A reference in this Act to foreign tax is
a reference to tax imposed by a law of a foreign country, being:
(a) tax upon income; or
(b) tax upon profits or gains, whether
of an income or capital nature; or
(c) any other tax, being a tax that is
subject to an agreement having the force of law under the International Tax
Agreements Act 1953;
but does not include a unitary tax or a credit absorption
tax.
(5B) This section applies to a non‑share
dividend in the same way as it applies to a dividend.
(6) In this
section:
credit absorption tax means a tax imposed by
a law of a foreign country to the extent that the tax would not have been
payable if the taxpayer concerned or another taxpayer had not been entitled to an
offset in respect of the tax under Division 770 of the Income Tax
Assessment Act 1997.
law, in relation to a foreign country, means
a law of that country, or of any part of, or place in, that country.
unitary tax means tax imposed by a law of a
foreign country, being a law which, for the purposes of taxing income, profits
or gains of a company derived from sources within that country, takes into
account, or is entitled to take into account, income, losses, outgoings or
assets of the company (or of a company that for the purposes of that law is
treated as being associated with the company) derived, incurred or situated outside
that country, but does not include tax imposed by that law if that law only
takes those matters into account:
(a) if such an associated company is a
resident for the purposes of that law; or
(b) for the purposes of granting any
form of relief in relation to tax imposed on dividends received by one company
from another company.
6B
Income beneficially derived
(1) For the purposes of this Act, an amount
of income derived by a person, not being a dividend paid by a company to the
person as a shareholder in the company, shall be deemed to be attributable to a
dividend:
(a) if the person derived the amount
of income by reason of being the beneficial owner of the share in respect of
which the dividend was paid; or
(b) if the person derived the amount of
income as a beneficiary in a trust estate and the amount of income can be
attributed, directly or indirectly, to the dividend or to an amount that is
deemed, by any application or successive applications of this subsection, to be
an amount of income attributable to the dividend.
(1A) For the purposes of this Act, an amount of
income derived by a person, being income other than passive income, is to be
taken to be income attributable to passive income:
(a) if the person derived the amount
of income by reason of being beneficially entitled to an amount representing
passive income; or
(b) if the person derived the amount
of income as a beneficiary in a trust estate and the amount of income can be
attributed, directly or indirectly, to passive income or to an amount that is
taken, by any application or successive applications of this subsection, to be
an amount of income attributable to passive income.
(2) For the purposes of this Act, an amount
of income derived by a person, being income other than interest income, shall
be deemed to be income attributable to interest income:
(a) if the person derived the amount
of income by reason of being beneficially entitled to an amount representing
interest income; or
(b) if the person derived the amount
of income as a beneficiary in a trust estate and the amount of income can be
attributed, directly or indirectly, to interest income or to an amount that is
deemed, by any application or successive applications of this subsection, to be
an amount of income attributable to interest income.
(2A) For the purposes of this Act, an amount of
income derived by a person shall be deemed to be income derived from a
particular source:
(a) except where paragraph (b)
applies:
(i) if the person derived
the amount of income by reason of being beneficially entitled to an amount that
is derived from that source; or
(ii) if the person derived
the amount of income as a beneficiary in a trust estate and the amount of
income can be attributed, directly or indirectly, to income derived from that
source or to an amount that is deemed, by any other application or applications
of this subsection, to be an amount that is income derived from that source; or
(b) if the income so derived is, by
virtue of subsection (1), (1A) or (2), attributable to a dividend, passive
income or interest income derived from that source.
(3) Where a beneficiary in a trust estate is
presently entitled to income of the trust estate, that income shall, for the
purposes of this section, be deemed to be an amount of income derived by the
person.
(4) This
section:
(a) applies
to a non‑share equity interest in the same way as it applies to a share;
and
(b) applies to an equity holder in the
same way as it applies to a shareholder; and
(c) applies to a non‑share dividend
in the same way as it applies to a dividend.
6BA
Taxation treatment of certain shares
(1) This section applies if a shareholder
holds shares in a company (the original shares) and the company
issues other shares (the bonus shares) in respect of the original
shares.
(2) If the bonus shares are a dividend, or
taken to be a dividend (including as a result of section 45C), the
consideration for the acquisition of the shares for the purposes of this Act is
so much of the dividend as is:
(a) included in the taxpayer’s
assessable income; and
(b) is not rebatable under section 46A.
(3) If the bonus shares are issued for no
consideration and are not a dividend or taken to be a dividend, then for the
purposes of this Act (other than section 26AAC), in determining:
(a) the value of such of the original
shares and bonus shares as the taxpayer elects under section 70‑45
of the Income Tax Assessment Act 1997 to value at cost; and
(b) where any of the original shares
or any of the bonus shares are not articles of trading stock of the taxpayer:
(i) the amount or value of
the consideration paid in respect of the acquisition of any of those shares for
the purposes of Part 3‑1 or 3‑3 of the Income Tax
Assessment Act 1997; or
(ii) the amount of any
profit or loss arising on the sale or disposal of any of those shares;
any amounts paid or payable by the taxpayer in respect of
the original shares (whether on purchase of the shares, on application for or
allotment of the shares, to meet calls or otherwise) shall be deemed to have
been paid or to be payable by the taxpayer in respect of the original shares
and the bonus shares in such proportions as the Commissioner considers
appropriate in the circumstances.
(4) A company
issues shares for no consideration if:
(a) it credits its capital account
with profits in connection with the issue of the shares; or
(b) it credits its capital account
with the amount of any dividend to a shareholder and the shareholder does not
have a choice whether to be paid the dividend or to be issued with the shares.
This subsection does not limit the generality of subsection (3).
Note: A company that makes a credit covered by paragraph (a)
or (b) will have a tainted share capital account.
(5) Subject to subsection (6), if a
shareholder has a choice whether to be paid a dividend or to be issued shares
and the shareholder chooses to be issued with shares:
(a) the dividend is taken to be
credited to the shareholder; and
(b) the dividend is taken to have been
paid out of profits; and
(c) subsections (2) and (3) apply
in working out the consideration for the acquisition of the shares for the
purposes of this Act.
However, the share capital account of the company does not
become a tainted share capital account as a result of the crediting of the dividend
to the share capital account.
(6) Subsection (5) does not apply if:
(a) a shareholder in a listed public
company (within the meaning of the Income Tax Assessment Act 1997) has a
choice whether to be paid a dividend (other than a minimally franked dividend
within the meaning of subsection 45(3)) or to be issued shares and the
shareholder chooses to be issued with shares; and
(b) the company does not credit the
share capital account in connection with the issue of those shares.
Note: If subsection (5) does not apply because
of this subsection, subsection (3) will apply.
(7) This
section (other than subsection (6)):
(a) applies to a non‑share
equity interest in the same way as it applies to a share; and
(b) applies to an equity holder in the
same way as it applies to a shareholder; and
(c) applies to a non‑share
dividend in the same way as it applies to a dividend.
6C
Source of royalty income derived by a non‑resident
(1) This section applies to income that is
derived on or after 1 July 1968 by a non‑resident and consists of
royalty that:
(a) is paid or credited to the non‑resident
by the Commonwealth, by a State, by an authority of the Commonwealth or of a
State or by a person who is, or by persons at least one of whom is, a resident
and is not an outgoing wholly incurred by the Commonwealth, the State, the
authority or that person or those persons in carrying on business in a country
outside Australia at or through a permanent establishment of the Commonwealth,
the State, the authority or that person or those persons in that country; or
(b) is paid or credited to the non‑resident
by a person who is, or by persons each of whom is, a non‑resident and is,
or is in part, an outgoing incurred by that person or those persons in carrying
on business in Australia at or through a permanent establishment of that person
or those persons in Australia.
(1A) For the purposes of Division 5 and
Division 6 of Part III, but subject to subsections (3) and (4),
income to which this section applies shall be deemed to be attributable to
sources in Australia.
(2) For the purposes of sections 6‑5
and 6‑10 of the Income Tax Assessment Act 1997, but subject to subsections (3)
and (4), income to which this section applies shall be deemed to have been
derived from a source in Australia.
(3) Where:
(a) income to which this section
applies is paid or credited to the non‑resident by whom it is derived by
the Commonwealth, by a State, by an authority of the Commonwealth or of a State
or by a person who is, or by persons at least one of whom is, a resident; and
(b) the royalty of which the income
consists is, in part, an outgoing incurred by the Commonwealth, the State, the
authority or that person or those persons in carrying on business in a country
outside Australia at or through a permanent establishment of the Commonwealth,
the State, the authority or that person or those persons in that country;
subsection (2) has effect in relation to so much only
of the income as is attributable to so much of the royalty as is not an outgoing
so incurred.
(4) Where:
(a) income to which this section
applies is paid or credited to the non‑resident by whom it is derived by
a person who, or by persons each of whom, is a non‑resident; and
(b) the royalty of which the income
consists is, in part only, an outgoing incurred by the person or persons by
whom it is paid or credited in carrying on business in Australia at or through
a permanent establishment of that person or those persons in Australia;
subsection (2) has effect in relation to so much only
of the income as is attributable to so much of the royalty as is an outgoing so
incurred.
(5) In subsection (6), a reference to a
relevant person is a reference to the Commonwealth, a State, an authority of
the Commonwealth or of a State or a person who is, or persons at least 1 of
whom is, a resident.
(6) For the purposes of paragraphs (1)(a)
and (3)(b), where:
(a) royalty is paid or credited, after
the commencement of this subsection, to a non‑resident by a relevant
person carrying on business in a country outside Australia; and
(b) the royalty or a part of the
royalty:
(i) is incurred by the
relevant person in gaining or producing income that is derived by the relevant
person otherwise than in carrying on business in a country outside Australia at
or through a permanent establishment of the relevant person in that country or
is incurred by the relevant person for the purpose of gaining or producing
income to be so derived; or
(ii) is incurred by the
relevant person in carrying on business for the purpose of gaining or producing
income and is reasonably attributable to income that is derived, or may be
derived, by the relevant person otherwise than in so carrying on business at or
through a permanent establishment of the relevant person in a country outside
Australia;
the royalty or the part of the royalty, as the case may
be, is not an outgoing incurred by the relevant person in carrying on business
in a country outside Australia at or through a permanent establishment of the
relevant person in that country.
(7) For the
purposes of paragraphs (1)(b) and (4)(b), where:
(a) royalty is paid or credited, after
the commencement of this subsection, to a non‑resident by another person
or other persons (in this subsection referred to as the payer),
being:
(i) another person who is
carrying on business in Australia and is a non‑resident; or
(ii) other persons who are
carrying on business in Australia and each of whom is a non‑resident; and
(b) the royalty or a part of the
royalty:
(i) is incurred by the
payer in gaining or producing income that is derived by the payer in carrying
on business in Australia at or through a permanent establishment of the payer
in Australia or is incurred by the payer for the purpose of gaining or
producing income to be so derived; or
(ii) is incurred by the
payer in carrying on a business for the purpose of gaining or producing income
and is reasonably attributable to income that is derived, or may be derived, by
the payer in so carrying on business at or through a permanent establishment of
the payer in Australia;
the royalty or the part of the royalty, as the case may
be, is an outgoing incurred by the payer in carrying on business in Australia
at or through a permanent establishment of the payer in Australia.
6CA Source
of natural resource income derived by a non‑resident
(1) In this section:
double tax agreement means an agreement
within the meaning of the International Tax Agreements Act 1953.
natural resource income means income that:
(a) is derived by a non‑resident;
and
(b) is calculated, in whole or in
part, by reference to the value or quantity of natural resources produced,
recovered or produced and recovered, in Australia after 7 April 1986;
but does not include:
(c) income that consists of royalty;
or
(d) income where:
(i) on 7 April 1986, the non‑resident had a continuing entitlement to receive the income;
(ii) the income was derived
by the non‑resident pursuant to that continuing entitlement;
(iii) the non‑resident
was, at 5 o’clock in the afternoon, by standard time in the Australian Capital
Territory on 7 April 1986, a resident, within the meaning of a double
tax agreement, of a foreign country in respect of which the double tax
agreement was in force;
(iv) before 8 April
1986, the Commissioner had given a statement in writing to the effect that
income tax would be levied on 50% of income included in a specified class of
income; and
(v) the income is included
in that class of income.
(2) For the purposes of Divisions 5 and
6 of Part III, natural resource income shall be deemed to be attributable
to sources in Australia.
(3) For the purposes of section 255 of
this Act and sections 6‑5 and 6‑10 of the Income Tax
Assessment Act 1997, natural resource income shall be deemed to have been
derived from a source in Australia.
6D
Some tax offsets under the 1997 Assessment Act are treated as credits
A tax offset under a provision of the Income
Tax Assessment Act 1997 that corresponds to a provision of this Act that
provides for a credit is taken to be a credit for the purposes of this Act.
Note: All other tax offsets under the Income Tax
Assessment Act 1997 are treated as rebates: see section 160ADA.
6F
Dual resident investment company
(1) For the purposes of this Act, a company
(other than a company in the capacity of trustee) is a dual resident investment
company in relation to a year of income if:
(a) at any time during the year of
income the company is a resident of Australia; and
(b) the company is liable to tax in a
foreign country in respect of some or all of the income or profits of the
company of the year of income (or would be so liable if the company derived
income or profits) because:
(i) the company is treated
as a resident of that country for the purposes of the relevant law of that country;
or
(ii) the company is treated
as domiciled in that country for the purposes of the relevant law of that
country; or
(iii) the company’s
management and control is treated as being located in that country for the
purposes of the relevant law of that country; and
(c) at any time during the year of
income when the company was in existence:
(i) the company was not
carrying on business with a reasonable view to profit; or
(ii) a substantial purpose
of the company (whether or not stated in its constituent document) was to
acquire or hold shares, securities or other investments in related companies
(whether directly or indirectly through one or more companies, partnerships or
trusts).
(2) For the purposes of this section,
companies are related to each other if they are controlled (as defined by subsection (3))
by the same person, either alone or together with associates (whether or not
the same associates are involved in relation to each company).
(3) For the purposes of this section, a
person, either alone or together with associates, controls a company if:
(a) the person, either alone or
together with associates:
(i) controls or is capable
of controlling, either directly or through one or more interposed companies,
partnerships or trusts, at least 50% of the maximum number of votes that might
be cast at a general meeting of the company; or
(ii) is beneficially
entitled to receive, directly or indirectly, at least 50% of any dividends that
are or might be paid, or of any distribution of capital that is or may be made,
by the company; or
(iii) is capable, under a
scheme, of gaining such control or such an entitlement; or
(b) the company or its directors are
accustomed or under an obligation (whether formal or informal), or might
reasonably be expected, to act in accordance with the directions, instructions
or wishes of the person, either alone or together with associates.
(4) Section 159GZH applies for the
purposes of this section in determining the beneficial entitlement of a person
to receive indirectly the whole or a particular fraction of a dividend that is,
or might be, paid by a company or of a distribution of capital of a company.
(5) In this section:
associate has the same meaning as in section 318.
scheme means:
(a) any agreement, arrangement,
understanding, promise or undertaking, whether express or implied and whether
or not enforceable, or intended to be enforceable, by legal proceedings; and
(b) any scheme, plan, proposal,
action, course of action or course of conduct, whether there are 2 or more
parties or only one party involved.
6H
Recognised small credit unions, recognised medium credit unions and recognised
large credit unions
Recognised small credit union in relation to a year of
income
(1) For the purposes of this Act, a credit union
is a recognised small credit union in relation to a year of income if:
(a) both:
(i) the year of income is
the 1994‑95 year of income; and
(ii) either:
(A) the
credit union is not a designated credit union; or
(B) the
credit union’s notional taxable income of the year of income is less than
$50,000; or
(b) both:
(i) the year of income is
the 1995‑96 year of income or a later year of income; and
(ii) the credit union’s
notional taxable income of the year of income is less than $50,000.
Recognised medium credit union in relation to a year of
income
(2) For the
purposes of this Act, a credit union is a recognised medium credit union in
relation to a year of income if:
(a) the year of income is the 1994‑95
year of income or a later year of income; and
(b) the credit union is not a
recognised small credit union in relation to the year of income; and
(c) the credit union’s notional
taxable income of the year of income is less than $150,000.
Recognised large credit union in relation to a year of
income
(3) For the purposes of this Act, a credit
union is a recognised large credit union in relation to a year of income if:
(a) the year of income is the 1994‑95
year of income or a later year of income; and
(b) the credit union is neither:
(i) a recognised small
credit union in relation to the year of income; nor
(ii) a recognised medium
credit union in relation to the year of income.
Designated credit union
(4) For the purposes of this section, a
credit union is a designated credit union if:
(a) it was in existence on 1 July 1993; and
(b) assuming that its accounts for the
last accounting period that ended before 1 July 1993 had been prepared in
accordance with generally accepted accounting principles—the amount that would
have been shown in those accounts as the gross value of its assets as at the
end of that accounting period is more than $30 million.
Notional taxable income
(5) For the purposes of this section, the
notional taxable income of a credit union of a year of income is the amount
that would be its taxable income of the year of income if:
(a) section 23G did not apply to
income derived by it in the 1994‑95 year of income or any later year of
income; and
(b) Division 9 of Part III
had not been enacted.
Definitions
(6) In this section:
accounts, in relation to a credit union,
means accounts prepared for the purposes of reporting annually to the
shareholders in the credit union.
accounting period, in relation to a credit
union, means a period at the end of which the balance of its accounts is
struck.
credit union means a credit union as defined
in section 23G, except a life assurance company.
7A
Application of Act in relation to certain Territories
(1) This Act extends to Norfolk Island, the Territory
of Cocos (Keeling) Islands and the Territory of Christmas Island.
(2) Subject to Division 1A of Part III,
this Act has effect as if Norfolk Island, the Territory of Cocos (Keeling) Islands
and the Territory of Christmas Island were part of Australia.
7B
Application of the Criminal Code
Chapter 2 of the Criminal Code
applies to all offences against this Act.
Note: Chapter 2 of the Criminal Code
sets out the general principles of criminal responsibility.
Part II—Administration
8
Commissioner
The Commissioner shall have the general
administration of this Act.
14
Annual report
(1) The Commissioner shall, as soon as
practicable after 30 June in each year, prepare and furnish to the
Minister a report on the working of this Act, including any breaches or
evasions of this Act of which the Commissioner has notice.
(2) The Minister shall cause a copy of a
report furnished to him under subsection (1) to be laid before each House
of the Parliament within 15 sitting days of that House after the day on which
he receives the report.
(3) For the purposes of section 34C of
the Acts Interpretation Act 1901, a report that is required by subsection (1)
to be furnished as soon as practicable after 30 June in a year shall be
taken to be a periodic report relating to the working of this Act during the year
ending on that 30 June.
16
Officers to observe secrecy
(1) In this section, unless the contrary
intention appears:
Director of Public Prosecutions means a
person holding office as, or acting as, the Director of Public Prosecutions
under the Director of Public Prosecutions Act 1983.
officer means a person who is or has been
appointed or employed by the Commonwealth or by a State, and who by reason of
that appointment or employment, or in the course of that employment, may
acquire or has acquired information respecting the affairs of any other person,
disclosed or obtained under the provisions of this Act or of any previous law
of the Commonwealth relating to income tax.
Royal Commission means a Commission that has
been commissioned by the Governor‑General, by Letters Patent in pursuance
of the Royal Commissions Act 1902 or of any other power, to conduct an
inquiry, and includes any member of such a Commission.
Special Prosecutor means a person holding
office as, or acting as, a Special Prosecutor under the Special Prosecutors
Act 1982.
tax‑related offence means:
(a) an offence against:
(i) an Act of which the
Commissioner has the general administration or regulations under such an Act;
or
(ii) the Crimes
(Taxation Offences) Act 1980; or
(b) an offence against the Crimes
Act 1914 relating to a law referred to in paragraph (a).
(1A) For the purposes of this section, a person
who, although not appointed or employed by the Commonwealth, performs services
for the Commonwealth shall be taken to be employed by the Commonwealth.
(2) Subject to this section, an officer shall
not either directly or indirectly, either while he is, or after he ceases to
be an officer, make a record of, or divulge or communicate to any person any
information respecting the affairs of another person acquired by the officer as
mentioned in the definition of officer in subsection (1).
(2A) Subsection (2) does not apply to the
extent that the person makes the record of the information, or divulges or
communicates the information, in the performance of the person’s duties as an
officer.
Note: A defendant bears an evidential burden in
relation to the matters in subsection (2A), see subsection 13.3(3) of the Criminal
Code.
(3) An officer shall not be required to
produce in Court any return, assessment or notice of assessment, or to divulge
or communicate to any Court any matter or thing coming under his notice in the
performance of his duties as an officer, except when it is necessary to do so
for the purpose of carrying into effect the provisions of this Act or of any
previous law of the Commonwealth relating to Income Tax.
(4) Nothing in this section shall be deemed
to prohibit the Commissioner, a Second Commissioner, or a Deputy Commissioner,
or any person thereto authorized by him, from communicating any information to:
(a) any person performing, in
pursuance of any appointment or employment by the Commonwealth, any duty
arising under any Act administered by the Commissioner of Taxation, for the
purpose of enabling that person to carry out any such duty;
(b) any board exercising any function
under any Act administered by the Commissioner of Taxation, or any member of
any such Board;
(c) the Tribunal in connection with
proceedings under an Act of which the Commissioner has the general
administration;
(d) the Repatriation Commission for
the purpose of the administration of any law of the Commonwealth relating to
pensions;
(e) the Secretary of the Department
dealing with matters relating to the social security law (within the meaning of
the Social Security Act 1991) for the purpose of the administration of
that law; or
(ea) the Secretary to the Department of
Employment, Education and Training for the purpose of the administration of any
law of the Commonwealth relating to pensions, allowances or benefits;
(eb) the Chief Executive Officer of the
Commonwealth Services Delivery Agency, established by the Commonwealth
Services Delivery Agency Act 1997, for the purpose of the administration of
the social security law (within the meaning of the Social Security Act 1991);
(f) the Secretary to the Department
of Health for the purpose of the administration of any law of the Australian
Capital Territory or of the Northern Territory which is administered by the
Minister of State for Health;
(fa) the Chief Executive Officer of
Medicare Australia for the purpose of the administration of the Childcare
Rebate Act 1993, being information as to whether a registered carer (within
the meaning of that Act) or an applicant for registration as a registered carer
has a tax file number;
(fb) the Chief Executive Officer of
Medicare Australia for the purpose of the administration of the Private
Health Insurance Incentives Act 1998 or Part 2‑2 or 6‑4 of
the Private Health Insurance Act 2007;
(fc) the Secretary to the Department of
Family and Community Services for the purpose of the administration of the A
New Tax System (Family Assistance) (Administration) Act 1999;
(fd) Comcare, established by section 68
of the Safety, Rehabilitation and Compensation Act 1988, for purposes
consistent with the functions of that body under that Act;
(g) the Safety, Rehabilitation and
Compensation Commission, established by section 89A of the Safety,
Rehabilitation and Compensation Act 1988, for purposes consistent with the
functions of that body under that Act;
(gaa) the Military Rehabilitation and
Compensation Commission established by section 361 of the Military
Rehabilitation and Compensation Act 2004, for purposes consistent with the
functions of that body under that Act;
(ga) the Australian Statistician for
the purposes of the Census and Statistics Act 1905, being the following
kind of information about a person who is an employer (whether or not the
person is also a business person):
(i) the name and address
of the person;
(ii) the name or
description of the industry, trade, business, calling, service, profession or
occupation in which the person is an employer;
(iii) the number of males
and the number of females who are employees of the person;
(gb) the Australian Statistician for
the purposes of the Census and Statistics Act 1905, being the following
kind of information about a person who is a business person (whether or not the
person is also an employer):
(i) the name and address
of the person;
(ii) the name or description
of the business;
(iii) such other information
in relation to the business as is requested by the Australian Statistician;
(h) the Secretary, Department of
Defence, for the purpose of the administration of any law of the Commonwealth
relating to payments in respect of dependants of members of the Defence Force;
(ha) the authorized person holding
office under the Loan (Income Equalization Deposits) Act 1976 for the
purposes of the administration of that Act;
(hb) the Secretary to the Department of
Education and the Secretary to the Department of Social Security for the
purpose of the administration of any law of the Commonwealth relating to
financial assistance to students;
(hba) the Development Allowance
Authority, for the purpose of the administration of the Development
Allowance Authority Act 1992 or of the prosecution provisions within the
meaning of Chapter 4 of that Act;
(hc) the Australian Prudential
Regulation Authority, for the purpose of the administration of the Superannuation
(Excluded Funds) Taxation Act 1987 (including a repealed provision of that
Act as that provision continues to apply because of the Taxation Laws
Amendment (Superannuation) Act 1992 or the Occupational Superannuation
Standards Amendment Act 1993) or of the prosecution provisions within the
meaning of that Act;
(hca) the Australian Prudential
Regulation Authority or the Australian Securities and Investments Commission,
for the purpose of the administration of the Superannuation Industry
(Supervision) Act 1993;
(hcaa) the Australian Prudential Regulation
Authority, or the Australian Securities and Investments Commission, for the
purpose of that body performing its functions in relation to FHSAs;
(hcb) the Australian Prudential
Regulation Authority, for the purpose of the administration of the Financial
Institutions Supervisory Levies Collection Act 1998;
(hd) the Secretary to the Department of
Immigration and Ethnic Affairs, for the purpose of assisting in locating
persons who are unlawfully in Australia;
(j) the Secretary to the Department
of Housing and Construction, for the purpose of the administration of any law
of the Commonwealth having an object of assisting persons to purchase or build
their own homes;
(ja) the Child Support Registrar, for
the purposes of the administration of the Child Support (Registration and
Collection) Act 1988 and the Child Support (Assessment) Act 1989;
(k) a Royal Commission in respect of
which Letters Patent issued by the Governor‑General declare that the
Royal Commission is a Royal Commission to which this paragraph applies, for the
purpose of conducting its inquiry; or
(l) the Treasurer, for the purpose of
exercising his or her powers under subsection 128AE(2A) or (2C); or
(m) Innovation Australia, established
by section 6 of the Industry Research and Development Act 1986, for
the purpose of the administration of a law of the Commonwealth relating to
venture capital.
(4AA) In paragraphs (4)(ga) and (gb):
business person means a person who is
carrying on a business, whether alone, in partnership or otherwise.
description, in relation to a business,
includes a description or specification of a category in which the business is
included.
employee means a person who receives, or is
entitled to receive, work and income support related withholding payments and
benefits.
employer means a person who pays or is liable
to pay work and income support related withholding payments and benefits, and
includes:
(a) in the case of an unincorporate
body of persons other than a partnership—the manager or other principal officer
of that body; and
(b) in the case of a partnership—each
partner; and
(c) an Australian government agency as
defined in subsection 995‑1(1) of the Income Tax Assessment Act 1997.
(4A) Subject to subsections (4B) and (4C),
where information respecting the affairs of a person is communicated to a Royal
Commission in pursuance of paragraph (4)(k):
(a) the Royal Commission may, in a
manner that does not identify, and is not reasonably capable of being used to
identify, the person to whom the information relates:
(i) communicate the
information to the Governor‑General in a report by the Royal Commission;
or
(ii) divulge the
information in the course of a proceeding conducted by the Royal Commission
other than a proceeding conducted in private;
(aa) the Royal Commission may divulge
the information in the course of a proceeding conducted in private by the Royal
Commission;
(b) the Royal Commission may
communicate the information to the Attorney‑General if the Royal
Commission is of the opinion that the information indicates that a person may
have committed an offence against an Act, being an offence the punishment, or
maximum punishment, for which is or includes imprisonment for life or for a
period exceeding 6 months;
(ba) the Royal Commission may
communicate the information to the Director of Public Prosecutions or a Special
Prosecutor if the Royal Commission is of the opinion that the information
relates or may relate to an investigation of a tax‑related offence;
(c) subject to the preceding
paragraphs, the Royal Commission shall not divulge or communicate the
information;
(d) a person who has ceased to be the
person constituting, or to be a member of, the Royal Commission shall not make
a record of the information, or divulge or communicate the information, in any
circumstances; and
(e) a person to whom information has
been communicated in accordance with paragraph (c) or subsection (4AAA)
shall not:
(i) while he is a person
or employee under the control of the Royal Commission—divulge or communicate
the information; or
(ii) after he ceases to be
a person or employee under the control of the Royal Commission—make a record of
the information, or divulge or communicate the information, in any
circumstances.
(4AAA) Paragraph (4A)(c) and subparagraph (4A)(e)(i)
do not apply to the extent that the person divulges or communicates the
information to the Royal Commission or a person or employee under the control
of the Royal Commission for the purposes of, or in connection with, the inquiry
being conducted by the Royal Commission.
Note: A defendant bears an evidential burden in
relation to the matters in subsection (4AAA), see subsection 13.3(3) of
the Criminal Code.
(4B) Where information respecting the affairs of
a person is communicated to a Royal Commission in pursuance of paragraph (4)(k),
nothing in subsection (4A) prevents the communication of the information
to:
(a) if the person to whose affairs the
information relates is not a company—that person;
(b) if the person to whose affairs the
information relates is a company:
(i) any person who is, or
has been, a director or officer of the company; or
(ii) any person who is, or
has been, directly involved in, or responsible for, the preparation of
information furnished to the Commissioner on behalf of the company; or
(c) the person who furnished the
information to the Commissioner of Taxation.
(4C) Where subsection (4B) permits the
communication of information to a person, nothing in subsection (4A)
prevents the communication of the information to a barrister or solicitor
appearing before the Royal Commission for the purpose of representing the
person.
(4D) Where information is communicated to a
person in accordance with subsection (4B) or (4C) or paragraph (4A)(aa),
being information that was not furnished to the Commissioner of Taxation by the
person and does not relate to the affairs of the person, the person shall not
make a record of the information, or divulge or communicate the information, in
any circumstances.
(4E) Where information is communicated to the
Attorney‑General under paragraph (4A)(b), the Attorney‑General
may communicate the information to the Commissioner of the Australian Federal
Police.
(4EA) Subject to subsection (4E), the
Attorney‑General must not divulge or communicate information communicated
to the Attorney‑General under paragraph (4A)(b).
(4EB) Subsection (4EA) does not apply to the
extent that the Attorney‑General divulges or communicates the information
to a person or employee under his or her control for the purposes of, or in
connection with, the performance by the Attorney‑General of his or her
function under subsection (4E).
Note: A defendant bears an evidential burden in
relation to the matters in subsection (4EB), see subsection 13.3(3) of the
Criminal Code.
(4EC) A person who has ceased to be the Attorney‑General
must not make a record of information communicated to the person under paragraph (4A)(b),
or divulge or communicate the information, in any circumstances.
(4ED) A person to whom information has been
communicated in accordance with subsection (4EB) or (4EE) must not:
(a) while he or she is a person or
employee under the control of the Attorney‑General—divulge or communicate
the information; or
(b) after he or she ceases to be a
person or employee under the control of the Attorney‑General—make a
record of the information, or divulge or communicate the information, in any
circumstances.
(4EE) Paragraph (4ED)(a) does not apply to
the extent that the person divulges or communicates the information to the
Attorney‑General or another person or employee under the control of the
Attorney‑General for the purposes of, or in connection with, the
performance by the Attorney‑General of his or her function under subsection (4E).
Note: A defendant bears an evidential burden in
relation to the matters in subsection (4EE), see subsection 13.3(3) of the
Criminal Code.
(4F) Where information is communicated to the
Commissioner of the Australian Federal Police under subsection (4E):
(a) the Commissioner of the Australian
Federal Police must not divulge or communicate the information; and
(b) a person who has ceased to be the
Commissioner of the Australian Federal Police must not make a record of the
information, or divulge or communicate the information, in any circumstances;
and
(c) a person to whom information has
been communicated in accordance with subsection (4FAA) or (4FAB) must not:
(i) while he or she is a
person or employee under the control of the Commissioner of the Australian
Federal Police—divulge or communicate the information; or
(ii) after he or she ceases
to be a person or employee under the control of the Commissioner of the
Australian Federal Police—make a record of the information, or divulge or
communicate the information, in any circumstances.
(4FAA) Paragraph (4F)(a) does not apply to the
extent that the Commissioner of the Australian Federal Police divulges or
communicates the information to a person or employee under his or her control
for the purposes of, or in connection with, the performance by that person or
employee of the duties of his or her office or employment.
Note: A defendant bears an evidential burden in
relation to the matters in subsection (4FAA), see subsection 13.3(3) of
the Criminal Code.
(4FAB) Subparagraph (4F)(c)(i) does not apply
to the extent that the person divulges or communicates the information:
(a) to the Commissioner of the
Australian Federal Police for the purposes of, or in connection with, the
performance by the Commissioner of the Australian Federal Police of the duties
of his or her office; or
(b) another person or employee under
the control of the Commissioner of the Australian Federal Police for the
purposes of, or in connection with, the performance by that person or employee
of the duties of his or her office or employment, as the case may be.
Note: A defendant bears an evidential burden in
relation to the matters in subsection (4FAB), see subsection 13.3(3) of
the Criminal Code.
(4FA) Where information is communicated to the
Director of Public Prosecutions under paragraph (4A)(ba):
(a) the Director of Public
Prosecutions must not divulge or communicate the information; and
(b) a person who is no longer the
Director of Public Prosecutions must not make a record of the information, or
divulge or communicate the information, in any circumstances; and
(c) a person to whom information has
been communicated in accordance with subsection (4FAAA) or (4FAAB) must
not:
(i) while he or she is a
person or employee under the control of the Director of Public
Prosecutions—divulge or communicate the information; or
(ii) when he or she is no
longer a person or employee under the control of the Director of Public
Prosecutions—make a record of the information, or divulge or communicate the
information, in any circumstances.
(4FAAA) Paragraph (4FA)(a) does not apply to the
extent that the Director of Public Prosecutions divulges or communicates the
information to a person or employee under his or her control for the purposes
of, or in connection with, the performance by that person or employee of the
duties of his or her office or employment.
Note: A defendant bears an evidential burden in
relation to the matters in subsection (4FAAA), see subsection 13.3(3) of
the Criminal Code.
(4FAAB) Subparagraph (4FA)(c)(i) does not apply to
the extent that the person divulges or communicates the information to:
(a) the Director of Public
Prosecutions for the purposes of, or in connection with, the performance by the
Director of Public Prosecutions of the duties of his or her office; or
(b) to another person or employee
under the control of the Director of Public Prosecutions, for the purposes of,
or in connection with, the performance by that other person or employee of the
duties of his or her office or employment, as the case may be.
Note: A defendant bears an evidential burden in
relation to the matters in subsection (4FAAB), see subsection 13.3(3) of
the Criminal Code.
(4FB) Where information is communicated to a
Special Prosecutor under paragraph (4A)(ba):
(a) the Special Prosecutor must not
divulge or communicate the information; and
(b) a person who is no longer a
Special Prosecutor must not make a record of the information, or divulge or
communicate the information, in any circumstances; and
(c) a person to whom information has
been communicated in accordance with subsection (4FBA) or (4FBB) must not:
(i) while he or she is a
person or employee under the control of the Special Prosecutor—divulge or
communicate the information; or
(ii) when he or she is no
longer a person or employee under the control of the Special Prosecutor—make a
record of the information, or divulge or communicate the information, in any
circumstances.
(4FBA) Paragraph (4FB)(a) does not apply to the
extent that the Special Prosecutor divulges or communicates the information to
a person or employee under his or her control for the purposes of, or in
connection with, the performance by that person or employee of the duties of
his or her office or employment.
Note: A defendant bears an evidential burden in
relation to the matters in subsection (4FBA), see subsection 13.3(3) of
the Criminal Code.
(4FBB) Subparagraph (4FB)(c)(i) does not apply
to the extent that the person divulges or communicates the information to:
(a) the Special Prosecutor for the
purposes of, or in connection with, the performance by the Special Prosecutor
of the duties of his or her office; or
(b) to another person or employee
under the control of the Special Prosecutor, for the purposes of, or in
connection with, the performance by that other person or employee of the duties
of his or her office or employment, as the case may be.
Note: A defendant bears an evidential burden in
relation to the matters in subsection (4FBB), see subsection 13.3(3) of
the Criminal Code.
(4G) A reference in subsection (4AAA) to a
person under the control of a Royal Commission includes a reference to:
(a) a barrister or solicitor appointed
by the Attorney‑General to assist the Royal Commission;
(b) a person assisting a barrister or
solicitor so appointed; and
(c) a member or special member of the
Australian Federal Police, or a member of a police force of a State or
Territory, assigned to the Royal Commission to carry out an investigation on
behalf of, or under the control of, the Royal Commission.
(4H) A reference in subsection (4EB), (4ED)
or (4EE) to a person under the control of the Attorney‑General includes a
reference to:
(a) an officer of, or person employed
in, the Attorney‑General’s Department;
(b) a person holding office, or
employed, under an Act administered by the Attorney‑General; and
(c) a person under the control of a
person to whom paragraph (b) applies.
(4J) A person to whom information has been
communicated under paragraph (4)(k) or under subsection (4A), (4AAA),
(4E), (4EB), (4EE), (4FAA), (4FAB), (4FAAA), (4FAAB), (4FBA) or (4FBB) shall
not be required to divulge or communicate that information to any court.
(4JA) Where information is communicated to a
person under paragraph (4A)(ba) or subsection (4FAAA), (4FAAB),
(4FBA) or (4FBB), nothing in subsection (4FA) or (4FB) prevents:
(a) the communication of the
information to another person for the purposes of, or in connection with, the
prosecution of a person for a tax‑related offence; or
(b) if the information is admissible
in a prosecution of a person for a tax‑related offence—the communication
of the information to a court in the course of proceedings before that court
against the last‑mentioned person for that offence.
(4JB) A person to whom information has been
communicated in accordance with paragraph (4JA)(a) shall not make a record
of the information, or divulge or communicate the information.
(4JC) Subsection (4JB) does not apply to the
extent that the person makes the record of the information, or divulges or
communicates the information, for the purposes of, or in connection with, the
prosecution of a person for a tax‑related offence.
Note: A defendant bears an evidential burden in
relation to the matters in subsection (4JC), see subsection 13.3(3) of the
Criminal Code.
(5) Any person to whom information is
communicated under subsection (4) other than paragraph (4)(k) or
(4)(l), and any person or employee under his control shall, in respect of that
information, be subject to the same rights, privileges, obligations and
liabilities, under subsections (2) and (3), as if he were an officer.
(5A) For the purposes of subsections (2)
and (5), an officer or person shall be deemed to have communicated such
information to another person in contravention of those subsections if he
communicates that information to any Minister or to any Minister of the Crown
of a State.
(5B) Where the Treasurer is satisfied that it is
desirable to do so for the purpose of enabling the Government of the
Commonwealth to review the operation of the provisions of this Act providing
for rebates of tax by reference to export market development expenditure, he
may, by writing under his hand, request the Commissioner to communicate to him,
or to a person specified in the request, being a Minister of State, the
Secretary to the Department of the Treasury or the Secretary to the Department
of Trade, information relating to such matters as are specified in the request,
and, notwithstanding anything contained in this section, the Commissioner, or
an officer authorized by him, shall communicate information relating to those
matters to the person specified in the request.
(5BA) Where the Treasurer is satisfied that it is
desirable to do so for the purpose of enabling the Government of the Commonwealth
to review the operation of the provisions of this Act providing for allowable
deductions in respect of moneys paid on shares in companies that hold licences
in force under the Management and Investment Companies Act 1983, he may,
by writing signed by him, request the Commissioner to communicate to him or to
another person specified in the request, being a Minister of State, the
Secretary to the Department of the Treasury or the Secretary to the Department
of Science, information relating to such matters as are specified in the
request, and, notwithstanding anything contained in this section, the
Commissioner, or an officer authorized by him, shall communicate information
relating to those matters to the person specified in the request.
(5C) The Secretary to the Department of the
Treasury, the Secretary to the Department of Trade, the Secretary to the
Department of Science or any other officer or employee of the Commonwealth
shall not, either while he is, or after he ceases to be, such an officer or
employee:
(a) make a record of, or divulge or
communicate to a Minister of State or any other officer or employee of the
Commonwealth, any information relating to the affairs of a person acquired by
him by reason, directly or indirectly, of a communication in accordance with subsection (5B)
or (5BA); or
(b) divulge or communicate any such
information to any person who is not a Minister of State or officer or employee
of the Commonwealth.
(5CA) Paragraph (5C)(a) does not apply to the
extent that the person makes the record of the information, or divulges or
communicates the information, in the performance of a duty as an officer or
employee of the Commonwealth.
Note: A defendant bears an evidential burden in
relation to the matters in subsection (5CA), see subsection 13.3(3) of the
Criminal Code.
(5D) A person to whom subsection (5C)
applies shall not be required to produce in a court a document containing
information referred to in that subsection or to divulge or communicate to a
court any such information.
(6) Any officer shall, if and when required
by the Commissioner, a Second Commissioner or Deputy Commissioner to do so,
make an oath or declaration, in the approved form, to maintain secrecy in
conformity with the provisions of this section.
Penalty: 100 penalty units or imprisonment for 2 years, or
both.
16A
Provisions relating to the Fitzgerald inquiry
(1) In this section:
inquiry means the inquiry being made by
Gerald Edward Fitzgerald Q.C. under the Order in Council that was made under The
Commissions of Inquiry Act of 1950 of the State of Queensland and published
in the Queensland Government Gazette, on 26 May 1987, at pages 758A and
758B, being that Order in Council as amended by:
(a) the Order in Council made under
that Act and published in the Queensland Government Gazette, on 24 June 1987, at pages 1841A and 1841B; and
(b) any other instrument, whether made
before or after the commencement of this section.
proceeds of crime proceedings means
proceedings under the Proceeds of Crime Act 1987 or a law of the State
of Queensland relating to the restraint of dealing with, or the confiscation
of, proceeds of crime, being:
(a) if the proceedings relate to a tax‑related
offence—proceedings commenced before or after a conviction for that offence; and
(b) if the proceedings relate to any
other offence—proceedings commenced after a conviction for that offence.
State Attorney‑General means the
Attorney‑General of the State of Queensland.
State Commissioner means Gerald Edward
Fitzgerald Q.C., in his capacity as the person making the inquiry.
State Police Commissioner means the
Commissioner of the Police Force of the State of Queensland or a person for the
time being performing the duties of that Commissioner.
(2) In this section, Director of Public
Prosecutions, officer, Special Prosecutor
and tax‑related offence have the same respective meanings
as in section 16.
(3) Nothing in section 16 shall be
deemed to prohibit the Commissioner of Taxation, a Second Commissioner or a
Deputy Commissioner, or any person authorised by the Commissioner, a Second
Commissioner or a Deputy Commissioner, from communicating any information to
the State Commissioner for the purposes of the inquiry.
(4) Subject to subsections (8) and (9),
where information respecting the affairs of a person is communicated to the
State Commissioner, the State Commissioner may:
(a) in a manner that does not
identify, and is not reasonably capable of being used to identify, the person
to whom the information relates:
(i) communicate the information
to the Governor of the State of Queensland in a report by the State
Commissioner; or
(ii) divulge the
information in the course of a proceeding conducted by the State Commissioner,
other than a proceeding conducted in private;
(b) divulge the information in the
course of a proceeding conducted in private by the State Commissioner;
(c) communicate the information to the
Attorney‑General if the State Commissioner is of the opinion that the
information indicates that a person may have committed an offence against an
Act punishable by imprisonment for life or for a period exceeding 6 months;
(d) communicate the information to the
State Attorney‑General if the State Commissioner is of the opinion that
the information indicates that a person may have committed an offence against a
law of the State of Queensland punishable by imprisonment for life or for a
period exceeding 6 months;
(e) communicate the information to the
Director of Public Prosecutions or a Special Prosecutor if the State
Commissioner is of the opinion that the information relates, or may relate, to
an investigation of a tax‑related offence or to proceeds of crime
proceedings, being proceedings under the Proceeds of Crime Act 1987; and
(f) communicate the information to
the Director of Prosecutions of the State of Queensland if the State
Commissioner is of the opinion that the information relates, or may relate, to
proceeds of crime proceedings, being proceedings under a law of the State of Queensland
relating to the restraint of dealing with, or the confiscation of, proceeds of
crime.
(5) Where information respecting the affairs
of a person is communicated to the State Commissioner under this section, the
State Commissioner may divulge or communicate the information to a person or
employee under the control of the State Commissioner for the purposes of, or in
connection with, the inquiry but shall not, except under subsection (4),
otherwise divulge or communicate the information.
(6) Where the State Commissioner ceases to be
the State Commissioner, he shall not in any circumstances make a record of, or
divulge or communicate, any information respecting the affairs of a person that
was communicated to the State Commissioner under this section.
(7) A person to whom information has been communicated
under subsection (5) or this subsection shall not:
(a) while he or she is a person or
employee under the control of the State Commissioner—divulge or communicate the
information except to the State Commissioner, or another person or employee under
the control of the State Commissioner, for the purposes of, or in connection
with, the inquiry; or
(b) after he or she ceases to be such
a person or employee—in any circumstances make a record of, or divulge or
communicate, the information.
(8) Where information respecting the affairs
of a person is communicated to the State Commissioner under this section,
nothing in this section prevents the communication of the information to:
(a) if the person to whose affairs the
information relates is not a company—that person;
(b) if the person to whose affairs the
information relates is a company:
(i) any person who is, or
has been, a director or officer of the company; or
(ii) any person who is, or
has been, directly involved in, or responsible for, the preparation of
information given to the Commissioner of Taxation on behalf of the company; or
(c) the person who gave the
information to the Commissioner of Taxation.
(9) Where the communication of information to
a person is permitted under subsection (8), nothing in this section
prevents the communication of the information to a barrister or solicitor
appearing before the State Commissioner for the purpose of representing the
person.
(10) Where information is communicated to a
person under subsection (8) or (9) or paragraph (4)(b), being
information that was not given to the Commissioner of Taxation by the person
and does not relate to the affairs of the person, the person shall not in any
circumstances make a record of, or divulge or communicate, the information.
(11) Where information is communicated to the
Attorney‑General under this section:
(a) the Attorney‑General may
communicate the information to the Commissioner of Police;
(b) the Attorney‑General shall
not otherwise divulge or communicate the information except to a person or
employee under the control of the Attorney‑General for the purpose of, or
in connection with, the performance by the Attorney‑General of the
function under paragraph (a);
(c) a person who has ceased to be the
Attorney‑General shall not in any circumstances make a record of, or
divulge or communicate, the information; and
(d) a person to whom information has
been communicated under paragraph (b) or this paragraph shall not:
(i) while he or she is a
person or employee under the control of the Attorney‑General—divulge or
communicate the information except to the Attorney‑General, or another
person or employee under the control of the Attorney‑General, for the
purposes of, or in connection with, the performance by the Attorney‑General
of the function under paragraph (a); or
(ii) after he or she ceases
to be such a person or employee—in any circumstances make a record of, or
divulge or communicate, the information.
(12) Where information is communicated to the
State Attorney‑General under this section:
(a) the State Attorney‑General
may communicate the information to the State Police Commissioner;
(b) the State Attorney‑General
shall not otherwise divulge or communicate the information except to a person
or employee under the control of the State Attorney‑General for the
purpose of, or in connection with, the performance by the State Attorney‑General
of the function under paragraph (a);
(c) a person who has ceased to be the
State Attorney‑General shall not in any circumstances make a record of,
or divulge or communicate, the information; and
(d) a person to whom information has
been communicated under paragraph (b) or this paragraph shall not:
(i) while he or she is a
person or employee under the control of the State Attorney‑General—divulge
or communicate the information except to the State Attorney‑General, or
another person or employee under the control of the State Attorney‑General,
for the purposes of, or in connection with, the performance by the State
Attorney‑General of the function under paragraph (a); or
(ii) after he or she ceases
to be such a person or employee—in any circumstances make a record of, or
divulge or communicate, the information.
(13) Where information is communicated to the
Commissioner of Police or the State Police Commissioner under this section:
(a) that Commissioner shall not
divulge or communicate the information except to a person or employee under the
control of that Commissioner for the purposes of, or in connection with, the
performance by that person or employee of the duties of his or her office or
employment;
(b) a person who has ceased to be the
Commissioner of Police or the State Police Commissioner, as the case may be,
shall not in any circumstances make a record of, or divulge or communicate, the
information; and
(c) a person to whom information has
been communicated by a Commissioner under paragraph (a) or this paragraph
shall not:
(i) while he or she is a
person or employee under the control of that Commissioner—divulge or communicate
the information except to that Commissioner, or another person or employee
under the control of that Commissioner, for the purposes of, or in connection
with, the performance by that Commissioner of the duties of his or her office,
or the performance by that person or employee of the duties of his or her
office or employment, as the case may be; or
(ii) after he or she ceases
to be such a person or employee—in any circumstances make a record of, or
divulge or communicate, the information.
(14) Where information is communicated to the
Director of Public Prosecutions or the Director of Prosecutions of the State of
Queensland under this section:
(a) that Director shall not divulge or
communicate the information except to a person or employee under the control of
that Director for the purposes of, or in connection with, the performance by
that person or employee of the duties of his or her office or employment;
(b) a person who is no longer the
Director of Public Prosecutions or the Director of Prosecutions of the State of
Queensland, as the case may be, shall not in any circumstances make a record
of, or divulge or communicate, the information; and
(c) a person to whom information has
been communicated by a Director under paragraph (a) or this paragraph
shall not:
(i) while he or she is a
person or employee under the control of that Director—divulge or communicate
the information except to that Director, or to another person or employee under
the control of that Director, for the purposes of, or in connection with, the
performance by that Director of the duties of his or her office, or the
performance by that person or employee of the duties of his or her office or
employment, as the case may be; or
(ii) after he or she ceases
to be such a person or employee—in any circumstances make a record of, or
divulge or communicate, the information.
(15) Where information is communicated to a
Special Prosecutor under this section:
(a) the Special Prosecutor shall not
divulge or communicate the information except to a person or employee under his
or her control for the purposes of, or in connection with, the performance by
that person or employee of the duties of his or her office or employment;
(b) a person who is no longer a
Special Prosecutor shall not, in any circumstances, make a record of, or
divulge or communicate, the information; and
(c) a person to whom information has
been communicated under paragraph (a) or this paragraph shall not:
(i) while he or she is a
person or employee under the control of the Special Prosecutor—divulge or
communicate the information except to the Special Prosecutor, or to another
person or employee under the control of the Special Prosecutor, for the
purposes of, or in connection with, the performance by the Special Prosecutor
of the duties of his or her office, or the performance by that other person or
employee of the duties of his or her office or employment, as the case may be;
or
(ii) when he or she is no
longer such a person or employee—in any circumstances, make a record of, or
divulge or communicate, the information.
(16) In this section:
(a) a reference to a person under the
control of the State Commissioner includes a reference to:
(i) a barrister or
solicitor appointed by the State Attorney‑General to assist the State
Commissioner;
(ii) a person assisting a
barrister or solicitor so appointed; and
(iii) a member of the police
force of the State of Queensland assigned to the inquiry to carry out an
investigation on behalf of, or under the control of, the State Commissioner;
(b) a reference to a person under the
control of the Attorney‑General includes a reference to:
(i) an officer of, or a
person employed in, the Attorney‑General’s Department;
(ii) a person holding
office, or employed, under an Act administered by the Attorney‑General;
and
(iii) a person under the
control of a person referred to in subparagraph (ii); and
(c) a reference to a person under the
control of the State Attorney‑General includes a reference to:
(i) an officer of, or a
person employed in, the Department of Justice of the State of Queensland;
(ii) a person holding
office, or employed, under a law of that State administered by the State
Attorney‑General; and
(iii) a person under the
control of a person referred to in subparagraph (ii).
(17) A person to whom information has been
communicated under this section shall not be required to divulge or communicate
that information to any court.
(18) Where information is communicated to a
person under paragraph (4)(e) or (f) or subsection (14) or (15),
nothing in subsection (14) or (15) prevents:
(a) the communication of the
information to another person for the purposes of, or in connection with, the
prosecution of a person for a tax‑related offence or proceeds of crime
proceedings against a person; or
(b) if the information is admissible
in the prosecution of a person for a tax‑related offence, or in proceeds
of crime proceedings against a person, the communication of the information to
a court in proceedings before that court against the last‑mentioned
person for that offence or in those proceeds of crime proceedings, as the case
may be.
(19) A person to whom information has been
communicated under paragraph (18)(a) shall not make a record of, or
divulge or communicate, the information except for the purposes of, or in
connection with, the prosecution of a person for a tax‑related offence or
proceeds of crime proceedings against a person.
Penalty: $10,000 or imprisonment for 2 years, or both.
Part III—Liability to taxation
Division 1—General
18
Accounting period
Any person may, with the leave of the
Commissioner, adopt an accounting period being the 12 months ending on some
date other than 30 June. For the purposes of this Act, the person’s
accounting period in each succeeding year shall end on the corresponding date
of that year, unless:
(a) with the leave of the Commissioner
some other date is adopted; or
(b) the accounting period ends earlier
under section 18A.
18A
Accounting periods for VCLPs, ESVCLPs, AFOFs and VCMPs
(1) If a partnership becomes, or ceases to
be, a VCLP, an ESVCLP, an AFOF or a VCMP on a particular day:
(a) the accounting period during which
that day occurs (the first accounting period) is taken to have
ended immediately before that day; and
(b) another accounting period is taken
to have commenced at the beginning of that day.
The other accounting period ends on the day on which the
first accounting period would have ended if this section did not apply.
Example: A partnership whose accounting periods ended on 30 June
becomes a VCLP, an ESVCLP on 1 October 2002, and ceases to be a VCLP, an
ESVCLP on 1 April 2003.
The effect of becoming a VCLP, an
ESVCLP: the accounting period that commenced on 1 July 2002 is taken under this section to end on 30 September 2002, and a second accounting
period commences on 1 October 2002. The second accounting period is
scheduled to end on 30 June 2003.
The effect of ceasing to be a VCLP, an
ESVCLP: the second accounting period is now taken under this section to end
on 31 March 2003, and a third accounting period commences on 1 April 2003. The third accounting period is to end on 30 June 2003.
(2) This section does not apply in relation
to a partnership becoming, or ceasing to be, a VCLP, an ESVCLP, an AFOF or a
VCMP on the day on which an accounting period commences.
21
Where consideration not in cash
(1) Where, upon any transaction, any
consideration is paid or given otherwise than in cash, the money value of that
consideration shall, for the purposes of this Act, be deemed to have been paid
or given.
(2) This section has effect subject to
section 21A.
21A
Non‑cash business benefits
(1) For the purposes of this Act, in
determining the income derived by a taxpayer, a non‑cash business benefit
that is not convertible to cash shall be treated as if it were convertible to
cash.
(2) For the purposes of this Act, if a non‑cash
business benefit (whether or not convertible to cash) is income derived by a
taxpayer:
(a) the benefit shall be brought into
account at its arm’s length value reduced by the recipient’s contribution (if
any); and
(b) if the benefit is not convertible
to cash—in determining the arm’s length value of the benefit, any conditions
that would prevent or restrict the conversion of the benefit to cash shall be
disregarded.
(3) Where:
(a) a non‑cash business benefit
is income derived by a taxpayer in a year of income; and
(b) if the taxpayer had, at the time
the benefit was provided, incurred and paid unreimbursed expenditure in respect
of the provision of the benefit equal to the amount of the arm’s length value
of the benefit—a once‑only deduction would, or would but for section 82A,
and Subdivisions F, GA and G of Division 3 of this Part, of this Act, and
Divisions 28 and 900 of the Income Tax Assessment Act 1997, have
been allowable to the taxpayer in respect of a percentage (in this subsection
called the deductible percentage) of the expenditure;
the amount that, apart from this subsection, would be
applicable under subsection (2) of this section in respect of the benefit
shall be reduced by the deductible percentage.
(4) Where:
(a) a non‑cash business benefit
is income derived by a taxpayer in a year of income; and
(b) a percentage (in this subsection
called the non‑deductible entertainment percentage) of any
expenditure incurred by the provider in respect of the provision of the benefit
is non‑deductible entertainment expenditure;
the amount that, apart from this subsection, would be
applicable under subsection (2) in respect of the benefit shall be reduced
by the non‑deductible entertainment percentage.
(5) In this section:
arm’s length value, in relation to a non‑cash
business benefit, means:
(a) the amount that the recipient
could reasonably be expected to have been required to pay to obtain the benefit
from the provider under a transaction where the parties to the transaction are
dealing with each other at arm’s length in relation to the transaction; or
(b) if such an amount cannot be
practically determined—such amount as the Commissioner considers reasonable.
income derived by a taxpayer means income
derived by a taxpayer in carrying on a business for the purpose of gaining or
producing assessable income.
non‑cash business benefit means
property or services provided after 31 August 1988:
(a) wholly or partly in respect of a
business relationship; or
(b) wholly or partly for or in
relation directly or indirectly to a business relationship.
non‑deductible entertainment expenditure
means expenditure to the extent to which:
(a) section 32‑5 of the Income
Tax Assessment Act 1997 applies to the expenditure; and
(b) but for that section, the
expenditure would be deductible under section 8‑1 of the Income
Tax Assessment Act 1997.
once‑only deduction, in relation to
expenditure, means a deduction in a year of income in respect of a percentage
of the expenditure where no deduction is allowable in respect of a percentage
of the expenditure in any other year of income.
provide:
(a) in relation to property—includes
dispose of (whether by assignment, declaration of trust or otherwise); and
(b) in relation to services—includes
allow, confer, give, grant or perform.
recipient’s contribution, in relation to a
non‑cash business benefit, means the amount of any consideration paid to
the provider by the recipient in respect of the provision of the benefit,
reduced by the amount of any reimbursement paid to the recipient in respect of
that consideration.
services includes any benefit, right
(including a right in relation to, and an interest in, real or personal
property), privilege or facility and, without limiting the generality of the
foregoing, includes a right, benefit, privilege, service or facility that is,
or is to be, provided under:
(a) an arrangement for or in relation
to:
(i) the performance of
work (including work of a professional nature), whether with or without the
provision of property;
(ii) the provision of, or
of the use of facilities for, entertainment, recreation or instruction; or
(iii) the conferring of
rights, benefits or privileges for which remuneration is payable in the form of
a royalty, tribute, levy or similar exaction;
(b) a contract of insurance; or
(c) an arrangement for or in relation
to the lending of money.
(6) Notwithstanding section 21, the
consideration referred to in the definition of recipient’s contribution
in subsection (5) of this section is consideration in money.
23AA
Income of persons connected with certain projects of United States
Government
(1) In this section, unless the contrary
intention appears:
approved project means the establishment,
maintenance or operation of the North West Cape naval communication station, of
the Joint Defence Space Research Facility, of the Sparta project or of the
Joint Defence Space Communications Station.
Australia includes the Territories.
civilian accompanying the United States Forces
means a person (not being a member of the United States Forces, an Australian
citizen or a person ordinarily resident in Australia) who:
(a) is an employee:
(i) of the United States
Forces; or
(ii) of, or of a body
conducting, a club or other facility established for the benefit or welfare of
members of the United States Forces or of persons accompanying those Forces and
which is recognized by the Government of the United States of America as a non‑appropriated
fund activity; or
(b) is serving with an organization
that, with the approval of the Government of the Commonwealth, accompanies the
United States Forces in Australia.
dependant, in relation to a person, means:
(a) the spouse of that person; or
(b) a
relative, other than the spouse, of that person who is wholly or mainly
dependent for support on that person;
but, in the case of a person who, immediately before
becoming such a spouse or relative, was ordinarily resident in Australia, does
not include that person so long as that person continues to be ordinarily
resident in Australia.
foreign contractor means a person who is a
party to a prescribed contract and is not:
(a) a company incorporated in Australia;
(b) an Australian citizen; or
(c) a person, other than a company,
who is ordinarily resident in Australia.
foreign employee means a person who:
(a) is an employee of a foreign
contractor; or
(b) is a director of a company that is
a foreign contractor;
and is not an Australian citizen or ordinarily resident in
Australia.
prescribed contract means:
(a) a contract to which the Government
of the United States of America is a party in connexion with an approved
project; or
(b) a contract made for purposes
connected with the performance of a contract referred to in paragraph (a).
prescribed purposes means:
(a) in relation to a foreign
contractor or foreign employee—purposes relating to the performance of a
prescribed contract;
(aa) in relation to a United States
employee—purposes relating to an approved project; and
(b) in relation to a member of the
United States Forces or a civilian accompanying the United States
Forces—purposes relating to the carrying on of activities agreed upon between
the Government of the Commonwealth and the Government of the United States of
America.
the Joint Defence Space Communications Station
means the undertaking the establishment of which is provided for by an
agreement dated 10 November 1969 between the Government of the
Commonwealth and the Government of the United States of America.
the Joint Defence Space Research Facility
means the undertaking the establishment of which is provided for by an
agreement dated 9 December 1966 between the Government of the Commonwealth
and the Government of the United States of America.
the North West Cape naval communication station
means the naval communication station the establishment of which is provided
for by the agreement approved by the United States Naval Communication
Station Agreement Act 1963.
the Sparta project
means the undertaking the establishment of which is provided for by a
memorandum of arrangement dated 30 March 1966 between the Government of
the Commonwealth, the Government of the United Kingdom of Great Britain and
Northern Ireland and the Government of the United States of America.
the United States Forces
means the armed forces of the Government of the United States of America.
United States employee means a
person who is employed by the Government of the United States of America and is
not:
(a) a member of the United States
Forces;
(b) a civilian accompanying the United
States Forces;
(c) an Australian citizen; or
(d) a person ordinarily resident in Australia.
(2) For the purposes of this section, a
foreign contractor, foreign employee or United States employee who is in
Australia, or is carrying on business in Australia, solely for prescribed
purposes does not cease to be in Australia solely for those purposes, or to be
carrying on business in Australia solely for those purposes, by reason of
anything undertaken or done by him in connexion with an undertaking in
Australia of the Government of the United States of America, other than an
approved project, agreed upon between the Government of the Commonwealth and
the Government of the United States of America.
(3) Where a person:
(a) has been in Australia, or has
carried on business in Australia, solely for prescribed purposes during a
period when he was a foreign contractor or foreign employee;
(b) has been in Australia solely for
prescribed purposes during a period when he was a member of the United States
Forces, a civilian accompanying the United States Forces or a United States
employee; or
(c) has been in Australia during a
period when he was a dependant of such a contractor, employee, member or civilian
who was in Australia solely for prescribed purposes;
that person shall, for the purposes of the provisions of
this Act other than Subdivision A of Division 17, be deemed not to have
been a resident of Australia during that period, and the presence of that
person in Australia during that period shall be disregarded in determining, for
the purposes of those provisions, whether the person was a resident of
Australia at any other time.
(4) Subsection (3) does not apply in
respect of, or of a part of, a period when a person was, or was a dependant of,
a foreign contractor, a foreign employee, a civilian accompanying the United
States Forces or a United States employee if the person:
(a) being a company—was not a domestic
corporation for the purposes of the law of the United States of America
relating to income tax; or
(b) not being a company—was not a
resident of the United States of America for the purposes of that law or a
citizen of the United States of America;
during that period or that part of that period, as the
case may be.
(5) Where:
(a) a foreign contractor or a foreign
employee has derived income wholly and exclusively from, or from employment in
connexion with, the performance in Australia of a prescribed contract;
(b) the income is not exempt from
income tax imposed by Chapter One of Subtitle A of the Internal Revenue Code of
1986 of the United States of America; and
(c) the foreign contractor or foreign
employee was, at the time the income was derived, in Australia, or carrying on
business in Australia, solely for prescribed purposes;
the income shall, for the purposes of this Act, be deemed
to have been derived from sources out of Australia.
(6) Where:
(a) a person has derived income in
respect of service as a civilian accompanying the United States Forces or as a
United States employee during a period when he was in Australia solely for
prescribed purposes; and
(b) the income is not exempt from
income tax imposed by Chapter One of Subtitle A of the Internal Revenue Code of
1986 of the United States of America;
the income shall, for the purposes of this Act, be deemed
to have been derived from sources out of Australia.
23AB
Income of certain persons serving with an armed force under the control of the
United Nations
(1) In this
section:
prescribed taxpayer means a taxpayer who,
being a resident of Australia, is, or is included in a class of persons that
is, prescribed by the regulations for the purposes of this section.
tax deductions unapplied, in relation to a
deceased person, means any amounts withheld under Part 2‑5 in
Schedule 1 to the Taxation Administration Act 1953 from work and
income support related withholding payments and benefits derived by the
deceased person in respect of United Nations service:
(a) that have not been credited in
payment of income tax; and
(b) in respect of which a payment has
not been made by the Commissioner.
the prescribed area has the same meaning as
in section 79A.
United Nations service means service, other
than service as a member of the Defence Force, performed, at the direction or
with the approval of the Commonwealth, outside Australia with an armed force
under the control of the United Nations, at a time when the person performing
the service was a prescribed taxpayer.
(2) The regulations may prescribe a person or
a class of persons for the purposes of this section but shall not so prescribe
a person or class of persons unless the salary, wages and allowances received
by the person or by all the persons in that class, as the case may be, in respect
of his or their United Nations service are paid, given or granted by the
Commonwealth or by the United Nations for and on behalf of the Commonwealth.
(3) A succeeding provision of this section
does not apply in relation to a person if the regulations provide that that
provision does not apply in relation to that person or in relation to a class
of persons in which that person is included.
(4) Regulations made for the purposes of subsection (2)
or (3) may provide that the regulations shall be deemed to have taken effect on
a date specified in the regulations, being a date before the date on which the
regulations are notified in the Gazette, and, in that case, the
regulations shall be deemed to have taken effect on the date so specified.
(5) Where:
(a) a payment of compensation under
the Safety, Rehabilitation and Compensation Act 1988 is made in respect
of the incapacity, impairment or death of a taxpayer;
(b) the incapacity, impairment or
death of the taxpayer resulted from an occurrence that happened during the
performance by the taxpayer of United Nations service; and
(c) if the taxpayer had, at the time
of the happening of the occurrence, been a member of the Defence Force
rendering continuous full‑time service outside Australia while the
taxpayer was allotted for duty in an operational area described in item 4,
5, 6, 7 8, 9, 10, 11, 12, 13 or 14 of Column 1 of Schedule 2 to the Veterans’
Entitlements Act 1986, the Commonwealth would be liable to pay a pension
under that Act in respect of the incapacity, impairment or death of the
taxpayer;
the payment of compensation is exempt from income tax.
(6) For the purposes of section 15‑2
of the Income Tax Assessment Act 1997, the total value of all
allowances, gratuities, compensations, benefits, bonuses and premiums (in this
subsection referred to as living allowances) allowed, given or
granted in meals, sustenance or the use of premises or quarters (including
payment in lieu of one or more of those living allowances) to a taxpayer in
respect of, or for or in relation directly or indirectly to, United Nations
service shall be deemed to be an amount calculated at the rate of $2 for each
week of that service in which any of those living allowances were so allowed,
given or granted, or in which payment in lieu of any of those living allowances
was made, to the taxpayer.
(7) Subject to subsections (8), (8A) and
(9A) and subsection 79B(4), a taxpayer is entitled to a rebate of tax in his
assessment in respect of income of a year of income in which he has performed
United Nations service and derived income by way of salary, wages or other
allowances in respect of that service:
(a) where the total period of that
service performed by the taxpayer during the year of income is more than one‑half
of the year of income or where the taxpayer dies while performing that service
during the year of income—an amount equal to the sum of:
(i) $338; and
(ii) an amount equal to 50%
of the sum of the following rebates (if any) in respect of the year of income:
(AA) any rebate
to which the taxpayer would be entitled under section 159L, apart from
subsections 159L(3A), (5A) and (5B);
(B) any
rebate to which the taxpayer is entitled under section 159J in respect of
a dependant included in class 5 or 6 in the table in subsection 159J(2);
(BA) any
rebate to which the taxpayer would be entitled under section 159J in
respect of a dependant included in class 2 in the table in subsection 159J(2),
apart from subsections 159J(1AA), (3AA) and (3AB);
(C) any
rebate to which the taxpayer would, disregarding subsection 159J(1A), be
entitled under section 159J in respect of a dependant included in class 3
or 4 in the table in subsection 159J(2);
(D) any
rebate to which the taxpayer would be entitled under section 159J in
respect of a dependant included in class 1 in the table in subsection 159J(2) (ignoring
subsections 159J(1AA), (3AA) and (3AB)) if subsection 159J(1B) also included a
reference to any dependant included in class 1 of that table and the amount
applicable to class 1 of that table were $2,440;
(b) in any other case—such amount as,
in the opinion of the Commissioner, is reasonable in the circumstances, being
an amount not greater than the amount of the rebate to which the taxpayer would
have been entitled under this subsection if paragraph (a) had applied to
him in respect of the year of income.
Note 1: Paragraph 23AB(7)(a) lets a taxpayer include
the dependent spouse rebate (without child), the child‑housekeeper rebate
or the housekeeper rebate for the purpose of working out the amount of rebate
under this section, even if the taxpayer or the taxpayer’s spouse is eligible
for family tax benefit at the Part B rate for the whole or part of a year.
Note 2: Another effect of that paragraph (see sub-subparagraph (D))
is to let a taxpayer include the dependent spouse rebate (with child), despite
its abolition by the A New Tax System (Family Assistance) (Consequential and
Related Measures) Act (No. 1) 1999, for the purpose of working out the
rebate amount under this section.
(8) For the purposes of subsection (7),
but subject to subsection (8A), the total period of United Nations service
of a taxpayer in any year of income shall be deemed to include any period in
that year of income during which the taxpayer has resided, or has actually been,
in the prescribed area.
(8A) For the purposes of subsection (7),
United Nations service does not include any period of service of the taxpayer
in respect of which an exemption from income tax applies under section 23AG.
(9) Where a rebate is allowable under subsection (7)
in the assessment of a taxpayer in respect of income of a year of income and,
but for this subsection, a rebate of a lesser amount would be allowable in that
assessment under section 79A, a rebate under section 79A is not
allowable in that assessment.
(9A) Where a rebate is allowable under section 79A
in the assessment of a taxpayer in respect of income of a year of income and,
but for this subsection, a rebate of the same or a lesser amount would be
allowable in that assessment under subsection (7), a rebate under subsection (7)
is not allowable in that assessment.
(9B) Subsection 79B(4) shall be disregarded in
determining for the purposes of subsections (9) and (9A) of this section
the amount of a rebate allowable to a taxpayer under subsection (7) of
this section or under section 79A.
(10) Where:
(a) the trustee of the estate of a
deceased person who has performed United Nations service is liable to pay
income tax, in respect of a year of income, upon income that consists of or includes
salary, wages or allowances derived by the deceased person in respect of that
service;
(b) the death of the person resulted
from an occurrence that happened during that service; and
(c) if the person had, at the time of
the happening of the occurrence, been a member of the Defence Force rendering
continuous full‑time service outside Australia while the taxpayer was
allotted for duty in an operational area described in item 4, 5, 6, 7 or 8
of Column 1 of Schedule 2 to the Veterans’ Entitlements Act 1986,
the Commonwealth would be liable to pay a pension under that Act in respect of
the death of the person;
the trustee is, by force of this subsection, released from
the payment of so much of that tax as remains after deducting any tax
deductions unapplied:
(d) if the assessable income of the
deceased person of the year of income consists solely of the salary, wages or
allowances derived in respect of that service—from the amount of income tax so
payable by the trustee; or
(e) if the assessable income of the
deceased person of the year of income includes income other than the salary,
wages or allowances derived in respect of that service:
(i) from the amount of
income tax so payable by the trustee; or
(ii) from the amount by
which the income tax payable in respect of the income of the year of income has
been increased by the inclusion of the salary, wages or allowances so derived
in the assessable income of the deceased person of the year of income;
whichever is the less.
(11) Nothing in subsection (10) shall be
construed as authorizing or requiring the Commissioner to refund any amount
paid as or for income tax by or on behalf of the deceased person or the trustee
of his estate.
23AC
Exemption of pay and allowances of members of Defence Force serving in
operational areas
(1) Pay and allowances earned by a person as
a member of the Defence Force are exempt from income tax where:
(a) the pay and allowances are earned
during a period of operational service of the person; and
(b) the person served in an
operational area during the whole or a part of that period.
(2) Subject to this section, the operational
service of a member of the Defence Force, for the purposes of this section, is
the member’s service where all of the following conditions are satisfied:
(a) the member’s service was while:
(i) a member of, or
attached to, a body, contingent or detachment of the Naval, Military or Air
Forces of the Commonwealth at a time when it was allotted for duty in an
operational area; or
(ii) a member of the Naval,
Military or Air Forces of the Commonwealth allotted for duty in an operational
area; or
(iii) a member of the Naval,
Military or Air Forces of the Commonwealth attached to a particular part of the
armed forces of the United Kingdom or of the United States of America at a time
when that part was allotted, by the appropriate authority of the country
concerned, for duty in an operational area;
(b) if the operational area is covered
by subsection (6) and:
(i) subparagraph (a)(i)
or (ii) applies; or
(ii) subparagraph (a)(iii)
applies and the member was not serving in an operational area on 2 August 1990;
there is in force a certificate
in writing issued by the Chief of the Defence Force to the effect that the
allotment concerned was in response to Iraq’s invasion of Kuwait;
(c) if the operational area is covered
by subsection (6) and paragraph (b) does not apply—the member was
serving in the operational area on 2 August 1990;
(ca) if the operational area is covered
by subsection (6A)—there is in force a certificate in writing issued by
the Chief of the Defence Force to the effect that the allotment concerned was
in response to Iraq’s invasion of Kuwait;
(cb) if the operational area is Cambodia—there
is in force a certificate in writing issued by the Chief of the Defence Force
to the effect that the allotment concerned was in respect of the member’s
service as part of:
(i) the group called the
United Nations Advance Mission in Cambodia; or
(ii) the group called the
United Nations Transitional Authority in Cambodia;
(cc) if the operational area is the
former Yugoslavia—there is in force a certificate in writing issued by the
Chief of the Defence Force to the effect that the allotment concerned was in
respect of the member’s service as part of a United Nations peacekeeping force;
(cd) if the operational area is Somalia—there
is in force a certificate in writing issued by the Chief of the Defence Force
to the effect that the allotment concerned was in respect of the member’s
service as part of:
(i) the operation called
Operation Restore Hope; or
(ii) the operation called
the United Nations Operation in Somalia;
(d) the member’s service was not as or
under an attachÈ at an Australian embassy or legation.
(2A) A certificate issued in accordance with paragraph (2)(cb),
(cc) or (cd) shall cease to have force only in accordance with a certificate of
revocation signed by the Chief of the Defence Force.
(2B) A certificate of revocation made in
accordance with subsection (2A) is a legislative instrument.
(3) For the purposes of this section, the
operational service of a member of the Defence Force allotted for duty in an
operational area covered by subsection (6), (6A) or (6B):
(a) is taken to have commenced:
(i) if he was in Australia
at the time at which he was allotted for duty in the operational area—at the
time of his departure from the last port of call in Australia for duty in that
area;
(ii) if he was outside Australia
at the time at which he was allotted for duty in the operational area—at the time
at which he was so allotted;
(iii) if he was allotted for
duty in the area before the time at which it became an operational area and he
was in Australia at that time—at the time of his departure from the last port
of call in Australia for duty in that area; or
(iv) if he was allotted for
duty in the area before the time at which it became an operational area and he
was outside Australia at that time—at that time;
(b) is taken to have ended at the
earlier of the end of the termination date (if any) applicable to the
operational area and:
(i) on his returning to
Australia—at the time at which he arrived at the first port of call in
Australia, unless he left Australia for further duty in an operational area
within 14 days after his arrival in Australia; or
(ii) where he was allotted
for duty in an area outside Australia other than an operational area—at the
time at which he arrived in that area, or, if he was in that area at the time
at which he was so allotted, at that time; and
(c) is taken to include a period of
hospital treatment consequent upon an illness contracted or injuries sustained
during the person’s operational service.
(3A) For the purposes of this section, the
operational service of a member of the Defence Force allotted for duty in an
operational area to which subsection (6C) or (6D) applies:
(a) is taken to have begun at the
later of:
(i) the time when the
member arrived in the operational area; and
(ii) the time when the
member’s allotment for the duty in the operational area began; and
(b) is taken to have ended at the
earliest of:
(i) the time when the
member departed from the operational area; and
(ii) the time when the
member’s allotment for the duty in the operational area ended; and
(iii) the end of any
termination date (defined in subsection (7)) applicable to the operational
area; and
(c) is taken to include a period of
hospital treatment resulting from an illness contracted, or injuries sustained,
during the member’s operational service.
(4) The Chief of the Defence Force may, by
signed instrument, delegate to an officer of the Defence Force the powers
conferred by paragraph (2)(b), (ca), (cb), (cc) or (cd).
(5) Applications may be made to the Tribunal
for review of decisions of the Chief of the Defence Force under paragraph (2)(b),
(ca), (cb), (cc) or (cd).
(6) For the purposes of this section, the
area comprising the following countries and sea areas:
(a) Bahrain, Oman, Qatar, Saudi
Arabia, the United Arab Emirates and the island of Cyprus;
(b) the sea areas contained within the
Gulf of Suez, the Gulf of Aqaba, the Red Sea, the Gulf of Aden, the Persian
Gulf and the Gulf of Oman;
(c) the sea area contained within the Arabian
Sea north of the boundary formed by joining each of the following points to
the next:
(i) 20° 30´
N 70° 40´ E;
(ii) 14° 30´
N 67° 35´ E;
(iii) 8° 30´ N
60° 00´ E;
(iv) 6°
20´ N 53° 52´ E;
(v) 5° 48´ N 49° 02´ E;
(d) the sea areas contained within the
Suez Canal and the Mediterranean Sea east of 30° E;
is taken to have become an operational area on 2 August 1990.
(6A) For the purposes of this section, the area
comprising Iraq and Kuwait is taken to have become an operational area on 23 February 1991.
(6B) For the purposes of this section, the area
comprising Cambodia is taken to have become an operational area on 20 October 1991.
(6C) For the purposes of this section, the area
comprising the former Yugoslavia is taken to have become an operational area on
12 January 1992.
(6D) For the purposes of this section, the area
comprising Somalia is taken to have become an operational area on 20 October 1992.
(7) In this
section:
operational area has the meaning given by subsection (6),
(6A), (6B), (6C) or (6D).
port includes airport.
termination date means:
(a) in relation to an operational area
covered by subsection (6) or (6A)—9 June 1991; or
(b) in relation to an operational area
covered by subsection (6B), (6C) or (6D)—the date prescribed by
regulations (which may be a date before the commencement of the regulations)
for the purposes of this definition as the termination date in respect of the
operational area covered by that subsection.
23AD
Exemption of pay and allowances of Defence Force members performing certain
overseas duty
Requirements for exemption
(1) The pay and allowances earned by a person
serving as a member of the Defence Force are exempt from tax if:
(a) they are earned while there is in
force a certificate in writing issued by the Chief of the Defence Force to the
effect that the person is on eligible duty with a specified organisation in a
specified area outside Australia; and
(b) the eligible duty is not as, or
under, an attache at an Australian embassy or legation.
Eligible duty
(2) The regulations may declare that duty
with a specified organisation, in a specified area outside Australia and after
a specified day, is eligible duty for the purposes of this section.
Where paragraph (1)(a) certificate in force
(3) A certificate under paragraph (1)(a):
(a) comes into force at the later of:
(i) the time specified in
the certificate (which may be before the time when it is issued, but not before
the end of the specified day under the regulations); and
(ii) the time when the
person arrives for duty in the specified area concerned; and
(b) subject to paragraph (c),
continues in force until the earliest of:
(i) the time of the
person’s departure from the specified area; and
(ii) the time when, in
accordance with a certificate of revocation signed by the Chief of the Defence
Force, it ceases to be in force; and
(iii) any time prescribed by
the regulations in relation to the eligible duty for the purposes of this
subparagraph; and
(c) is in force during any period of
hospital treatment resulting from an illness contracted, or injuries sustained,
during the person’s eligible duty.
Review of paragraph (1)(a) certificate
(4) An application may be made to the
Tribunal for review of a decision of the Chief of the Defence Force under paragraph (1)(a).
Delegation of paragraph (1)(a) power
(5) The Chief of the Defence Force may, by
signed instrument, delegate to an officer of the Defence Force the power
conferred by paragraph (1)(a).
Revocation certificate is legislative instrument
(6) A certificate of revocation referred to
in subparagraph (3)(b)(ii) is a legislative instrument.
23AF
Exemption of certain income derived in respect of approved overseas projects
(1) Where a taxpayer, being a natural person,
has been engaged on qualifying service on a particular approved project for a
continuous period of not less than 91 days, any eligible foreign remuneration
derived by the person that is attributable to that qualifying service is exempt
from tax.
(3) Subject to subsections (4) and (5),
a person shall be taken for the purposes of this section to be engaged on
qualifying service on an approved project during any period during which:
(a) the person is outside Australia
and is engaged in the performance of personal services in connection with the
approved project;
(b) the person is travelling between Australia
and the site of the approved project;
(c) by reason of an incapacity for
work due to accident or illness occurring while the person was, by virtue of paragraph (a)
or (b), to be taken to be engaged on qualifying service on the approved
project, the person is absent from work; or
(d) the person is on eligible leave,
being leave that accrued in respect of a period during which the person was, by
virtue of any of the preceding paragraphs, to be taken to be engaged on
qualifying service on the approved project.
(4) A person shall not be taken to have been
engaged on qualifying service on a particular approved project while the person
was travelling between Australia and the site of the approved project unless
the Commissioner is satisfied that the time taken for the journey is reasonable.
(5) A person shall not be taken to have been
engaged on qualifying service on a particular approved project by virtue of paragraph (3)(c)
during a period of incapacity for work unless the person is taken to have been
engaged on qualifying service on that approved project by virtue of paragraph (3)(a),
(b) or (d) during a period that commenced immediately after the incapacity
ceased.
(6) Where:
(a) a person was engaged on qualifying
service on a particular approved project; and
(b) due to unforeseen circumstances,
the person ceased to be engaged on qualifying service on that approved project;
the period during which the person is to be taken to have
been engaged on qualifying service on that approved project shall, except for
the purpose of determining whether income derived by the person is eligible
foreign remuneration, be taken to include the additional period after the
person ceased to be engaged on qualifying service on that approved project
during which the person would, in the opinion of the Commissioner, have
continued to be engaged on qualifying service on that approved project but for
those unforeseen circumstances.
(7) Where:
(a) a person (in this subsection
referred to as the original person) was engaged on qualifying
service on a particular approved project;
(b) due to unforeseen circumstances,
the original person ceased to be engaged on qualifying service on that approved
project; and
(c) as soon as practicable after the
time when the original person ceased to be engaged on qualifying service on
that approved project, another person (in this subsection referred to as the substituted
person) commenced to be engaged on qualifying service on that approved
project in lieu of the original person;
the period during which the substituted person is to be
taken to have been engaged on qualifying service on that approved project
shall, except for the purpose of determining whether income derived by the
substituted person is eligible foreign remuneration, be taken to include a
period that ended immediately before the substituted person commenced to be
engaged on qualifying service on that approved project in lieu of the original
person and was of the same duration as the continuous period during which the
original person was, immediately before the original person ceased to be
engaged on qualifying service on that approved project, taken to have been
engaged on qualifying service on that approved project.
(8) Where:
(a) during the period (in this
subsection referred to as the total project period) commencing at
the time when a person was first engaged on qualifying service on an approved
project and ending at the time when the person was last engaged on qualifying
service on that approved project, the person was in Australia during a period
or periods (in this subsection referred to as the intervening period or
intervening periods) during which the person was not engaged on
qualifying service on that approved project;
(b) the total number of days in the
intervening period or intervening periods does not exceed one‑sixth of
the total number of days during the total project period during which the
person was engaged on qualifying service on the approved project; and
(c) at all times during the total
project period, the person was engaged on qualifying service on the approved
project or was in Australia;
the periods during the total project period during which
the person was engaged on qualifying service on the approved project shall
together be taken to constitute a continuous period during which the person was
engaged on qualifying service on the approved project.
(9) Where, immediately before a person
commences to take eligible leave, leave of the same kind as the eligible leave
has accrued in relation to the person but has not been used and that unused
leave consists of:
(a) leave that accrued in respect of a
period or periods when the person was engaged on qualifying service on an
approved project and leave that accrued in respect of a period or periods when
the person was not engaged on qualifying service on an approved project;
(b) leave that accrued in respect of 2
or more periods when the person was engaged on qualifying service on 2 or more
different approved projects; or
(c) leave
that accrued in respect of 2 or more periods when the person was engaged on
qualifying service on 2 or more different approved projects and leave that
accrued in respect of a period or periods when the person was not engaged on
qualifying service on an approved project;
the following provisions apply for the purposes of
determining the extent to which the eligible leave taken by the person was
eligible leave that accrued in respect of a period when the person was engaged
on qualifying service on a particular approved project:
(d) in a case to which paragraph (a)
applies—the person shall be deemed first to have taken leave that accrued in
respect of the period when the person was engaged on qualifying service on the
approved project referred to in that paragraph;
(e) in a case to which paragraph (b)
applies—the leave shall be deemed to have been taken in the order that is
reverse to the order in which it accrued;
(f) in a case to which paragraph (c)
applies:
(i) the person shall be
deemed not to have taken any of the leave that accrued in respect of a period
or periods when the person was not engaged on qualifying service on an approved
project until the person had taken leave for a number of days equal to the
number of days of leave referred to in that paragraph that had accrued in
respect of periods when the person was engaged on qualifying service on
approved projects; and
(ii) the leave that had
accrued in respect of periods when the person was engaged in qualifying service
on approved projects shall be deemed to have been taken by the person in the
order that is reverse to the order in which that leave accrued.
(10) Where the amount of income derived by a
person that:
(a) is attributable to qualifying
service on an approved project; and
(b) would, apart from this subsection,
be eligible foreign remuneration;
exceeds the amount of income that the Commissioner
considers would be reasonable remuneration in respect of that qualifying
service, the amount of the excess is not eligible foreign remuneration for the
purposes of this section.
(11) Where the Minister for Trade is satisfied
that the undertaking of an eligible project that was commenced, or is proposed
to be commenced, after 19 August 1980 is, or will be, in the national
interest, he may, by writing signed by him, approve that eligible project for
the purposes of this section.
(12) The Minister for Trade may, either
generally or as otherwise provided by the instrument of delegation, by writing
signed by him, delegate to a person his power under subsection (11).
(13) The power so delegated, when exercised by
the delegate shall, for the purposes of this section, be deemed to have been
exercised by the Minister for Trade.
(14) A delegation under subsection (12)
does not prevent the exercise of a power by the Minister for Trade.
(15) Where:
(a) a person has derived eligible
foreign remuneration during a year of income; and
(b) at the time of making an
assessment in respect of income of the person of the year of income, the
Commissioner is of the opinion that, at a later time, circumstances will exist
by reason of which that eligible foreign remuneration will be exempt from tax
by virtue of this section;
the Commissioner may apply the provisions of this section
as if those circumstances existed at the time of making the assessment.
(16) Where, in the making of an assessment,
this section has been applied on the basis that a circumstance that did not
exist at the time of making the assessment would exist at a later time and the
Commissioner, after making the assessment, becomes satisfied that that circumstance
will not exist, then, notwithstanding anything contained in section 170,
the Commissioner may amend the assessment at any time for the purposes of
ensuring that this section shall be taken always to have applied on the basis
that that circumstance did not exist.
(17) For the purposes of this section, income
is excluded income if:
(a) the income is income to which
section 23AG applies; or
(aa) the income is a payment,
consideration or amount that:
(i) is included in
assessable income under Division 82, section 83‑295 or Division 301,
302, 304 or 305 of the Income Tax Assessment Act 1997; or
(ii) is included in
assessable income under Division 82 of the Income Tax (Transitional
Provisions) Act 1997; or
(iii) is mentioned in
paragraph 82‑135(e), (f), (g), (i) or (j) of the Income Tax Assessment
Act 1997; or
(iv) is an amount
transferred to a fund, if the amount is included in the assessable income of
the fund under section 295‑200 of the Income Tax Assessment Act
1997; or
(b) the income is derived from sources
in a country other than Australia and:
(i) is exempt from income
tax in that country; and
(ii) would not be exempt
from income tax in that country apart from the operation of an agreement
applying to Australia and that other country relating to the avoidance of
double taxation or of a law of that other country giving effect to such an
agreement; or
(c) the income consists of:
(i) payments in lieu of
long service leave; or
(ii) payments by way of
superannuation or pension.
(17A) If the income of a taxpayer of a year of
income consists of an amount that is exempt from tax under this section (in
this section called the exempt amount) and other income, the
amount of tax (if any) payable in respect of the other income is calculated
using the formula:
where:
Notional gross tax means the number of whole
dollars in the amount of income tax that would be assessed under this Act in
respect of the taxpayer’s taxable income of the year of income if:
(a) the exempt amount were not exempt
income; and
(aa) if the exempt amount is a payment
covered by section 83‑240 or 305‑65 of the Income Tax
Assessment Act 1997—the exempt amount (excluding any part of that amount
that represented contributions made by the taxpayer) were assessable income of
the taxpayer; and
(b) the taxpayer were not entitled to
any rebate of tax.
Notional gross taxable income means the
number of whole dollars in the amount that would have been the taxpayer’s
taxable income of the year of income if the exempt amount were not exempt income.
Other taxable income means the amount (if
any) remaining after deducting from so much of the other income as is
assessable income:
(d) any deductions allowable to the
taxpayer in relation to the year of income that relate exclusively to that
assessable income; and
(e) so much of any other deductions
(other than apportionable deductions) allowable to the taxpayer in relation to
the year of income as, in the opinion of the Commissioner, may appropriately be
related to that assessable income; and
(f) the amount calculated using the
formula in subsection (17B).
(17B) The formula
referred to in paragraph (17A)(f) is:
where:
Apportionable deductions means the number of
whole dollars in the apportionable deductions allowable to the taxpayer in
relation to the year of income.
Other taxable income means the amount that,
apart from paragraph (17A)(f), would be represented by the component Other
taxable income in subsection (17A).
Notional gross taxable income means the
number of whole dollars in the amount that would have been the taxpayer’s
taxable income of the year of income if the exempt amount were not exempt
income.
(17C) Subsection (17A) applies to a taxpayer
in respect of income of a year of income as if any payment covered by section 83‑240
or 305‑65 of the Income Tax Assessment Act 1997 in relation to
qualifying service that was made in respect of the taxpayer during that year of
income were income of the taxpayer of that year of income that is exempt from
tax under this section.
(18) In this section, unless the contrary
intention appears:
approved project means a project in respect
of which there is in force an approval granted under subsection (11).
eligible contractor means:
(a) a resident of Australia;
(b) the Commonwealth, a State, a
Territory, the government of a country other than Australia or an authority of
the Commonwealth, of a State, of a Territory or of the government of a country
other than Australia;
(c) an organization:
(i) of which Australia and
a country or countries other than Australia are members; or
(ii) that is constituted by
a person or persons representing Australia and a person or persons representing
a country or countries other than Australia; or
(d) an agency of an organization to
which paragraph (c) applies.
eligible foreign remuneration, in relation to
a person, means income (not being excluded income) that is derived by the
person at a time when the person is a resident, being:
(a) income consisting of salary,
wages, commission, bonuses or allowances, or of amounts included in a person’s
assessable income under Division 13A, derived by the person in his
capacity as an employee of an eligible contractor; or
(b) income, or amounts included in a
person’s assessable income under Division 13A, derived by the person under
a contract with an eligible contractor, being a contract that is wholly or
substantially for the personal services of the person;
that is directly attributable to qualifying service by the
person on an approved project and includes any payments received in lieu of
eligible leave that accrued in respect of a period during which the person was
a resident and was engaged on qualifying service on an approved project.
eligible leave means leave other than long
service leave.
eligible project means:
(a) a project for the design, supply
or installation of any equipment or facilities;
(b) a project for the construction of
works;
(c) a project for the development of
an urban area or a regional area;
(d) a project for the development of
agriculture;
(e) a project consisting of giving
advice or assistance relating to the management or administration of a
government department or of a public utility; or
(f) a project included in a class of
projects approved in writing for the purposes of this section by the Minister
for Trade.
employee includes:
(a) a person employed by the
Commonwealth, by a State, by a Territory, by the government of a country other
than Australia or by an authority of the Commonwealth, of a State, of a
Territory or of the government of a country other than Australia; and
(b) a member of the Defence Force.
long service leave means long leave,
furlough, extended leave or leave of a similar kind (however described).
23AG
Exemption of income earned in overseas employment
(1) Where a resident, being a natural person,
has been engaged in foreign service for a continuous period of not less than 91
days, any foreign earnings derived by the person from that foreign service are
exempt from tax.
(1A) A person is taken, for the purposes of subsection (1),
to have been engaged in foreign service for a continuous period of 91 days if:
(a) the person died at a time when he
or she was engaged in foreign service for a continuous period of less than 91
days; and
(b) he or she would have otherwise
continued to be engaged in the foreign service; and
(c) his or her continuous period of
engagement in the foreign service would have otherwise been a period of at
least 91 days.
(2) An amount of foreign earnings derived in
a foreign country is not exempt from tax under this section if the amount is
exempt from income tax in the foreign country only because of any of the
following:
(a) a law of the foreign country
giving effect to a double tax agreement;
(b) a double tax agreement;
(c) provisions of a law of the foreign
country under which income covered by any of the following categories is
generally exempt from income tax:
(i) income derived in the
capacity of an employee;
(ii) income from personal
services;
(iii) similar income;
(d) the law of the foreign country
does not provide for the imposition of income tax on one or more of the
categories of income mentioned in paragraph (c);
(e) a law of the foreign country
corresponding to the International Organisations (Privileges and Immunities)
Act 1963 or to the regulations under that Act;
(f) an international agreement to
which Australia is a party and that deals with:
(i) diplomatic or consular
privileges and immunities; or
(ii) privileges and
immunities in relation to persons connected with international organisations;
(g) a law of the foreign country
giving effect to an agreement covered by paragraph (f).
(2A) Subsection (2) does not apply in
relation to foreign earnings to the extent that the person derived them from
foreign service in Iraq after 31 December 2002 but before 1 May 2004.
(3) If the income of a taxpayer of a year of
income consists of an amount that is exempt from tax under this section (in
this section called the exempt amount) and other income, the
amount of tax (if any) payable in respect of the other income is calculated
using the formula:
where:
Notional gross tax means the number of whole
dollars in the amount of income tax that would be assessed under this Act in
respect of the taxpayer’s taxable income of the year of income if:
(a) the exempt amount were not exempt
income; and
(aa) if the exempt amount is a payment
covered by section 83‑240 or 305‑65 of the Income Tax
Assessment Act 1997—the exempt amount (excluding any part of that amount
that represented contributions made by the taxpayer) were assessable income of
the taxpayer; and
(b) the taxpayer were not entitled to
any rebate of tax.
Notional gross taxable income means the
number of whole dollars in the amount that would have been the taxpayer’s
taxable income of the year of income if the exempt amount were not exempt
income.
Other taxable income means the amount (if
any) remaining after deducting from so much of the other income as is
assessable income:
(d) any deductions allowable to the
taxpayer in relation to the year of income that relate exclusively to that
assessable income; and
(e) so much of any other deductions
(other than apportionable deductions) allowable to the taxpayer in relation to
the year of income as, in the opinion of the Commissioner, may appropriately be
related to that assessable income; and
(f) the amount calculated using the
formula in subsection (4).
(4) The
formula referred to in paragraph (3)(f) is:
where:
Apportionable deductions means the number of
whole dollars in the apportionable deductions allowable to the taxpayer in
relation to the year of income.
Other taxable income means the amount that,
apart from paragraph (3)(f), would be represented by the component Other
taxable income in subsection (3).
Notional gross taxable income means the
number of whole dollars in the amount that would have been the taxpayer’s
taxable income of the year of income if the exempt amount were not exempt
income.
(5) Subsection (3) applies to a taxpayer
in respect of income of a year of income as if any payment covered by section 83‑240
or 305‑65 of the Income Tax Assessment Act 1997 that related to
the termination of employment that was made in respect of the taxpayer during
that year of income were income of the taxpayer of that year of income that is
exempt from tax under this section.
(6) For the purposes of this section, a
period during which a person is engaged in foreign service includes any period
during which the person is, in accordance with the terms and conditions of that
service:
(a) absent on recreation leave, other
than:
(i) leave wholly or partly
attributable to a period of service or employment other than that foreign
service;
(ii) long service leave,
furlough, extended leave or leave of a similar kind (however described); or
(iii) leave without pay or
on reduced pay; or
(b) absent from work because of
accident or illness.
(6A) 2 or more periods in which a person has
been engaged in foreign service are together taken to constitute a continuous
period of foreign service until:
(a) the end of the last of the 2 or
more periods; or
(b) a time (if any), since the start
of the first of the 2 or more periods, when the person’s total period of
absence exceeds 1/6 of the person’s total period of foreign
service;
whichever happens sooner.
Example: Kate is engaged in foreign service for 20 days,
is absent for 2 days and is then engaged in foreign service for 10 days. These
2 periods of foreign service constitute a continuous period of foreign service,
because the total period of absence is never more than 1/10
of the total period of foreign service.
Kate is then absent for 5 days before
commencing a further period of foreign service. No matter how long the further
period lasts, it can never constitute a continuous period of foreign service
with the first 2 periods of foreign service, because on the fourth day of the
second absence the total period of absence is 1/5 of the total period of foreign service.
(6B) In subsection (6A):
total period of absence, in relation to a
particular time, means the number of days, in the period starting at the start
of the first of the 2 or more periods and ending at that time, for which the
person was not engaged in foreign service.
total period of foreign service, in relation
to a particular time, means the number of days, in the period starting at the
start of the first of the 2 or more periods and ending at that time, for which
the person was engaged in foreign service.
(6F) Where:
(a) a person has derived foreign
earnings during a year of income; and
(b) at the time of making an
assessment in respect of income of the person of the year of income, the
Commissioner is of the opinion that, at a later time, circumstances will exist
because of which those foreign earnings will be exempted from tax by this
section;
the Commissioner may apply the provisions of this section
as if those circumstances existed at the time of making the assessment.
(6G) Where:
(a) in the making of an assessment,
this section has been applied on the basis that a circumstance that did not
exist at the time of making the assessment would exist at a later time; and
(b) the Commissioner, after making the
assessment, becomes satisfied that the circumstance will not exist;
then, notwithstanding anything contained in section 170,
the Commissioner may amend the assessment at any time for the purposes of
ensuring that this section shall be taken always to have applied on the basis
that the circumstance did not exist.
(7) In this section:
double tax agreement means:
(a) double tax agreement within the
meaning of Part X; or
(b) the Timor Sea Treaty.
employee includes:
(a) a person employed by a government
or an authority of a government or by an international organisation; or
(b) a member of a disciplined force.
foreign earnings means income consisting of
earnings, salary, wages, commission, bonuses or allowances, or of amounts
included in a person’s assessable income under Division 13A, but does not
include any payment, consideration or amount that:
(a) is included in assessable income
under Division 82 or Subdivision 83‑295 or Division 301,
302, 304 or 305 of the Income Tax Assessment Act 1997; or
(b) is included in assessable income
under Division 82 of the Income Tax (Transitional Provisions) Act 1997;
or
(c) is mentioned in paragraph 82‑135(e),
(f), (g), (i) or (j) of the Income Tax Assessment Act 1997; or
(d) is an amount transferred to a
fund, if the amount is included in the assessable income of the fund under
section 295‑200 of the Income Tax Assessment Act 1997.
foreign service means service in a foreign
country as the holder of an office or in the capacity of an employee.
income tax, in relation to a foreign country:
(a) in all cases—does not include a
municipal income tax; and
(b) in the case of a federal foreign
country—does not include a State income tax.
23AH
Foreign branch income of Australian companies not assessable
Objects
(1) The objects of this section are:
(a) to ensure that active foreign
branch income derived by a resident company, and capital gains made by a
resident company in disposing of non‑tainted assets used in deriving
foreign branch income, (except income and capital gains from the operation of
ships or aircraft in international traffic) are not assessable income or exempt
income of the company; and
(b) to include in the assessable
income of a resident company that part of its income and capital gains derived
through a branch in a foreign country that is comparable to the amounts that
would be included in an attributable taxpayer’s assessable income for income and
capital gains derived by a CFC resident in the same foreign country; and
(c) to get the same outcomes where one
or more partnerships or trusts are interposed between a resident company and a
foreign branch.
Foreign branch income not assessable
(2) Subject to this section, foreign income
derived by a company, at a time when the company is a resident in carrying on a
business, at or through a PE of the company in a listed country or unlisted
country is not assessable income, and is not exempt income, of the company.
Foreign capital gains and losses disregarded
(3) Subject to this section, a capital gain
from a CGT event happening to a CGT asset is disregarded for the purposes of
Part 3‑1 of the Income Tax Assessment Act 1997 if:
(a) the gain is made by a company that
is a resident; and
(b) the company used the asset wholly
or mainly for the purpose of producing foreign income in carrying on a business
at or through a PE of the company in a listed country or unlisted country; and
(c) the asset is not taxable
Australian property.
(4) Subject to this section, a capital loss
from a CGT event happening to a CGT asset is disregarded for the purposes of
Part 3‑1 of the Income Tax Assessment Act 1997 if:
(a) the loss is made by a company that
is a resident; and
(b) the company used the asset wholly
or mainly for the purpose of producing foreign income in carrying on a business
at or through a PE of the company in a listed country or unlisted country; and
(c) had the loss been a gain, it would
be disregarded under subsection (3).
Exceptions: listed country PE
(5) Subsection (2) does not apply to
foreign income derived by the company if:
(a) the PE is in a listed country; and
(b) the PE does not pass the active
income test (see subsection (12)); and
(c) the foreign income is both:
(i) adjusted tainted
income (see subsection (13)); and
(ii) eligible designated
concession income in relation to a listed country.
(6) Subsection (3) or (4) does not apply
to a capital gain or capital loss if:
(a) the PE is in a listed country; and
(b) for a capital gain—the gain is
from a tainted asset and is eligible designated concession income in relation
to a listed country; and
(c) for a capital loss—the loss is
from a tainted asset and would be eligible designated concession income in
relation to a listed country if it were a capital gain.
Exceptions: unlisted country PE
(7) Subsection (2) does not apply to
foreign income derived by the company if:
(a) the PE is in an unlisted country;
and
(b) the PE does not pass the active
income test (see subsection (12)); and
(c) the foreign income is adjusted
tainted income (see subsection (13)).
(8) Subsection (3) or (4) does not apply
to a capital gain or capital loss if:
(a) the PE is in an unlisted country;
and
(b) the gain or loss is from a tainted
asset.
Income derived in disposing of a business
(9) This section applies to foreign income
derived by an entity in the course of disposing, in whole or in part, of a
business carried on in a listed country or unlisted country at or through a PE
of the entity in the listed country or unlisted country as if the foreign
income had been derived in carrying on that business.
Interposed partnerships or trusts
(10) This section applies to any indirect
interest (through one or more partnerships or trust estates) of a company in
foreign income derived by a partnership or trustee through a PE of the
partnership or trustee in a listed country or unlisted country as if that
indirect interest were foreign income derived by the company through a PE of
the company in that country.
(11) This section applies to any indirect
interest (through one or more partnerships or trust estates) of a company in a
capital gain or capital loss made in relation to an asset of a partnership, or
made by a trustee, in carrying on a business at or through a PE of the
partnership or trustee in a listed country or unlisted country as if that
indirect interest were a capital gain or capital loss made by the company
through a PE of the company in that country.
Active income test
(12) A PE of an entity passes the active
income test for a year of income if the entity would have passed the
active income test in section 432 if:
(a) the assumptions in subsection (14)
were made; and
(b) subsection 432(3) and 446(2) and
paragraphs 432(1)(b) and (e) and 447(1)(b), (d) and (f) had not been enacted.
Adjusted tainted income
(13) For the purposes of this section, the adjusted
tainted income of a PE of an entity is income or other amounts that
would be adjusted tainted income of the entity for the purposes of Part X
if:
(a) the assumptions in subsection (14)
were made; and
(b) subsection 446(2) and paragraphs
447(1)(b), (d) and (f) had not been enacted.
Assumptions for subsections (12) and (13)
(14) The assumptions referred to in paragraphs (12)(a)
and (13)(a) are:
(a) except in applying paragraphs
447(1)(a), (c) and (e) and 450(6)(c), (7)(d) and (8)(b), the only income or
other amounts derived by the entity were the income derived in carrying on
business at or through the PE; and
(b) the entity’s statutory accounting
periods were the same as the entity’s years of income; and
(c) in applying paragraphs 447(1)(a),
(c) and (e) and 450(6)(c), (7)(d) and (8)(b):
(i) the part of the
entity’s operations that consists of the business carried on at or through the
PE were a company (the PE company); and
(ii) the remaining part of
the entity’s operations were a separate company (the HQ company);
and
(iii) the PE company and the
HQ company had carried out the transactions that they would have carried out if
the PE company were engaged in the same or similar activities as the PE under
the same or similar conditions as the PE and were dealing wholly independently
with the HQ company; and
(iv) any income derived by
the HQ company were disregarded; and
(d) if the entity is an AFI entity
(within the meaning of subsection 326(2))—the entity were an AFI subsidiary;
and
(e) in applying paragraphs 447(1)(a),
(c) and (e), the HQ company were an associate of the PE company.
(14A) This section does not apply to foreign
income, or to a capital gain or capital loss, of a company to the extent that
the income, gain or loss is from:
(a) the operation of ships or aircraft
in international traffic at or through a PE of the company in a listed country
or unlisted country; or
(b) things that are ancillary to that
operation.
(14B) A company operates a ship or aircraft in
international traffic if the company operates it for transporting passengers or
goods between a place in one country and a place in another country.
Definitions
(15) In this
section:
company does not include a company in the
capacity of a trustee.
double tax agreement has the same meaning as
in Part X.
eligible designated concession income has the
same meaning as in Part X.
foreign income includes an amount that:
(a) apart from this section, would be
included in assessable income under a provision of this Act other than Part 3‑1
or 3‑3 of the Income Tax Assessment Act 1997 (CGT); and
(b) is derived from sources in a
listed country or unlisted country.
listed country has the same meaning as in
Part X.
permanent establishment, or PE,
in relation to a listed country or unlisted country:
(a) if there is a double tax agreement
in relation to that country—has the same meaning as in the double tax
agreement; or
(b) in any other case—has the meaning
given by subsection 6(1).
statutory accounting period has the same
meaning as in Part X.
tainted asset has the same meaning as in Part X.
unlisted country has the same meaning as in
Part X.
23AI
Amounts paid out of attributed income not assessable
(1) Where:
(a) either:
(i) an attribution account
payment of a kind referred to in paragraph 365(1)(a), (b), (c) or (e) is made
to a taxpayer (other than a partnership or taxpayer in the capacity of trustee
of a trust); or
(ii) an attribution account
payment of a kind referred to in paragraph 365(1)(d) is made to a taxpayer; and
(b) on the making of the payment, an
attribution debit arises, for the entity making the payment, in relation to the
taxpayer;
the following provisions have effect:
(c) if the payment is of a kind
referred to in paragraph 365(1)(a)—the payment is not assessable income, and is
not exempt income, to the extent of the debit;
(d) if the payment is of a kind
referred to in paragraph 365(1)(b) and, apart from this section, an amount
would be included in the taxpayer’s assessable income under section 92 in
respect of an individual interest in the net income of the partnership of the
year of income referred to in that paragraph—that amount is not assessable
income, and is not exempt income, to the extent of the debit;
(e) if the payment is of a kind
referred to in paragraph 365(1)(c) and, apart from this section, an amount
would be included in the taxpayer’s assessable income under section 97,
98A or 100 in respect of a share of the net income of the trust of the year of
income referred to in that paragraph—that amount is not assessable income and
is not exempt income, to the extent of the debit;
(ea) if the payment is of a kind
referred to in paragraph 365(1)(c) and, apart from this section, an amount
would be assessable to the trustee of the trust referred to in that paragraph
under section 98 in respect of a share of the net income of the trust of
the year of income referred to in that paragraph—that amount is not so
assessable to the extent of the debit;
(f) if the payment is of a kind
referred to in paragraph 365(1)(d)—the payment is not, to the extent of the
debit, assessable to the taxpayer as mentioned in that paragraph;
(g) if the payment is of a kind
referred to in paragraph 365(1)(e) and, apart from this section, an amount
would be included in the taxpayer’s assessable income, of the year of income
referred to in that paragraph, under section 99B in respect of the trust
property referred to in that paragraph—that amount is not assessable income,
and is not exempt income, to the extent of the debit.
(2) This section is to be disregarded for the
purposes of applying any other provision of this Act to determine allowable
deductions.
(3) In this section:
attribution account payment has the same
meaning as in Part X.
attribution debit has the same meaning as in
Part X.
company has the same meaning as in Part X.
trust has the same meaning as in Part X,
but does not include a trust covered by subsection 371(7).
23AJ
Certain non‑portfolio dividends from foreign countries not assessable
A non‑portfolio dividend (as
defined in section 317) paid to a company is not assessable income, and is
not exempt income, of the company if:
(a) the company is an Australian
resident and does not receive the dividend in the capacity of a trustee; and
(b) the company that paid the dividend
is not a Part X Australian resident (as defined in that section).
23AK
Amounts paid out of attributed foreign investment fund income not assessable
(1) If:
(a) either:
(i) a FIF attribution
account payment of a kind referred to in paragraph 603(1)(a), (b), (c), (d),
(f), (g) or (h) is made to a taxpayer (other than a partnership or taxpayer in
the capacity of trustee of a trust); or
(ii) a FIF attribution
account payment of a kind referred to in paragraph 603(1)(e) is made to a
taxpayer; and
(b) on the making of the payment, a
FIF attribution debit arises, for the FIF attribution account entity making the
payment, in relation to the taxpayer;
the following provisions have effect:
(c) if the payment is of a kind
referred to in paragraph 603(1)(a) or (b)—the payment is not assessable income,
and is not exempt income, to the extent of the debit;
(d) if the payment is of a kind
referred to in paragraph 603(1)(c) and, apart from this section, an amount
would be included in the taxpayer’s assessable income under section 92 in
respect of an individual interest in the net income of the partnership of the
year of income referred to in that paragraph—that amount is not assessable
income, and is not exempt income, to the extent of the debit;
(e) if the payment is of a kind
referred to in paragraph 603(1)(d) and, apart from this section, an amount
would be included in the taxpayer’s assessable income under section 97,
98A or 100 in respect of a share of the net income of the trust of the year of
income referred to in that paragraph—that amount is not assessable income, and
is not exempt income, to the extent of the debit;
(ea) if the payment is of a kind
referred to in paragraph 603(1)(d) and, apart from this section, an amount
would be assessable to the trustee of the trust referred to in that paragraph
under section 98 in respect of a share of the net income of the trust of
the year of income referred to in that paragraph—that amount is not so
assessable to the extent of the debit;
(f) if the payment is of a kind
referred to in paragraph 603(1)(e)—the payment is not, to the extent of the
debit, assessable to the taxpayer as mentioned in that paragraph;
(g) if the payment is of a kind
referred to in paragraph 603(1)(f) and, apart from this section, an amount
would be included in the taxpayer’s assessable income, of the year of income
referred to in that paragraph, under section 99B in respect of the trust
property referred to in that paragraph—that amount is not assessable income,
and is not exempt income, to the extent of the debit;
(h) if the payment is of a kind
referred to in paragraph 603(1)(g)—the payment is not assessable income, and is
not exempt income, to the extent of the debit;
(i) if the payment is of a kind
referred to in paragraph 603(1)(h)—the payment is not assessable income, and is
not exempt income, to the extent of the debit.
(2) This section is to be disregarded for the
purposes of applying any other provision of this Act to determine allowable
deductions.
(3) In this section:
FIF attribution account entity has the same
meaning as in Part XI.
FIF attribution account payment has the same
meaning as in Part XI.
FIF attribution debit has the same meaning as
in Part XI.
trust has the same meaning as in Part XI,
but does not include a trust covered by subsection 605(11).
23E
Redemption of Special Bonds redeemable at a premium
(1) An amount received by a person upon the
redemption of a Special Bond, other than a part of that amount paid as accrued
interest, is not assessable income and is not exempt income of the person.
(2) Subsection (1) does not affect the
operation of this Act in relation to the redemption of a Special Bond owned by
a person where, if the Special Bond had been sold by that person at the time of
the redemption:
(a) the proceeds of the sale would
have been included in the assessable income of that person; or
(b) any profit arising from the sale
would, disregarding section 26BB, have been included in the assessable
income of that person.
(3) In this section, Special Bond
means security of the Commonwealth issued under the Commonwealth Inscribed
Stock Act 1911 and bearing on its face the words “Special Bond”.
23G
Exemption of interest received by credit unions
(1) In this section:
credit union means a company in relation to
which the following conditions are satisfied:
(a) the company is an ADI (authorised
deposit‑taking institution) for the purposes of the Banking Act 1959;
(b) the company has a consent under
section 66 of that Act that allows it to assume or use the expression
“credit union” or “credit society”, or another expression (whether or not in
English) that is of like import to either of those expressions.
(2) Income derived during a year of income by
a credit union that is an approved credit union in relation to that year of
income, being interest paid to the credit union by members of the credit union
not being companies in respect of loans made to those members, is exempt from
income tax.
(2A) Subsection (2) does not apply to a
credit union in relation to a year of income if:
(a) the credit union is a recognised
medium credit union in relation to the year of income; or
(b) the credit union is a recognised
large credit union in relation to the year of income.
(3) For the purposes of this section, a
credit union is an approved credit union in relation to a year of income if,
and only if, the Commissioner is satisfied that:
(a) during that year of income the
credit union did not enter into any transactions of a kind not ordinarily
entered into by a company of a kind referred to in paragraph (a) of the
definition of credit union in subsection (1); and
(b) by comparison with the profits of
other credit unions for that year of income and the amounts transferred by
those credit unions out of those profits to reserves, and after making due
allowance for differences in the numbers of transactions entered into by other
credit unions and the first‑mentioned credit union and the amounts to
which the respective transactions related, the profit of the first‑mentioned
credit union for that year of income was not excessive and the first‑mentioned
credit union did not transfer an unreasonable part of that profit to a reserve.
(4) In determining for the purposes of paragraph (3)(a)
whether any transactions entered into by a credit union during a year of income
were transactions of a kind referred to in that paragraph, the Commissioner may
have regard to:
(a) the circumstances in which, and
the terms and conditions upon which, during that year of income:
(i) moneys were lent to,
invested with, or otherwise obtained by, the credit union;
(ii) moneys were lent or
otherwise made available by the credit union to its members or to other
persons; and
(iii) moneys were invested
by the credit union;
(b) the nature of the connexion (if
any) between:
(i) the credit union or
any of its members and any of the persons by whom moneys were lent to, invested
with, or otherwise made available to, the credit union during that year of
income;
(ii) the credit union or
any of its members and any of the persons who owed moneys to the credit union
at any time during that year of income; or
(iii) any of the persons by
whom moneys were lent to, invested with, or otherwise made available to, the
credit union during that year of income and any of the persons who owed moneys
to the credit union at any time during that year of income; and
(c) any other relevant matters.
23J Sale
of securities purchased at a discount
(1) An amount received by a person upon the
sale or redemption of eligible securities purchased or otherwise acquired at a
discount on or before 30 June 1982, other than any part of that amount
received as accrued interest, is not assessable income and is not exempt income
of the person.
(2) Subsection (1) does not apply in
relation to an amount received by a person by virtue of a transaction that is
part of, or is incidental to, the carrying on by the person of a business that
includes buying and selling eligible securities of any kind.
(3) Subsection (1) does not affect the
operation of section 25A or 26C of this Act or section 15‑15 of
the Income Tax Assessment Act 1997.
(4) In this section, eligible
securities means:
(a) bonds, debentures, stock or other
securities; and
(b) any other document evidencing or
acknowledging the indebtedness of a person, whether or not the debt is secured.
23K
Substitution of certain securities
(1) In this section:
central borrowing authority means:
(a) the New South Wales Treasury
Corporation;
(b) the Victorian Public Authorities
Finance Agency;
(c) the Victoria Transport Borrowing
Agency;
(d) the Queensland Government
Development Authority;
(e) the Treasurer of the State of Western
Australia;
(f) the South Australian Government
Financing Authority;
(g) the Local Government Finance
Authority of South Australia;
(h) any other public authority of a
State, being a public authority that is empowered to issue securities in the
manner referred to in paragraph (2)(a).
public authority includes a Minister of the
Crown in right of a State, a municipal corporation and any other local
government body.
security means stock, a bond or debenture, or
any other document evidencing the indebtedness of a person, whether or not the
debt is secured.
(2) For the purposes of this section, a
person shall be taken to have issued a security (in this subsection referred to
as the substituted security) to a taxpayer in substitution for
another security (in this subsection referred to as the original security)
held by the taxpayer if and only if:
(a) the substituted security was
issued by the person to the taxpayer in exchange for the surrender or transfer
of, or otherwise in replacement or substitution for, the original security; and
(b) the terms and conditions provided
for by the substituted security were identical in all material respects to
those provided for by the original security.
(3) Where:
(a) but for this subsection, a person
would be taken to have issued a security (in this subsection referred to as the
substituted security) to a taxpayer in substitution for another
security (in this subsection referred to as the original security)
held by the taxpayer; and
(b) either or both of the following
conditions is or are satisfied:
(i) an amount was payable
by the taxpayer by way of consideration for the issue of the substituted
security; or
(ii) an amount was payable
to the taxpayer by way of consideration for the surrender, transfer,
replacement or substitution of the original security;
the person shall not be taken for the purposes of this
section to have issued the substituted security in substitution for the
original security.
(4) Where:
(a) under terms and conditions provided
for by a security, the day on which interest is payable in respect of a period
is different from that on which interest is payable in respect of the same
period under another security; and
(b) the terms and conditions provided
for by the securities are otherwise identical in all material respects;
the following provisions have effect:
(c) if the days on which the interest
is payable are separated by an interval not exceeding 31 days—the terms and
conditions provided for by the 2 securities shall, for the purposes of paragraph (2)(b),
be taken to be identical in all material respects; and
(d) in any other case—the terms and
conditions provided for by the 2 securities shall, for the purposes of paragraph (2)(b),
be taken not to be identical in all material respects.
(5) Where, on or after 8 August 1984, a central borrowing authority issued or issues a security (in this subsection
referred to as the substituted security) to a taxpayer in
substitution for another security (in this subsection referred to as the original
security) held by the taxpayer that was issued by a public authority
other than the central borrowing authority:
(a) the substituted security shall,
for the purposes of this Act, be deemed to be a continuation of the original
security on the terms and conditions provided for by the substituted security;
and
(b) no amount shall, in respect of the
issue of the substituted security or the surrender, transfer, replacement or
substitution of the original security, be included in, allowable as a deduction
from or taken into account in ascertaining any amount included in or allowable
as a deduction from, the assessable income of any taxpayer in respect of any
year of income.
23L
Certain benefits in the nature of income not assessable
(1) Income derived by a taxpayer by way of
the provision of a fringe benefit is not assessable income and is not exempt
income of the taxpayer.
(1A) Income derived by a taxpayer by way of the
provision of a benefit (other than a benefit to which section 15‑70
of the Income Tax Assessment Act 1997 applies) that, but for paragraph (g)
of the definition of fringe benefit in subsection 136(1) of the Fringe
Benefits Tax Assessment Act 1986, would be a fringe benefit is exempt
income of the taxpayer.
(2) Where:
(a) in a year of income, a taxpayer
derives income consisting of one or more non‑cash business benefits
(within the meaning of section 21A); and
(b) the
total amount that is applicable under section 21A in respect of those
benefits does not exceed $300;
the income is exempt income.
Division 1AB—Certain State/Territory bodies exempt from income tax
Subdivision A—Exemption for certain State/Territory bodies
24AK
Key principle
A body that is a State/Territory body
(an STB) is exempt from income tax under this Division unless it
is an excluded STB. There are 5 different ways in which a body can be an STB.
24AL
Diagram—guide to work out if body is exempt under this Division
The following diagram is a guide to help
work out whether a body is exempt from income tax under this Division:
24AM
Certain STBs exempt from tax
The income of a State/Territory body (an
STB) is exempt from income tax unless section 24AN applies
to the STB.
24AN
Certain STBs not exempt from tax under this Division
Income derived by an STB is not exempt
from income tax under this Division if, at the time that it is derived, the STB
is an excluded STB.
Notes: 1. For the definition of excluded STB
see section 24AT.
2. Even
though an excluded STB is not exempt from income tax under this Division, it
may still be exempt under another provision of this Act.
24AO
First way in which a body can be an STB
A body is an STB if:
(a) it is a company limited solely by
shares; and
(b) all the shares in it are
beneficially owned by one or more government entities.
Note: For the definition of government entity see
section 24AT. Note that an excluded STB is not a government entity.
24AP
Second way in which a body can be an STB
A body is an STB if:
(a) it is established by State or
Territory legislation; and
(b) it is not a company limited solely
by shares; and
(c) the legislation provides that it
must distribute all of its profits (if any) only to one or more government
entities; and
(d) if the legislation makes provision
as to the way its net assets may be distributed if it is dissolved or wound
up—the provision is that, if it is dissolved, all of its net assets (if any)
must be distributed only to one or more government entities.
24AQ
Third way in which a body can be an STB
A body is an STB if:
(a) it is established by State or
Territory legislation; and
(b) it is not a company limited solely
by shares; and
(c) the legislation gives the power to
appoint or dismiss its governing person or body only to one or more government
entities.
24AR Fourth
way in which a body can be an STB
A body is an STB if:
(a) it is established by State or
Territory legislation; and
(b) it is not a company limited solely
by shares; and
(c) the legislation gives the power to
direct its governing person or body as to the conduct of its affairs only to
one or more government entities.
24AS
Fifth way in which a body can be an STB
A body is an STB if:
(a) it is not a company limited solely
by shares; and
(b) it is not established by State or
Territory legislation; and
(c) all the legal and beneficial
interests (including, but not limited to, interests as to income, profits,
dividends, capital and distributions of capital) in it are held only by one or
more government entities; and
(d) all the rights or powers (if any)
to vote, appoint or dismiss its governing person or body and direct its
governing person or body as to the conduct of its affairs are held only by one
or more government entities.
24AT
What do excluded STB, government entity and Territory mean?
In this Division:
excluded STB means an STB that:
(a) at a particular time, is
prescribed as an excluded STB in relation to that time; or
(b) is a municipal corporation or
other local governing body (within the meaning of section 50‑25 of
the Income Tax Assessment Act 1997); or
(c) is a public educational
institution to which any of paragraphs 50‑55(a) to (c) of the Income
Tax Assessment Act 1997 applies; or
(d) is a public hospital to which any
of paragraphs 50‑55(a) to (c) of the Income Tax Assessment Act 1997
applies; or
(e) is a superannuation fund.
government entity means:
(a) a State; or
(b) a Territory; or
(ba) a municipal corporation or other
local governing body (within the meaning of section 50‑25 of the Income
Tax Assessment Act 1997); or
Note: The effect of this paragraph is that some bodies
owned or controlled by a municipal corporation or other local governing body
may be an STB even though the municipal corporation or other local governing
body is an excluded STB.
(c) another STB that is not an
excluded STB.
Territory means the Northern Territory
or the Australian Capital Territory.
24AU
Governor, Minister and Department Head taken to be a government entity
For the purposes of sections 24AQ,
24AR and 24AS, if the power to appoint, dismiss or direct the governing body is
given to, or is held by:
(a) a Governor of a State; or
(b) a Minister of the Crown of a
State; or
(c) a Minister of a Territory; or
(d) the head of a Department of a
State or a Territory; or
(e) any combination of paragraphs (a)
to (d);
the power is taken to be given to, or held by, a
government entity.
24AV
Regulations prescribing excluded STBs
States and Territories to consent to STBs being
excluded STBs
(1) The regulations may prescribe that an STB
is an excluded STB only if all States and Territories consent to the STB being
so prescribed.
Regulations prescribing excluded STBs may be
retrospective
(2) Despite subsection 12(2) of the Legislative
Instruments Act 2003, a regulation prescribing an STB as an excluded STB
may provide that the STB is an excluded STB in relation to a time before the
day of the notification of the regulation in the Gazette.
Subdivision B—Body ceasing to be an STB
24AW
Body ceasing to be an STB
If a body ceases to be an STB in a year
of income (the cessation year), this Act applies to the body as
if:
(a) the cessation were a change which
requires a company to calculate its taxable income and tax loss under
Subdivision 165‑B of the Income Tax Assessment Act 1997; and
(b) the references in that Subdivision
to “company” were references to “body”; and
(c) if the body is not a company—there
were no further requirement for the body to calculate its taxable income for
the year of income under that Subdivision; and
(d) the amount of any notional loss of
the body calculated under section 165‑50 of that Act for the period
before the cessation were nil; and
(e) the body’s deductions for tax
losses were attributed under section 165‑55 of that Act to the
period before the cessation and not to any other period; and
(f) those deductions were taken not
to be full year deductions under section 165‑55 of that Act; and
(g) the application of Parts 3‑1
and 3‑3 of the Income Tax Assessment Act 1997 were modified, for
the purposes of that Subdivision, in accordance with section 24AX of this
Act.
24AX
Special provisions relating to capital gains and losses
Period after cessation date—prior net capital losses to
be disregarded
(1) In determining if an amount is to be
included in the assessable income of the body under Parts 3‑1 and 3‑3
of the Income Tax Assessment Act 1997 for a period that occurred after
the cessation, any net capital losses incurred before the cessation are to be
disregarded.
Special cases where net capital gain before cessation
and net capital loss after cessation
(2) Subsections (3) and (4) apply if:
(a) a net capital gain accrued in the
period before the cessation; and
(b) if the period from the cessation
until the end of the year of income were treated as a year of income—a net
capital loss would have accrued in that period.
Special case 1—gain exceeds loss
(3) If this subsection applies and the net
capital gain exceeds the net capital loss:
(a) the amount that is to be included
in the assessable income of the body for the period that occurred before the
cessation as a result of the net capital gain accruing to the body is taken to
be the amount by which the net capital gain exceeds the net capital loss; and
(b) no net capital gain is taken to
have accrued, and no net capital loss is taken to have been incurred, in any
period in the cessation year after the cessation; and
(c) in determining if a net capital
gain accrued to, or a net capital loss was incurred by, the body for the year
following the cessation year, no net capital loss is taken to have been
incurred by the body in the cessation year.
Special case 2—loss equal to or exceeds gain
(4) If this subsection applies and the net
capital gain does not exceed the net capital loss:
(a) no amount is to be included in the
assessable income of the body for any period in the cessation year as a result
of a net capital gain accruing to the body; and
(b) in determining if a net capital
gain accrued to, or a net capital loss was incurred by, the body for the year
following the cessation year, the net capital loss that the body incurred in
the cessation year is taken to be the amount (if any) by which the net capital
loss exceeds the net capital gain.
24AY
Losses from STB years not carried forward
(1) If a body is an STB on the last day of a
year of income in which it incurs a tax loss, the tax loss is not allowable as
a deduction from the body’s assessable income of a later year of income unless
the body is an STB on the first day of that later year of income.
Note: This section prevents losses from years prior
to the cessation year from being carried forward to years after the cessation
year.
(2) This section only applies to a tax loss
incurred in the 1995‑96 year of income or a later year of income.
24AYA
Effect of unfunded superannuation liabilities
(1) This section applies to a deduction under
section 290‑60 of the Income Tax Assessment Act 1997 in
respect of a contribution made in relation to a person who was an employee of a
prescribed excluded STB when it ceased to be an STB.
(2) A deduction to which this section applies
is not allowable to the body for any year of income unless the requirements of subsections (3)
and (4) are complied with.
(3) For the deduction to be allowable, the
body must obtain a certificate by an authorised actuary stating the actuarial
value, as at the time the body ceases to be an STB, of liabilities of the STB
to provide superannuation benefits for, or for SIS dependants of, employees of
the body, where the liabilities:
(a) accrued after 30 June 1995 and before the time when the body ceased to be an STB; and
(b) were, according to actuarial
principles, unfunded at that time.
(4) The certificate must be in a form
approved in writing by the Commissioner. The body must obtain the certificate:
(a) before the date of lodgment of its
return of income of the year of income in which the body ceased to be an STB;
or
(b) within such further time as the
Commissioner allows.
(5) If the body obtains the certificate, a
deduction to which this section applies is nevertheless not allowable for a
year of income if the sum of all deductions to which this section applies for
the year of income is less than or equal to the unfunded liability limit (see subsection (6))
for the year of income.
(6) If the sum is greater than that limit, so
much of the deduction as is worked out using the following formula is not
allowable:
where:
Unfunded liability limit for a year of
income is:
(a) if the year of income is the one
in which the body ceases to be an STB—the actuarial value of the liabilities
set out in the actuary’s certificate; or
(b) in any other case—that actuarial
value as reduced by the total amount of deductions to which this section
applies that, because of subsection (5), have not been allowable to the
body for all previous years of income.
(7) Expressions used in this section that are
also used in section 290‑60 of the Income Tax Assessment Act 1997
have the same respective meanings as in that section.
24AZ
Meaning of period and prescribed excluded STB
In this Subdivision:
period means any of the periods into which
the cessation year is divided under section 165‑45 of the Income
Tax Assessment Act 1997.
prescribed excluded STB means an STB
that is an excluded STB as a result of regulations made for the purposes of paragraph (a)
of the definition of excluded STB in section 24AT.
Division 1A—Provisions relating to certain External Territories
24B
Interpretation
(1) In this Division, unless the contrary
intention appears:
prescribed person means:
(a) a person who is a Territory
resident;
(b) a person who is a trustee of a
trust that is a Territory trust in relation to the year of income, being the
person in his capacity as trustee of that trust; or
(c) a company that is a Territory
company in relation to the year of income.
prescribed Territory means Norfolk Island.
(2) For the purposes of this Division:
(a) a reference to an agreement,
right, power or option shall be construed as including a reference to an
agreement, right, power or option that is not enforceable by legal proceedings
whether or not it was intended to be so enforceable; and
(b) an arrangement or understanding,
whether formal or informal and whether expressed or implied, shall be deemed to
be an agreement.
(3) Where the effect of a provision of this
Division that refers to the derivation of income by a person not being a
company or to the application of income for the benefit of a person not being a
company depends upon the determination of the question whether or not the
person is a Territory resident, that question shall be determined as at the
time of the derivation of the income by the person or of the application of the
income for the benefit of the person, as the case may be.
(4) This Division applies in relation to
profits or gains of a capital nature in the same manner as it applies in
relation to income.
(5) For the purposes of this Division (other
than section 24C), the adjacent area, within the meaning of the Sea
Installations Act 1987, in relation to a prescribed Territory shall, after
the commencement of this subsection, be taken to be part of the prescribed
Territory.
24C
Territory resident
A reference in this Division to a
Territory resident is a reference to a person, not being a company, who:
(a) resides, and has his ordinary
place of residence, in a prescribed Territory; and
(b) would not, but for the operation
of subsection 7A(2), be treated as a resident of Australia.
24D
Territory company
(1) Subject to this section, a company is,
for the purposes of this Division, a Territory company in relation to the year
of income if, and only if:
(a) the company was incorporated in a
prescribed Territory;
(b) at all times during the year of
income the company was managed and controlled wholly and exclusively in that
Territory and was so managed and controlled by a person who was a Territory
resident or by persons who were Territory residents;
(c) at no time during the year of
income was a shareholding interest in the company held by a person (not being a
company) who was not a Territory resident;
(d) at no time during the year of
income was a person, or were 2 or more persons, in a position to affect any
rights in connexion with the company of the holder of a shareholding interest
in the company; and
(e) no agreement was entered into
before or during the year of income by virtue of which a person or persons
would be in a position after the year of income to affect any rights in
connexion with the company of the holder of a shareholding interest in the
company.
(2) For the purposes of this section, a
person shall be deemed to have held a shareholding interest in a company at a
particular time if at that time:
(a) in the case of a company having a
share capital—the person was beneficially entitled to, or to an interest in,
any shares in the company (whether or not the whole or any part of the legal
ownership of the shares was vested in the person); or
(b) in the case of a company limited
by guarantee or limited by both shares and guarantee—the person was a member of
the company or had a beneficial interest in any right or interest of a member
of the company in or in relation to the company.
(3) For the purposes of this section, where
at any time a person held a shareholding interest in a company and at that time
that company held a shareholding interest in another company (including a
shareholding interest that the first‑mentioned company is deemed to have
held by another application or other applications of this subsection), that
person shall be deemed to have held at that time a shareholding interest in
that other company.
(4) For the purposes of paragraphs (1)(d)
and (e), a person or persons shall be taken to have been, or to be, in a
position at a particular time to affect rights in connexion with a company of
the holder of a shareholding interest in the company if at that time that
person had or has, or those persons had or have, a right, power or option
(whether by virtue of any provision of the constituent document of the company
or of any other company or by virtue of any agreement or instrument or
otherwise) to do any act or thing that would divest the holder of that
shareholding interest of all or any of those rights, to reduce the extent of
all or any of those rights, to specify the manner in which all or any of those
rights were or are to be exercised or to do any act or thing that would prevent
the holder of that shareholding interest from exercising all or any of those
rights for his own benefit or receiving any benefits accruing by reason of the
existence of all or any of those rights.
(5) A reference in subsection (4) to the
doing of any act or thing that would reduce the extent of any rights in
connexion with a company of the holder of a shareholding interest in the
company includes a reference to the doing of any act or thing that would reduce
the proportion that those rights bear to the total number of the rights of the
same kind in connexion with the company of all the holders of shareholding
interests in the company.
(6) A company that would, apart from this
subsection, be a Territory company for the purposes of this Division in
relation to the year of income shall be deemed not to be a Territory company
for the purposes of this Division in relation to the year of income if the
affairs or business operations of the company were to any extent managed or
conducted in the year of income in the interests of persons other than the
holders of shareholding interests in the company or are likely to be so managed
or conducted in a later year of income.
(7) In determining for the purposes of this
section whether the affairs or business operations of a company were, or are
likely to be, managed or conducted to any extent in the interests of persons
other than the holders of shareholding interests in the company, regard shall
be had to any act or thing done, or likely to be done, in the course of the
management or conduct of those affairs or operations, irrespective of the
purpose or purposes for which that act or thing was done, or is likely to be
done, and notwithstanding that the doing of that act or thing took place, or is
likely to take place, in the course of ordinary family or commercial dealing.
Note: Section 960‑255 of the Income
Tax Assessment Act 1997 may be relevant to determining family relationships
for the purposes of subsection (7).
(8) Where, but for this subsection, a company
would not be a Territory company for the purposes of this Division in relation
to a year of income by reason of a non‑compliance of a temporary nature
with the requirements of paragraph (1)(b) or (c), the Commissioner may
disregard that non‑compliance.
(9) Where, but for this subsection, a company
would not be a Territory company for the purposes of this Division in relation
to a year of income by reason of a non‑compliance with paragraph (1)(d)
or (e) or by reason of subsection (6) but the Commissioner is of the
opinion that, having regard to the general effect of the provisions of this
section and to special circumstances that exist in relation to the company, it
would be inappropriate not to regard the company as a Territory company in
relation to that year of income, the Commissioner may regard the company as a
Territory company for the purposes of this Division in relation to that year of
income.
24E
Territory trusts
(1) A trust is, for the purposes of this
Division, a Territory trust in relation to the year of income if:
(a) the trust resulted from:
(i) a will, a codicil or
an order of a court that varied or modified the provisions of a will or
codicil; or
(ii) an intestacy or an
order of a court that varied or modified the application, in relation to the
estate of a deceased person, of the provisions of the law relating to the
distribution of the estates of persons who die intestate;
(b) the deceased person was a Territory
resident immediately before his death; and
(c) either of the following
subparagraphs applies in relation to the trust:
(i) the administration of
the estate of the deceased person had not, before the end of the year of
income, progressed to a stage that would give to any beneficiary a present
entitlement to income that was derived by the trustee before or during the year
of income; or
(ii) at no time during the
year of income was any person presently entitled to income derived by the
trustee during the year of income and at the end of the year of income no
person other than a Territory resident had any interest, whether vested or
contingent, in any income derived by the trustee during the year of income or
could by the exercise of a power conferred on any person obtain such an
interest.
(2) A trust is, for the purposes of this
Division, a Territory trust in relation to the year of income if:
(a) the trust was created by an
instrument (not being a will or a codicil) executed in a prescribed Territory
by a Territory resident; and
(b) at no time during the year of
income was any person presently entitled to income derived by the trustee
during the year of income and at the end of the year of income no person other
than a Territory resident had any interest, whether vested or contingent, in
any income derived by the trustee during the year of income or could by the
exercise of a power conferred on any person obtain such an interest.
(3) A trust is not, for the purposes of this
Division, a Territory trust in relation to the year of income except as
provided by this section.
(4) For the
purposes of this Division:
(a) where 2 or more beneficiaries are
presently entitled to shares of any income derived by a trustee (whether or not
any of those beneficiaries is under a legal disability), the respective shares
of that income to which those beneficiaries are so entitled shall be deemed to
be held by the trustee upon separate trusts for those beneficiaries;
(b) if there is a share of any income
derived by a trustee to which no beneficiary is presently entitled, the trustee
shall be deemed to hold that share upon a trust separate from the trust or
trusts upon which he holds the remainder of that income; and
(c) a reference to income derived by a
trustee of a trust is a reference to income derived by the trustee in his
capacity as trustee of that trust.
24F
Exemption from tax of certain income derived from sources outside Australia
(1) Subject to subsections (2), (3) and
(4), this section applies to:
(a) income derived (otherwise than as
a trustee) from sources outside Australia by a person being a Territory
resident or by a company being a Territory company in relation to the year of
income; and
(b) income derived from sources
outside Australia by a trustee of a trust that is a Territory trust in relation
to the year of income.
(2) This section does not apply to income
consisting of a dividend paid by a company that is a resident of Australia
other than a company that is a resident of Australia by reason only of the
operation of subsection 7A(2).
(3) Subject to subsection (4), this
section does not apply to income if the Commissioner is satisfied that the
income has been, or may be, applied for the benefit of a person not being a
Territory resident, or for the benefit of a company not being a Territory
company in relation to the year of income of the company in which the income
has been or may be applied.
(4) Subsection (3) does not exclude the
operation of this section in relation to any income if the Commissioner is
satisfied that the application of the income as mentioned in that subsection
resulted, or would result, from an agreement or transaction that was a genuine
commercial or family dealing and was not entered into or effected for the
purpose, or for purposes that included the purpose, of avoiding liability to
taxation.
Note: Section 960‑255 of the Income
Tax Assessment Act 1997 may be relevant to determining family relationships
for the purposes of subsection (4).
(5) Income to which this section applies is
exempt from income tax.
24G
Exemption from tax of certain income derived from sources in a prescribed
Territory
(1) Subject to subsections (2) and (3),
this section applies to:
(a) income derived (otherwise than as
a trustee) from sources in a prescribed Territory by a person who is a
Territory resident;
(b) income derived (otherwise than as
a trustee) from sources in a prescribed Territory by a company that is a
Territory company in relation to the year of income;
(c) income derived from sources in a
prescribed Territory by a trustee of a trust that is a Territory trust in
relation to the year of income;
(d) income derived from sources in a
prescribed Territory by a trustee of a trust, being income to which a
beneficiary who is under a legal disability and is a Territory resident is
presently entitled; and
(e) income derived by a person from an
office or employment the duties of which are wholly or mainly performed in a
prescribed Territory, if the Commissioner is satisfied that, at the time when the
person commenced to perform duties of that office or employment in that
Territory, he intended to remain in that Territory for a continuous period of
more than 6 months.
(2) Subject to subsection (3), this
section does not apply to income if the Commissioner is satisfied that the
income has been, or may be, applied for the benefit of a person not being a
Territory resident, or for the benefit of a company not being a Territory
company in relation to the year of income of the company in which the income
has been or may be applied.
(3) Subsection (2) does not exclude the
operation of this section in relation to any income if the Commissioner is
satisfied that the application of the income as mentioned in that subsection
resulted, or would result, from an agreement or transaction that was a genuine
commercial or family dealing and was not entered into or effected for the
purpose, or for purposes that included the purpose, of avoiding liability to
taxation.
Note: Section 960‑255 of the Income
Tax Assessment Act 1997 may be relevant to determining family relationships
for the purposes of subsection (3).
(4) Income to which this section applies is
exempt from income tax.
24H
When income to be taken to be applied for benefit of a person
(1) In determining for the purposes of this
Division whether any income has been, or may be, applied for the benefit of a
person, regard shall be had to all benefits that have accrued, or may accrue,
as the case may be, at any time to the person (whether or not the person had,
or may have, rights at law or in equity in or to those benefits) as a result of
the derivation of, or in relation to, that income, irrespective of the nature
or form of the benefits.
(2) Without limiting the generality of subsection (1),
income shall be taken, for the purposes of this Division, to have been applied
for the benefit of a person if:
(a) the income has been so dealt with
that it will, at a future time, and whether in the form of income or not, enure
for the benefit of the person;
(b) the derivation of the income has
operated to increase the value to the person of any property or rights of any
kind held by or for the benefit of the person;
(c) the person has received or become
entitled to receive any benefit (including a loan or a repayment, in whole or
in part, of a loan, or any other payment of any kind) provided out of the
income or out of property or money that was available for the purpose by reason
of the derivation of the income;
(d) the person has power, by means of
the exercise by the person of any power of appointment or revocation or
otherwise, to obtain, whether with or without the consent of any other person,
the beneficial enjoyment of the income; or
(e) the person is able, in any manner
whatsoever, and whether directly or indirectly, to control the application of
the income.
(3) Without limiting the generality of subsection (1),
it shall be taken, for the purposes of this Division, that income may be
applied for the benefit of a person if:
(a) the income may be so dealt with that
it will, at a future time, and whether in the form of income or not, enure for
the benefit of the person;
(b) the derivation of the income may
operate to increase the value to the person of any property or rights of any
kind held by or for the benefit of the person;
(c) the person may receive or become
entitled to receive any benefit (including a loan or a repayment, in whole or
in part, of a loan, or any other payment of any kind) to be provided out of the
income or out of property or money that is or will be available for the purpose
by reason of the derivation of the income;
(d) the person may, in the event of
the exercise of any power vested in any other person, become entitled to the
beneficial enjoyment of the income; or
(e) the person may become able, in any
manner whatsoever, and whether directly or indirectly, to control the
application of the income.
24J
Source of dividends
(1) In this section:
prescribed income means income consisting of
Territory income or residual income, or both.
residual income means income derived before 20 July 1972 from a source that, for the purposes of the Income Tax Assessment Act
1936 as amended and in force at the time when the income was derived, was a
source outside Australia or was a source in a Territory that is a prescribed
Territory.
Territory income means income to which
section 24F or 24G applies.
(2) For the purposes of this Division, but
subject to subsection (3), income consisting of a dividend shall be deemed
to be derived from a source in a prescribed Territory if, and only if:
(a) the dividend:
(i) is paid by a company
that is a Territory company in relation to the year of income of the company in
which the dividend is paid; and
(ii) is paid by that
company wholly and exclusively out of the amount remaining after deducting from
prescribed income of the company all losses and outgoings incurred in gaining
or producing that income that would have been allowable deductions if that
income had been assessable income; or
(b) the dividend is paid by a company
that was incorporated in a prescribed Territory but is not a Territory company
in relation to the year of income of the company in which the dividend is paid,
and is paid by that company:
(i) wholly and exclusively
out of the amount remaining after deducting from residual income of the company
all losses and outgoings incurred in gaining or producing that income that
would have been allowable deductions if that income had been assessable income;
or
(ii) wholly and exclusively
out of the amount remaining after deducting from income, being a dividend,
derived by the company, being a dividend that is deemed to be derived from a
source in a prescribed Territory by another application or other applications
of this paragraph, all losses and outgoings incurred in gaining or producing
that income that would have been allowable deductions if that income had been
assessable income.
(3) Where:
(a) a dividend derived by a prescribed
person is attributable to residual income; and
(b) the Commissioner is satisfied that
the dividend would not have been derived by a prescribed person but for:
(i) a change in the
beneficial ownership of shares in a company that took place on or after 20 July 1972; or
(ii) the making of any
agreement or other instrument, the granting or assignment of, or the failure to
exercise, any right, power or option, or the doing of any other act or thing,
in relation to shares in a company on or after that date;
the dividend shall be deemed, for the purposes of this
Division, not to have been derived from a source in a prescribed Territory.
(4) Subparagraph (3)(b)(i) does not
apply in relation to a change in the beneficial ownership of shares resulting
from:
(a) a will, a codicil or an order of a
court that varied or modified the provisions of a will or codicil; or
(b) an intestacy or an order of a
court that varied or modified the application, in relation to the estate of a
deceased person, of the provisions of the law relating to the distribution of
the estates of persons who die intestate.
(5) For the purposes of subsection (3),
a dividend is attributable to residual income if the dividend is paid in whole
or in part out of:
(a) an amount ascertained in
accordance with paragraph (2)(a), where the amount is so ascertained by
reference to an amount of prescribed income of a company that includes residual
income of the company; or
(b) an amount ascertained in
accordance with paragraph (2)(b).
(6) Where a dividend paid by a company
incorporated in a prescribed Territory to another company incorporated in a
prescribed Territory is attributable to residual income, any dividend paid by
the other company in whole or in part out of the first‑mentioned dividend
shall be deemed to be attributable to residual income.
(7) The reference in subsection (6) to a
dividend that is attributable to residual income includes a reference to a
dividend that is deemed to be attributable to residual income by virtue of any
other application or applications of that subsection.
24K
Source of income from employment
For the purposes of this Division,
income derived from an office or employment shall be deemed to be derived from
a source in a prescribed Territory:
(a) if, and only if, the duties of
that office or employment are wholly or mainly performed in a prescribed
Territory; and
(b) to such extent only as the
Commissioner considers reasonable remuneration for the performance of those
duties.
24L
Source of interest or royalty
(1) This section applies to income derived by
a person who is a prescribed person, being income that consists of interest or
a royalty that:
(a) is paid to the prescribed person
by the Commonwealth, by a State, by an authority of the Commonwealth or of a
State or by a person who is, or by persons at least one of whom is, a resident
and is not an outgoing wholly incurred by the Commonwealth, the State, the
authority or that person or those persons in carrying on business in a country
outside Australia at or through a permanent establishment of the Commonwealth,
the State, the authority or that person or those persons in that country; or
(b) is paid to the prescribed person
by a person who is, or by persons each of whom is, a non‑resident and is,
or is in part, an outgoing incurred by that person or those persons in carrying
on business in Australia at or through a permanent establishment of that person
or those persons in Australia.
(2) For the purposes of this Division, but
subject to this section, income to which this section applies shall be deemed:
(a) not to have been derived from a
source in a prescribed Territory; and
(b) not to have been derived from a
source outside Australia.
(3) Where:
(a) income to which this section
applies is paid to the prescribed person by whom it is derived by the
Commonwealth, by a State, by an authority of the Commonwealth or of a State or
by a person who is, or by persons at least one of whom is, a resident; and
(b) the interest or royalty of which
the income consists is, in part, an outgoing incurred by the Commonwealth, the
State, the authority or that person or those persons in carrying on business in
a country outside Australia at or through a permanent establishment of the
Commonwealth, the State, the authority or that person or those persons in that
country;
subsection (2) has effect in relation to so much only
of the income as is attributable to so much of the interest or royalty as is
not an outgoing so incurred.
(4) Where:
(a) income to which this section
applies is paid to the prescribed person by whom it is derived by a person who,
or by persons each of whom, is a non‑resident; and
(b) the interest or royalty of which
the income consists is, in part only, an outgoing incurred by the person or
persons by whom it is paid in carrying on business in Australia at or through a
permanent establishment of that person or those persons in Australia;
subsection (2) has effect in relation to so much only
of the income as is attributable to so much of the interest or royalty as is an
outgoing so incurred.
(4A) In subsection (4B), a reference to a
relevant person is a reference to the Commonwealth, a State, an authority of
the Commonwealth or of a State or a person who is, or persons at least 1 of
whom is, a resident.
(4B) For the purposes of paragraphs (1)(a)
and (3)(b), where:
(a) interest or royalty is paid, after
the commencement of this subsection, to a prescribed person by a relevant
person carrying on business in a country outside Australia; and
(b) the interest, a part of the
interest, the royalty or a part of the royalty:
(i) is incurred by the
relevant person in gaining or producing income that is derived by the relevant
person otherwise than in carrying on business in a country outside Australia at
or through a permanent establishment of the relevant person in that country or
is incurred by the relevant person for the purpose of gaining or producing
income to be so derived; or
(ii) is incurred by the
relevant person in carrying on business for the purpose of gaining or producing
income and is reasonably attributable to income that is derived, or may be
derived, by the relevant person otherwise than in so carrying on business at or
through a permanent establishment of the relevant person in a country outside
Australia;
the interest, the part of the interest, the royalty or the
part of the royalty, as the case may be, is not an outgoing incurred by the
relevant person in carrying on business in a country outside Australia at or
through a permanent establishment of the relevant person in that country.
(4C) For the purposes of paragraphs (1)(b)
and (4)(b), where:
(a) interest or royalty is paid, after
the commencement of this subsection, to a prescribed person by another person
or persons (in this subsection referred to as the payer), being:
(i) another person who is
carrying on business in Australia and is a non‑resident; or
(ii) other persons who are
carrying on business in Australia and each of whom is a non‑resident; and
(b) the interest, a part of the
interest, the royalty or a part of the royalty:
(i) is incurred by the
payer in gaining or producing income that is derived by the payer in carrying
on business in Australia at or through a permanent establishment of the payer
in Australia or is incurred by the payer for the purpose of gaining or
producing income to be so derived; or
(ii) is incurred by the
payer in carrying on a business for the purpose of gaining or producing income
and is reasonably attributable to income that is derived, or may be derived, by
the payer in so carrying on business at or through a permanent establishment of
the payer in Australia;
the interest, the part of the interest, the royalty or the
part of the royalty, as the case may be, is an outgoing incurred by the payer
in carrying on business in Australia at or through a permanent establishment of
the payer in Australia.
(5) In subsections (1), (3), (4), (4A),
(4B) and (4C), Australia, resident and non‑resident
have the meanings that those expressions would have if subsection 7A(2) did not
refer to Norfolk Island.
(6) For the purposes of this section, interest
or a royalty shall be deemed to have been paid by a person to another person
although it is not actually paid over to the other person but is reinvested,
accumulated, capitalized, carried to any reserve, sinking fund or insurance
fund however designated, or otherwise dealt with on behalf of the other person
or as the other person directs.
24M
Certain income deemed not to be derived from sources in a prescribed Territory
or outside Australia
(1) Income (not being a dividend) that would,
but for this subsection, be taken to be derived from a source in a prescribed
Territory shall be deemed, for the purposes of this Division, not to be derived
from such a source to the extent to which the income is received or accrues,
directly or indirectly, in pursuance of an agreement or transaction that:
(a) was not a genuine commercial or
family agreement or transaction; or
(b) was entered into for the purpose,
or for purposes that included the purpose, of avoiding liability to taxation.
Note: Section 960‑255 of the Income
Tax Assessment Act 1997 may be relevant to determining family relationships
for the purposes of paragraph (1)(a).
(2) Income that would, but for this
subsection, be taken to be derived from a source outside Australia shall be
deemed, for the purposes of this Division, not to be derived from such a source
to the extent to which the income is received or accrues, directly or
indirectly, in pursuance of an agreement or transaction that:
(a) was not a genuine commercial or
family agreement or transaction; or
(b) was entered into for the purpose,
or for purposes that included the purpose, of avoiding liability to taxation.
Note: Section 960‑255 of the Income
Tax Assessment Act 1997 may be relevant to determining family relationships
for the purposes of paragraph (2)(a).
24P
Transitional capital gains tax provisions for certain Cocos (Keeling) Islands
assets
(1) Subject to an election under subsection (5),
this section applies to a CGT asset held by a taxpayer where all of the
following conditions are satisfied:
(a) the asset was owned by the
taxpayer at the end of 30 June 1991;
(b) if there had been a disposal
(within the meaning of former Part IIIA) of the asset by the taxpayer on 1 July
1991, that Part would have applied in respect of that disposal (ignoring former
section 160ZZF and former Divisions 5A, 7A and 17 of that Part);
(c) if:
(i) there had been a
disposal (within the meaning of former Part IIIA) of the asset by the
taxpayer on 1 July 1991; and
(ii) profits or gains of a
capital nature had been derived by the taxpayer in respect of that disposal;
and
(iii) former section 24BB
had not been enacted; and
(iv) former section 24BA
had applied in relation to the year of income in which disposal occurred;
the profits or gains would have
been exempt income under this Division.
(2) For the purposes of Parts 3‑1
and 3‑3 of the Income Tax Assessment Act 1997:
(a) except for the purposes of
determining the cost base to the taxpayer of the asset—the asset is taken to
have been acquired by the taxpayer on 30 June 1991; and
(b) the first element of the asset’s
cost base in the hands of the taxpayer (at the end of 30 June 1991) is its market value at that time.
(3) Despite Division 121 of the Income
Tax Assessment Act 1997, the taxpayer is not required to keep records of
the date of acquisition of the asset, or its cost base on 30 June 1991.
(5) If, as at the date on which a CGT event
happens in relation to the asset, the taxpayer has complied with former section 160ZZU
of this Act and Division 121 of the Income Tax Assessment Act 1997
in relation to the asset, the taxpayer may elect that this section does not
apply in relation to the asset.
Division 2—Income
Subdivision A—Assessable income generally
25A
Assessable income to include certain profits
(1A) This section does not apply in respect of
the sale of property acquired on or after 20 September 1985.
(1B) This section
does not apply to a profit arising in the 1997‑98 year of income or a
later year of income from the carrying on or carrying out of a profit‑making
undertaking or scheme, even if the undertaking or scheme was entered into, or
began to be carried on or carried out, before the 1997‑98 year of income.
Note: Section 15‑15 (Profit‑making
undertaking or plan) of the Income Tax Assessment Act 1997 deals with
such a profit.
(1) The assessable income of a taxpayer shall
include profit arising from the sale by the taxpayer of any property acquired
by him for the purpose of profit‑making by sale, or from the carrying on
or carrying out of any profit‑making undertaking or scheme.
(2) Subject to subsection (3), where:
(a) after 23 August 1983, a taxpayer sold or sells property (in this subsection referred to as the relevant
property) being:
(i) shares in a private
company;
(ii) an interest in a
partnership; or
(iii) an interest in a
private trust estate; and
(b) at the time of sale of the
relevant property:
(i) the company,
partnership or trustee of the trust estate, as the case may be, held property
that:
(A) was
acquired for the purpose of profit‑making by sale by the company,
partnership or trustee, as the case may be; and
(B) was not
excepted property of the company, partnership or trust estate, as the case may
be; or
(ii) the company,
partnership or trustee of the trust estate, as the case may be, held an
interest, through one or more interposed companies, partnerships or trusts, in
property that:
(A) was
acquired for the purpose of profit‑making by sale by another private
company, partnership or trustee of a private trust estate; and
(B) was not
excepted property of that other company, partnership or trust estate, as the
case may be;
the taxpayer shall, for the purposes of the application of
this Act (including any application of any other provision of this section), be
deemed to have acquired the relevant property for the purpose of profit‑making
by sale.
(3) Subsection (2) does not apply in
relation to the sale by a taxpayer of property where the Commissioner, having
regard to:
(a) the extent to which the assets of
the company, partnership or trust estate, as the case may be, referred to in paragraph (2)(a),
immediately before the time of sale, consisted of the property referred to in subparagraph (2)(b)(i)
or the interest referred to in subparagraph (2)(b)(ii), as the case may be;
(b) the nature and extent, immediately
before the time of sale, of the taxpayer’s control of the company, partnership
or trust estate, as the case may be, referred to in paragraph (2)(a)
including, in the case of a company, the nature and extent of the taxpayer’s
shareholding in the company;
(c) the circumstances surrounding any
other sale, whether or not by the taxpayer, of shares in the company, or an
interest in the partnership or trust estate, as the case may be, referred to in
paragraph (2)(a), being a sale at a time when the property of that
company, partnership or trust estate included the property referred to in subparagraph (2)(b)(i)
or the interest referred to in subparagraph (2)(b)(ii), as the case may
be; and
(d) such other matters as the Commissioner
considers relevant;
considers that it is not appropriate that that subsection
should apply in relation to the sale of the property by the taxpayer.
(4) Where:
(a) a taxpayer acquired or acquires
property, being shares in a company, for the purpose of profit‑making by
sale; and
(b) after 23 August 1983:
(i) the company issued or
issues other shares (in this subsection referred to as the bonus shares)
to the taxpayer in satisfaction of a dividend (including an amount debited
against an amount standing to the credit of a share premium account) payable to
the taxpayer in respect of the shares referred to in paragraph (a); or
(ii) by reason that the
taxpayer was the owner of the shares referred to in paragraph (a), the
company issued or issues to the taxpayer rights to acquire other shares in the
company;
the taxpayer shall, for the purposes of the application of
this Act (including any other application of this subsection and any
application of any other provision of this section), be deemed to have acquired
the bonus shares or the rights, as the case may be, for the purpose of profit‑making
by sale.
(5) Where, after 23 August 1983,
property was or is acquired by a taxpayer as a result of a transfer in the
prescribed manner by a person who acquired the property for the purpose of
profit‑making by sale, the taxpayer shall, for the purposes of the
application of this Act (including any other application of this subsection and
any application of any other provision of this section), be deemed to have
acquired the property for the purpose of profit‑making by sale.
(6) Where:
(a) after 23 August 1983, a taxpayer sold or sells property; and
(b) the property sold was:
(i) an interest in
property, being property acquired by the taxpayer for the purpose of profit‑making
by sale; or
(ii) property, or an
interest in property, in which was merged an interest in property, being an
interest acquired by the taxpayer for the purpose of profit‑making by
sale;
the taxpayer shall, for the purposes of the application of
this Act (including any application of any other provision of this section), be
deemed to have acquired the property sold for the purpose of profit‑making
by sale.
(7) For the purposes of subsection (2),
where a company, partnership or trustee of a trust estate holds or held
property (in this subsection referred to as the underlying property)
consisting of:
(a) an interest in property, being
property acquired by the company, partnership or trustee for the purpose of
profit‑making by sale; or
(b) property, or an interest in
property, in which was merged an interest in property, being an interest
acquired by the company, partnership or trustee for the purpose of profit‑making
by sale;
the company, partnership or trustee, as the case may be,
shall be deemed to have acquired the underlying property for the purpose of
profit‑making by sale.
(8) Where:
(a) property (in this subsection
referred to as the acquired property) was or is acquired for the
purpose of profit‑making by sale; and
(b) after 23 August 1983, property (in this subsection referred to as the transferred property)
being:
(i) an interest in the
acquired property; or
(ii) property, or an
interest in property, in which was merged an interest in the acquired property;
was or is transferred to a
taxpayer in the prescribed manner;
the taxpayer shall, for the purposes of the application of
this Act (including any other application of this subsection and any
application of any other provision of this section), be deemed to have acquired
the transferred property for the purpose of profit‑making by sale.
(9) Where a taxpayer sold or sells property
that, by virtue of any of the preceding provisions of this section, is deemed
to have been acquired by the taxpayer for the purpose of profit‑making by
sale, so much (if any) of the proceeds of sale as, in the opinion of the
Commissioner, is appropriate shall, for the purposes of this Act, be deemed to
be profit arising from the sale by the taxpayer of the property.
(10) For the purposes of the application of subsection (9)
in relation to the sale of property (in this subsection referred to as the relevant
property) by a taxpayer:
(a) if:
(i) the relevant property
is deemed by subsection (2) to have been acquired by the taxpayer for the
purpose of profit‑making by sale;
(ii) the property (in this
paragraph referred to as the underlying property) to which sub-subparagraph (2)(b)(i)(A)
or (2)(b)(ii)(A), as the case may be, applies was actually acquired for the
purpose of profit‑making by sale by the company, partnership or trustee
referred to in that sub-subparagraph (which company, partnership or
trustee is in this paragraph referred to as the underlying owner);
and
(iii) the
relevant property was not transferred to the taxpayer in the prescribed manner;
the Commissioner shall have
regard to the extent to which, in his opinion, the proceeds of sale of the
relevant property are attributable to the amount of any increase in the value
of the underlying property during the period (in this paragraph referred to as
the relevant period) when the underlying property was held by the
underlying owner and the relevant property was held by the taxpayer reduced by
the amount of any capital expenditure incurred by the underlying owner in
respect of the underlying property during the relevant period (not including
expenditure in respect of which a deduction has been allowed, or is allowable,
to the underlying owner);
(b) if the relevant property is deemed
by subsection (5) to have been acquired by the taxpayer for the purpose of
profit‑making by sale and the relevant property was actually acquired for
the purpose of profit‑making by sale by the person (in this paragraph
referred to as the transferor) who transferred the relevant
property to the taxpayer in the prescribed manner—the Commissioner shall have
regard to the extent to which the amount (if any) that would have been included
in the assessable income of the transferor if the transferor had sold the
relevant property at the time when it was sold by the taxpayer for an amount of
consideration equal to the amount of the consideration received or receivable
by the taxpayer in respect of the sale of the relevant property by the taxpayer
exceeds the sum of:
(i) any expenditure
incurred by the taxpayer in respect of the relevant property, not including:
(A) any
consideration given by the taxpayer in respect of the transfer of the relevant
property to the taxpayer; or
(B) expenditure
to which subparagraph (ii) applies;
(ii) where the taxpayer
incurred expenditure of a capital nature in respect of the relevant property
otherwise than:
(A) in
acquiring property for the purpose of profit‑making by sale; or
(B) as
part of a profit‑making undertaking or scheme;
an amount equal to so
much of the consideration received or receivable by the taxpayer in respect of
the sale of the relevant property by the taxpayer as exceeds the amount that,
in the opinion of the Commissioner, would have been the consideration received
or receivable by the taxpayer if the taxpayer had not incurred that capital
expenditure; and
(iii) the amount of any
profit included in the assessable income of the transferor in respect of the
transfer of the relevant property to the taxpayer;
(c) if the relevant property is deemed
to have been acquired by the taxpayer by virtue of the application of this
section (either directly or indirectly) in relation to property (in this
paragraph referred to as the related property) that was actually
acquired by the taxpayer or by another person or other persons for the purpose
of profit‑making by sale—the Commissioner shall have regard to the extent
to which the relevant property consists of, or is attributable to, the related
property;
(d) if the relevant property consists
of rights to acquire shares in a company, being rights that the taxpayer is
deemed by subsection (4) to have acquired for the purpose of profit‑making
by sale—the relevant property shall be deemed to have been acquired by the
taxpayer at no cost; and
(e) if the relevant property consists
of bonus shares that the taxpayer is deemed by subsection (4) to have
acquired for the purpose of profit‑making by sale—the cost to the
taxpayer of the relevant property shall be ascertained in accordance with
section 6BA.
(11) For the purposes of this section, property
shall be taken to have been transferred to a person (in this subsection
referred to as the transferee) in the prescribed manner if:
(a) the following conditions are
satisfied:
(i) the property is
transferred by way of gift or for consideration the amount or value of which is
less than the amount that, in the opinion of the Commissioner, is the value of
the property immediately before the time of transfer;
(ii) the property is
transferred otherwise than as a result of:
(A) a will,
a codicil or an order of a court that varied or modified the provisions of a
will or a codicil; or
(B) an
intestacy or an order of a court that varied or modified the application, in
relation to the estate of a deceased person, of the provisions of the law
relating to the distribution of the estates of persons who die intestate; and
(iii) the Commissioner is
satisfied that the transferee and the person who transferred the property were
not dealing with each other at arm’s length in relation to the transfer of the
property; or
(b) the property:
(i) is transferred by way
of a distribution of property of a private company or private trust estate made
(whether in the course of the winding up of the company or trust estate or
otherwise) to the transferee in his capacity as a shareholder in the company or
a beneficiary of the trust estate, as the case may be; and
(ii) is not excepted
property of the company or trust estate, as the case may be.
(12) In this section:
(a) a reference to excepted property
of a company, partnership or trust estate is a reference to:
(i) trading stock of the
company, partnership or trustee; or
(ii) property being plant within
the meaning of section 45‑40 of the Income Tax Assessment Act
1997 purchased for use by the company, partnership or trustee of the trust
estate for the purpose of producing assessable income;
(b) a reference to a private company
is a reference to a company other than a company the shares in which are listed
for quotation in the official list of a stock exchange in Australia or
elsewhere;
(c) a reference to a private trust
estate is a reference to a trust estate other than a unit trust the units in
which are listed for quotation in the official list of a stock exchange in
Australia or elsewhere or are ordinarily available for subscription or purchase
by the public; and
(d) a reference to property generally
or to a particular kind of property includes a reference to an estate or
interest in property or in that kind of property, as the case may be.
26AAC
Shares and rights acquired under schemes for the acquisition of shares by
employees
(1) For the purposes of this section and
section 26AAD, a taxpayer shall be taken to have acquired a share in a
company, or a right to acquire a share in a company, under a scheme for the acquisition
of shares by employees if:
(a) in the case of a share, the share
was acquired by the taxpayer:
(i) in respect of, or for
or in relation directly or indirectly to, any employment of, or services
rendered by, the taxpayer or a relative of the taxpayer; or
(ii) as a result of the
exercise or operation of a right to acquire the share, being a right that was
acquired by the taxpayer in respect of, or for or in relation directly or
indirectly to, any employment of, or services rendered by, the taxpayer or a
relative of the taxpayer; or
(b) in the case of a right, the right
was acquired by the taxpayer in respect of, or for or in relation directly or
indirectly to, any employment of, or services rendered by, the taxpayer or a
relative of the taxpayer.
(2) Where a taxpayer who has acquired a right
to acquire a share in a company in respect of, or for or in relation directly
or indirectly to, any employment of, or services rendered by, the taxpayer or a
relative of the taxpayer disposes of, and re‑acquires, the right on one
or more occasions, each such re‑acquisition of the right shall be taken,
for the purposes of this section and section 26AAD, to be an acquisition
of the right in respect of, or for or in relation directly or indirectly to,
that employment of, or those services rendered by, the taxpayer or that
relative of the taxpayer, as the case may be.
(3) A reference in this section to a share in
a company, or a right to acquire a share in a company, having been acquired by
a taxpayer in respect of, or for or in relation directly or indirectly to, any
employment of, or services rendered by, the taxpayer or a relative of the
taxpayer includes, but is not limited to, a reference to such a share or right
having been acquired by a taxpayer:
(a) in pursuance of an agreement,
arrangement or understanding under which a company was to issue shares in the
company to employees of the company or of another company or to relatives of
those employees; or
(b) in pursuance of the terms of a
trust deed under which a trustee is required or authorized to sell, or
otherwise to transfer, shares in a company to employees of the company or of
another company or to relatives of those employees.
(4) Subject to subsection (4AA), this
section applies to and in relation to an acquisition by a taxpayer of a share
in a company, or of a right to acquire a share in a company, if, and only if:
(a) in the case of a share, the share
was acquired by the taxpayer after 17 September 1974 otherwise than as a
result of the exercise or operation of a right that:
(i) being a right that had
not previously been acquired and disposed of by the taxpayer—was acquired by
the taxpayer on or before that date; or
(ii) being a right that had
previously been acquired and disposed of by the taxpayer, was first acquired by
the taxpayer on or before that date; or
(b) in the case of a right to acquire
a share:
(i) where the right had
not previously been acquired and disposed of by the taxpayer—the right was
acquired by the taxpayer after 17 September 1974; or
(ii) where the right had
previously been acquired and disposed of by the taxpayer—the right was first
acquired by the taxpayer after that date;
and a reference in this section to the acquisition by a
taxpayer of a share or a right to acquire a share shall be construed
accordingly.
(4AA) This section and section 26AAD do not
apply to an acquisition by a taxpayer of a share in a company, or of a right to
acquire a share in a company, if:
(a) an amount is, or apart from
section 139BA would be, included in the assessable income of a taxpayer
under Division 13A in relation to the acquisition; or
(aa) the consideration for the
acquisition is equal to, or more than, the market value of the share or right
(within the meaning of Subdivision F of Division 13A) at the time of the
acquisition; or
(b) in the case of a share—the share
was acquired as a result of the exercise of a right and this section did not
apply in relation to the acquisition of the right.
(4A) For the purposes of this section, a taxpayer
shall be taken to have acquired an ESAS share in a company (in this section
called the issuing company), or to have acquired an ESAS right to
acquire a share in a company (in this section also called the issuing
company), if:
(a) the share or right was acquired
under a scheme (in this subsection called the acquisition scheme)
for the acquisition of shares by employees;
(b) in the case of a share—the share
was acquired by the taxpayer on or after 1 July 1988:
(i) in respect of, or for
or in relation directly or indirectly to, any employment of the taxpayer by the
issuing company or a related company; or
(ii) as a result of the
exercise or operation of a right to acquire the share, being a right that was
acquired, or first acquired, by the taxpayer on or after 1 July 1988 in
respect of, or for or in relation directly or indirectly to, any employment of
the taxpayer by the issuing company or a related company;
(c) in the case of a right—the right
was acquired by being issued to the taxpayer on or after 1 July 1988 in respect of, or for or in relation directly or indirectly to, any employment of
the taxpayer by the issuing company or a related company;
(d) the Commissioner is satisfied that
all of the following conditions were satisfied in relation to the acquisition
scheme as at the time the share or right was acquired:
(i) both:
(A) the
acquisition scheme; and
(B) any
scheme for the provision of financial assistance in respect of acquisitions of
shares or rights under the acquisition scheme;
were operated on a non‑discriminatory
basis;
(ii) all the shares
available for acquisition under the scheme were ordinary shares;
(iii) all the rights
available for acquisition under the scheme were rights to acquire ordinary
shares;
(iv) the scheme was operated
so that no employee would be permitted to dispose of a share or right (whether
by assignment, declaration of trust or otherwise) before the earlier of the
following times:
(A) the end
of the period of 3 years after the time of the acquisition of the share or
right;
(B) the time
when the employee ceased, or first ceased, to be employed by a member of the
group constituted by the issuing company and any related companies;
(v) neither shares nor
rights were available for acquisition under the acquisition scheme by persons
other than permanent employees of the issuing company or of related companies;
and
(e) no deduction is allowable to the
issuing company or a related company in any year of income in respect of
expenditure incurred in relation to the acquisition of shares or rights under
the acquisition scheme.
(4B) For the purposes of subsection (4A), a
scheme shall be taken to be operated on a non‑discriminatory basis if,
and only if:
(a) participation in the scheme is
open to all permanent employees of the issuing company and related companies;
(b) in the case of an acquisition
scheme—the following conditions are satisfied in relation to all offers to
acquire shares or rights under the scheme:
(i) the time for
acceptance of each offer is reasonable;
(ii) the following features
of each offer are the same for all permanent employees of the issuing company
and related companies:
(A) the
consideration for the acquisition concerned (whether that consideration is
determined by reference to the value of the share or right or otherwise);
(B) the
number of shares or rights, the minimum number of shares or rights or the
maximum number of shares or rights, offered to each employee, as applicable;
(C) the time
for acceptance of the offer;
(D) the
steps taken for the circulation of information about the offer; and
(c) in the case of a scheme for the
provision of financial assistance by way of the making of a loan to acquire
shares or rights under the acquisition scheme—the following conditions are
satisfied in relation to all loans made to acquire shares or rights to which a
particular offer under the acquisition scheme relates:
(i) the time for taking up
each loan is reasonable;
(ii) both of the following
features of each loan are the same for all permanent employees of the issuing
company and related companies:
(A) the
terms and conditions of the loan;
(B) the loan
amount, the minimum loan amount, or the maximum loan amount, offered to each
employee, as applicable.
(4C) Subsection (4F) applies to a taxpayer
in relation to a year of income and in relation to:
(a) all of the ESAS rights to acquire
shares in a particular issuing company, being rights acquired by the taxpayer
during the year of income; and
(b) all of the ESAS shares in a
particular issuing company, being shares acquired by the taxpayer during the
year of income;
unless:
(c) the taxpayer elects that subsection (4F)
does not apply to the taxpayer in relation to that year of income; or
(d) the taxpayer was not employed by
the issuing company or a related company on the last day of the year of income.
(4D) Where, apart from this subsection, subsection (4F)
would apply to a taxpayer in relation to a year of income and in relation to 2
or more issuing companies:
(a) if the taxpayer elects that subsection (4F)
shall apply in relation to only one of those companies—subsection (4F)
does not apply in relation to the remaining companies; or
(b) in any other case—subsection (4F)
does not apply in relation to any of those companies.
(4E) An election by a taxpayer under subsection (4C)
or (4D) must be made on or before the date of lodgment of the return of income
of the taxpayer for the year of income to which the election relates, or before
such later date as the Commissioner allows.
(4F) Where this subsection applies to a
taxpayer in relation to a year of income:
(a) the taxpayer shall be taken to
have made an election under subsection (8A) in relation to all of the ESAS
rights to acquire shares in a particular company, being rights acquired by the
taxpayer during the year of income;
(b) the taxpayer shall be taken to
have made an election under subsection (15A) in relation to all of the
ESAS shares in a particular company, being shares acquired by the taxpayer
during the year of income; and
(c) the aggregate of the amounts that
would, apart from this subsection, be included in the assessable income of the
taxpayer of the year of income under subsection (5) and paragraph (8C)(a)
in respect of those shares and those rights (which aggregate is in this subsection
called the aggregate discount amount) shall be reduced by the
amount obtained by multiplying whichever is the lesser of the following
amounts:
(i) $2,000;
(ii) the aggregate of:
(A) in the
case of shares—the values of the shares when they were acquired by the
taxpayer; and
(B) in the
case of rights to acquire shares—the amounts that would have been the value of
the shares if they had been acquired by the taxpayer at the time the rights
were acquired by the taxpayer;
as the case requires
(which aggregate is in this subsection called the aggregate value);
by whichever is the lesser of
the following percentages:
(iii) 10%;
(iv) the percentage
calculated by dividing the aggregate discount amount by the aggregate value.
(5) Where a taxpayer has acquired during the
year of income a share in a company under a scheme for the acquisition of
shares by employees, the assessable income of the taxpayer of the year of
income includes the value of that share at the time when it was acquired by the
taxpayer less the sum of:
(a) the amount, if any, paid or
payable by the taxpayer as consideration for the share; and
(b) if the taxpayer acquired the share
as a result of the exercise or operation of a right (whether that right was
unconditional or subject to conditions) to acquire the share—the amount, if
any, paid or payable by the taxpayer as consideration for the right.
(6) Where:
(a) a taxpayer has acquired a right
(whether that right was unconditional or was subject to conditions) to acquire
a share in a company under a scheme for the acquisition of shares by employees;
(b) as a result of a disposition or
successive dispositions of the right, the right was subsequently acquired by an
associate of the taxpayer without having been, at any time since it was first
acquired by the taxpayer, in the ownership of a person other than the taxpayer
or an associate of the taxpayer; and
(c) as a result of the exercise or
operation of the right, that associate of the taxpayer acquired a share in the
company;
the taxpayer shall be deemed for the purposes of this
section (other than subsections (4A), (4B), (4C), (4D) and (4F)):
(d) to have acquired the share under a
scheme for the acquisition of shares by employees and to have so acquired the
share at the time when it was acquired by the associate; and
(e) to have paid as consideration for
the share the amount, if any, paid or payable by the associate as consideration
for the share.
(7) Where:
(a) a taxpayer has acquired a right
(whether that right was unconditional or was subject to conditions) to acquire
a share in a company under a scheme for the acquisition of shares by employees;
(b) as a result of a disposition or of
successive dispositions of the right, the right was subsequently acquired by an
associate of the taxpayer without having been, at any time since it was first
acquired by the taxpayer, in the ownership of a person other than the taxpayer
or an associate of the taxpayer; and
(c) the associate has disposed of the
right to a person, not being the taxpayer or another associate of the taxpayer;
the assessable income of the taxpayer of the year of
income during which the associate disposed of the right as mentioned in paragraph (c)
includes the amount, if any, received by the associate as consideration for the
right less the amount, if any, paid or payable by the taxpayer as consideration
for the right.
(8) Where a taxpayer:
(a) has acquired a right (whether that
right was unconditional or was subject to conditions) to acquire a share in a
company under a scheme for the acquisition of shares by employees (including a
right that has been previously acquired and disposed of by the taxpayer but not
including a right that has, at any time since it was first acquired by the
taxpayer, been in the ownership of a person other than the taxpayer or an
associate of the taxpayer); and
(b) has disposed of that right to a
person not being an associate of the taxpayer;
the assessable income of the taxpayer of the year of
income during which the taxpayer disposed of the right as mentioned in paragraph (b)
includes the amount, if any, received by the taxpayer as consideration for the
right less the amount, if any, paid or payable by the taxpayer as consideration
for the right.
(8A) Where a taxpayer has acquired a right (whether
that right was unconditional or was subject to conditions) to acquire a share
in a company under a scheme for the acquisition of shares by employees, being a
right issued after 19 September 1985, the taxpayer may elect that subsection (8C)
is to apply in relation to that right.
(8B) An election under subsection (8A) in
relation to a right must be made on or before the date of lodgment of the
return of income of the taxpayer for the year of income in which the right was
acquired, or before such later date as the Commissioner allows.
(8C) Where a taxpayer has made an election under
subsection (8A) in relation to a right:
(a) the assessable income of the
taxpayer of the year of income during which that right was issued to the
taxpayer includes the value of that right at the time when it was issued to the
taxpayer less the amount, if any, paid or payable by the taxpayer as
consideration for the right;
(b) no amount shall be included in the
assessable income of the taxpayer of any year of income in respect of that
right by virtue of any other provision of this section; and
(c) no amount shall be included in the
assessable income of the taxpayer of any year of income by virtue of subsection (5)
in respect of a share acquired by the taxpayer as a result of the exercise or
operation of the right.
(8D) Where:
(a) a taxpayer has made an election
under subsection (8A) in relation to a right;
(b) by virtue of paragraph (8C)(a),
an amount has been included, or would, but for this subsection, be included, in
the assessable income of the taxpayer of a year of income in respect of that
right; and
(c) by virtue of any conditions or
restrictions (being conditions or restrictions applicable only to rights to
acquire shares in the company acquired under a scheme for the acquisition of
shares by employees) attached to, or to the issue of, the right, the taxpayer
has been divested of ownership of the right;
then, notwithstanding paragraph (8C)(a), the
assessable income of the taxpayer of the year of income referred to in paragraph (b)
of this subsection shall be deemed not to have included, or not to include, as
the case may be, the amount referred to in that paragraph.
(9) Where:
(a) the trustee of the estate of a
deceased person has acquired a share in a company as a consequence of the
exercise or operation of a right to acquire the share, being a right owned by
the deceased person at the time of his death; and
(b) an amount would have been included
in the assessable income of the deceased person under this section if he had
not died and had acquired the share on the day on which it was acquired by the
trustee for a consideration equal to the consideration, if any, paid by the
trustee for the share;
the amount that would have been so included in the
assessable income of the deceased person shall be included in the assessable
income of the trust estate of the year of income during which the trustee
acquired the share and shall be deemed to be income to which no beneficiary is
presently entitled.
(11) Where, as a result of a disposition of a
right to acquire a share in a company:
(a) an amount would, but for this
subsection, be included by virtue of this section in the assessable income of a
taxpayer of a year of income; and
(b) an amount has been, or will be,
included by virtue of another section of this Act in the assessable income of
any year of income of the taxpayer or of an associate of the taxpayer
(including, in the case of an associate being a trustee, the assessable income
of the trust estate);
the amount referred to in paragraph (a) that would,
but for this subsection, be included in the assessable income of the taxpayer
shall be reduced by so much of that amount as does not exceed the amount
referred to in paragraph (b).
(11A) Subsection (11) does not apply to a
disposal of a right to acquire a share in a company if that disposal would
result in a capital gain or capital loss for the purposes of Part 3‑1
of the Income Tax Assessment Act 1997.
(12) Where:
(a) as a result of the acquisition by
a taxpayer or by an associate of a taxpayer of a share in a company, an amount
has been, or will be, included by virtue of this section in the assessable
income of the taxpayer of a year of income; and
(b) as a result of the first
disposition of the share after the acquisition referred to in paragraph (a),
an amount would, but for this subsection, be included by virtue of another
section of this Act in the assessable income of any year of income of the
taxpayer or of an associate of the taxpayer (including, in the case of an
associate being a trustee, the assessable income of the trust estate);
the amount referred to in paragraph (b) that would,
but for this subsection, be included in the assessable income of a person or of
a trust estate shall be reduced by so much of that amount as does not exceed
the amount referred to in paragraph (a).
(12A) Subsection (12) does not apply to a
disposal of a right to acquire a share in a company if that disposal would
result in a capital gain or capital loss for the purposes of Part 3‑1
of the Income Tax Assessment Act 1997.
(13) Where:
(a) an amount is included in the
assessable income of a trust estate by virtue of subsection (9) as a
result of the acquisition by the trustee of a share in a company; and
(b) as a result of the first
disposition of the share after the acquisition referred to in paragraph (a),
an amount would, but for this subsection, be included by virtue of another
section of this Act in the assessable income of the trust estate of any year of
income;
the amount referred to in paragraph (b) that would,
but for this section, be included in the assessable income of the trust estate
shall be reduced by so much of that amount as does not exceed the amount
referred to in paragraph (a).
(13A) Subsection (13) does not apply to a
disposal of a right to acquire a share in a company if that disposal would
result in a capital gain or capital loss for the purposes of Part 3‑1
of the Income Tax Assessment Act 1997.
(14) A reference in this section to an
associate of a taxpayer is a reference to any of the following persons:
(a) a relative of the taxpayer;
(b) a trustee of a trust estate, where
the taxpayer or any relative of the taxpayer benefits or is capable of
benefiting under the trust;
(c) a partner of the taxpayer;
(d) a company, where:
(i) the company is, or its
directors are, accustomed or under an obligation, whether formal or informal,
to act in accordance with the directions, instructions or wishes of the
taxpayer or of a relative of the taxpayer; or
(ii) the taxpayer is, the
persons who are associates of the taxpayer by virtue of paragraphs (a),
(b) and (c) are, or the taxpayer and the persons who are associates of the
taxpayer by virtue of those paragraphs are, in a position to cast, or control
the casting of, more than 50% of the maximum number of votes that might be cast
at a general meeting of the company.
(15) Where:
(a) a taxpayer acquires a share in a
company under a scheme for the acquisition of shares by employees; and
(b) by reason of any conditions or
restrictions (being conditions or restrictions applicable only to shares in the
company acquired under such a scheme) attached to, or to the issue of, the
share (including conditions or restrictions in relation to the payment of
moneys in respect of the share) the right of the taxpayer to dispose of the
share is restricted or the taxpayer is liable to be divested of his ownership
of the share;
the acquisition of the share by the taxpayer shall be
deemed for the purposes of this section (other than subsections (4A),
(4B), (4C), (4D) and (4F)) to have taken place at the time when the right of
the taxpayer to dispose of the share ceases to be so restricted, the time when
the taxpayer ceases to be so liable to be divested of his ownership of the
share or the time immediately before the taxpayer disposes of the share,
whichever first happens.
(15A) A taxpayer may elect that subsection (15)
is not to apply in relation to a share, being a share acquired by the taxpayer
after 19 September 1985.
(15B) An election under subsection (15A) in
relation to a share must be made on or before the date of lodgment of the
return of income of the taxpayer for the year of income in which the share was
acquired by the taxpayer, or within such further period as the Commissioner allows.
(15C) Where:
(a) a taxpayer has made an election
under subsection (15A) in relation to a share;
(b) by virtue of subsection (5),
an amount has been included, or would but for this subsection, be included, in
the assessable income of the taxpayer of a year of income in respect of that
share; and
(c) by virtue of any conditions or
restrictions mentioned in paragraph (15)(b) attached to, or to the issue
of, the share, the taxpayer has been divested of ownership of the share;
then, notwithstanding subsection (5), the assessable
income of the taxpayer of the year of income referred to in paragraph (b)
of this subsection shall be deemed not to have included, or not to include, as
the case may be, the amount referred to in that paragraph.
(16) Where a taxpayer who has a right to
acquire a share in a company is to be taken to have acquired the right under a
scheme for the acquisition of shares by employees by virtue of the operation of
subsection (2), a reference in this section to the amount, if any, paid or
payable by the taxpayer as consideration for the right shall be read as a
reference to the amount, if any, paid or payable by the taxpayer as
consideration in respect of the first acquisition of the right by him.
(17) A reference in this section to the amount
paid or payable by a person as consideration for a share or for a right to
acquire a share includes a reference to any expenditure incurred by the person
in the year of income or in any preceding year of income in connexion with the
acquisition of the share or right other than expenditure allowed or allowable
as a deduction from the assessable income of the person of any of those years
of income.
(18) For the purposes of this section, in
determining the value of a share or of a right to acquire a share, the share or
the right, and any share that may be acquired as a consequence of the exercise
or operation of the right, shall be deemed not to be subject to any conditions
or restrictions (being conditions or restrictions applicable only to shares in,
or rights to acquire shares in, the company acquired under a scheme for the
acquisition of shares by employees).
(18A) A reference in this section to the giving of
financial assistance includes a reference to the giving of financial assistance
by way of the making of a loan, the giving of a guarantee, the provision of
security, the release of an obligation or the forgiving of a debt or otherwise.
(18B) For the purposes of this section, the
question whether a company is related to another company shall be determined in
the same manner as the question whether a corporation is related to another
corporation is determined for the purposes of the Corporations Act 2001.
(18C) In this section:
employee, in relation to a company, includes
a director of the company.
permanent employee, in relation to a company,
means:
(a) a full‑time employee of the
company; or
(b) a permanent part‑time
employee of the company;
with at least 12 months service (whether continuous or non‑continuous).
(18D) For the purposes of the definition of
permanent employee in subsection (18C), the period during which a
person is engaged in service includes any period during which the person is, in
accordance with the terms and conditions of that service:
(a) absent on recreation leave, other
than:
(i) long service leave,
furlough, extended leave or leave of similar kind (however described); or
(ii) leave without pay or
on reduced pay; or
(b) absent from work because of
accident or illness.
(18E) Nothing in section 170 prevents the
amendment of an assessment at any time for the purposes of giving effect to paragraph (4A)(e).
(19) Nothing in section 170 prevents the
amendment of an assessment made in relation to a taxpayer if the amendment is
made for the purpose of giving effect to subsection (8D) or (15C) and
effects a reduction in the liability of the taxpayer.
26AAD
The effect of 100% takeovers and restructures on the operation of section 26AAC
Treating acquisitions as continuations of existing
shares etc.
(1) To the extent that:
(a) a taxpayer acquires:
(i) shares in a company
(the new company) that can reasonably be regarded as matching
shares in another company (the old company) that the taxpayer had
acquired under a scheme for the acquisition of shares by employees; or
(ii) rights to acquire
shares in a company (the new company) that can reasonably be
regarded as matching rights in another company (the old company)
that the taxpayer had acquired under a scheme for the acquisition of shares by
employees; and
(b) the acquisition occurs in
connection with a 100% takeover, or a restructure, of the old company; and
(c) as a result of the takeover or
restructure, the taxpayer ceased to hold the shares or rights in the old
company;
then, if the conditions in subsections (3) to (5) are met, the matching shares or rights are treated, for the purposes of section 26AAC,
as if they were a continuation of the shares or rights in the old company.
Note: In determining to what extent something can
reasonably be regarded as matching shares or rights in the old company, one of
the factors to consider is the respective market values of that thing and of
those shares or rights.
Treating acquisitions as disposals of existing shares
etc.
(2) However, to the extent that, in
connection with the takeover or restructure, the taxpayer acquires anything
that:
(a) can reasonably be regarded as
matching any shares or rights in the old company that the taxpayer had acquired
under a scheme for the acquisition of shares by employees; but
(b) is not a matching share or right
to which subsection (1) applies;
the taxpayer is treated, for the purposes of section 26AAC,
as having disposed of shares, or disposed of rights (other than by exercising
them), that the taxpayer held, under a scheme for the acquisition of shares by
employees, in the old company immediately before the takeover or restructure.
Conditions for the continuation of shares or rights
(3) The first condition is that, immediately
before the takeover or restructure, the taxpayer held shares, or rights to
acquire shares, in the old company under a scheme for the acquisition of shares
by employees.
(4) The second condition is that:
(a) to the extent that the matching
shares or rights are shares, they are ordinary shares; or
(b) to the extent that the matching
shares or rights are rights, they are rights to acquire ordinary shares.
(5) The third condition is that the matching
shares or rights are subject to:
(a) the same conditions or
restrictions as; or
(b) conditions or restrictions that
have the same effect as;
the conditions or restrictions (if any) that attached to
the shares or rights in the old company that they can reasonably be regarded as
matching.
Apportionment rules
(6) If:
(a) subsection (1) applies to
shares or rights that the taxpayer has acquired; and
(b) the taxpayer had paid or given
consideration (the original consideration) for an acquisition,
under a scheme for the acquisition of shares by employees, of any of the shares
or rights in the old company (the original shares or rights);
the taxpayer is treated as having paid or given, for any
of the apportionable assets for the original shares or rights, consideration of
an amount worked out by spreading the original consideration proportionately
among all the apportionable assets according to their market values immediately
after the takeover or restructure.
(7) The apportionable assets
for the original shares or rights are:
(a) all matching shares or rights held
by the taxpayer that are treated because of this section as a continuation of
the original shares or rights; and
(b) anything else that the taxpayer
acquired in connection with the takeover or restructure and that can reasonably
be regarded as matching the original shares or rights; and
(c) in the case of a restructure—any
shares or rights in the old company that the taxpayer held immediately before,
and continues to hold immediately after, the restructure and that can
reasonably be regarded as matching the original shares or rights.
Definitions
(8) In this section:
100% takeover has the same meaning as in
section 139GCB.
conditions or restrictions, in relation to
shares or rights, means conditions or restrictions (if any) relating to:
(a) the shares or rights, or shares
acquired as a result of the exercise of the rights; or
(b) the issue or disposal of the
shares or rights, or shares acquired as a result of the exercise of the rights.
employee, in relation to a company, includes
a director of the company.
holding company has the same meaning as in
the Corporations Act 2001.
market value has the same meaning as in
Subdivision F of Division 13A, as that Subdivision applies for the
purposes of section 139DS.
Note: Subsection 139FA(4) alters the meaning of
market value of a share or right for the purposes of section 139DS.
restructure has the same meaning as in
section 139GCC.
subsidiary has the same meaning as in the Corporations
Act 2001.
26AB
Assessable income—premium for lease
(1A) For the purposes of assessments for the
1997‑98 year of income and later years of income, this section applies
only in relation to assignments of leases granted before 20 September
1985.
Note: The Income Tax Assessment Act 1997 does
not contain a rewritten version of this section.
For the 1998‑99 year of income and
later years of income, Parts 3‑1 and 3‑3 (about CGT) deal with
the income tax treatment of premiums for:
·
granting leases; and
·
assigning leases granted on or after 20 September 1985.
For the 1997‑98 year of income, former
Part IIIA of this Act (about CGT) dealt with the income tax treatment of
such premiums.
(1) In this section, premium
means a consideration payable in one amount, or each amount of a consideration
payable in more than one amount, where the consideration is:
(a) in the nature of a premium, fine
or foregift payable for or in connexion with the grant or assignment of a
lease; or
(b) for or in connexion with an assent
to the grant or assignment of a lease;
but does not include an amount in respect of goodwill or a
licence.
(2) Where, in the year of income, a taxpayer receives
a premium that relates to the grant or assignment of a lease of property that
was not, at the date on which the agreement to grant or assign the lease was
made, or the assent to the grant or assignment of the lease was given, as the
case may be, intended by the grantee or assignee to be used by the grantee or
the assignee or some other person wholly or partly for the purpose of gaining
or producing assessable income, the assessable income of the taxpayer shall
include the premium.
(3) Where, in the year of income, a taxpayer
receives a premium that relates to the grant or assignment of a lease of
property that was, at the date on which the agreement to grant or assign the
lease was made, or the assent to the grant or assignment of the lease was given,
as the case may be, intended by the grantee or assignee to be used by the
grantee or assignee or some other person partly for the purpose of gaining or
producing assessable income and partly for other purposes, the assessable
income of the taxpayer shall include such part of the premium as the
Commissioner considers may reasonably be attributed to the intended use of the
property for purposes other than gaining or producing assessable income.
(4) Where, in a case referred to in subsection (2)
or (3), the taxpayer satisfies the Commissioner that, at the date on which the
agreement to grant or assign the lease was made, or the assent to the grant or
assignment of the lease was given, as the case may be, he believed on
reasonable grounds that the grantee or assignee intended a particular use of
the property by the grantee or assignee or some other person for the purpose of
gaining or producing assessable income, the Commissioner may apply this section
on the basis that that intention existed.
(5) This section does not apply in relation
to:
(b) a premium received in connexion
with the assignment of a lease of land granted under a law of a State or
Territory relating to mining;
(c) a premium received in connexion
with the grant or assignment of a lease that was, for the purposes of former
section 88B, a grant or assignment for mining purposes; or
(d) a premium received in connexion
with the assignment from the Commonwealth or a State of a lease:
(i) granted in perpetuity
or for a term not less than 99 years; or
(ii) with a right of
purchase; or
(iii) effecting improvements
to be used for residential purposes only.
26AF
Assessable income to include value of benefits received from or in connection
with former paragraph 23(ja) funds or former section 23FB funds
(1) Where:
(a) in a year of income and after 19 August
1980, a taxpayer receives or obtains a benefit of any kind out of, or
attributable to assets of, a paragraph 23(ja) fund or a section 23FB fund;
(aa) if the fund is an exempt fund
within the meaning of section 26AFB (as in force just before the
commencement of Schedule 1 to the Superannuation Legislation Amendment
(Simplification) Act 2007)—the benefit was received or obtained by the
taxpayer before the proclaimed superannuation standards day;
(b) the benefit is received or
obtained otherwise than in accordance with approved terms and conditions
applicable to the fund at the time when the benefit is received or obtained;
and
(c) the Commissioner is satisfied that
the taxpayer received or obtained the benefit:
(i) by reason that the
taxpayer was, or had been, a member of the fund;
(ii) by reason that the
taxpayer was, or had been, a dependant of a person who was, or had been, a
member of the fund; or
(iii) by reason that the
taxpayer was, or had been, associated with a person who was, or had been, a
member of the fund;
the assessable income of the taxpayer of the year of
income shall include the amount or value of that benefit.
(2) Where, in a year of income and after 19 August
1980, a taxpayer receives valuable consideration in respect of the transfer by
the taxpayer to another person (whether by assignment, by declaration of trust
or by any other means) of a right (whether vested or contingent) to receive a
benefit from a fund, being a paragraph 23(ja) fund or a section 23FB fund
and not being an exempt fund within the meaning of section 26AFB (as in
force just before the commencement of Schedule 1 to the Superannuation
Legislation Amendment (Simplification) Act 2007), the assessable income of
the taxpayer of the year of income shall include the amount or value of that
consideration.
(3) In this section:
approved terms and conditions, in relation to
a fund, means:
(a) in the case of a paragraph 23(ja)
fund—terms and conditions approved by the Commissioner under subparagraph
23(ja)(ii) as in force at any time before the commencement of section 1 of
the Taxation Laws Amendment Act (No. 4) 1987; or
(b) in the case of a section 23FB
fund—terms and conditions approved by the Commissioner under subsection 23FB(2)
as in force at any time before the commencement of section 1 of the Taxation
Laws Amendment Act (No. 4) 1987.
paragraph 23(ja) fund means a fund the income
of which of any year of income is or has been exempt from tax by virtue of
paragraph 23(ja) as in force at any time before the commencement of section 1
of the Taxation Laws Amendment Act (No. 4) 1987 or would, but for
the provisions of section 121C as in force at any time before the
commencement of section 21 of the Taxation Laws Amendment Act 1985 and
Division 9C, be, or have been, exempt from tax by virtue of that
paragraph;
section 23FB fund
means:
(a) a fund the income of which of any
year of income is or has been exempt from tax by virtue of section 23FB as
in force at any time before the commencement of section 1 of the Taxation
Laws Amendment Act (No. 4) 1987 or would, but for the provisions of
Division 9C, be, or have been, exempt from tax by virtue of that section;
and
(b) a fund that was a section 79
fund for the purposes of this section as in force at any time before the
commencement of the Income Tax Assessment Amendment Act (No. 3) 1984.
(4) For the purposes of this section, where
either of the following paragraphs applies in relation to an exempt fund within
the meaning of section 26AFB of this Act (as in force just before the
commencement of Schedule 1 to the Superannuation Legislation Amendment
(Simplification) Act 2007) in relation to the year of income of the fund
commencing on 1 July 1986 or a subsequent year of income:
(a) the year of income ended before
the proclaimed superannuation standards day and the income of the fund of the
year of income would, but for the amendments made by the Taxation Laws
Amendment Act (No. 4) 1987, have been exempt from tax under paragraph
23(ja) or section 23FB of this Act, as in force at any time before the
commencement of section 1 of that Act;
(b) the proclaimed superannuation
standards day occurred during the year of income and, if the year of income had
ended on the proclaimed superannuation standards day, the income of the fund of
the year of income would have been exempt from tax under paragraph 23(ja) or
section 23FB of this Act, as in force at any time before the commencement
of section 1 of that Act;
paragraph 23(ja) or section 23FB of this Act, as in
force immediately before the commencement of section 1 of that Act, shall
be taken to have continued to apply in relation to the fund in relation to the
year of income of the fund.
26AFA
Assessable income to include value of certain benefits received from or in
connection with former section 23F funds
(1) Where:
(a) in a year of income and on or
after 7 December 1983, a taxpayer receives or obtains a benefit of any
kind out of, or attributable to assets of, a section 23F fund;
(aa) if the fund is an exempt fund
within the meaning of section 26AFB (as in force just before the
commencement of Schedule 1 to the Superannuation Legislation Amendment
(Simplification) Act 2007)—the benefit was received or obtained by the
taxpayer before the proclaimed superannuation standards day;
(b) the benefit:
(i) is not a benefit that
the taxpayer has a right to receive from the fund; or
(ii) is an excessive
benefit; and
(c) the Commissioner is satisfied that
the taxpayer received or obtained the benefit:
(i) by reason that the
taxpayer was, or had been, a member of the fund;
(ii) by reason that the
taxpayer was, or had been, a dependant of a person who was, or had been, a
member of the fund;
(iii) by reason that the
taxpayer was, or had been, associated with a person who was, or had been, a
member of the fund; or
(iv) by reason that the
taxpayer was, or had been, associated with a person who had made contributions
to the fund, being contributions to which Subdivision AA of Division 3
applied;
the assessable income of the taxpayer of the year of
income shall include the amount or value of that benefit.
(2) Where:
(a) subsection (1) would, but for
this subsection, apply to the amount or value of an excessive benefit received
or obtained by a taxpayer out of, or attributable to assets of, a section 23F
fund; and
(b) the Commissioner, having regard
to:
(i) the nature of the
fund;
(ii) the circumstances by
reason of which the benefit is an excessive benefit; and
(iii) such other matters
relating to the receiving or obtaining of the benefit by the taxpayer as the
Commissioner considers relevant;
is satisfied that it would be
unreasonable for subsection (1) to apply to the whole or part of the
benefit;
that subsection does not apply to the benefit, or to that
part of the benefit, as the case may be.
(3) Where, in a year of income and on or
after 7 December 1983, a taxpayer receives valuable consideration in
respect of the transfer by the taxpayer to another person (whether by
assignment, by declaration of trust or by any other means) of a right (whether
vested or contingent) to receive a benefit from a fund, being a section 23F
fund and not being an exempt fund within the meaning of section 26AFB (as
in force just before the commencement of Schedule 1 to the Superannuation
Legislation Amendment (Simplification) Act 2007), the assessable income of
the taxpayer of the year of income shall include the amount or value of that
consideration.
(4) In this
section:
dependant, in relation to a taxpayer, includes
the spouse and any child of the taxpayer.
excessive benefit means a benefit of any kind
that is excessive in amount or value having regard to the matters mentioned in
subparagraphs 23F(2)(h)(i), (ii), (iii) and (iv) as in force at any time before
the commencement of section 1 of the Taxation Laws Amendment Act (No. 4)
1987.
section 23F fund means a fund to which
section 23F (as in force at any time before the commencement of section 1
of the Taxation Laws Amendment Act (No. 4) 1987) applies, or has applied,
in relation to any year of income.
(5) For the purposes of this section, where
either of the following paragraphs applies in relation to an exempt fund within
the meaning of section 26AFB of this Act (as in force just before the
commencement of Schedule 1 to the Superannuation Legislation Amendment
(Simplification) Act 2007) in relation to the year of income of the fund
commencing on 1 July 1986 or a subsequent year of income:
(a) the year of income ended before
the proclaimed superannuation standards day and section 23F of this Act,
as in force immediately before the commencement of section 1 of the Taxation
Laws Amendment Act (No. 4) 1987, would, but for the amendments made by
that Act, have applied in relation to the fund in relation to the year of
income;
(b) the proclaimed superannuation
standards day occurred during the year of income and, if the year of income had
ended on the proclaimed superannuation standards day, section 23F of this
Act, as in force immediately before the commencement of section 1 of that
Act, would, but for the amendments made by that Act, have applied in relation
to the fund in relation to the year of income;
section 23F of this Act, as in force immediately
before the commencement of section 1 of that Act, shall be taken to have
continued to apply in relation to the fund in relation to the year of income of
the fund.
26AG
Certain film proceeds included in assessable income
(1) Where:
(a) under a contract entered into on
or after 1 October 1980, a taxpayer has expended, or is deemed by section 124ZAP
to have expended, capital moneys in producing, or by way of contribution to the
cost of producing, a film;
(b) by reason of the moneys having
been expended, the taxpayer became the owner of an interest in the copyright in
the film; and
(c) a deduction has been allowed, or
is allowable, to the taxpayer under former section 124ZAF or under section 124ZAFA
in respect of some or all of those moneys;
this section applies, and shall be deemed always to have
applied, in relation to the taxpayer in relation to a year of income (whether
commencing before or after the commencement of this section), to:
(d) any amount derived by the taxpayer
in the year of income from sources in or out of Australia as consideration for
the use of, or the right to use, the copyright or the film, to the extent to
which the amount derived is attributable to the interest referred to in paragraph (b);
and
(e) any amount (other than an amount
to which paragraph (d) applies) receivable by the taxpayer from sources in
or out of Australia as consideration in respect of the disposal, in the year of
income, of the whole or a part of the interest referred to in paragraph (b).
(2) The assessable income of a taxpayer of a
year of income shall include amounts to which this section applies in relation
to the taxpayer in relation to the year of income.
(3) Where:
(a) for any reason, including:
(i) the formation or
dissolution of a partnership; or
(ii) a variation in the
constitution of a partnership or in the interests of the partners;
a change has occurred in the
ownership of, or in the interests of persons in, a copyright in a film;
(b) the person, or one or more of the
persons, who owned the copyright before the change has or have an interest in
the copyright after the change; and
(c) any person (in this subsection
referred to as the relevant person) who had an interest in the
copyright before the change:
(i) did not have an
interest in the copyright after the change; or
(ii) had a lesser interest
in the copyright after the change;
the following provisions have effect:
(d) if the relevant person did not
have an interest in the copyright after the change, the relevant person shall
be deemed, for the purposes of subsection (1), to have disposed of the
whole of his interest in the copyright at the time when the change occurred for
an amount of consideration equal to:
(i) if the change occurred
in pursuance of an agreement and the agreement specified, as the value of the
copyright for the purposes of the agreement, an amount greater than the value
of the copyright at the time when the change occurred—so much of the amount
specified in the agreement as bears to that amount the same proportion as the
value, at the time when the change occurred, of the interest deemed to have
been disposed of bears to the value of the copyright at the time when the
change occurred; and
(ii) in any other case—the
value, at the time when the change occurred, of the interest disposed of;
(e) if the relevant person had a
lesser interest in the copyright after the change, the relevant person shall be
deemed, for the purposes of subsection (1), to have disposed of a part of
his interest in the copyright at the time when the change occurred for an
amount of consideration equal to:
(i) if the change occurred
in pursuance of an agreement and the agreement specified, as the value of the
copyright for the purposes of the agreement, an amount greater than the value
of the copyright at the time when the change occurred—so much of the amount specified
in the agreement as bears to that amount the same proportion as the value, at
the time when the change occurred, of the part of the interest deemed to have
been disposed of bears to the value of the copyright at the time when the
change occurred; and
(ii) in any other case—the
value, at the time when the change occurred, of the part of the interest
disposed of.
(4) For the purposes of this section, where,
in pursuance of a judgment of a court or otherwise, an amount is paid to a
taxpayer in respect of an infringement, or an alleged infringement, of a
copyright in a film, the taxpayer shall be deemed to have disposed of a part of
his interest in the copyright, at the time of payment, in consideration of the
payment of that amount.
(5) Subject to subsections (3) and (6),
a reference in this section to the consideration receivable by a taxpayer in
respect of the disposal of the whole or a part of the taxpayer’s interest in a
copyright (which whole or part is in this subsection referred to as the unit)
is a reference to:
(a) where the unit is disposed of for
a specified price—that price less:
(i) the expenses of the
disposal; and
(ii) if the disposal is a
taxable supply—an amount equal to the GST payable on the supply; or
(b) where the unit is disposed of
together with other property and no separate price is allocated to the
unit—such amount as the Commissioner determines.
(6) Where:
(a) a taxpayer disposes of the whole
or a part of the taxpayer’s interest in a copyright (which whole or part is in this
subsection referred to as the unit) to another person;
(b) the Commissioner is satisfied,
having regard to any connection between the taxpayer and that other person or
to any other relevant circumstances, that the taxpayer and that other person
were not dealing with each other at arm’s length in relation to the disposal;
and
(c) there was no amount receivable by
the taxpayer in respect of the disposal or the amount receivable by the
taxpayer in respect of the disposal was less than the value of the unit at the
time of the disposal;
the amount of the consideration receivable by the taxpayer
in respect of the disposal shall be taken, for the purposes of this section, to
be the amount that was the value of the unit at the time of the disposal.
(8) If:
(a) a non‑resident taxpayer
derives, from sources outside Australia, income in respect of a film; and
(b) but for this subsection, subsection (2)
would include the amount in the taxpayer’s assessable income of a year of
income;
that subsection does not include in the taxpayer’s
assessable income so much of the amount as:
(c) is attributable to the exhibition
of the film in the country from sources in which the income was derived; and
(d) is not exempt from income tax in
the country from sources in which the income was derived.
(9) Where:
(a) an amount (in this subsection
referred to as the relevant amount) is derived by a partnership
in a year of income; and
(b) if the relevant amount were
derived by a partner in the partnership, the relevant amount, or a part of the
relevant amount, would, by virtue of paragraph (1)(d), be an amount to
which this section applies in relation to that partner in relation to the year
of income;
the following provisions have effect:
(c) the relevant amount shall not be
taken into account, for the purposes of any provision of this Act, in
calculating the net income of the partnership, or the partnership loss, of any
year of income in accordance with section 90; and
(d) for the purposes of the
application of this Act in relation to a taxpayer being a partner in the
partnership, an amount equal to:
(i) so much of the
relevant amount as the partners have agreed is derived for the benefit of the
taxpayer; or
(ii) if the partners have
not agreed as mentioned in subparagraph (i)—so much of the relevant amount
as bears to the relevant amount the same proportion as the individual interest
of the taxpayer in the net income of the partnership of the year of income in
which the relevant amount was derived by the partnership bears to that net
income or, as the case requires, the individual interest of the taxpayer in the
partnership loss for that year of income bears to that partnership loss;
shall be taken to have been
derived by the taxpayer.
(10) Where:
(a) a partnership has disposed of the
whole or a part of the copyright or of an interest in the copyright in a film;
(b) an amount (in this subsection
referred to as the relevant amount) is receivable by the
partnership as consideration in respect of that disposal; and
(c) if the relevant amount were
receivable by a partner in the partnership, the relevant amount or a part of
the relevant amount would, by virtue of paragraph (1)(e), be an amount to
which this section applies in relation to that partner in relation to the year
of income;
the following provisions have effect:
(d) the relevant amount shall not be
taken into account, for the purposes of any provision of this Act, in
calculating the net income of the partnership, or the partnership loss, of any
year of income in accordance with section 90;
(e) for the purposes of the
application of this Act in relation to a taxpayer being a partner in the
partnership, an amount equal to:
(i) so much of the
relevant amount as the partners have agreed is receivable for the benefit of the
taxpayer; or
(ii) if the partners have
not agreed as mentioned in subparagraph (i)—so much of the relevant amount
as bears to the relevant amount the same proportion as the individual interest
of the taxpayer in the net income of the partnership of the year of income in
which the disposal mentioned in paragraph (a) occurred bears to that net
income, or, as the case requires, the individual interest of the taxpayer in
the partnership loss for that year of income bears to that partnership loss;
shall be taken to be receivable
by the taxpayer;
(f) where the taxpayer had an
interest in the copyright before the disposal and did not have an interest in
the copyright after the disposal or had a lesser interest in the copyright
after the disposal, the amount deemed to be receivable by the taxpayer shall be
deemed to be receivable in respect of the disposal by the taxpayer of his
interest in the copyright or of a part of his interest in the copyright, as the
case may be;
(g) where the disposal is deemed to
have occurred by virtue of subsection (4) or is a disposal to which paragraph (13)(a)
applies, the amount deemed to be receivable by the taxpayer shall be deemed to
be receivable, in respect of the disposal by the taxpayer of a part of his
interest in the copyright.
(11) In determining for the purposes of subsection (10)
whether a partnership has disposed of the whole or part of a copyright or of an
interest in a copyright and in determining the amount of consideration
receivable by the partnership in respect of the disposal, subsections (4),
(5), (6) and (13) apply as if the partnership were a taxpayer.
(12) Where:
(a) a taxpayer has disposed of the
whole or a part of the taxpayer’s interest in a copyright;
(b) by reason of that disposal, an
amount would, but for subsection 124T(3), be included in the assessable income
of the taxpayer of a year of income under section 124P or would be
applied, under section 124N or 124S, in reducing the residual value, for
the purposes of Division 10B, of a unit of industrial property owned by
the taxpayer; and
(c) but for this subsection, this
section would apply, in relation to a year of income, to the amount of the
consideration receivable by the taxpayer in respect of the disposal;
the amount to which this section applies by virtue of the
disposal is the amount of the consideration referred to in paragraph (c)
reduced by the amount that would be included in the assessable income of the
taxpayer, or would be applied under section 124N or 124S, as mentioned in paragraph (b).
(13) In this section:
(a) a reference to a disposal by a
taxpayer of the whole or a part of the taxpayer’s interest in a copyright in a
film includes a reference to the assignment by the taxpayer of a right to
receive amounts as consideration for the use of, or the right to use, the
copyright or the film;
(b) a reference to an amount derived
by a taxpayer as consideration for the use of, or the right to use, a copyright
in a film includes a reference to an amount derived as consideration for the
granting of a licence in respect of copyright in the film that is to come into
existence at a future time or upon the happening of a future event;
(c) a reference to the value of
property at a particular time shall, if there is insufficient evidence of the
value of the property at that time, be read as a reference to such amount as,
in the opinion of the Commissioner, is fair and reasonable;
(d) a reference to the expenditure of
capital moneys is a reference to the expenditure of moneys that is expenditure
of a capital nature;
(e) a reference to a taxpayer becoming
the owner of an interest in copyright includes a reference to the taxpayer
becoming the owner of the copyright; and
(f) a reference to copyright, in
relation to a film, is a reference to the copyright subsisting in the film by
virtue of Part IV of the Copyright Act 1968 and includes a
reference to copyright subsisting in, or in relation to, the film or in any
work comprised in the film, under the law of a country other than Australia.
26AH
Bonuses and other amounts received in respect of certain short‑term life
assurance policies
(1) In this section, unless the contrary
intention appears:
agreement means any agreement, arrangement or
understanding, whether formal or informal, whether express or implied and
whether or not enforceable, or intended to be enforceable, by legal
proceedings.
assurance year, in relation to an eligible
policy, means the period of 12 months commencing on, or on any anniversary of,
the date of commencement of risk of the policy.
date of commencement of risk, in relation to
an eligible policy, means the date of commencement of the period in respect of
which the first or only premium paid under the policy was paid or, if the first
or only premium was not paid in respect of a period, the date on which that
premium was paid.
eligible period, in relation to an eligible
policy, means the period of 10 years commencing on the date of commencement of
risk of the policy.
eligible policy means a life assurance policy
in relation to which the date of commencement of risk is after 27 August 1982, other than a funeral policy (as defined in the Income Tax
Assessment Act 1997) issued on or after 1 January 2003.
eligible reckoning date, in relation to an
eligible policy, means the date of commencement of an assurance year that, for
the purposes of an application of subsection (13), is the premium increase
year referred to in that subsection.
(2) Where a paid‑up life assurance
policy is issued to a taxpayer in lieu of an eligible policy:
(a) the paid‑up policy shall,
for the purposes of this section, be deemed to be a continuation of the
eligible policy; and
(b) no amount shall be taken for the
purposes of subsection (4) to have been re‑invested or otherwise
dealt with on behalf of the taxpayer or as he directs in connection with the
issue of the paid‑up policy to the taxpayer in lieu of the eligible
policy.
(3) This section applies to any amount
received after 27 August 1982 under an eligible policy.
(4) For the purposes of this section, but subject
to subsection (5), a taxpayer shall be taken to have received an amount
under or in relation to an eligible policy although the amount is not actually
paid to the taxpayer but is re‑invested or otherwise dealt with on his
behalf or as he directs.
(5) Subsection (4) does not apply in
relation to an amount in relation to an eligible policy if the amount is re‑invested
or otherwise dealt with on behalf of the taxpayer or as the taxpayer directs so
as to increase the amount that might reasonably be expected to be received
under the eligible policy on a surrender or maturity of the eligible policy.
(6) Where, during the eligible period in
relation to an eligible policy, a taxpayer receives an amount (in this
subsection referred to as the relevant amount) under the policy
as or by way of a bonus, being an amount that, but for this section, would not
be included in the assessable income of the taxpayer of any year of income, the
assessable income of the taxpayer of the year of income in which the relevant amount
is received shall include:
(a) if the relevant amount is received
during the first 8 years of the eligible period—an amount equal to the relevant
amount;
(b) if the relevant amount is received
during the ninth year of the eligible period—an amount equal to two‑thirds
of the relevant amount; or
(c) if the relevant amount is received
during the tenth year of the eligible period—an amount equal to one‑third
of the relevant amount.
(6A) If, during the year of income, an amount
referred to in subsection (6) is received during the eligible period in
relation to an eligible policy held by the trustee of a non‑complying
superannuation fund:
(a) subsection (6) does not apply
to the amount; and
(b) the amount is included in the
assessable income of the fund of the year of income.
(7) Subsection (6) does not apply to any
amount received by a taxpayer in a year of income under an eligible policy
where:
(a) the amount is received in
consequence of:
(i) the death of the
person on whose life the policy was effected; or
(ii) an accident, illness
or other disability suffered by the person on whose life the policy was
effected; or
(aa) the eligible policy is an RSA; or
(b) the eligible policy is held by the
trustee of:
(i) a complying
superannuation fund; or
(ii) a complying approved
deposit fund; or
(iii) a pooled
superannuation trust; or
(ba) the eligible policy is issued by a
life assurance company and the company’s liabilities under the policy are to be
discharged out of:
(i) complying
superannuation/FHSA assets within the meaning of the Income Tax Assessment
Act 1997; or
(ii) segregated exempt
assets within the meaning of that Act; or
(c) except where the policy was
effected, purchased or taken on assignment with a view to it being forfeited,
surrendered or otherwise terminated, or to it maturing, within 10 years—the
amount was received by the taxpayer by reason of the forfeiture, surrender or
other termination of the whole or a part of the policy in circumstances arising
out of serious financial difficulties of the taxpayer.
(8) Where:
(a) subsection (6) would, but for
this subsection, apply to an amount (in this subsection referred to as the relevant
amount) received by a taxpayer by reason of the forfeiture, surrender
or other termination of the whole or a part of an eligible policy; and
(b) the Commissioner, having regard
to:
(i) the total amount of
premiums paid under the eligible policy;
(ii) the total amounts
received by the taxpayer or by any other person under the eligible policy and
the total amounts of bonuses included in the amounts so received;
(iii) the amount of the
surrender value of the eligible policy at the time when the forfeiture,
surrender or other termination occurred; and
(iv) such other matters as
the Commissioner considers relevant, is of the opinion that it would be
unreasonable for subsection (6) to apply to the relevant amount or to a
part of the relevant amount;
subsection (6) does not apply to the relevant amount,
or to that part of the relevant amount, as the case may be.
(9) Where:
(a) otherwise than as or by way of a
bonus, a taxpayer receives an amount (in this subsection referred to as the relevant
amount) under an eligible policy; and
(b) the Commissioner is of the opinion
that the relevant amount or a part of the relevant amount represents the whole
or part of:
(i) a bonus that has
accrued or has been declared in respect of the policy; or
(ii) a bonus that can
reasonably be expected to accrue in respect of the policy;
the relevant amount or the part of the relevant amount, as
the case may be, shall, for the purposes of subsection (6), be deemed to
have been received by the taxpayer under the policy as or by way of a bonus.
(10) Where:
(a) subsection (9) applies by
reason that the Commissioner has formed an opinion under paragraph (9)(b)
that the whole or a part of an amount received by a taxpayer represents the
whole or a part of a bonus; and
(b) the taxpayer subsequently receives
an amount (in this subsection referred to as the actual bonus),
being the whole or a part of the bonus, or of the part of the bonus, as the
case may be, referred to in paragraph (a) of this subsection;
the following provisions have effect:
(c) the operation of subsection (9)
is not affected by the receipt of the actual bonus; and
(d) no part of the actual bonus shall
be included in the assessable income of the taxpayer.
(11) Where, in relation to an eligible policy,
a taxpayer receives an amount from the assurer, or from another person at the
request of, or under an agreement with, the assurer, by way of an advance or
loan in respect of which interest is not payable or in respect of which
interest is payable at a rate less than the rate of interest that could
reasonably be expected to be payable in respect of a loan of the same amount
made on similar terms and conditions by the assurer or the other person, as the
case may be, to a person with whom the assurer or that other person was dealing
at arm’s length, the amount shall, for the purposes of subsection (9), be
deemed to be an amount to which paragraph (9)(a) applies.
(12) Where an eligible policy, or any right to
receive any benefits that have accrued, or will or may reasonably be expected
to accrue, under an eligible policy, is sold or assigned in whole or in part by
a taxpayer during the eligible period in relation to the policy:
(a) the amount of any consideration
received by the taxpayer in respect of that sale or assignment shall be deemed
to be an amount to which paragraph (9)(a) applies; and
(b) subsections (9) and (10) apply
in relation to that consideration as if “represents” were omitted from paragraphs (9)(b)
and (10)(a) and “is attributable” to were substituted.
(13) Where the amount of the premiums payable
under an eligible policy in relation to an assurance year (in this subsection
referred to as the premium increase year) exceeds by more than
25% the amount of the premiums payable under the policy in relation to the
immediately preceding assurance year, the eligible period in relation to the
policy shall, for the purposes of:
(a) the application of subsection (6)
in relation to any amount received under the policy after the date of
commencement of the premium increase year and before the first subsequent
eligible reckoning date (if any) in relation to the eligible policy; and
(b) the application of subsection (12)
in relation to any sale or assignment of the policy after the date of
commencement of the premium increase year and before the first subsequent
eligible reckoning date (if any) in relation to the eligible policy;
be reckoned from the date of commencement of the premium
increase year.
(14) This section has effect in relation to an
eligible policy in relation to which the date of commencement of risk is on or
before 7 December 1983 as if:
(a) “10 years” were omitted from the
definition of eligible period in subsection (1) and “4
years” were substituted;
(b) “8 years”, “ninth year” and “tenth
year” were omitted from subsection (6) and “2 years”, “third year” and
“fourth year” respectively were substituted; and
(c) “10 years” were omitted from paragraph (7)(c)
and “4 years” were substituted.
26AJ
Investment‑related lottery winnings to be included in assessable income
(1) If:
(a) either:
(i) a loan benefit is
provided to a taxpayer, or to another person, in respect of a year of income
(in this subsection called the current year of income); or
(ii) an amount (other than
loan principal) is paid or credited to a taxpayer, or to another person, during
a year of income (in this subsection also called the current year of
income); or
(iii) other property or
services are provided to a taxpayer, or to another person, during a year of
income (in this subsection also called the current year of income);
and
(b) the making of a loan, the payment
or crediting of the amount, or the provision of the property or services, as
the case may be, is by way of winnings from:
(i) betting (including
pool betting); or
(ii) a lottery or other
form of gambling; or
(iii) a game with prizes;
and
(c) the chance to participate in the
betting, lottery, gambling or game (in this subsection called the betting
chance) was provided:
(i) wholly or partly in
respect of an investment held by the taxpayer in or with a third person (who
may be an associate of the taxpayer) (in this subsection called the investment
body); or
(ii) wholly or partly in
relation directly or indirectly to such an investment; and
(d) the betting, lottery, gambling or
game was organised by, or on behalf of:
(i) the investment body
(either acting alone or together with one or more other persons); or
(ii) an associate of the
investment body (either acting alone or together with one or more other
persons); and
(e) if the recipient of the loan
benefit, amount or property or services, as the case may be, is a person other
than the taxpayer—either:
(i) the other person is an
associate of the taxpayer; or
(ii) the loan benefit,
amount or property or services, as the case may be, is provided under an
arrangement to which the taxpayer, or an associate of the taxpayer, is a party;
and
(f) no part of the value of the
betting chance is included in the assessable income of the taxpayer of any year
of income; and
(g) the provision of the betting
chance is neither:
(i) a fringe benefit; nor
(ii) a benefit that, apart
from paragraph (g) of the definition of fringe benefit in
subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986, would
be a fringe benefit;
then:
(h) if subparagraph (a)(i)
applies—the taxpayer’s assessable income of the current year of income includes
the amount (if any) by which the benchmark amount of interest in relation to
the loan in respect of the current year of income exceeds the amount of
interest that has accrued on the loan in respect of the current year of income;
or
(i) if subparagraph (a)(ii)
applies—the taxpayer’s assessable income of the current year of income includes
the amount paid or credited; or
(j) if subparagraph (a)(iii)
applies—the taxpayer’s assessable income of the current year of income includes
the arm’s length value of the property or services, reduced by the recipient’s
contribution (if any).
(2) If:
(a) apart
from this subsection, an amount (in this subsection called the gross
assessable amount) is included in a taxpayer’s assessable income of a
year of income under paragraph (1) (h) in respect of a loan benefit; and
(b) assuming that:
(i) the recipient of the
loan benefit had, on the last day of the period (in this subsection called the loan
period) during the year of income when the recipient was under an
obligation to repay the whole or any part of the loan, incurred and paid
unreimbursed interest (in this subsection called the gross interest),
in respect of the loan, in respect of the loan period; and
(ii) the amount of the
gross interest was equal to the benchmark amount of interest in relation to the
loan in respect of the year of income;
a once‑only deduction (in
this subsection called the gross deduction) would, or would apart
from section 82A, and Subdivisions F and GA of Division 3 of this
Part, of this Act, and Divisions 28 and 900 of the Income Tax
Assessment Act 1997, have been allowable to the recipient in respect of the
gross interest;
the gross assessable amount is reduced by:
(c) if no interest accrued on the loan
in respect of the loan period—the amount of the gross deduction; or
(d) in any other case—the amount
worked out using the formula:
Gross deduction – Reducing amount
where:
Gross deduction
means the amount of the gross deduction.
Reducing amount
means the amount (if any) that would, or that would apart from section 82A,
and Subdivisions F and GA of Division 3 of this Part, of this Act, and
Divisions 28 and 900 of the Income Tax Assessment Act 1997, have
been allowable as a once‑only deduction to the recipient in respect of
the interest that accrued on the loan in respect of the loan period if that
interest had been incurred and paid by the recipient on the last day of the
loan period.
(3) If:
(a) apart
from this subsection, an amount (in this subsection called the gross
assessable amount) is included in a taxpayer’s assessable income of a
year of income under paragraph (1)(j) in respect of the provision of
property or services; and
(b) assuming that:
(i) the recipient of the
property or services had, at the time the property or services were provided,
incurred and paid unreimbursed expenditure in respect of the provision of the
property or services; and
(ii) the expenditure was
equal to the amount of the arm’s length value of the property or services;
a once‑only deduction
would, or would apart from section 82A, and Subdivisions F and GA of
Division 3 of this Part, of this Act, and Divisions 28 and 900 of the
Income Tax Assessment Act 1997, have been allowable to the recipient in
respect of a percentage (in this subsection called the deductible
percentage) of the expenditure;
the gross assessable amount is reduced by the deductible
percentage.
(4) For the purposes of the application of
this section to a taxpayer, if a person (in this subsection called the provider)
makes a loan to another person (who may be the taxpayer) (in this subsection
called the recipient):
(a) the making of the loan is taken to
constitute a loan benefit provided by the provider to the recipient; and
(b) that loan benefit is taken to be
provided in respect of each year of income of the taxpayer during the whole or
part of which the recipient is under an obligation to repay the whole or any
part of the loan.
(5) For the purposes of this section, if a
person (in this subsection called the provider) makes a deferred
interest loan (in this subsection called the principal loan) to
another person (in this subsection called the recipient):
(a) the provider is taken, at the end
of:
(i) the period of 6 months
commencing on the day on which the principal loan was made; and
(ii) each subsequent period
of 6 months;
(being in either case a period
during the whole of which the recipient is under an obligation to repay the
whole or any part of the principal loan) to have made a loan (in this
subsection called the deemed loan) to the recipient; and
(b) the amount of the deemed loan is
equal to the amount by which the interest (in this subsection called the accrued
interest) that has accrued on the principal loan in respect of that
period exceeds the amount (if any) paid in respect of the accrued interest
before the end of that period; and
(c) if any part of the accrued
interest becomes payable or is paid after the time when the deemed loan is
taken to have been made, the deemed loan is to be reduced accordingly; and
(d) the deemed loan is taken to have
been made at a nil rate of interest.
(6) For the purposes of this section, if no
interest is payable in respect of a loan, a nil rate of interest is taken to be
payable in respect of the loan.
(7) For the purposes of this section, a
person is taken to be under an obligation to pay or repay an amount even though
the amount is not due for payment or repayment.
(8) For the purposes of this section, if a
person does anything that results in the creation of property in another
person, the first‑mentioned person is taken to have provided that
property to the other person at the time when the property comes into
existence.
(9) For the purposes of this section, if:
(a) a particular mode of application
of money by a taxpayer in relation to another person (in this subsection called
the investment body) would not, apart from this subsection, be an
investment; and
(b) a chance to participate in:
(i) betting (including
pool betting); or
(ii) a lottery or other
form of gambling; or
(iii) a game with prizes;
is provided to the taxpayer or a
third person:
(iv) wholly or partly in
respect of the mode of application of money by the taxpayer; or
(v) wholly or partly in
relation directly or indirectly to the mode of application of money by the
taxpayer; and
(c) if a cash payment had been
provided by the investment body to the taxpayer instead of that chance, the
payment would constitute, to any extent, a return on an investment held by the
taxpayer in or with the investment body;
the mode of application of money is taken to be an
investment held by the taxpayer with the investment body.
(10) If a ballot is held to determine the order
in which loans are to be made by a Starr‑Bowkett building society to its
members, then the making of a loan in accordance with the ballot is not covered
by paragraph (1)(b).
(11) In this section:
arm’s length value, in relation to property
or services, means:
(a) the amount that the recipient
could reasonably have been expected to have been required to pay to obtain the
property or services from the provider under a transaction where the parties to
the transaction are dealing with each other at arm’s length in relation to the
transaction; or
(b) if such an amount cannot be
practically determined—such amount as represents a reasonable valuation of the
property or services.
arrangement means:
(a) any agreement, arrangement,
understanding, promise or undertaking, whether express or implied, and whether
or not enforceable, or intended to be enforceable, by legal proceedings; and
(b) any scheme, plan, proposal,
action, course of action or course of conduct, whether unilateral or otherwise.
associate has the same meaning in relation to
a person as that expression has in relation to a person in section 318.
benchmark amount of interest, in relation to
a loan, in relation to a year of income, means the amount of interest that
would have accrued on the loan in respect of the year of income if the interest
was calculated on the daily balance of the loan at the benchmark interest rate
in relation to the year of income.
benchmark interest rate, in relation to a
year of income, means the predominant per cent per annum interest rate on new,
variable interest rate housing loans to individuals for owner‑occupation
that is specified, for the June immediately preceding the financial year to
which the year of income relates, in the “Interest Rates and Yields: Banks”
table in the Statistical Directory of the Reserve Bank of Australia Bulletin
dated July in that financial year.
deferred interest loan means a loan in
respect of which interest is payable at a rate exceeding nil, other than:
(a) a loan where the whole of the
interest is due for payment within 6 months after the loan is made; or
(b) a loan where:
(i) the interest is
payable by instalments; and
(ii) the intervals between
instalments do not exceed 6 months; and
(iii) the first instalment
is due for payment within 6 months after the loan is made.
investment means any mode of application of
money for the purpose of gaining a return.
loan includes:
(a) an advance of money; and
(b) the provision of credit or any
other form of financial accommodation; and
(c) the payment of an amount for, on
account of, on behalf of or at the request of a person where there is an obligation
(whether express or implied) to repay the amount; and
(d) a transaction (whatever its terms
or form) which in substance effects a loan of money.
loan benefit has the meaning given by subsection (4).
once‑only deduction, in relation to
expenditure, means a deduction in a year of income in respect of a percentage
of the expenditure where no deduction is allowable in respect of a percentage
of the expenditure in any other year of income.
person means any of the following:
(a) a company;
(b) a partnership;
(c) a person in the capacity of
trustee;
(d) any other person.
provide:
(a) in relation to property—includes
dispose of (whether by assignment, declaration of trust or otherwise); and
(b) in relation to services—includes
allow, confer, give, grant or perform.
recipient’s contribution, in relation to
property or services, means the amount of any consideration paid to the
provider by the recipient in respect of the provision of the property or
services, reduced by the amount of any reimbursement paid to the recipient in
respect of that consideration.
return, in relation to an investment,
includes interest, income or profit.
services includes any benefit, right
(including a right in relation to, and an interest in, real or personal
property), privilege or facility and, without limiting the generality of the
foregoing, includes a right, benefit, privilege, service or facility that is,
or is to be, provided under:
(a) an arrangement for or in relation
to:
(i) the performance of
work (including work of a professional nature), whether with or without the
provision of property; or
(ii) the provision of, or
the use of facilities for, entertainment, recreation or instruction; or
(iii) the conferring of
rights, benefits or privileges for which remuneration is payable in the form of
a royalty, tribute, levy or similar exaction; or
(b) a contract of insurance; or
(c) an arrangement for or in relation
to the lending of money.
unreimbursed expenditure means expenditure no
part of which has been reimbursed.
unreimbursed interest means interest no part
of which has been reimbursed.
26BB
Assessability of gain on disposal or redemption of traditional securities
(1) In this
section:
acquire, in relation to a security, means
acquire, on issue, purchase, transfer, assignment or otherwise, the security or
the right to receive payment of the amount or amounts payable under the
security.
connected entity has the same meaning as in
the Income Tax Assessment Act 1997.
dispose, in relation to a security, means
sell, transfer, assign or dispose of in any way the security or the right to
receive payment of the amount or amounts payable under the security.
eligible return has the same meaning as in
Division 16E.
periodic interest has the same meaning as in
Division 16E.
security has the same meaning as in Division 16E.
traditional security, in relation to a
taxpayer, means a security held by the taxpayer that:
(a) is or was acquired by the taxpayer
after 10 May 1989;
(b) either:
(i) does not have an
eligible return; or
(ii) has an eligible
return, where:
(A) the
precise amount of the eligible return is able to be ascertained at the time of
issue of the security; and
(B) that
amount is not greater than 11/2 % of the amount calculated in accordance with
the formula:
where:
Payments
is the amount of the payment or of the sum of the payments (excluding any
periodic interest) liable to be made under the security when held by any
person; and
Term
is the number (including any fraction) of years in the term of the security.
(c) is not a prescribed security
within the meaning of section 26C; and
(d) is not trading stock of the
taxpayer.
(2) Where a taxpayer disposes of a
traditional security or a traditional security of a taxpayer is redeemed, the
amount of any gain on the disposal or redemption shall be included in the
assessable income of the taxpayer of the year of income in which the disposal
or redemption takes place.
(3) Where the Commissioner, having regard to
any connection between the parties to the transaction by which the taxpayer
disposed of the traditional security or by which it was redeemed, or by which
the taxpayer acquired the traditional security, is satisfied that the parties
were not dealing with each other at arm’s length in relation to the transaction,
then, for the purposes of determining under subsection (2) the amount of
any gain on the disposal or redemption, the consideration for the transaction
shall be taken to be:
(a) the amount that might reasonably
be expected for the transaction if the parties were independent parties dealing
at arm’s length with each other; or
(b) where, for any reason it is not
possible or practicable for the Commissioner to ascertain that amount—such
amount as the Commissioner determines.
(4) Subsection (2) does not apply to a
gain on the disposal or redemption of a traditional security if:
(a) the disposal or redemption occurs
because the traditional security is converted into ordinary shares in a company
that is:
(i) the issuer of the
traditional security; or
(ii) a connected entity of
the issuer of the traditional security; and
(b) the traditional security was
issued on the basis that it will or may convert into ordinary shares in:
(i) the issuer of the
traditional security; or
(ii) the connected entity.
(5) Subsection (2) does not apply to a
gain on the disposal or redemption of a traditional security if:
(a) the disposal or redemption is in
exchange for ordinary shares in a company that is neither:
(i) the issuer of the
traditional security; nor
(ii) a connected entity of
the issuer of the traditional security; and
(b) in the case of a disposal—the
disposal is to:
(i) the issuer of the
traditional security; or
(ii) a connected entity of
the issuer of the traditional security; and
(c) the traditional security was
issued on the basis that it will or may be:
(i) disposed of to the
issuer of the traditional security or to the connected entity; or
(ii) redeemed;
in exchange for ordinary shares
in the company.
26BC
Securities lending arrangements
(1) In this section:
convertible note:
(a) in relation to a company—has the
same meaning as in Division 3A; or
(b) in relation to a unit trust—means
a note issued by the trustee of the unit trust, being a note that, if the unit
trust were a company, would be a convertible note issued by the company, and
includes a note that would be a convertible note within the meaning of Division 3A
if:
(i) references in that
Division to a company were references to a unit trust, or to the trustee of the
unit trust, as the context requires; and
(ii) references in that
Division to shares were references to units.
debenture, in relation to a unit trust, means
an instrument issued by the trustee of the unit trust, being an instrument
that, if the unit trust were a company, would be a debenture issued by the
company.
distribution includes:
(a) interest; or
(b) a dividend; or
(c) a share issued by a company to a
shareholder in the company where the share is issued:
(i) as a bonus share; or
(ii) in the circumstances
mentioned in subsection 6BA(1); or
(d) an amount credited by the trustee
of a unit trust to a unit holder as a unit holder; or
(e) a unit issued by the trustee of a
unit trust to which section 130‑20 of the Income Tax Assessment
Act 1997 applies (apart from subsection (4) of that section).
eligible security means:
(a) a share, bond, debenture,
convertible note, right, option or similar financial instrument issued by a
public company; or
(b) a unit, bond, debenture,
convertible note, right, option or similar financial instrument issued by the
trustee of:
(i) a listed unit trust;
or
(ii) a unit trust any of
the units of which were offered to the public; or
(c) a bond, debenture, right, option
or similar financial instrument issued by a government or by an authority of a
government.
government means:
(a) the Commonwealth, a State or a
Territory; or
(b) the government of, or of a part
of, a foreign country.
listed company means a company any of the
shares of which are listed for quotation in the official list of a stock
exchange in Australia or elsewhere.
listed unit trust means a unit trust any of
the units of which are listed for official quotation in the official list of a
stock exchange in Australia or elsewhere.
option:
(a) in relation to a company—means an
option to acquire shares in the company; or
(b) in relation to a unit trust—means
an option to acquire units in the unit trust; or
(c) in relation to a government or an
authority of a government—means an option to acquire a bond, debenture or
similar financial instrument issued by the government or by the authority.
public company means:
(a) a listed company; or
(b) a mutual life assurance company;
or
(c) a company in which a government or
an authority of a government has a controlling interest; or
(d) a company that is a 100%
subsidiary of a company covered by paragraph (a), (b) or (c).
right:
(a) in relation to a company—means a
right to acquire shares in the company or to acquire an option; or
(b) in relation to a unit trust—means
a right to acquire units in the unit trust or to acquire an option; or
(c) in relation to a government or an
authority of a government—means a right to acquire a bond, debenture or similar
financial instrument issued by the government or by the authority or to acquire
an option.
(2) If an eligible security is held by a
person as trustee for another person who is absolutely entitled to the eligible
security as against the trustee, this section applies as if the eligible
security were vested in the other person and any acts of the trustee were the
acts of that other person.
(3) This section applies where:
(a) under a written agreement of the
kind known as a securities lending arrangement, being an agreement that was
entered into after 9 May 1990:
(i) at a particular time (in
this section called the original disposal time), a taxpayer (in
this section called the lender) disposed of an eligible security
(in this section called the borrowed security) to another
taxpayer (in this section called the borrower); and
(ii) at a later time (in
this section called the re‑acquisition time), being less
than 12 months after the original disposal time, the lender:
(A) re‑acquired
the borrowed security (which re‑acquired security is in this section
called the replacement security) from the borrower; or
(B) acquired
an identical security (which acquired security is in this section also called
the replacement security) from the borrower; and
(b) both the borrower and the lender
were dealing with each other at arm’s length in relation to each of the
transactions mentioned in paragraph (a); and
(c) if any of the following events
occurred during the period (in this section called the borrowing period)
commencing at the original disposal time and ending at the re‑acquisition
time:
(i) the making or payment
of a distribution (whether in property or money) in respect of the borrowed
security;
(ii) the issue, by the
company, trustee, government or government authority concerned, of a right or
option in respect of the borrowed security;
(iii) if the borrowed
security is a right or option:
(A) the
giving of a direction by the lender to the borrower to exercise the right or
option; or
(B) the
giving of a direction by the lender to the borrower to exercise an identical
right or option;
then (even if the event occurred
after the borrowed security was disposed of by the borrower to a third party),
the lender receives from the borrower, under the agreement:
(iv) if subparagraph (i)
applies:
(A) the
distribution; or
(B) if the
distribution is in property—identical property; or
(C) a
payment (in this section called the compensatory payment) equal
to the value to the lender of the distribution; or
(v) if subparagraph (ii)
applies:
(A) the
right or option; or
(B) an
identical right or option; or
(C) a
payment (in this section also called the compensatory payment)
equal to the value to the lender of the right or option; or
(vi) if subparagraph (iii)
applies:
(A) the
shares, units, bonds, debentures or financial instruments that resulted from
exercising the right or option; or
(B) shares,
units, bonds, debentures or financial instruments that are identical to those
that resulted from, or that would have resulted from, exercising the right or
option; or
(C) a
payment (in this section also called the compensatory payment)
equal to the value to the lender of the shares, units, bonds, debentures or
financial instruments that resulted from, or would have resulted from,
exercising the right or option; and
(d) if the total consideration payable
or to be given by the borrower under the agreement consists of:
(i) the transfer of, or
the promise to transfer, the replacement security or replacement securities
concerned; and
(ii) other consideration
(in this paragraph called the notifiable consideration);
the agreement contains:
(iii) if the notifiable
consideration is wholly covered by one of the following categories:
(A) a fee;
(B) an
adjustment for variations in the market value of eligible securities;
(C) other
consideration;
a statement specifying
the category concerned and setting out such information as will enable the
amount or value of the notifiable consideration to be readily ascertained; or
(iv) if the notifiable
consideration is covered by 2 or more of the following categories:
(A) a fee;
(B) an
adjustment for variations in the market value of eligible securities;
(C) other
consideration;
a statement dissecting
the notifiable consideration into those categories in such a manner as will
enable the amount or value of each category to be readily ascertained; and
(e) the lender does not dispose of (by
transfer, declaration of trust or otherwise) the right to receive any part of
the total consideration payable or to be given by the borrower under the
agreement.
(3A) For the purposes of paragraph (3)(c),
if, apart from this subsection, either of the following events occurred after
the commencement of the borrowing period:
(a) the making or payment of a
distribution (whether in property or money) in respect of the borrowed
security;
(b) the issue, by the company,
trustee, government or government authority concerned, of a right or option in
respect of the borrowed security;
(even if the event occurred after the borrowed security
was disposed of by the borrower to a third party), the event is taken to have
occurred during the borrowing period if, and only if, (assuming that the
borrower had held the borrowed security at all times during the borrowing
period) the entitlement to the distribution or issue would have been
attributable to the borrower’s holding of the borrowed security at a particular
time during the borrowing period.
(4) In determining:
(a) whether an amount (other than a
fee payable under the securities lending arrangement) is included in the
assessable income of the lender under a provision of this Act other than Part 3‑1
or 3‑3 of the Income Tax Assessment Act 1997 (about CGT); or
(b) whether an amount is allowable as
a deduction to the lender;
in respect of either or both of the transactions covered
by paragraph (3)(a), the lender is to be treated as if:
(c) neither of those transactions had
been entered into; and
(d) the lender had held the borrowed
security at all times during the borrowing period; and
(e) if the replacement security is not
the borrowed security—the replacement security were the borrowed security.
(4A) If the lender receives a compensatory
payment covered by sub-subparagraph (3)(c)(v)(C), then, in determining
whether an amount is included in the assessable income of the lender under a
provision of this Act other than Part 3‑1 or 3‑3 of the Income
Tax Assessment Act 1997, the lender is to be treated as if:
(a) the lender had held the borrowed
security at all relevant times during the borrowing period; and
(b) the right or option had been
issued directly to the lender in respect of the borrowed security; and
(c) the lender had disposed of the
right or option immediately after its issue for a consideration equal to the
compensatory payment.
(4B) If the lender receives a compensatory
payment covered by sub-subparagraph (3)(c)(vi)(C), then, in determining
whether an amount is included in the assessable income of the lender under a
provision of this Act other than Part 3‑1 or 3‑3 of the Income
Tax Assessment Act 1997, the lender is to be treated as if:
(a) the lender had held the right or
option at all relevant times during the borrowing period; and
(b) the lender had exercised the right
or option; and
(c) the lender had immediately
disposed of the shares, units, bonds, debentures or financial instruments that
resulted from exercising the right or option for a consideration equal to the
compensatory payment.
(5) In determining:
(a) whether an amount is included in
the assessable income of the borrower under a provision of this Act other than
Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997;
or
(b) an amount (other than a fee
payable under the securities lending arrangement) is allowable as a deduction
to the borrower;
in respect of either or both of the transactions covered
by paragraph (3)(a):
(c) if the borrowed security was
disposed of by the borrower to a third party:
(i) the borrower is to be
treated as if the borrower had acquired the borrowed security from the lender
for a consideration equal to the market value of the borrowed security at the
time of its acquisition; and
(ii) the borrower is to be
treated as if the borrower had disposed of the replacement security to the
lender for a consideration equal to the market value of the borrowed security
at the time of its acquisition from the lender; or
(d) in any other case—the borrower is
to be treated as if neither of the transactions referred to in paragraph (3)(a)
had been entered into.
(6) Any capital gain or capital loss from the
disposal of the borrowed security by the lender is disregarded.
(6A) If the lender acquired the borrowed
security before 20 September 1985, the lender is taken (for the purposes
of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997)
to have acquired the replacement security before that day.
(6B) If the lender acquired the borrowed
security on or after 20 September 1985, the first element of the cost base
of the replacement security is the cost base of the borrowed security just
before the acquisition of the replacement security. The reduced cost base of
the replacement security is worked out similarly.
(7) If:
(a) the borrowed security was acquired
on or after 20 September 1985; and
(b) a CGT event (other than one
involving a transaction covered by subsection (3)) happens in relation to
the replacement security at least 12 months after the lender acquired a paired
security in relation to the replacement security (otherwise than under a
transaction covered by subsection (3));
section 114‑10 of the
Income Tax Assessment Act 1997 (about the requirement for 12 months
ownership) does not apply to the CGT event.
(8) For the purposes of subsection (7):
(a) if CGT event A1 happens (involving
a transaction covered by subsection (3)) by the lender disposing of an
eligible security to the borrower, that security is a paired security in
relation to the replacement security subsequently acquired or re‑acquired
by the lender; and
(b) a security is a paired security in
relation to a second security if the first security is a paired security in
relation to a third security that is a paired security in relation to the
second security (including a pairing with the second security by another
application or other applications of this paragraph).
(9) For the purpose of applying Parts 3‑1
and 3‑3 of the Income Tax Assessment Act 1997 to the borrower:
(a) if the borrower disposes of the
borrowed security to a third party:
(i) the first element of
the cost base and reduced cost base of the borrowed security (in the hands of
the borrower) is taken to be its market value when the borrower acquired it;
and
(ii) when the borrower
disposes of a replacement security to the lender, the capital proceeds from
that CGT event are taken to be that market value; and
(b) if no third party is involved—the
transactions referred to in paragraph (3)(a) are ignored.
(9A) For the purpose of applying Parts 3‑1
and 3‑3 of the Income Tax Assessment Act 1997 to the borrower, the
incidental costs to the borrower of the acquisition of an eligible security
covered by sub-subparagraph (3)(a)(ii)(B) include a compensatory payment
incurred by the borrower (to the extent that the borrower has not deducted and
cannot deduct it).
(9B) For the purposes of the application of
Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997
to a right or option received by the lender as mentioned in subparagraph (3)(c)(v),
the borrower and lender are to be treated as if the eligible security in
respect of which the right or option was issued had been held by the lender at
the time of the acquisition of the right or option.
(9C) For the purposes of the application of
Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997
to a share, unit, bond, debenture or financial instrument received by the
lender as mentioned in subparagraph (3)(c)(vi), the borrower and the
lender are to be treated as if:
(a) the share, unit, bond, debenture
or financial instrument had been received as the result of the exercise of the
borrowed security; and
(b) the borrowed security had been
held by the lender at the time of the exercise; and
(c) the lender had exercised the
borrowed security; and
(d) the lender had exercised the
borrowed security at the time the direction concerned was given; and
(e) the amount of the contribution (if
any) made by the lender to the borrower in respect of the carrying out of the
direction were an amount paid as consideration by the lender in respect of the
exercise.
(9D) If a distribution covered by subparagraph (3)(c)(i)
consists of one or more shares issued by a company to the borrower or to a
third party in the circumstances mentioned in subsection 6BA(1), then, for the
purposes of the applicaton of Parts 3‑1 and 3‑3 of the Income
Tax Assessment Act 1997 to a share (in this subsection called the
notional bonus share) received by the lender in relation to the distribution
in the circumstances mentioned in sub-subparagraph (3)(c)(iv)(A) or (B),
the borrower and the lender are to be treated as if:
(a) the company had issued the
notional bonus share to the lender instead of the borrower or the third party,
as the case requires; and
(b) the notional bonus share had been
issued in the circumstances mentioned in subsection 6BA(1); and
(c) the notional bonus share had been
issued in respect of the borrowed security; and
(d) the lender had held the borrowed
security at the time the notional bonus share was issued.
(9E) If a distribution covered by subparagraph (3)(c)(i)
consists of one or more units issued by the trustee of a unit trust to the
borrower or to a third party in the circumstances covered by section 130‑20
of the Income Tax Assessment Act 1997, then, for the purposes of the
application of Parts 3‑1 and 3‑3 of the Income Tax
Assessment Act 1997 to a unit (in this subsection called the notional
bonus unit) received by the lender in relation to the distribution in
the circumstances mentioned in sub-subparagraph (3)(c)(iv)(A) or (B), the
borrower and the lender are to be treated as if:
(a) the trustee had issued the
notional bonus unit to the lender instead of the borrower or the third party,
as the case requires; and
(b) the notional bonus unit had been
issued in the circumstances covered by section 130‑20 of the Income
Tax Assessment Act 1997; and
(c) the notional bonus unit had been
issued in respect of the borrowed security; and
(d) the lender had held the borrowed
security at the time the notional bonus unit was issued.
(9F) If the lender receives a compensatory
payment covered by sub-subparagraph (3)(c)(v)(C), then, for the purposes
of the application of Parts 3‑1 and 3‑3 of the Income Tax
Assessment Act 1997 to the lender, the lender is to be treated as if:
(a) the lender had held the borrowed
security at all relevant times during the borrowing period; and
(b) the right or option had been
issued directly to the lender in respect of the borrowed security; and
(c) the lender had disposed of the
right or option immediately after its issue and had received capital proceeds
of an amount equal to the compensatory payment.
(9G) If the lender receives a compensatory
payment covered by sub-subparagraph (3)(c)(vi)(C), then, for the purposes
of the application of Parts 3‑1 and 3‑3 of the Income Tax
Assessment Act 1997 to the lender, the lender is to be treated as if:
(a) the lender had held the right or
option at all relevant times during the borrowing period; and
(b) the lender had exercised the right
or option; and
(c) the lender had immediately
disposed of the shares, units, bonds, debentures or financial instruments that
resulted from exercising the right or option and had received capital proceeds
of an amount equal to the compensatory payment.
(11A) If:
(a) the lender receives from the
borrower a distribution or identical property covered by subparagraph (3)(c)(iv);
and
(b) assuming that the borrowed
security had continued to be held by the lender, an amount (in this subsection
called the otherwise assessable amount) would have been included
in the lender’s assessable income of a year of income in respect of the
distribution concerned;
the lender’s assessable income of the year of income
includes an amount equal to the otherwise assessable amount.
(11B) If:
(a) the lender receives from the
borrower a compensatory payment covered by sub-subparagraph (3)(c)(iv)(C);
and
(b) assuming that the borrowed
security had continued to be held by the lender, an amount (in this subsection
called the otherwise assessable amount) would have been included
in the lender’s assessable income of a year of income in respect of the
distribution concerned;
the lender’s assessable income of the year of income
includes an amount equal to the otherwise assessable amount.
(12) Where:
(a) a taxpayer has entered into a
transaction of a kind referred to in subparagraph (3)(a)(i); and
(b) at the time of making an
assessment in respect of income of the taxpayer of the year of income in which
the transaction occurred, the Commissioner is of the opinion that, at a later
time, circumstances will exist because of which this section will apply in
connection with that transaction;
the Commissioner may apply the provisions of this section
as if those circumstances existed at the time of making the assessment.
(13) Where:
(a) in the making of an assessment,
this section has been applied on the basis that a circumstance that did not
exist at the time of making the assessment would exist at a later time; and
(b) after the making of the
assessment, the Commissioner becomes satisfied that the circumstance will not
exist;
then, in spite of anything in section 170, the
Commissioner may amend the assessment at any time for the purpose of ensuring
that this section is to be taken always to have applied on the basis that the
circumstance did not exist.
26C
Disposal of certain securities
(1) Where:
(a) a
taxpayer disposes of a prescribed security by sale, gift, conversion or
otherwise and the value of the security on the day of the disposal exceeds the
cost of the security to the taxpayer; or
(b) a prescribed security owned by a
taxpayer is redeemed and the amount received by the taxpayer upon the
redemption exceeds the cost of the security to the taxpayer;
an amount equal to the excess shall be included in the
assessable income of the taxpayer.
(2) For the purposes of this section:
(a) where a prescribed security is
disposed of to a person by sale, gift or otherwise, that person shall be deemed
to have purchased it at a cost equal to its value on the day of the disposal;
and
(b) where a person who owns a
prescribed security dies:
(i) that person shall be
deemed to have sold the security on the day of his death; and
(ii) the person upon whom
the security devolves by reason of the death shall be deemed to have purchased
it at a cost equal to its value on the day of the death.
(4) In this section:
prescribed security means:
(a) a seasonal security as defined by,
section 4 of the Loan (Short‑term Borrowings) Act 1959; or
(b) any stock or other security issued
by the Commonwealth that does not bear interest;
and includes an interest in any such seasonal security,
stock or other security.
stock means Commonwealth Government Inscribed
Stock or Australian Consolidated Inscribed Stock.
26E
Income from RSAs
(1) All benefits provided in respect of, and
amounts that are paid from, an RSA (including amounts taken to be paid from an
RSA under subsection (2)) are taken to have an Australian source.
(2) If the premiums of an insurance policy
are paid from an RSA, any amounts paid by the insurer under the policy are
taken to be paid by the RSA provider as a benefit of the RSA.
27
Interest on loans raised in Australia by governments outside Australia
(1) The interest on loans raised in
Australia, after 31 December 1923, by the government of any country or
dominion out of Australia, or by any authority constituted by or under any law
of any such country or dominion, and received directly or indirectly by a resident,
shall be deemed to be derived by him from a source in Australia, and shall be
included in his assessable income.
(2) For the purposes of this section, a loan
shall be deemed to have been raised in Australia if subscriptions to the loan
were invited in Australia by public advertisement, by the issue of a
prospectus, or otherwise.
Subdivision AA—Non‑superannuation annuities etc.
27H
Assessable income to include annuities and superannuation pensions
(1) Subject to Division 54 of the Income
Tax Assessment Act 1997, the assessable income of a taxpayer of a year of
income shall include:
(a) the amount of any annuity derived
by the taxpayer during the year of income excluding, in the case of an annuity
that has been purchased, any amount that, in accordance with the succeeding
provisions of this section, is the deductible amount in relation to the annuity
in relation to the year of income; and
(b) the amount of any payment made to
the taxpayer during the year of income as a supplement to an annuity, whether
the payment is made voluntarily, by agreement or by compulsion of law and
whether or not the payment is one of a series of recurrent payments.
Note: Division 54 of the Income Tax
Assessment Act 1997 provides a tax exemption for certain payments under structured
settlements and structured orders.
(2) Subject to subsections (3) and (3A),
the deductible amount in relation to an annuity derived by a taxpayer during a
year of income is the amount (if any) ascertained in accordance with the
formula 
,
where:
A is the relevant share in relation to the
annuity in relation to the taxpayer in relation to the year of income.
B is the amount of the undeducted purchase
price of the annuity.
C is:
(a) if there is a residual capital
value in relation to the annuity and that residual capital value is specified
in the agreement by virtue of which the annuity is payable or is capable of
being ascertained from the terms of that agreement at the time when the annuity
is first derived—that residual capital value; or
(b) in any other case—nil; and
D is the relevant number in relation to the
annuity.
(3) Subject to subsection (3A), where
the Commissioner is of the opinion that the deductible amount ascertained in
accordance with subsection (2) is inappropriate having regard to:
(a) the terms and conditions applying
to the annuity; and
(b) such other matters as the
Commissioner considers relevant;
the deductible amount in relation to the annuity derived
by the taxpayer during the year of income is so much of the annuity as, in the
opinion of the Commissioner, represents the undeducted purchase price having
regard to:
(c) the terms and conditions applying
to the annuity;
(d) any certificate or certificates of
an actuary or actuaries stating the extent to which, in the opinion of the
actuary or actuaries, the amount of the annuity derived by the taxpayer during
the year of income represents the undeducted purchase price; and
(e) such other matters as the
Commissioner considers relevant.
(3A) For the purposes of this section, where the
annuity derived by a taxpayer during a year of income is part of an annuity of
which a part has been commuted in the year of income or a preceding year of
income, the deductible amount ascertained under subsection (2) or (3)
shall be reduced by such amount as, in the opinion of the Commissioner, is
appropriate having regard to:
(c) any deductible amount ascertained
under this section in relation to the annuity in relation to a preceding year
of income; and
(d) such other matters as the
Commissioner considers relevant.
(4) In this section:
actuary means a Fellow or Accredited Member
of the Institute of Actuaries of Australia.
agreement means any agreement, arrangement or
understanding whether formal or informal, whether express or implied and
whether or not enforceable, or intended to be enforceable, by legal
proceedings.
annuity means an annuity, a pension paid from
a foreign superannuation fund (within the meaning of the Income Tax
Assessment Act 1997) or a pension paid from a scheme mentioned in paragraph
290‑5(c) of that Act, but does not include:
(a) an annuity that is a qualifying
security for the purposes of Division 16E; or
(b) a superannuation income stream
(within the meaning of the Income Tax Assessment Act 1997).
life expectation factor, in relation to a
person in relation to an annuity, means the number of years in the complete
expectation of life of the person as ascertained by reference to the prescribed
Life Tables at the time at the beginning of the period to which the first
payment of the annuity relates.
purchase price means:
(a) in relation to a pension—the sum
of:
(i) contributions made by
any person to a foreign superannuation fund to obtain the pension; and
(ii) so much as the
Commissioner considers reasonable of contributions made by any person to a
foreign superannuation fund to obtain superannuation benefits including the
pension; and
(b) in relation to an annuity other
than a pension—the sum of:
(i) payments made solely
to purchase the annuity; and
(ii) so much as the
Commissioner considers reasonable of payments made to purchase the annuity and
to obtain other benefits.
relevant number, in relation to an annuity in
relation to a year of income, means:
(a) where the annuity is payable for a
term of years certain—the number of years in the term;
(b) where the annuity is payable
during the lifetime of a person and not thereafter—the life expectation factor
of the person; and
(c) in any other case—the number that
the Commissioner considers appropriate having regard to the number of years in
the total period during which the annuity will be, or may reasonably be
expected to be, payable.
relevant share, in relation to an annuity
derived by a taxpayer during a year of income, means:
(a) in a case where the annuity
derived by the taxpayer is a share of an annuity (which annuity is in this
paragraph referred to as the total annuity) payable to the
taxpayer and another person or other persons—the fraction ascertained by
dividing the number of whole dollars in the amount of the annuity derived by
the taxpayer during the year of income by the number of whole dollars in the
amount of the total annuity derived during the year of income by the taxpayer
and the other person or persons; or
(b) in any other case—the number 1.
residual capital value, in relation to an
annuity, means the capital amount payable on the termination of the annuity.
undeducted purchase price, in relation to an
annuity, has the meaning given by section 27A immediately before the commencement
of Schedule 1 to the Superannuation Legislation Amendment
(Simplification) Act 2007.
(5) In the definition of purchase price
in subsection (4):
(a) a reference to contributions made
by any person to a foreign superannuation fund to obtain a pension does not
include a reference to contributions made to a foreign superannuation fund by
an employer, or by another person under an agreement to which the employer is a
party, for the purpose of providing superannuation benefits for, or for
dependants of, an employee of the employer; and
(b) a reference to payments made to
purchase, or solely to purchase, an annuity (other than a pension) does not
include a reference to payments made by an employer, or by another person under
an agreement to which the employer is a party, to purchase, or solely to
purchase, the annuity for, or for dependants of, an employee of the employer.
(6) For the purposes of subsection (5),
in determining whether a person is an employer of another person, treat the
holding of an office by the other person as employment of that person.
Subdivision D—Dividends
43A
Subdivision has effect subject to provisions of Division 216 of the Income
Tax Assessment Act 1997
This Subdivision has effect subject to
the provisions of Division 216 of the Income Tax Assessment Act 1997
(which describes cum dividend sales in which a distribution to a member of a
corporate tax entity is treated as having been made to someone else).
43B
Application of Subdivision to non‑share dividends
(1) This Subdivision:
(a) applies to a non‑share
equity interest in the same way as it applies to a share; and
(b) applies to an equity holder in the
same way as it applies to a shareholder; and
(c) applies to a non‑share
dividend in the same way as it applies to a dividend.
(2) Subsection (1) does not apply to
section 47A.
(3) Paragraph (1)(c) does not apply to
subsection 44(1).
(4) Subsection (1) has effect subject to
the special provision that is made for non‑share dividends in subsection
44(1).
44
Dividends
(1) The assessable income of a shareholder in
a company (whether the company is a resident or a non‑resident) includes:
(a) if the shareholder is a resident:
(i) dividends (other than
non‑share dividends) that are paid to the shareholder by the company out
of profits derived by it from any source; and
(ii) all non‑share
dividends paid to the shareholder by the company; and
(b) if the shareholder is a non‑resident:
(i) dividends (other than
non‑share dividends) paid to the shareholder by the company to the extent
to which they are paid out of profits derived by it from sources in Australia;
and
(ii) non‑share
dividends paid to the shareholder by the company to the extent to which they
are derived from sources in Australia; and
(c) if the shareholder is a non‑resident
carrying on business in Australia at or through a permanent establishment of
the shareholder in Australia, and the company is a resident:
(i) dividends (other than
non‑share dividends) that are paid to the shareholder by the company and
are attributable to the permanent establishment, to the extent to which they
are paid out of profits derived by the company from sources outside Australia;
and
(ii) non‑share
dividends that are paid to the shareholder by the company and are attributable
to the permanent establishment, to the extent to which they are derived from
sources outside Australia.
This subsection does not apply to a dividend (or non‑share
dividend) to the extent to which another provision of this Act that expressly
deals with dividends includes some or all of the dividend (or non‑share
dividend) in, or excludes some or all of the dividend (or non‑share
dividend) from, the shareholder’s assessable income.
Note 1: Some of the other provisions of this Act that
expressly deal with dividends are sections 23AJ, 23AI, 23AK and 128D.
Note 2: An amount declared to be conduit foreign income
is not included in assessable income under paragraph (1)(b) or (c): see
section 802‑15 of the Income Tax Assessment Act 1997.
(1B) Where:
(a) the amount of the moneys or of the
value of other property of which a dividend paid by a company consists is
debited against an amount standing to the credit of a share capital account of
the company; or
(b) a dividend paid by a company is a
repayment by the company of an amount paid‑up on a share;
the dividend shall, for the purposes of this section, be
deemed to have been paid by the company out of profits derived by it.
(2) Subsections (3) and (4) apply to a
demerger dividend unless the head entity elects in writing, within one month
after it decides which of its shareholders will receive ownership interests in
the demerged entity under the demerger, that those subsections do not apply to
the total demerger dividend for all shareholders.
(3) This section applies to the demerger
dividend as if it had not been paid out of profits.
(4) A demerger dividend is not assessable
income or exempt income.
(5) However, subsections (3) and (4) do
not apply to a demerger dividend unless, just after the demerger, CGT assets
owned by the demerged entity or a demerger subsidiary representing at least 50%
by market value of all the CGT assets (or a reasonable approximation of market
value) owned by the demerged entity and its demerger subsidiaries are used,
directly or indirectly, in one or more businesses carried on by one or more of
those entities.
(6) In applying subsection (5),
disregard any assets that are ownership interests in a demerger subsidiary
unless they are used in a business referred to in that subsection.
(7) In this section:
permanent establishment of a person:
(a) has the same meaning as in a
double tax agreement (as defined in Part X) that relates to a foreign
country and affects the person; or
(b) has the meaning given by
subsection 6(1), if there is no such agreement.
45
Streaming of bonus shares and unfranked dividends
Application of section
(1) This section applies in respect of a
company that, whether in the same year of income or in different years of
income, streams the provision of shares (other than shares to which subsection
6BA(5) applies) and the payment of minimally franked dividends to its
shareholders in such a way that:
(a) the shares are received by some
shareholders but not all shareholders; and
(b) some or all of the shareholders
who do not receive the shares receive or will receive minimally franked
dividends.
(2) The value of the share at the time that
the shareholder is provided with the share is taken, for the purposes of this
Act, to be a dividend that is unfrankable (within the meaning of subsection 995‑1(1)
of the Income Tax Assessment Act 1997) and that is paid by the company,
out of profits of the company, to the shareholder at that time.
(3) A dividend is minimally franked if
it is not franked, or is franked to less than 10%, in accordance with section 202‑5
or 208‑60 of the Income Tax Assessment Act 1997.
45A
Streaming of dividends and capital benefits
Application of section
(1) This section applies in respect of a
company that, whether in the same year of income or in different years of
income, streams the provision of capital benefits and the payment of dividends
to its shareholders in such a way that:
(a) the capital benefits are, or apart
from this section would be, received by shareholders (the advantaged
shareholders) who would, in the year of income in which the capital
benefits are provided, derive a greater benefit from the capital benefits than
other shareholders; and
(b) it is reasonable to assume that
the other shareholders (the disadvantaged shareholders) have
received, or will receive, dividends.
However, it does not apply if section 45 applies in
relation to the streaming or in the circumstances set out in subsection (5).
Commissioner to determine that section 45C applies
(2) The Commissioner may make, in writing, a
determination that section 45C applies in relation to the whole, or a
part, of the capital benefits. A determination does not form part of an
assessment.
Note: Subsection (6) limits the determination
to a part of the capital benefit in certain cases.
Meaning of provision of capital benefit
(3) A reference to the provision of a
capital benefit to a shareholder in a company is a reference to any of
the following:
(a) the provision to the shareholder
of shares in the company;
(b) the distribution to the shareholder
of share capital or share premium;
(c) something that is done in relation
to a share that has the effect of increasing the value of a share (which may or
may not be the same share) held by the shareholder.
(3A) For the purposes of this section, a non‑share
distribution to an equity holder is taken to be the distribution to the equity
holder of share capital to the extent to which it is a non‑share capital
return.
Meaning of greater benefit from capital benefits
(4) The circumstances in which a shareholder
would, in a year of income, derive a greater benefit from capital
benefits than another shareholder include, but are not limited to, any of the
following circumstances existing in relation to the first shareholder and not
in relation to the other shareholder:
(a) some or all of the shares in the
company held by the shareholder were acquired, or are taken to have been
acquired, before 20 September 1985;
(b) the shareholder is a non‑resident;
(c) the cost base (for the purposes of
Part IIIA) of the relevant share is not substantially less than the value
of the applicable capital benefit;
(d) the shareholder has a net capital
loss for the year of income in which this capital benefit is provided;
(e) the shareholder is a private
company who would not have been entitled to a rebate under former section 46F
if the shareholder had received the dividend that was paid to the disadvantaged
shareholder;
(f) the shareholder has income tax
losses.
Certain capital benefits not covered
(5) This section does not apply where the
capital benefit provided to the advantaged shareholders is the provision of
shares and it is reasonable to assume that the disadvantaged shareholders have
received, or will receive, fully franked dividends.
Determination limited in certain cases
(6) If the capital benefit provided to the
advantaged shareholders is the provision of shares and it is reasonable to
assume that the disadvantaged shareholders have received, or will receive,
partly franked dividends, the Commissioner may only make a determination under subsection (2)
in relation to so much of the capital benefit as the Commissioner considers
relates to the unfranked part of the dividend.
45B
Schemes to provide certain benefits
Purpose of section
(1) The purpose of this section is to ensure
that relevant amounts are treated as dividends for taxation purposes if:
(a) components of a demerger
allocation as between capital and profit do not reflect the circumstances of a
demerger; or
(b) certain payments, allocations and
distributions are made in substitution for dividends.
Application of section
(2) This section applies if:
(a) there is a scheme under which a
person is provided with a demerger benefit or a capital benefit by a company;
and
(b) under the scheme, a taxpayer (the relevant
taxpayer), who may or may not be the person provided with the demerger
benefit or the capital benefit, obtains a tax benefit; and
(c) having regard to the relevant
circumstances of the scheme, it would be concluded that the person, or one of
the persons, who entered into or carried out the scheme or any part of the
scheme did so for a purpose (whether or not the dominant purpose but not
including an incidental purpose) of enabling a taxpayer (the relevant
taxpayer) to obtain a tax benefit.
Commissioner to determine that section 45BA or 45C applies
(3) The Commissioner may make, in writing, a
determination that:
(a) section 45BA applies in
relation to the whole, or a part, of the demerger benefit; or
(b) section 45C applies in
relation to the whole, or a part, of the capital benefit.
A determination does not form part of an assessment.
Note: If section 45BA applies in relation to
the whole, or a part, of a demerger benefit, this benefit may be a capital
benefit.
Meaning of provided with a demerger benefit
(4) A person is provided with a
demerger benefit if in relation to a demerger:
(a) a company provides the person with
ownership interests in that or another company; or
(b) something is done in relation to
an ownership interest owned by the person that has the effect of increasing the
value of an ownership interest (which may or may not be the same ownership
interest) owned by the person.
Meaning of provided with a capital benefit
(5) A reference to a person being provided
with a capital benefit is a reference to any of the following:
(a) the provision of ownership
interests in a company to the person;
(b) the distribution to the person of
share capital or share premium;
(c) something that is done in relation
to an ownership interest that has the effect of increasing the value of an
ownership interest (which may or may not be the same interest) that is held by
the person.
(6) However, a person is not provided
with a capital benefit to the extent that the provision of interests,
the distribution or the thing done referred to in subsection (5) involves
the person receiving a demerger dividend.
(7) For the purposes of this section, a non‑share
distribution to an equity holder is taken to be the distribution to the equity
holder of share capital to the extent to which it is a non‑share capital
return.
Meaning of relevant circumstances of scheme
(8) The relevant circumstances
of a scheme include:
(a) the extent to which the demerger
benefit or capital benefit is attributable to capital or the extent to which
the demerger benefit or capital benefit is attributable to profits (realised
and unrealised) of the company or of an associate (within the meaning in
section 318) of the company;
(b) the pattern of distributions of
dividends, bonus shares and returns of capital or share premium by the company
or by an associate (within the meaning in section 318) of the company;
(c) whether the relevant taxpayer has
capital losses that, apart from the scheme, would be carried forward to a later
year of income;
(d) whether some or all of the
ownership interests in the company or in an associate (within the meaning in
section 318) of the company held by the relevant taxpayer were acquired,
or are taken to have been acquired, by the relevant taxpayer before 20 September
1985;
(e) whether the relevant taxpayer is a
non‑resident;
(f) whether the cost base (for the
purposes of the Income Tax Assessment Act 1997) of the relevant
ownership interest is not substantially less than the value of the applicable
demerger benefit or capital benefit;
(h) if the scheme involves the
distribution of share capital or share premium—whether the interest held by the
relevant taxpayer after the distribution is the same as the interest would have
been if an equivalent dividend had been paid instead of the distribution of
share capital or share premium;
(i) if the scheme involves the
provision of ownership interests and the later disposal of those interests, or
an increase in the value of ownership interests and the later disposal of those
interests:
(i) the period for which
the ownership interests are held by the holder of the interests; and
(ii) when the arrangement
for the disposal of the ownership interests was entered into;
(j) for a demerger only:
(i) whether the profits of
the demerging entity and demerged entity are attributable to transactions
between the entity and an associate (within the meaning in section 318) of
the entity; and
(ii) whether the assets of
the demerging entity and demerged entity were acquired under transactions
between the entity and an associate (within the meaning in section 318) of
the entity;
(k) any of the matters referred to in
subparagraphs 177D(b)(i) to (viii).
Meaning of obtaining a tax benefit
(9) A relevant taxpayer obtains a tax
benefit if an amount of tax payable, or any other amount payable under
this Act, by the relevant taxpayer would, apart from this section, be less than
the amount that would have been payable, or would be payable at a later time
than it would have been payable, if the demerger benefit had been an assessable
dividend or the capital benefit had been a dividend.
Expressions to have same meanings as in Part IIIAA
(10) Expressions used in this section that are
defined in Part IIIAA have the same meanings as in that Part.
45BA
Effect of determinations under section 45B for demerger benefits
(1) If the Commissioner makes a determination
under subsection 45B(3), the amount of the demerger benefit, or the part of the
benefit, is taken not to be a demerger dividend for the purposes of this Act
for the owner of the ownership interest or the relevant taxpayer at the time
when the owner or relevant taxpayer is provided with the demerger benefit.
(2) The amount of the demerger benefit is:
(a) if the benefit is the provision of
an ownership interest—the market value of the interest at the time that it is
provided; or
(b) if the benefit is an increase in
the value of an ownership interest—the increase in the market value of the
interest as a result of the change; or
(c) if the benefit is a distribution
to the shareholder of share capital or share premium—the amount debited to the
share capital account or share premium account of the company in connection
with the provision of the benefit.
45C
Effect of determinations under sections 45A and 45B for capital benefits
(1) If the Commissioner makes a determination
under subsection 45A(2) or 45B(3), the amount of the capital benefit, or the
part of the benefit, is taken, for the purposes of this Act, to be an unfranked
dividend that is paid by the company to the shareholder or relevant taxpayer at
the time that the shareholder or relevant taxpayer is provided with the capital
benefit.
(2) The dividend is taken to have been paid
out of profits of the company.
(3) If the Commissioner has made a
determination under section 45B in respect of the whole or a part of a
capital benefit and the Commissioner makes a further written determination that
the capital benefit, or the part of the capital benefit, was paid under a
scheme for which a purpose, other than an incidental purpose, was to avoid
franking debits arising in relation to the distribution from the company:
(a) on the day on which notice of the
determination is served in writing on the company, a class C franking debit of
the company arises in respect of the capital benefit; and
(b) the amount of the franking debit
is the amount that, if the company had paid a dividend of an amount equal to
the amount of the capital benefit, or the part of the capital benefit, at the
time when it was provided and had fully franked the dividend, would have been
the franked amount of the dividend.
(4) The amount of the capital benefit is:
(a) if the benefit is the provision of
an ownership interest—the market value of the interest at the time that it is
provided; or
(b) if the benefit is an increase in
the market value of an ownership interest—the increase in the market value of
the interest as a result of the change; or
(c) if the benefit is a distribution
to the shareholder of share capital or share premium—the amount debited to the
share capital account or share premium account of the company in connection
with the provision of the benefit.
(4A) For the purposes of this section:
(a) a non‑share distribution to
an equity holder is taken to be the distribution to the equity holder of share
capital to the extent to which it is a non‑share capital return; and
(b) the debit to the company’s non‑share
capital account, in respect of the non‑share distribution, is taken to be
a debit to the company’s share capital account.
Franking debit to be reduced by any franking debit
under former section 160AQCB, 160AQCNA or 160AQCNB
(5) If:
(a) a franking debit of the company
arises under paragraph (3)(b) in respect of a capital benefit; and
(b) a franking debit of the company
arises under former section 160AQCB, 160AQCNA or 160AQCNB in respect of
the same capital benefit;
the amount of the franking debit arising under paragraph (3)(b)
is reduced by the amount of the franking debit arising under that former
section.
Expressions to have same meanings as in Part IIIAA
(6) Expressions used in this section that are
defined in Part IIIAA have the same meanings as in that Part.
45D
Determinations under sections 45A, 45B and 45C
Notice by Commissioner of determination
(1) If the Commissioner makes a determination
under section 45A, 45B or 45C, the Commissioner must give a copy of the
determination to the company concerned (which, in the case of a demerger
benefit referred to in section 45B, is the head entity of the demerger
group). The notice may be included in a notice of assessment.
Notice by company of determination
(1A) That company must, in the case of a
determination under section 45A or 45B, give a copy of the notice to:
(a) the advantaged shareholder referred
to in section 45A; or
(b) the relevant taxpayer referred to
in section 45B.
Publication in national newspaper of determination in
relation to listed public company
(2) If the Commissioner makes a determination
referred to in paragraph (1)(b), in respect of a dividend paid by a listed
public company within the meaning of the Income Tax Assessment Act 1997,
the Commissioner is taken to have served notice in writing of the determination
on the advantaged shareholder if the Commissioner causes the notice to be
published in a daily newspaper that circulates generally in each State, the
Australian Capital Territory and the Northern Territory. The notice is taken to
have been served on the day on which the publication takes place.
Evidence of determination
(3) The production of:
(a) a notice of a determination; or
(b) a document signed by the
Commissioner, a Second Commissioner or a Deputy Commissioner purporting to be a
copy of a determination;
is conclusive evidence of:
(c) the due making of the determination;
and
(d) except in proceedings under Part IVC
of the Taxation Administration Act 1953 on an appeal or review relating
to the determination, that the determination is correct.
Objections
(4) If a taxpayer to whom a determination
relates is dissatisfied with the determination, the taxpayer may object against
it in the manner set out in Part IVC of the Taxation Administration Act
1953.
46FA
Deduction for dividends on‑paid to non‑resident owner
Allowable deduction
(1) An amount is allowable as a deduction
from the assessable income of a company (the resident company)
if:
(a) the resident company is paid a
dividend (the original dividend) that:
(i) is paid by a company
that is a resident; and
(ii) is a non‑portfolio
dividend; and
(iii) is not a fully‑franked
dividend; and
(b) the resident company is not a
group company in relation to the company that paid the original dividend in
relation to the year of income in which the dividend is paid; and
(ba) neither the resident company, nor
the company that pays the dividend, is a prescribed dual resident; and
(c) ignoring the amendments made by
Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions)
Act 2006, but for subsection 46AB(1) or 46AC(2) or subparagraph
46F(2)(a)(i) of this Act as in force just before the commencement of those
amendments, the resident company would have been entitled to a rebate under
section 46 of this Act as so in force in respect of the unfranked amount
of the original dividend; and
(d) the resident company pays a
dividend (the flow‑on dividend) to a company that is not a
resident (the non‑resident company); and
(e) the flow‑on dividend is not
a fully‑franked dividend; and
(f) the resident company declares
that the unfranked amount of the flow‑on dividend is an on‑payment
of the unfranked amount of the original dividend to the extent of a specified
percentage (not exceeding 100%); and
(g) when the original dividend is
paid, when the declaration is made and when the flow‑on dividend is paid,
the resident company is:
(i) a resident; and
(ii) wholly owned by the
non‑resident company.
The deduction is from assessable income of the year of
income in which the flow‑on dividend is paid. The amount of the deduction
is equal to the flow‑on amount worked out using subsection (2).
(2) The flow‑on amount
is:
Flow‑on declarations
(3) The declaration under paragraph (1)(f)
(the flow‑on declaration) must be made:
(a) in writing; and
(b) before the flow‑on dividend
is paid.
The declaration cannot be revoked or varied.
(4) The flow‑on declaration is
effective only to the extent to which the flow‑on amount does not exceed
the surplus in the resident company’s unfranked non‑portfolio dividend
account immediately before the declaration is made.
Note: See section 46FB for the unfranked non‑portfolio
dividend account.
Unfranked amount of flow‑on dividend unfrankable
(5) Part 3‑6 of the Income Tax
Assessment Act 1997 (the imputation system) applies to the unfranked amount
of the flow‑on dividend as if it were an unfrankable distribution within
the meaning of section 202‑45 of that Act if a deduction is allowed
to the resident company in relation to the flow‑on dividend.
Wholly owned by non‑resident company
(6) The resident company is wholly owned by
the non‑resident company if all the shares in the resident company are
held by and beneficially owned by the non‑resident company.
(7) However, the company is not wholly owned
by the non‑resident company if a person is in a position to affect
rights, in relation to the resident company, of the non‑resident company.
(8) The resident company is also not wholly
owned by the non‑resident company if at some future time a person will be
in a position to affect rights as described in subsection (7).
A person in a position to affect rights
(9) A person is in a position to affect
rights of a company in relation to another company if the person has a right,
power or option:
(a) to acquire those rights from one
or other of those companies; or
(b) to do something that would prevent
one or other of those companies from exercising its rights for its own benefit,
or from receiving any benefit arising from having those rights.
(10) It does not matter whether the person has
the right, power or option because of the constitution of one or other of those
companies, any agreement or otherwise.
Definitions
(11) In this section:
fully‑franked dividend means a dividend
whose franking percentage (within the meaning of section 203‑35 of
the Income Tax Assessment Act 1997) is 100%.
group company has the same meaning as in former
section 160AFE as in force immediately before 1 July 2002.
non‑portfolio dividend has the same
meaning as in section 317.
non‑resident company means a company
that is not a resident.
unfranked amount of a dividend (including an
unfrankable distribution within the meaning of section 202‑45 of the
Income Tax Assessment Act 1997) means the amount of the dividend less
the franked part.
46FB
Unfranked non‑portfolio dividend account
Company may establish account
(1) A company may establish an unfranked non‑portfolio
dividend account.
Account surplus
(2) An unfranked non‑portfolio dividend
account surplus exists for a company at a particular time if the company’s
total unfranked non‑portfolio dividend credits arising before that time
exceed its total unfranked non‑portfolio dividend debits arising before
that time.
(3) The amount of the surplus is equal to the
amount of the excess.
Credits
(4) An unfranked non‑portfolio dividend
credit arises for a company if:
(a) the company is paid an unfranked
non‑portfolio dividend; and
(b) the company is not a group company
in relation to the company that paid the dividend in relation to the year of
income in which the dividend is paid; and
(c) ignoring the amendments made by
Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions)
Act 2006, but for subsection 46AB(1) or 46AC(2) or subparagraph
46F(2)(a)(i) of this Act as in force just before the commencement of those
amendments, the company would have been entitled to a rebate under section 46
of this Act as so in force in respect of the unfranked amount of the dividend.
The amount of the credit is the unfranked amount of the
dividend. The credit arises when the dividend is paid to the company.
Debits
(5) An unfranked non‑portfolio dividend
debit arises for a company if the company makes a declaration under paragraph
46FA(1)(f) in relation to a dividend paid on a particular day. The amount of
the debit is the flow‑on amount under subsection 46FA(2). The debit
arises when the declaration is made.
Definitions
(6) In this section:
group company has the same meaning as in former
section 160AFE as in force immediately before 1 July 2002.
non‑portfolio dividend has the same
meaning as in section 317.
unfranked amount of a dividend (including an
unfrankable distribution within the meaning of section 202‑45 of the
Income Tax Assessment Act 1997) means the amount of the dividend less
the franked part.
47
Distributions by liquidator
(1) Distributions to shareholders of a
company by a liquidator in the course of winding‑up the company, to the
extent to which they represent income derived by the company (whether before or
during liquidation) other than income which has been properly applied to
replace a loss of paid‑up share capital, shall, for the purposes of this
Act, be deemed to be dividends paid to the shareholders by the company out of
profits derived by it.
(1A) A reference in subsection (1) to
income derived by a company includes a reference to:
(a) an amount (except a net capital gain)
included in the company’s assessable income for a year of income; or
(b) a net capital gain that would be
included in the company’s assessable income for a year of income if the Income
Tax Assessment Act 1997 required a net capital gain to be worked out as
follows:
Method
statement
Step 1. Work
out each capital gain (except a capital gain that is disregarded) that the
company made during that year of income. Do so without indexing any
amount used to work out the cost base of a CGT asset.
Step 2. Total the capital gain
or gains worked out under Step 1. The result is the net capital gain for that
year of income.
(2) Those distributions shall, to the extent
to which they are made out of any profits or income, be deemed to have been
paid wholly and exclusively out of those profits or that income.
(2A) Where:
(a) the business of a company has
been, or is in the course of being, discontinued otherwise than in the course
of a winding up of the company under any law relating to companies;
(b) in connexion with the
discontinuance, any moneys of the company have been or other property of the
company has been, on or after 19 October 1967, distributed, otherwise than
by the company, to shareholders of the company; and
(c) the moneys or other property so
distributed are not, for the purposes of this Act, dividends;
the distribution shall, subject to subsection (2B),
be deemed to be, for the purposes of this section, a distribution to the
shareholders by a liquidator in the course of winding up the company.
(2B) Where:
(a) subsection (2A) would, but
for this subsection, apply in relation to any moneys or other property of a
company distributed to shareholders of the company; and
(b) the company does not cease to
exist within a period of 3 years after the distribution, or within such further
period as the Commissioner allows;
subsection (2A) shall not apply, and shall be deemed
never to have applied, in relation to those moneys or that other property, and
those moneys or that other property so distributed shall, for the purposes of
this Act, be deemed to be dividends paid by the company to the shareholders out
of profits derived by it.
(3) For the purposes of this section, paid‑up
share capital includes capital which has been paid up in money or by
other valuable consideration and which has been cancelled and has not been
repaid by the company to the shareholders.
47A
Distribution benefits—CFCs
(1) Subject to subsection (2), if:
(a) a company (in this section called
the first company) has profits immediately before a distribution
time for a distribution benefit in relation to the first company; and
(b) the distribution time occurred
after 3 June 1990; and
(c) the first company is a CFC at the
distribution time; and
(d) the first company is a resident of
an unlisted country at the distribution time;
so much of the distribution payment in relation to the
distribution time as would not otherwise be a dividend and does not exceed the
amount of those profits is taken, for the purposes of this Act, to be a
dividend paid by the first company:
(e) to the recipient of the benefit as
a shareholder in the first company; and
(f) out of profits derived by the
first company; and
(g) at the distribution time.
(2) If:
(a) any of the following subparagraphs
applies:
(i) by virtue of subsection (1),
the whole or a part of the distribution payment is included in the assessable
income of a taxpayer of the year of income in which the distribution time
occurred under section 44;
(ii) by virtue of subsection (1),
the whole or a part of the distribution payment would, apart from section 23AI
or 23AJ, be included in the assessable income of a taxpayer of the year of
income in which the distribution time occurred under section 44; and
(b) both of the following
subparagraphs apply:
(i) the taxpayer’s return
of income for the year of income was not prepared on the basis that the
distribution payment had the consequence specified in subsection (1);
(ii) the taxpayer has not
notified the Commissioner, in writing, within 12 months after the end of the
year of income, that the distribution payment had the consequence specified in subsection (1);
that subsection has effect in relation to the taxpayer and
in relation to that distribution payment as if the reference in that subsection
to the purposes of this Act were a reference to the purposes of this Act (other
than section 365 of this Act and Division 770 of the Income Tax
Assessment Act 1997).
(3) Subject to subsections (9) and (12),
a reference in this section to a distribution benefit in relation to the first
company is a reference to an eligible benefit where the following conditions
are satisfied:
(a) the eligible benefit was provided
to:
(i) an associated entity
in relation to the first company; or
(ii) another entity that,
immediately after the time of the provision of the eligible benefit, was an
associated entity in relation to the first company;
(b) the eligible benefit was provided
by:
(i) the first company; or
(ii) an entity (in this
subsection called the arranger) other than the first company
under an arrangement between:
(A) the
first company; and
(B) the
arranger or another entity;
(c) if subparagraph (b)(ii)
applies—the first company made, or entered into an undertaking to make, one or
more transfers of property or services to the arranger or to another entity
(which transfers are in this section called the arrangement transfers)
that are attributable, in whole or in part, to the provision of the eligible
benefit.
(4) Where the first company entered into an
undertaking to make one or more arrangement transfers, the time of the
arrangement transfers is the time the undertaking was entered into.
(5) Where, at a particular time, an entity
(in this subsection called the provider) waives or releases the
obligation of another entity (in this subsection called the recipient)
to pay or repay to the provider an amount:
(a) the waiver or release is taken to
constitute an eligible benefit provided at that time by the provider to the
recipient; and
(b) if the eligible benefit is a
distribution benefit in relation to the first company—each of the following
times is a distribution time for the eligible benefit:
(i) if the eligible
benefit was provided by the first company—the time of the provision of the
eligible benefit; or
(ii) in any other case—the
time, or each of the times, of the arrangement transfers concerned;
(c) if the eligible benefit is a
distribution benefit in relation to the first company—the distribution payment
in relation to the distribution time is:
(i) if the benefit was
provided by the first company—the amount the payment or repayment of which is
waived or released; or
(ii) in any other case—so
much of the amount or market value of the arrangement transfer as is
attributable to the provision of the eligible benefit.
(6) For the purposes of subsection (5),
an entity is taken to be under an obligation to pay or repay an amount even if
the amount is not due for payment or repayment.
(7) Where, at a particular time, an entity
(in this subsection called the provider) makes a loan to another
entity (in this subsection called the recipient), where:
(a) the parties to the loan are not at
arm’s length with each other in relation to the loan; or
(b) the purpose, or one of the
purposes, of the making of the loan was to facilitate, directly or indirectly
(through one or more interposed companies, partnerships or trusts), the payment
of a dividend that is, or would be, non‑assessable non‑exempt
income under section 23AJ (in whole or in part); or
(c) the purpose, or one of the
purposes, of the making of the loan was to facilitate, directly or indirectly,
the provision of an eligible benefit by the recipient, being an eligible
benefit that is a distribution benefit in relation to any company;
the following provisions have effect:
(d) the making of the loan is taken to
constitute an eligible benefit provided by the provider to the recipient at
that time;
(e) if the eligible benefit is a
distribution benefit in relation to the first company—each of the following
times is a distribution time for the eligible benefit:
(i) if the benefit was
provided by the first company—the time of the provision of the benefit; or
(ii) in any other case—the
time, or each of the times, of the arrangement transfers concerned;
(f) if the eligible benefit is a
distribution benefit in relation to the first company—the distribution payment
in relation to the distribution time is:
(i) if the benefit was
provided by the first company—the amount of the loan; or
(ii) in any other case—so
much of the amount or market value of the arrangement transfer as is
attributable to the provision of the eligible benefit.
(8) Where, at a particular time:
(a) an entity (in this subsection
called the provider) acquires from a company (in this subsection
called the recipient):
(i) a share in the
recipient;
(ii) a right to acquire a
share in the recipient;
(iii) an option to acquire a
share in the recipient; or
(b) an entity (in this subsection also
called the provider) acquires from the trustee of a unit trust
(in this subsection also called the recipient):
(i) a unit in the
recipient;
(ii) a right to acquire a
unit in the recipient;
(iii) an option to acquire a
unit in the recipient;
the following provisions have effect:
(c) the acquisition is taken to constitute
an eligible benefit provided by the provider to the recipient at that time;
(d) if the eligible benefit is a
distribution benefit in relation to the first company—each of the following is
a distribution time for the eligible benefit:
(i) if the benefit was
provided by the first company—the time of the provision of the benefit; or
(ii) in any other case—the
time, or each of the times, of the arrangement transfers concerned;
(e) if the eligible benefit is a
distribution benefit in relation to the first company—the distribution payment
in relation to the distribution time is:
(i) if the benefit was
provided by the first company—the amount or market value of the consideration
paid or given by the first company in respect of the acquisition; or
(ii) in any other case—so
much of the amount or market value of the arrangement transfer as is
attributable to the provision of the eligible benefit;
(f) if:
(i) the eligible benefit
is a distribution benefit in relation to the first company; and
(ii) the provider
transferred property or services to the recipient in respect of the
acquisition;
in determining the profits of
the company immediately before the distribution time, or the first distribution
time, as the case requires, for the distribution benefit, the following
assumptions are to be made:
(iii) if the benefit was
provided by the first company—the assumption that, immediately before the
distribution time, the company had:
(A) disposed
of the property or services to an entity other than the recipient; and
(B) received,
in respect of that disposal, consideration equal to the market value of the
property or services;
(iv) if subparagraph (iii)
does not apply—the assumption that, immediately before the distribution time,
the company had:
(A) disposed
of equivalent property or services to an entity other than the recipient or the
entity who provided the eligible benefit; and
(B) received,
in respect of that disposal, consideration equal to the market value of the
property or services.
(9) An eligible benefit that is covered by subsection (8)
and provided at a particular time is not a distribution benefit in relation to
the first company if, at that time, there is no entity (other than the provider
referred to in that subsection) who is:
(a) either:
(i) the holder of an
eligible equity interest in the first company; or
(ii) an associate of an
entity who is the holder of an eligible equity interest in the first company;
and
(b) the holder of an eligible equity
interest in the recipient referred to in that subsection.
(10) Where:
(a) an entity (in this subsection
called the provider) transfers property or services to another
entity (in this subsection called the recipient); and
(b) the property or services are
transferred:
(i) for no consideration;
or
(ii) for a consideration
less than the market value of the property or services; and
(c) in the case of a transfer of
services—the services do not consist of the making of a loan; and
(d) in any case—the property or
services are not transferred by way of consideration for the acquisition from a
company of:
(i) a share in the
company; or
(ii) a right to acquire a
share in the company; or
(iii) an option to acquire a
share in the company; and
(e) in any case—the property or
services are not transferred in respect of the acquisition from the trustee of
a unit trust of:
(i) a unit in the unit
trust; or
(ii) a right to acquire a
unit in the unit trust; or
(iii) an option to acquire a
unit in the unit trust; and
(f) in the case of a transfer of
property—the property does not consist of a payment in respect of a call on a
share in a company;
the following provisions have effect:
(g) the transfer is taken to
constitute an eligible benefit provided by the provider to the recipient at
that time;
(h) if the eligible benefit is a
distribution benefit in relation to the first company—each of the following is
a distribution time for the eligible benefit:
(i) if the benefit was
provided by the first company—the time of the provision of the benefit; or
(ii) in any other case—the
time, or each of the times, of the arrangement transfers concerned;
(j) if the eligible benefit is a
distribution benefit in relation to the first company—the distribution payment
in relation to the distribution time is:
(i) if the benefit was
provided by the first company—the amount by which the amount or market value of
the property or services exceeds the consideration (including nil
consideration) mentioned in paragraph (b); or
(ii) if subparagraph (i)
does not apply and there is only one arrangement transfer—so much of the amount
or market value of the arrangement transfer as is attributable to the provision
of the eligible benefit; or
(iii) if subparagraph (i)
does not apply and there are 2 or more arrangement transfers—the amount worked
out in relation to the arrangement transfer using the following formula:
where:
Total Excess
means so much of the total amount or market value of all the arrangement
transfers as is attributable to the provision of the eligible benefit.
Arrangement
transfer means the amount or market value of the arrangement transfer
concerned.
Total
arrangement transfers means the total amount or market value of all of
the arrangement transfers.
(k) if the eligible benefit is a
distribution benefit in relation to the first company—in determining the
profits of the company immediately before a distribution time for the
distribution benefit, the following assumptions are to be made:
(i) if the benefit was
provided by the first company—the assumption that, immediately before the
distribution time, the company had:
(A) disposed
of the property or services to an entity other than the recipient; and
(B) received,
in respect of that disposal, consideration equal to the market value of the
property or services;
(ii) if subparagraph (i)
does not apply and there is only one arrangement transfer—the assumption that,
immediately before the distribution time, the company had:
(A) disposed
of the property or services covered by the arrangement transfer to an entity
other than the entity who provided the eligible benefit; and
(B) received,
in respect of that disposal, consideration equal to the market value of the
property or services;
(iii) if subparagraph (i)
does not apply and there are 2 or more arrangement transfers—the assumption
that, immediately before each distribution time, the company had:
(A) disposed
of the property or services covered by the arrangement transfer concerned to an
entity other than the entity who provided the eligible benefit; and
(B) received,
in respect of that disposal, consideration equal to the market value of the
property or services.
(10A) Subsection (10) does not apply to a
transfer that is taken by section 70‑30 or 70‑110 of the Income
Tax Assessment Act 1997 to have occurred.
(11) Where, at a particular time, an entity (in
this subsection called the provider) makes a payment to another
entity, being a company (in this subsection called the recipient),
in respect of a call on a share in the recipient:
(a) the making of the payment is taken
to constitute an eligible benefit provided by the provider to the recipient at
that time; and
(b) if the eligible benefit is a
distribution benefit in relation to the first company—each of the following is
a distribution time for the eligible benefit:
(i) if the benefit was
provided by the first company—the time of the provision of the benefit; or
(ii) in any other case—the
time, or each of the times, of the arrangement transfers concerned;
(c) if the eligible benefit is a distribution
benefit in relation to the first company—the distribution payment in relation
to the distribution time is:
(i) if the benefit was
provided by the first company—the amount of the payment; or
(ii) in any other case—so
much of the amount or market value of the arrangement transfer as is
attributable to the provision of the eligible benefit.
(12) An eligible benefit that is covered by subsection (11)
and provided at a particular time is not a distribution benefit in relation to
the first company if, at that time, there is no entity (other than the provider
referred to in that subsection) who is:
(a) either:
(i) the holder of an
eligible equity interest in the first company; or
(ii) an associate of an
entity who is the holder of an eligible equity interest in the first company;
and
(b) the holder of an eligible equity
interest in the recipient referred to in that subsection.
(13) If:
(a) apart from this subsection, a
particular eligible benefit that is covered by subsection (8) or (11) and
provided at a particular time is not a distribution benefit in relation to the
first company only because of subsection (9) or (12); and
(b) at a later time, there is an
entity (other than the provider referred to in subsection (8) or (11), as
the case may be) who is:
(i) either:
(A) the
holder of an eligible equity interest in the first company; or
(B) an
associate of an entity who is the holder of an eligible equity interest in the
first company; and
(ii) the holder of an
eligible equity interest in the recipient referred to in whichever of subsections (8)
and (11) is applicable; and
(ba) if the eligible benefit consists
of the acquisition of a share or unit—at that later time, the share or unit has
not been redeemed or bought back by the recipient mentioned in subsection (8)
for a consideration equal to or greater than the arm’s length value of the
share or unit;
the following provisions have effect:
(c) this section has effect as if subsection (9)
or (12), as the case requires, had never applied in relation to that eligible
benefit;
(d) section 170 does not prevent
the amendment of an assessment at any time for the purposes of giving effect to
this subsection.
(14) If:
(a) apart from this subsection, a
particular eligible benefit (in this subsection called the first eligible
benefit) that is covered by subsection (8) or (11) and provided at
a particular time is not a distribution benefit in relation to the first
company only because of subsection (9) or (12); and
(b) the recipient referred to in whichever
of subsections (8) and (11) is applicable provides an eligible benefit (in
this subsection called the second eligible benefit) to:
(i) the first company; or
(ii) the provider referred
to in whichever of those subsections is applicable; or
(iii) an associated entity
in relation to:
(A) the
first company; or
(B) that
provider; and
(c) the provision of the first
eligible benefit facilitated, directly or indirectly, the provision of the
second eligible benefit; and
(ca) if the second eligible benefit is
covered by subsection (8) or (11):
(i) the second eligible
benefit is provided on or after 13 September 1990; or
(ii) both:
(A) the
second eligible benefit was provided before 13 September 1990; and
(B) the
Commissioner is of the opinion that the provision of the second eligible
benefit had, or would be likely to have, the effect of enabling any taxpayer to
avoid tax;
the following provisions have effect:
(d) this section has effect as if subsection (9)
or (12), as the case requires, had never applied in relation to the first
eligible benefit;
(e) section 170 does not prevent
the amendment of an assessment at any time for the purposes of giving effect to
this subsection.
(15) In determining whether a company has
profits at a particular time, it is to be assumed that the accounts of the
company had been drawn up immediately before that time.
(16) For the purposes of this section, where:
(a) the first company has profits (in
this subsection called the original profits) immediately before a
distribution time for a distribution benefit in relation to the first company;
and
(b) by virtue of subsection (1),
an amount (in this subsection called the original assessable amount)
is included in the assessable income of a taxpayer (in this subsection called
the original taxpayer) of a year of income (in this subsection
called the original year of income) under section 44 in
respect of the distribution payment in relation to the distribution time; and
(c) any of the following subparagraphs
applies:
(i) the original taxpayer
is:
(A) a
resident at any time during the original year of income; and
(B) a
company or a natural person (other than a company or a natural person in the
capacity of a trustee);
(ii) the original taxpayer
is the trustee of a corporate unit trust in relation to the original year of
income;
(iii) the original taxpayer
is the trustee of a public trading trust in relation to the original year of
income;
(iv) the original taxpayer
is the trustee of a complying superannuation fund, a non‑complying
superannuation fund, a complying approved deposit fund, a non‑complying
approved deposit fund or a pooled superannuation trust in relation to the
original year of income;
(v) the original taxpayer
is the trustee of a resident trust estate (within the meaning of Division 6)
in relation to the year of income who is liable to be assessed and pay tax
under section 99 or 99A in respect of a part of the net income of the
trust estate;
then, in determining the profits that the first company
has at a later time, no account is to be taken of so much of the original
profits as is equal to the original assessable amount.
(17) For the purposes of this section, where:
(a) the first company has profits (in
this subsection called the original profits) immediately before a
distribution time for a distribution benefit in relation to the first company;
and
(b) by virtue of subsection (1),
an amount (in this subsection called the original assessable amount)
is included in the assessable income of a taxpayer (in this subsection called
the original taxpayer) of a year of income (in this subsection
called the original year of income) under section 44 in
respect of the distribution payment in relation to the distribution time; and
(c) all of the following conditions are
satisfied:
(i) the original taxpayer
is the trustee of a trust estate who is liable to be assessed and pay tax under
section 98 in respect of a share in the net income of the trust estate of
the original year of income;
(ii) the beneficiary who
was entitled to that share was a resident at any time during the original year
of income;
(iii) the whole or a part
(which whole or part is in this subsection called the beneficiary’s
portion of the original assessable amount) of the share of the net
income is attributable to the original assessable amount;
then, in determining the profits that the first company
has at a later time, no account is to be taken of so much of the original
profits as is equal to the beneficiary’s portion of the original assessable amount.
(18) For the purposes of this section, where:
(a) the first company has profits (in
this subsection called the original profits) immediately before a
distribution time for a distribution benefit in relation to the first company;
and
(b) by virtue of subsection (1),
an amount (in this subsection called the original assessable amount)
is included in the assessable income of a taxpayer (in this subsection called
the original taxpayer) of a year of income (in this subsection
called the original year of income) under section 44 in
respect of the distribution payment in relation to the distribution time; and
(c) the original taxpayer is the
trustee of a trust estate or a partnership; and
(d) the following conditions are
satisfied in relation to another taxpayer (in this subsection called the
actual taxpayer):
(i) an amount is included
in the assessable income of the actual taxpayer of a year of income (in this
subsection called the assessment year of income) under subsection
92(1) or section 97 or 100;
(ii) the actual taxpayer
is:
(A) a
resident at any time during the assessment year of income, being a company or a
natural person (other than a company or a natural person in the capacity of a
trustee); or
(B) the
trustee of a corporate unit trust in relation to the assessment year of income;
or
(C) the
trustee of a public trading trust in relation to the assessment year of income;
or
(D) the
trustee of a complying superannuation fund, a non‑complying
superannuation fund, a complying approved deposit fund, a non‑complying
approved deposit fund or a pooled superannuation trust in relation to the
assessment year of income; or
(E) the
trustee of a trust estate who is liable to be assessed and pay tax under
section 98 in respect of a share in the net income of a trust estate; or
(F) the
trustee of a trust estate who is liable to be assessed and pay tax under
section 99 or 99A in respect of a part of the net income of a trust
estate; or
(G) the
trustee of a trust estate where trustee beneficiary non‑disclosure tax is
payable under Division 6D on the whole or part of the net income of the
trust estate;
(iii) if sub-subparagraph (ii)(A),
(B), (C) or (D) applies—the whole or a part of the amount so included in the
actual taxpayer’s assessable income (which whole or part is in this subsection
called the actual taxpayer’s portion of the original assessable amount)
is attributable (either directly or indirectly through one or more interposed
partnerships or trusts) to the original assessable amount;
(iv) if sub-subparagraph (ii)(E)
applies:
(A) the
beneficiary who was entitled to the share concerned was a resident at any time
during the assessment year of income; and
(B) the
whole or a part (which whole or part is in this subsection also called the actual
taxpayer’s portion of the original assessable amount) of the share of
the net income is attributable (either directly or indirectly through one or
more interposed partnerships or trusts) to the original assessable amount;
(v) if sub-subparagraph (ii)(F)
applies:
(A) the
trust estate was a resident trust estate (within the meaning of Division 6)
in relation to the assessment year of income; and
(B) the
whole or a part (which whole or part is in this subsection also called the actual
taxpayer’s portion of the original assessable amount) of the part of
the net income is attributable (either directly or indirectly through one or
more interposed partnerships or trusts) to the original assessable amount;
(vi) if sub-subparagraph (ii)(G)
applies:
(A) the
trust estate was a resident trust estate (within the meaning of Division 6)
in relation to the assessment year of income; and
(B) the
whole or a part (which whole or part is in this subsection also called the actual
taxpayer’s portion of the original assessable amount) of the whole or
the part of the share of the net income is attributable (either directly or
indirectly through one or more interposed partnerships or trusts) to the
original assessable amount;
then, in determining the profits that the first company has
at a later time, no account is to be taken of so much of the original profits
as is equal to the actual taxpayer’s portion of the original assessable amount.
(18A) An assessment may be made of a taxpayer on
the assumption that subsection (2) will not be applicable in relation to a
particular distribution payment made during a year of income of the taxpayer.
(18B) Where:
(a) the assessment mentioned in subsection (18A)
is made; and
(b) after the making of the
assessment, the Commissioner becomes aware that subsection (2) was
applicable in relation to the distribution payment concerned;
then, in spite of anything in section 170, the
Commissioner may amend the assessment at any time for the purposes of ensuring
that the assessment is made as if subsection (18A) of this section were
disregarded.
(19) The provisions of section 102AAJ
apply for the purposes of this section in like manner as they apply for the
purposes of Division 6AAA.
(20) For the purposes of this section, the
question whether a company is a resident of an unlisted country is to be
determined in the same manner in which that question is determined for the
purposes of Part X.
(21) In this
section:
arm’s length value, in relation to the
redemption or buy‑back of a share in a company or a unit in a unit trust,
means the amount that the company or trustee could reasonably be expected to
have been required to pay to obtain the redemption or buy‑back of the
share or unit under a transaction where the parties to the transaction are
dealing with each other at arm’s length in relation to the transaction.
arrangement
means:
(a) any agreement, arrangement,
understanding, promise or undertaking, whether express or implied and whether
or not enforceable, or intended to be enforceable, by legal proceedings; and
(b) any scheme, plan, proposal,
action, course of action or course of conduct, whether there are 2 or more
parties or only one party involved.
associate has the same meaning as in Part X.
associated entity, in relation to a company,
means either of the following entities:
(a) a shareholder in the company;
(b) an entity who is an associate of a
shareholder in the company.
CFC has the same meaning as in Part X.
distribution benefit has the meaning given by
subsection (3) of this section.
eligible equity interest:
(a) in relation to a company, means
any of the following:
(i) a share, or an
interest in a share, in the company;
(ii) a right to acquire a
share, or an interest in a share, in the company;
(iii) an option to acquire a
share, or an interest in a share, in the company; or
(b) in relation to a unit trust, means
any of the following:
(i) a unit, or an interest
in a unit, in the unit trust;
(ii) a right to acquire a
unit, or an interest in a unit, in the unit trust;
(iii) an option to acquire a
unit, or an interest in a unit, in the unit trust; or
entity has the same meaning as in Part X.
loan includes:
(a) an advance of money; and
(b) the provision of credit or any
other form of financial accommodation; and
(c) the payment of an amount for, on
account of, on behalf or at the request of an entity where there is an
obligation (whether expressed or implied) to repay the amount; and
(d) a transaction (whatever its terms
or form) which in substance effects a loan of money.
property has the same meaning as in Division 6AAA.
services has the same meaning as in Division 6AAA.
statutory accounting period has the same
meaning as in Part X.
transfer has the same meaning as in Division 6AAA.
Division 3—Deductions
Subdivision A—General
51AAA
Deductions not allowable in certain circumstances
(1) Where:
(a) an amount is included in the
assessable income of a taxpayer of a year of income by section 102‑5
of the Income Tax Assessment Act 1997 (about net capital gains) or
subsection 124ZZB(1) of this Act (about notional capital gains of PDFs);
(b) a deduction would, but for this
section, be allowable under a provision listed in the table in subsection (2)
to the taxpayer; and
(c) if the amount had not been
included in the assessable income the deduction would be not be allowable;
the deduction is not allowable.
(2) The table
lists provisions allowing deductions that are affected by subsection (1).
Provisions of the Income Tax Assessment Act 1997 are identified in
normal text. The other provisions, in bold, are provisions of the Income
Tax Assessment Act 1936.
|
Deduction provisions
affected by net capital gains limit
|
|
Item
|
Provision
|
Description
|
|
1
|
Subdivision A of Division 3 of Part III
|
General
|
|
2
|
section 8‑1
|
General deductions
|
|
3
|
Division 25
|
Some expenses you can deduct
|
|
4
|
Division 30
|
Gifts or contributions
|
|
5
|
Division 34
|
Non‑compulsory uniforms
|
|
6
|
Division 36
|
Tax losses of earlier income years
|
|
7
|
Subdivision 40‑F
|
Facilities to conserve or convey water
|
|
8
|
Subdivision 40‑F
|
Establishing grapevines
|
|
9
|
Subdivision 40‑G
|
Landcare operations
|
|
10
|
Subdivision 40‑G
|
Mains electricity supply
|
|
11
|
Subdivision 40‑G
|
Telephone lines
|
|
12
|
Division 165
|
Income tax consequences of changing ownership or control
of a company
|
|
13
|
Subdivision 170‑A
|
Transfer of tax losses within
wholly‑owned groups of companies
|
|
14
|
Division 230
|
Financial arrangements
|
51AD
Deductions not allowable in respect of property used under certain leveraged
arrangements
(1) In this
section:
arrangement includes:
(a) any agreement, arrangement, understanding,
promise or undertaking, whether express or implied, and whether or not
enforceable, or intended to be enforceable, by legal proceedings; and
(b) any scheme, plan, proposal,
action, course of action or course of conduct, whether unilateral or otherwise.
associate has the same meaning in relation to
a person as that expression has in relation to a person in section 318.
construction includes manufacture.
control means effectively control.
goods includes whatever is capable of being
owned or used.
hire‑purchase agreement means a hire
purchase agreement to which Division 240 of the Income Tax Assessment
Act 1997 applies.
lease, in relation to property, includes:
(a) any arrangement under which a
right to use the property is granted by the owner to another person; and
(b) any arrangement under which a
right to use the property, being a right derived directly or indirectly from a
right referred to in paragraph (a), is granted by a person to another
person;
but does not include a hire‑purchase agreement.
owner, in relation to property, includes a
person who has taken, and holds, the property on hire under a hire‑purchase
agreement.
person includes a person in the capacity of a
trustee.
prescribed time means one o’clock in the afternoon, by standard time in the Australian Capital Territory, on 24 June 1982.
Note: This section applies to deductions under
Division 40 (Capital allowances) and Division 43 (Capital works) of
the Income Tax Assessment Act 1997 as if you were the owner of an asset
you hold (under that Division) instead of any other person: see section 40‑135
of that Act.
(1A) This section does not apply to property
that is put to a tax preferred use (within the meaning of the Income Tax
Assessment Act 1997) if the tax preferred use:
(a) starts on or after 1 July 2007; and
(b) does not occur under a legally
enforceable arrangement entered into before 1 July 2007.
(1B) This section does not apply to property
that is put to a tax preferred use (within the meaning of the Income Tax
Assessment Act 1997) if:
(a) the tax preferred use starts on or
after 1 July 2007; and
(b) the tax preferred use occurs under
a legally enforceable arrangement that was entered into before 1 July 2007; and
(c) an election is made under
item 71 of Schedule 1 to the Tax Laws Amendment (2007 Measures
No. 5) Act 2007 to have subitem 71(2) of that Schedule apply to the
property.
(1C) This section does not apply to property on
or after 1 July 2007 if:
(a) Division 16D applied to the
property immediately before 1 July 2007; or
(b) this section did not apply to the
property immediately before 1 July 2007 and Division 16D would apply
to the property on or after 1 July 2007 but for subsection 159GH(2).
For the purposes of applying paragraph (b), disregard
the operation of section 159GL.
(1D) Subparagraph (4)(a)(iii) and
sub-subparagraph (4)(b)(ii)(D) do not apply to property acquired by a
taxpayer if:
(a) the property is acquired by the
taxpayer on or after 1 July 2007; and
(b) the property is not acquired under
a legally enforceable arrangement entered into before 1 July 2007.
(2) In this section, a reference to the
acquisition of property by a person is a reference to:
(a) the person becoming the owner of
the property; or
(b) the construction of the property
for the person by another person or other persons on premises of the first‑mentioned
person.
(3) In this section, a reference to property
being held for use includes a reference to property that is installed ready for
use and held in reserve.
(3B) For the purpose of this section, disregard
an acquisition or disposal of property by way of the transfer of the property
for the provision or redemption of a security. Consequently this section
applies as if the person who was the owner of the property before the transfer continues
to be the owner after the transfer.
(4) Subject to subsections (1A), (1B),
(1C), (1D) and (8), this section applies, in relation to a taxpayer, to
property acquired or constructed by the taxpayer, being property acquired by
the taxpayer under a contract entered into after the prescribed time or
property constructed by the taxpayer, construction having commenced after that
time, if:
(a) at a time when the property is
owned by the taxpayer, a person (which person is in this section referred to as
the end‑user) holds rights as lessee under a lease of the
property, and:
(i) in a case where the
end‑user is not a resident of Australia—while the lease is in force, the
property is, or is to be, used by a person other than the taxpayer wholly or
principally outside Australia;
(ii) while the lease is in
force, the property is, or is to be, used by a person other than the taxpayer
otherwise than wholly and exclusively for the purpose of producing assessable
income; or
(iii) in a case where the
property was acquired by the taxpayer—the property was, prior to its
acquisition by the taxpayer, owned, and used or held for use, by the end‑user;
or
(b) in a case to which paragraph (a)
does not apply:
(i) at a time when the
property is owned by the taxpayer, the property is, or is to be, used (whether
or not by the taxpayer) wholly or partly in or in connection with the
production, supply, carriage, transmission or delivery of goods or the
provision of services; and
(ii) a person other than
the taxpayer (which person is in this section also referred to as the end‑user)
controls, will control, or is or will be able to control, directly or
indirectly, that use of the property, and:
(A) in a
case where the end‑user is not a resident of Australia—that use of the
property takes place, or is to take place, wholly or principally outside
Australia;
(B) in a
case where some or all of the goods are, or are to be, produced for the end‑user
or supplied, carried, transmitted or delivered to or for the end‑user, or
some or all of the services are, or are to be, provided to or for the end‑user—any
of those goods or services are, or are to be, used by the end‑user
otherwise than wholly and exclusively for the purpose of producing assessable
income;
(C) in
relation to the production, supply, carriage, transmission or delivery of
goods, or the provision of services, as mentioned in subparagraph (i), the
end‑user derives, or is to derive, no income or income that is wholly or
partly exempt from income tax; or
(D) in a
case where the property was acquired by the taxpayer—the property was, prior to
its acquisition by the taxpayer, owned, and used or held for use, by the end‑user.
(5) In subparagraph (4)(a)(iii) and sub-subparagraph (4)(b)(ii)(D),
a reference to the end‑user is a reference to the end‑user, any of
the end‑users (where there are 2 or more end‑users), any associate
of the end‑user or of any of those end‑users, or any 2 or more such
persons.
(6) For the purposes of subsection (4),
property shall be taken not to have been, prior to its acquisition by the
taxpayer, owned, and used or held for use, by a person if:
(a) the property was first used or
held for use by the person at a time within 6 months before the acquisition of
the property by the taxpayer; and
(b) at that time there was in
existence an arrangement that the property would be sold to another person and
leased by that person to the first‑mentioned person.
(7) Where:
(a) the end‑user consists of all
or any of the partners in a partnership; and
(b) a condition of paragraph (4)(a)
or (b), as the case may be, is satisfied in relation to any of the partners in
the partnership;
that condition shall be taken to be satisfied in relation
to all the partners in the partnership.
(8) This section does not apply to property,
in relation to a taxpayer, unless the whole or a predominant part of the cost
of the acquisition or construction, as the case may be, of the property by the
taxpayer is financed directly or indirectly by a debt or debts (which debt is,
or debts are, referred to in this subsection as the non‑recourse
debt) and the rights of the creditor or creditors as against the
taxpayer in the event of default in the repayment of principal or payment of
interest:
(a) are limited wholly or
predominantly to any or all of the following:
(i) rights (including the
right to moneys payable) in relation to any or all of the following:
(A) the
property or the use of the property;
(B) goods
produced, supplied, carried, transmitted or delivered, or services provided, by
means of the property;
(C) the loss
or disposal of the whole or a part of the property or of the taxpayer’s
interest in the property;
(ii) rights in respect of a
mortgage or other security over the property;
(iii) rights arising out of
any arrangement relating to the financial obligations of the end‑user of
the property towards the taxpayer, being financial obligations in relation to
the property;
(b) are in the opinion of the
Commissioner capable of being so limited, having regard to either or both of
the following:
(i) the assets of the
taxpayer;
(ii) any arrangement to
which the taxpayer is a party; or
(c) where paragraphs (a) and (b)
do not apply—are limited by reason that not all of the assets of the taxpayer
(not being assets that are security for debts of the taxpayer other than the
non‑recourse debt) would be available for the purpose of the discharge of
the whole of the non‑recourse debt (including the payment of interest) in
the event of any action or actions by the creditor or creditors against the
taxpayer arising out of that debt.
(9) Where:
(a) property
has been financed by a debt or debts as mentioned in subsection (8); and
(b) the rights of the creditor or
creditors as against the taxpayer are, or are capable of being, limited as
mentioned in that subsection;
the Commissioner may treat those rights as not being, or
capable of being, so limited if he is of the opinion, having regard to the
circumstances in which the debt was, or debts were, incurred and any other
matters that he thinks relevant, that it would be reasonable to do so.
(10) Subject to subsections (11), (12),
(13) and (15), where this section has applied to property, in relation to a
taxpayer, at any time, the taxpayer shall be deemed not to have occupied or
used the property, or held the property for use, at that time, for the purpose
of producing assessable income or in carrying on a business for that purpose.
(11) Where this section has applied to
property, in relation to a taxpayer, at any time during a year of income by
reason of subparagraph (4)(a)(ii) or sub-subparagraph (4)(b)(ii)(B),
and for any part of that time the end‑user held, occupied or used the
property referred to in that subparagraph, or held it for use, or used any
goods or services referred to in that sub‑subparagraph, as the case may
be, partly for the purpose of producing assessable income, the taxpayer shall
be deemed, for the whole of the time during the year of income when this
section applied to the property, to have held, occupied or used the property, or
held it for use, for the purpose of producing assessable income, or in carrying
on a business for that purpose, to the extent that the Commissioner considers
appropriate.
(12) Where this section has applied to
property, in relation to a taxpayer, at any time during a year of income by
reason of sub-subparagraph (4)(b)(ii)(C), and for any part of that time
the end‑user derived assessable income in relation to the production,
supply, carriage, transmission or delivery of goods, or the provision of
services, as mentioned in subparagraph (4)(b)(i), the taxpayer shall be
deemed, for the whole of the time during the year of income when this section
applied to the property, to have held, occupied or used the property, or held
it for use, for the purpose of producing assessable income, or in carrying on a
business for that purpose, to the extent that the Commissioner considers
appropriate.
(13) Where:
(a) this section has applied to
property, in relation to a taxpayer, at any time during a year of income by
reason of subparagraph (4)(a)(ii) or sub-subparagraph (4)(b)(ii)(B)
or (C);
(b) the end‑user referred to in
that subparagraph or sub‑subparagraph, as the case may be, consisted of
all or any of the partners in a partnership; and
(c) for any part of that time one or
more of the partners in the partnership was a person in respect of whom, but
for the operation of subsection (7), that subparagraph or sub‑subparagraph,
as the case may be, would not have applied;
the taxpayer shall be deemed, for the whole of the time
during the year of income when this section applied to the property, to have
held, occupied or used the property, or held it for use, for the purpose of
producing assessable income, or in carrying on a business for that purpose, to
the extent that the Commissioner considers appropriate.
(14) In considering, for the purposes of subsection (13),
the extent to which the taxpayer shall be deemed to have held, occupied or used
property, or held if for use, for the purpose of producing assessable income,
or in carrying on a business for that purpose, the Commissioner shall have
regard:
(a) to the interest or interests of
the partner or partners referred to in paragraph (13)(c) in the net
income, or the partnership loss, of the partnership of the year of income
corresponding to the year of income referred to in paragraph (13)(a);
(b) the extent to which, for any part
of the time referred to in paragraph (13)(a), a partner or partners other
than the partner or partners referred to in paragraph (13)(c) held, occupied
or used the property, or held it for use, or used the goods or services
referred to in sub-subparagraph (4)(b)(ii)(B), as the case may be, for the
purpose of producing assessable income; and
(c) the extent to which, for any part
of the time referred to in paragraph (13)(a), a partner or partners other
than the partner or partners referred to in paragraph (13)(c) derived
assessable income in relation to the production, supply, carriage, transmission
or delivery of goods, or the provision of services, as mentioned in subparagraph (4)(b)(i).
(15) Notwithstanding anything contained in subsections (10),
(11) and (13), at any time when this section applies to property by reason of subparagraph (4)(a)(ii),
the property shall be deemed not to be held, occupied or used, or held for use,
by the taxpayer for the purpose of producing assessable income, or in carrying
on a business for that purpose, if, at that time:
(a) 2 or more end‑users hold
rights as lessees under the lease of the property;
(b) one or more of the end‑users
(which end‑user is, or end‑users are, referred to in this
subsection as the exempt end‑user) is a company, or are
companies, the income of which is ordinarily exempt from income tax;
(c) the property is, or is to be, used
wholly or principally in or in connection with the conduct of operations or
transactions of a kind that the exempt end‑user ordinarily engages in;
(d) the exempt end‑user
controls, will control, or is or will be able to control, directly or
indirectly, that use of the property; and
(e) in relation to those operations or
transactions, the exempt end‑user derives, or is to derive, no income or
income that is exempt from income tax.
(16) Where a taxpayer has incurred expenditure
for repairs to property to which this section applies or has applied in
relation to the taxpayer and, but for this section, a deduction would be
allowable under section 25‑10 (Repairs) of the Income Tax
Assessment Act 1997 in respect of that expenditure, so much of the
expenditure as the Commissioner considers appropriate shall be deemed not to be
allowable, having regard to:
(a) the period for which the taxpayer
owned the property before the repairs were commenced and any part of that
period during which this section applies or applied to the property in relation
to the taxpayer; and
(b) in a case to which subsection (11),
(12) or (13) of this section applies or applied—the extent to which, for the
time during the part of the period referred to in paragraph (a), the
taxpayer was deemed to have held, occupied or used the property, or held it for
use, for the purpose of producing assessable income, or in carrying on a
business for that purpose.
(17) Where a taxpayer has incurred expenditure
in borrowing money to finance the acquisition or construction of property to
which this section applies or has applied in relation to the taxpayer and a
deduction has been allowed, or would but for this section be allowable, under
section 25‑25 (Borrowing expenses) of the Income Tax Assessment
Act 1997 in relation to that expenditure, so much of the deduction as the
Commissioner considers appropriate shall be deemed not to have been, or not to
be, allowable, as the case may be, having regard to:
(a) the period for which the money was
borrowed or, by the operation of subsection 25‑25(6) of that Act, is
deemed to have been borrowed and any part of that period during which this
section applies, applied or, in the opinion of the Commissioner, will apply to
the property; and
(b) in a case to which subsection (11),
(12), or (13) of this section applies or applied—the extent to which, for the
time during the part of the period referred to in paragraph (a), the
taxpayer is, or in the opinion of the Commissioner will be, deemed to have
held, occupied or used the property, or held it for use, for the purpose of
producing assessable income, or in carrying on a business for that purpose.
(18) Where a taxpayer has incurred expenditure
for the preparation, registration and stamping of a lease, or of an assignment
or surrender of a lease, of property to which this section applies or has
applied in relation to the taxpayer and a deduction has been allowed, or would
but for this section be allowable, under section 25‑20 (Lease
document expenses) of the Income Tax Assessment Act 1997 in respect of
that expenditure, so much of the deduction as the Commissioner considers
appropriate shall be deemed not to have been, or not to be, allowable, as the
case may be, having regard to:
(a) the period of the lease and any
part of that period during which this section applies, applied or, in the
opinion of the Commissioner, will apply to the property; and
(b) in a case to which subsection (11),
(12) or (13) of this section applies or applied—the extent to which, for the
time during the part of the period mentioned in paragraph (a), the
taxpayer is, or in the opinion of the Commissioner will be, deemed to have
held, occupied or used the property, or held it for use, for the purpose of
producing assessable income, or in carrying on a business for that purpose.
(19) Where:
(a) the individual interest of a
taxpayer in the net income of a partnership has been or is to be included in
the assessable income of the taxpayer of a year of income (in this subsection
referred to as the relevant year of income), or the individual
interest of a taxpayer in a partnership loss has been allowed or is allowable
as a deduction from the assessable income of the taxpayer of a year of income
(in this subsection also referred to as the relevant year of income);
(b) a deduction was taken into account
in calculating that net income or partnership loss;
(c) the deduction or a part of the
deduction (which deduction or part of the deduction, as the case may be, is
referred to in this subsection as the relevant deduction) would
not have been taken into account for the purpose of that calculation if this
section applied in relation to particular property acquired or constructed by
the partnership;
(d) this section does not apply in
relation to the property by reason only that the property was acquired by the
partnership under a contract entered into at or before the prescribed time or
was constructed by the partnership, construction having commenced at or before
that time; and
(e) the taxpayer became a partner in
the partnership under a contract entered into by the taxpayer after the
prescribed time;
there shall be included in the assessable income of the
taxpayer of the relevant year of income an amount that bears to the amount of
the relevant deduction the same proportion as the individual interest of the
taxpayer in that net income bears to that net income or, as the case requires,
as the individual interest of the taxpayer in that partnership loss bears to
that partnership loss.
(20) Where:
(a) the individual interest of a
taxpayer in the net income of a partnership has been or is to be included in
the assessable income of the taxpayer of a year of income (in this subsection
referred to as the relevant year of income), or the individual
interest of a taxpayer in a partnership loss has been allowed or is allowable
as a deduction from the assessable income of the taxpayer of a year of income
(in this subsection also referred to as the relevant year of income);
(b) a deduction was taken into account
in calculating that net income or partnership loss;
(c) the deduction or a part of the
deduction (which deduction or part of the deduction, as the case may be, is
referred to in this subsection as the relevant deduction) would
not have been taken into account for the purpose of that calculation if this
section applied in relation to particular property acquired or constructed by
the partnership;
(d) this section does not apply in
relation to the property by reason only that the property was acquired by the
partnership under a contract entered into at or before the prescribed time or
was constructed by the partnership, construction having commenced at or before
that time;
(e) the taxpayer became a partner in
the partnership under a contract entered into by the taxpayer before the prescribed
time; and
(f) after the prescribed time, the
taxpayer made or agreed to make a contribution or contributions (which
contribution is or contributions are in this subsection referred to as the additional
contribution) to the capital of the partnership in addition to any
contribution or contributions to the capital of the partnership that, under a
contract or contracts entered into at or before that time, he had made or
agreed to make; and
(g) by reason of making or agreeing to
make the additional contribution, the individual interest of the taxpayer in
that net income or partnership loss, being that individual interest expressed
as a fraction of the aggregate of the individual interests of the partners in
that net income or partnership loss, is greater than it would otherwise have
been;
there shall be included in the assessable income of the
taxpayer of the relevant year of income an amount ascertained in accordance
with the formula A (B – C), where:
A is the amount of the relevant deduction.
B is the individual interest of the taxpayer
in that net income or partnership loss, being that individual interest
expressed as a fraction of the aggregate of the individual interests of the
partners in that net income or partnership loss; and
C is the fraction that would be B
if another partner, and not the taxpayer, had made or agreed to make the
additional contribution.
(21) For the purposes of determining if this
section applies to property, the income of a prescribed excluded STB (within
the meaning of Division 1AB) is taken to be exempt.
51AEA
Meal entertainment—election under section 37AA of Fringe Benefits Tax
Assessment Act 1986 to use 50/50 split method
(1) If a meal entertainment fringe benefit
arises for a taxpayer for an FBT year and the taxpayer elects that Division 9A
of Part III of the Fringe Benefits Tax Assessment Act 1986 applies
to the taxpayer for the FBT year, and has not elected that Subdivision C of
that Division applies:
(a) for each expense incurred in the
FBT year by the taxpayer in providing meal entertainment, a deduction equal to
50% of that expense is allowable to the taxpayer for the year of income in
which it is incurred; and
(b) no other deduction under any
provision of this Act is allowable to the taxpayer for the expense.
(2) Expressions used in this section have the
same meaning as in the Fringe Benefits Tax Assessment Act 1986.
51AEB
Meal entertainment—election under section 37CA of Fringe Benefits Tax
Assessment Act 1986 to use the 12 week register method
(1) If a taxpayer has made an election under
section 37CA of the Fringe Benefits Tax Assessment Act 1986:
(a) for each expense incurred in the
FBT year by the taxpayer in providing meal entertainment, a deduction equal to
the amount worked out using the following formula is allowable to the taxpayer
for the year of income in which it is incurred:
Amount
of expense 5 Register percentage
(b) no other
deduction under any provision of this Act is allowable to the taxpayer for the
expense.
(2) The register
percentage is the percentage worked out using the formula:
where:
Total deductions for register meal entertainment
means the total of deductions that would (but for this section and section 51AEA)
be allowable to the taxpayer for expenses incurred by the taxpayer in providing
meal entertainment in the 12 week period covered by the register kept by the
employer under Subdivision C of Division 9A of the Fringe Benefits Tax
Assessment Act 1986.
Total register meal entertainment expenses
means the total of expenses incurred by the taxpayer in providing meal
entertainment during that 12 week period.
(3) Expressions used in this section have the
same meaning as in the Fringe Benefits Tax Assessment Act 1986.
51AEC
Entertainment facility—election under section 152B of Fringe Benefits
Tax Assessment Act 1986 to use 50/50 split method
(1) If a taxpayer has made an election under
section 152B of the Fringe Benefits Tax Assessment Act 1986:
(a) for each entertainment facility
leasing expense incurred in the FBT year by the taxpayer, a deduction equal to
50% of that expense is allowable to the taxpayer for the year of income in
which it is incurred; and
(b) no other deduction under any
provision of this Act is allowable to the taxpayer for entertainment facility
leasing expenses incurred in the FBT year.
(2) Expressions used in this section have the
same meaning as in the Fringe Benefits Tax Assessment Act 1986.
51AF
Car expenses incurred by employee
(1) Where:
(a) during a particular period, an
employer provides a car for the exclusive use of a person who is, or of persons
any of whom is, an employee of the employer or a relative of such an employee;
and
(b) at any time during that period,
the employee or a relative of the employee is entitled to use the car for
private purposes;
a deduction is not allowable under this Act in respect of
a car expense that relates to the car and:
(c) is incurred by the employee during
that period; or
(d) is incurred by the employee and is
wholly or partly attributable to that period.
(2) In this
section:
car has the meaning given by section 995‑1
of the Income Tax Assessment Act 1997, but does not include a car
covered by section 28‑165 of that Act.
car expense has the meaning given by section 28‑13
of the Income Tax Assessment Act 1997, but does not include a car
expense covered by section 28‑165 of that Act.
employee means a person who receives, or is
entitled to receive, work and income support related withholding payments and
benefits.
employer means a person who pays or is liable
to pay work and income support related withholding payments and benefits, and
includes:
(a) in the case of an unincorporate
body of persons other than a partnership—the manager or other principal officer
of that body; and
(b) in the case of a partnership—each
partner; and
(c) an Australian government agency as
defined in subsection 995‑1(1) of the Income Tax Assessment Act 1997.
51AGA
No deduction to employee for certain car parking expenses
No deduction
(1) A deduction is not allowable to an
employee under this Act in respect of expenditure to the extent to which it is
incurred in respect of the provision of car parking facilities for a car on a
day if:
(a) on that day, the employee has a
primary place of employment; and
(b) on that day, the car is parked for
one or more daylight periods exceeding 4 hours in total at, or in the vicinity
of, that primary place of employment; and
(c) the expenditure is in respect of
the provision of the parking facilities to which that parking relates; and
(d) on that day, the car was used in
connection with travel by the employee between:
(i) the place of residence
of the employee; and
(ii) that primary place of
employment; and
(e) the provision of parking
facilities for the car during the period or periods is not taken, under the
regulations, to be excluded from this section; and
(f) the day is on or after 1 July 1993.
Definitions
(2) In this
section:
car has the same meaning as in the Fringe
Benefits Tax Assessment Act 1986.
daylight period has the same meaning as in
the Fringe Benefits Tax Assessment Act 1986.
employee has the same meaning as in the
Fringe Benefits Tax Assessment Act 1986.
place of residence has the same meaning as
in the Fringe Benefits Tax Assessment Act 1986.
primary place of employment has the same
meaning as in the Fringe Benefits Tax Assessment Act 1986.
51AH
Deductions not allowable where expenses incurred by employee are reimbursed
(1) Where:
(a) either of the following
subparagraphs applies:
(i) a person makes a
payment in discharge, in whole or in part, of an obligation of the taxpayer to
pay an amount to a third person in respect of an amount of a loss or outgoing
incurred by the taxpayer;
(ii) a person reimburses
the taxpayer, in whole or in part, in respect of an amount of a loss or
outgoing incurred by the taxpayer;
(b) the payment or reimbursement, as
the case may be, constitutes:
(i) a fringe benefit; or
(ii) a benefit that, but
for paragraph (g) of the definition of fringe benefit in
subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986, would
be a fringe benefit; and
(c) in the case of a reimbursement—the
amount of the reimbursement is not included in the taxpayer’s assessable income
under section 15‑70 of the Income Tax Assessment Act 1997;
the amount of the deduction that, but for this section,
has been allowed or would be allowable in respect of the loss or outgoing shall
be:
(d) if it would be concluded that the
amount of the payment or reimbursement would have been the same even if the
loss or outgoing were not incurred in producing assessable income of the
taxpayer—calculated as if the loss or outgoing were reduced by the amount of
the payment or reimbursement; or
(e) in any other case—reduced by the
amount of the payment or reimbursement.
(2) Expressions (other than “fringe benefit”)
used in this section and in the Fringe Benefits Tax Assessment Act 1986 have
the same respective meanings in this section as they have in that Act.
(3) This section does not apply to deductions
under Division 40 of the Income Tax Assessment Act 1997 (about
capital allowances).
51AJ
Deductions not allowable for private component of contributions for fringe
benefits etc.
(1) Where:
(a) any of the following benefits is
provided in respect of the employment of an employee of an employer:
(i) an airline transport
benefit;
(ii) a board benefit;
(iii) a loan benefit;
(iv) a property benefit;
(v) a residual benefit;
(b) the benefit is:
(i) a fringe benefit; or
(ii) a benefit that, but
for paragraph (g) of the definition of fringe benefit in
subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986, would
be a fringe benefit;
(c) in the case of a loan benefit—the
taxpayer, being the recipient or the employee, incurs interest (in this section
called the recipients interest) in respect of the loan;
(d) in the case of a benefit other
than a loan benefit—the taxpayer, being the recipient or the employee, incurs
consideration (in this section called the recipients contribution)
to the provider or to the employer in respect of the provision of the
recipients transport, the recipients meal, the recipients property or the
recipients benefit, as the case may be;
(e) it would be concluded that, in
calculating the amount of the recipients interest, or the amount of the
recipients contribution, as the case may be, the provider or the employer made
an allowance for a particular level of application or use of the benefit in
producing assessable income of the taxpayer; and
(f) it would be concluded that the
amount of the recipients interest, or the amount of the recipients
contribution, as the case may be, would have been greater if it had been
calculated without making that allowance;
the following provisions have effect:
(g) if the extent of the application
or use of the benefit concerned in producing assessable income of the taxpayer
is equal to, or less than, that level—a deduction is not allowable to the
taxpayer under this Act in respect of the recipients interest or the recipients
contribution;
(h) if the extent of the application
or use of the benefit concerned in producing assessable income of the taxpayer
exceeds that level—the amount of the deduction that, but for this section, has
been allowed or would be allowable to the taxpayer under this Act in respect of
the recipients interest or the recipients contribution shall not exceed the
amount calculated in accordance with the formula:
D
– A
where:
D is the amount
of the deduction that, but for this section, would have been allowable to the
taxpayer under this Act in respect of the amount of the recipients interest or
the amount of the recipients contribution if it had been calculated without
making that allowance; and
A is the amount
of that allowance.
(2) Expressions (other than “recipients
contribution” and “fringe benefit”) used in this section and in the Fringe
Benefits Tax Assessment Act 1986 have the same respective meanings in this
section as they have in that Act.
51AK
Agreements for the provision of non‑deductible non‑cash business
benefits
(1) Subject to this section, where:
(a) under an agreement:
(i) a taxpayer incurs
expenditure; and
(ii) a non‑cash business
benefit is provided to the taxpayer or another person; and
(b) that benefit is not exclusively
for use or application for the purpose of producing assessable income of the
taxpayer;
the taxpayer shall be treated, for the purposes of this
Act, as if so much of the expenditure as does not exceed the arm’s length value
of the benefit had been incurred by the taxpayer exclusively in respect of that
benefit.
(2) This section does not apply so as to
treat particular expenditure, or the cost of particular property, to be a
particular amount for a particular purpose if there is another provision of
this Act that deems that expenditure, or the cost of that property, to be a
lesser amount for that purpose.
(3) A reference in this section to producing
assessable income includes a reference to:
(a) gaining assessable income; or
(b) carrying on a business for the
purpose of gaining or producing assessable income.
(4) Expressions used in this section and in
section 21A have the same respective meanings in this section as they have
in that section.
(5) In this section:
agreement means any agreement, arrangement or
understanding, whether formal or informal, whether express or implied and
whether or not enforceable, or intended to be enforceable, by legal proceedings.
expenditure includes a loss or outgoing.
52
Loss on property acquired for profit‑making
(1AA) This section
does not apply to a loss arising in the 1997‑98 year of income or a later
year of income from the carrying on or carrying out of a profit‑making
undertaking or scheme, even if the undertaking or scheme was entered into, or
began to be carried on or carried out, before the 1997‑98 year of income.
Note: Section 25‑40 (Loss from profit‑making
scheme) of the Income Tax Assessment Act 1997 deals with such a loss.
(1A) This section does not apply in respect of
the sale of property acquired on or after 20 September 1985.
(1) Any loss incurred by the taxpayer in the
year of income upon the sale of any property or from the carrying on or
carrying out of any undertaking or scheme, the profit (if any) from which sale,
undertaking or scheme would have been included in his assessable income, shall
be an allowable deduction:
Provided
that, in respect of property acquired by the taxpayer after the date of the
commencement of this proviso, no deduction shall be allowable under this
section (except where the Commissioner, being satisfied that the property was
acquired by the taxpayer for the purpose of profit‑making by sale or for
the carrying on or carrying out of any profit‑making undertaking or
scheme, otherwise directs) unless the taxpayer, not later than the date upon
which he lodges his first return under this Act after having acquired the
property, notifies the Commissioner that the property has been acquired by him
for the purpose of profit‑making by sale or for the carrying on or
carrying out of any profit‑making undertaking or scheme.
(2) Where:
(a) a taxpayer sells property (in this
subsection referred to as the relevant property) that is deemed
by subsection 25A(5) or (8) to have been acquired by the taxpayer for the
purpose of profit‑making by sale;
(b) the Commissioner is satisfied that
the relevant property has not been held or used by the taxpayer in a manner
inconsistent with such a purpose; and
(c) the Commissioner, having regard
to:
(i) the amount of the
consideration paid by the person who transferred the relevant property or, in a
case to which subsection 25A(8) applies, the property referred to in paragraph
25A(8)(b), to the taxpayer in respect of the purchase of the property so
transferred; and
(ii) such other matters as
the Commissioner considers relevant;
considers that it is appropriate
that a loss be deemed to be incurred by the taxpayer upon the sale of the
relevant property;
the taxpayer shall be deemed, for the purposes of this
section, to have incurred a loss upon the sale of the relevant property of such
amount as the Commissioner considers appropriate.
(3) Except as provided by subsection (2),
a deduction is not allowable to a taxpayer under this section in respect of a
loss incurred upon a sale of property to which paragraph (2)(a) applies.
(4) Where:
(a) a loss is incurred by a taxpayer
upon the sale of property (in this subsection referred to as the relevant
property); and
(b) the taxpayer is deemed to have
acquired the relevant property for the purpose of profit‑making by sale
by virtue of the application of subsection 25A(6) in accordance with subparagraph (b)(ii)
of that subsection;
the deduction that would, but for this subsection, be
allowable to the taxpayer under subsection (1) in respect of the loss
shall be reduced by such amount (if any) as the Commissioner considers
reasonable having regard to the extent to which the relevant property is
attributable to the interest in property that was acquired by the taxpayer for
the purpose of profit‑making by sale as mentioned in that subparagraph.
(5) A deduction is not allowable to a
taxpayer under subsection (1) in respect of a loss incurred by the
taxpayer upon the sale of property if:
(a) the sale is a transfer in the
prescribed manner by the taxpayer for the purposes of section 25A; or
(b) the property is deemed by
subsection 25A(2) to have been acquired by the taxpayer for the purposes of
profit‑making by sale and was not actually acquired by the taxpayer for
that purpose.
52A
Certain amounts disregarded in ascertaining taxable income
(1) Notwithstanding section 8‑1 of
the Income Tax Assessment Act 1997, losses or outgoings consisting of
expenditure incurred by a taxpayer in the purchase or acquisition, after 7 April
1978, of any prescribed property as trading stock of the taxpayer shall, if the
Commissioner considers that it would be unreasonable that a deduction be
allowable to the taxpayer in respect of the whole of those losses or outgoings,
be allowable as a deduction to the taxpayer to the extent only that the
Commissioner considers that it is reasonable in the circumstances that a
deduction be allowable to the taxpayer in respect of those losses or outgoings.
(2) Where:
(a) expenditure incurred by a taxpayer
in the purchase or acquisition, after 7 April 1978, of any prescribed
property that was purchased or acquired in the carrying on or carrying out of
any profit‑making undertaking or scheme would, but for this subsection,
be taken into account for the purpose of ascertaining whether any profit arose,
or any loss was incurred, from the carrying on or carrying out of the
undertaking or scheme and for the purpose of ascertaining the amount of any
such profit or loss; and
(b) the Commissioner considers that it
would be unreasonable that the whole of that expenditure be taken into account
for those purposes;
that expenditure shall be taken into account for those
purposes to the extent only that the Commissioner considers that it is
reasonable in the circumstances that the expenditure be taken into account for
those purposes.
(2A) Where:
(a) prescribed property that was
acquired by a taxpayer after 24 September 1978 and before the commencement
of this subsection or is acquired after the commencement of this subsection was
or is treated or used by the taxpayer as an asset of a business carried on by
the taxpayer;
(b) but for this subsection, a
deduction would be allowable to the taxpayer in respect of the value of that
property; and
(c) the Commissioner considers that it
would be unreasonable that a deduction be allowable to the taxpayer in respect
of the value of the property to the extent to which, but for this subsection, a
deduction would be allowable to the taxpayer in respect of the value of the
property;
a deduction shall be allowable to the taxpayer in respect
of the value of the property to the extent only that the Commissioner considers
that it is reasonable in the circumstances that a deduction be allowable to the
taxpayer in respect of that value.
(2B) Where:
(a) the value of any prescribed
property that:
(i) was acquired by a
taxpayer after 24 September 1978 and before the commencement of this
subsection or is acquired after the commencement of this subsection; and
(ii) was or is used by the
taxpayer in the carrying on or carrying out of any profit‑making
undertaking or scheme;
would, but for this subsection,
be taken into account for the purpose of ascertaining whether or not any profit
arose, or any loss was incurred, from the carrying on or the carrying out of
the undertaking or scheme and for the purpose of ascertaining the amount of any
such profit or loss; and
(b) the Commissioner considers that it
would be unreasonable that the value of the property be taken into account for
those purposes to the extent to which the value would, but for this subsection,
be taken into account for those purposes;
the value of the property shall be taken into account for
those purposes to the extent only that the Commissioner considers that it is
reasonable in the circumstances that that value be taken into account for those
purposes.
(3) In forming an opinion for the purposes of
subsection (1) or (2A) as to the extent to which it is reasonable that a
deduction be allowable to a taxpayer in respect of expenditure incurred in the
purchase or acquisition of prescribed property or in respect of the value of
prescribed property, as the case may be, or in forming an opinion for the
purposes of subsection (2) or (2B) as to the extent to which it is
reasonable that expenditure incurred by a taxpayer in the purchase or
acquisition of prescribed property should be taken into account for the
purposes referred to in subsection (2) or that the value of prescribed
property should be taken into account for the purposes referred to in subsection (2B),
as the case may be:
(a) if the taxpayer expended moneys in
purchasing or acquiring the prescribed property—the Commissioner shall have
regard to the circumstances in which, and the person or persons from whom, the
taxpayer obtained moneys:
(i) that were expended by
the taxpayer in purchasing or acquiring the prescribed property; or
(ii) that, in the opinion
of the Commissioner, were obtained by, or paid to, the taxpayer to enable the
taxpayer to expend moneys in purchasing or acquiring the prescribed property;
(b) if the taxpayer borrowed from
another person (in this paragraph referred to as the lender)
moneys that were expended by the taxpayer in purchasing or acquiring the prescribed
property or moneys that, in the opinion of the Commissioner, were obtained by,
or paid to, the taxpayer to enable the taxpayer to expend moneys in purchasing
or acquiring the prescribed property—the Commissioner shall have regard to:
(i) the circumstances in
which, and the terms and conditions on which, the taxpayer borrowed those
moneys from the lender; and
(ii) whether, in the
opinion of the Commissioner, the taxpayer and the lender were dealing with each
other at arm’s length in connexion with the borrowing of those moneys by the
taxpayer;
(c) if, either before or after the
purchase or acquisition of the prescribed property by the taxpayer, an
agreement or arrangement (whether or not enforceable by legal proceedings and
whether or not intended to be so enforceable) was entered into, or an
understanding was reached, as a result of which there has been, or there could
reasonably be expected to be, a substantial reduction in the value of the
prescribed property—the Commissioner shall have regard to that agreement,
arrangement or understanding;
(d) if the purchase or acquisition of
the prescribed property by the taxpayer arose out of, or was made in the course
of, a transaction, operation, undertaking, scheme or arrangement that was
entered into or carried out for the purpose, or for purposes that included the
purpose, of securing that a person who, if the transaction, operation,
undertaking, scheme or arrangement, had not been entered into or carried out,
would have been liable to pay income tax in respect of a year of income would
not be liable to pay income tax in respect of that year of income or would be
liable to pay less income tax in respect of that year of income than that
person would have been liable to pay if the transaction, operation, undertaking,
scheme or arrangement had not been entered into or carried out—the Commissioner
shall have regard to that transaction, operation, undertaking, scheme or
arrangement;
(e) if the purchase or acquisition of
the prescribed property by the taxpayer arose out of, or was made in the course
of, a transaction, operation, undertaking, scheme or arrangement that the
Commissioner is satisfied was by way of dividend stripping or was similar to a
transaction, operation, undertaking, scheme or arrangement by way of dividend
stripping—the Commissioner shall have regard to that transaction, operation,
undertaking, scheme or arrangement;
(f) if:
(i) the purchase or
acquisition of the prescribed property by the taxpayer arose out of, or was
made in the course of, a transaction, operation, undertaking, scheme or
arrangement under which, or in the course of which, money was to be paid, or
other property was to be transferred or made available by a person other than
the taxpayer, whether before or after the purchase or acquisition of the
prescribed property, to the taxpayer, to the taxpayer and a person or persons
other than the taxpayer or to a person or persons other than the taxpayer;
(ii) the Commissioner is
satisfied that the amount of money so to be paid, or the value of the property
so to be transferred or made available, as the case may be, was to be not less
than, or not substantially less than, the amount expended by the taxpayer in
the purchase or acquisition of the prescribed property;
the Commissioner shall have
regard to the fact that the purchase or acquisition of the prescribed property
by the taxpayer arose out of, or was made in the course of such a transaction,
operation, undertaking, scheme or arrangement;
(g) if the purchase or acquisition of
the prescribed property by the taxpayer arose out of, or was made in the course
of, a transaction, operation, undertaking, scheme or arrangement under which,
or in the course of which, other prescribed property was to be issued or
allotted by a company (whether to the taxpayer or any other person or persons)
and it could reasonably be expected that, as a result of the issue or allotment
of that other prescribed property, the value of the prescribed property
purchased or acquired by the taxpayer would be substantially reduced—the
Commissioner shall have regard to that transaction, operation, undertaking,
scheme or arrangement;
(h) if the purchase or acquisition of
the prescribed property by the taxpayer arose out of, or was made in the course
of, a transaction, operation, undertaking, scheme or arrangement under which,
or in the course of which, rights in respect of the prescribed property or in
respect of other prescribed property (whether that other prescribed property
had been issued or allotted before the time of the purchase or acquisition by
the taxpayer of the first‑mentioned prescribed property or was to be
issued or allotted at a later time) were to be withdrawn or varied and it could
reasonably be expected that, as a result of a withdrawal or variation of those
rights, the value of the prescribed property purchased or acquired by the
taxpayer would be substantially reduced—the Commissioner shall have regard to
that transaction, operation, undertaking, scheme or arrangement; and
(j) the Commissioner shall have
regard to any other matters that he considers relevant.
(4) In this section, prescribed
property means any chose in action.
(4A) In the preceding provisions of this
section, references to the value of any prescribed property shall, unless the
contrary intention appears, be read as including references to part of the
value of that prescribed property.
(5) For the purposes of this section:
(a) a person to whom prescribed
property is issued or allotted by a company shall be taken to have acquired that
prescribed property;
(b) a person upon whom prescribed
property devolves by reason of the death of a person shall be taken to have
acquired that prescribed property; and
(c) a person in whom prescribed
property vests by the operation of any trust or the exercise of any power under
a trust shall be taken to have acquired that prescribed property.
(6) The reference in paragraph (3)(b) to
terms and conditions shall be read as including a reference to implied terms
and conditions and to terms and conditions that are not enforceable by legal
proceedings whether or not they were intended to be so enforceable.
(7) Where, by virtue of the application of
the preceding provisions of this section, the amount (in this subsection
referred to as the relevant amount) of the deduction that is
allowable to a taxpayer in respect of losses or outgoings incurred by the
taxpayer in the purchase or acquisition of prescribed property is less than the
amount of those losses and outgoings, the cost of that prescribed property shall,
for the purposes of the application of Divisions 70 (Trading stock) and
385 (Primary production) of the Income Tax Assessment Act 1997 in
relation to that property in relation to the taxpayer, be taken to be an amount
that is the same as the relevant amount.
(8) References in this section to expenditure
incurred by a taxpayer in the purchase or acquisition of any prescribed
property shall, in the case of prescribed property being a share or stock in
the capital of a company, be read as including references to any payment made
or other consideration given by the taxpayer to the company in respect of the
prescribed property, whether as a payment of unpaid capital in respect of the
prescribed property or otherwise and whether on application for or allotment of
the prescribed property, to meet calls or otherwise.
(9) Subsection (8) applies to a non‑share
equity interest in the same way as it applies to a share.
63 Bad
debts
Where a debt in respect of the whole or
a part of a payment that has, or will, become liable to be made under a
qualifying security within the meaning of Division 16E is written off as a
bad debt by a taxpayer during a year of income, then, for the purposes of
paragraph 25‑35(1)(a) of
the Income Tax Assessment Act 1997, there is taken to have been included
in the taxpayer’s assessable income of a year of income so much of the debt as
equals the amount (if any) ascertained in accordance with the formula A – B,
where:
A is the amount (if any) or the sum of the
amounts (if any) included in the assessable income of the taxpayer of any year
or years of income under section 159GQ that is or are attributable to the
payment or to the part of the payment, as the case requires; and
B is the amount (if any) or the sum of the
amounts (if any) allowable as a deduction or deductions from the assessable
income of the taxpayer of any year or years of income under section 159GQ
that is or are attributable to the payment or to the part of the payment, as
the case requires.
63D
Bad debts etc. of money‑lenders not allowable deductions where
attributable to listed country or unlisted country branches
(1) Subject to section 63F, if:
(a) apart from this section and
section 63F, a deduction would be allowable to a taxpayer:
(i) under section 8‑1
or 25‑35 of the Income Tax Assessment Act 1997 in respect of the
writing off of a debt as bad; or
(ii) under section 63E
of this Act in respect of a debt/equity swap in relation to a debt; and
(b) the debt was created or acquired
in the ordinary course of a money‑lending business of the taxpayer who
carries on that business; and
(c) during any part or parts (the foreign
country branch period) of the period since the debt was so created or
acquired (the debt holding period), it is the case that, if
income had been derived by the taxpayer in respect of the debt, the income
would not, because of section 23AH of this Act, have been included in the
assessable income of the taxpayer;
then only a proportion of the deduction is allowable,
being the proportion calculated using the formula:
where:
debt holding period means the number of days
in the debt holding period.
eligible debt term
means:
(a) where
the debt was acquired from a person other than an associate, within the meaning
of section 318 of this Act—the number of days in the debt holding period;
or
(b) in any other case—the number of
days in the period beginning on the day on which the debt was created (whether
by the taxpayer or another person) and ending at the end of the day on which it
was written off.
foreign country branch period means the
number of days in the foreign country branch period.
(2) Where a debt that is written off, or in
respect of which there is a debt/equity swap (within the meaning of section 63E),
was acquired from another person, the creation, and any previous acquisition,
of the debt is to be disregarded for the purposes of applying subsection (1),
other than paragraph (b) of the definition of eligible debt term
in subsection (1).
(3) Where a part of a debt is written off as
bad, this section applies as if the part were an entire debt that is written
off as bad.
63E
Debt/equity swaps
Meaning of debt/equity swap
(1) For the purposes of this section, a debt/equity
swap occurs if:
(a) under an arrangement (defined in subsection (6)),
a taxpayer discharges, releases or otherwise extinguishes the whole or part of
a debt owed to the taxpayer in return for the issue by the debtor to the
taxpayer of shares (other than redeemable preference shares), or units, in the
debtor; and
(b) the debtor is:
(i) a company; or
(ii) a trading trust
(within the meaning of section 102N), or a public unit trust (within the
meaning of section 102P), in relation to the year of income in which the
units are issued; and
(c) the debt either:
(i) has been brought to
account by the taxpayer as assessable income of any year of income; or
(ii) is in respect of money
lent in the ordinary course of the business of the lending of money by the
taxpayer who carries on that business.
Meaning of equity value and swap loss
(2) For the purposes of this section:
(a) the equity value of
the shares or units is the greater of:
(i) their market value at
the time of their issue to the taxpayer; and
(ii) their value shown in
the accounts of the taxpayer as at the time of their issue to the taxpayer; and
(b) a swap loss occurs
if the amount of the whole or the part of the debt that is extinguished is
greater than the equity value of the shares or units.
Swap loss is deductible etc.
(3) If a debt/equity swap occurs:
(a) subject to section 63F, any
swap loss is allowable as a deduction from the taxpayer’s assessable income of
the year of income in which the shares or units are issued; and
(b) no amount is allowable as a
deduction from the assessable income of the taxpayer of any year of income
under section 8‑1 or 25‑35 of the Income Tax Assessment Act
1997 in respect of the writing off of the whole or part of the debt as bad
in connection with the debt/equity swap; and
(c) for the purposes of any
application of Subdivision 20‑A of the Income Tax Assessment Act
1997 in relation to the issue of the shares or units to the taxpayer, the
amount received in respect of the issue is taken to be the same as the equity
value of the shares or units.
Effect of debt/equity swap on later equity disposal
etc.
(4) If a debt/equity swap occurs and the
taxpayer later disposes of any of the shares or units or they are cancelled or
redeemed:
(a) except in accordance with paragraph (b),
no amount is included in, or allowable as a deduction from, the taxpayer’s
assessable income of any year of income under this Act in respect of the later
disposal, cancellation or redemption; and
(b) if the consideration received or
receivable by the taxpayer in respect of the disposal, cancellation or
redemption is different from the equity value of the shares or units:
(i) if the consideration
is greater—the difference is included in the taxpayer’s assessable income of
the year of income in which the disposal, cancellation or redemption occurs; or
(ii) if it is less—the
difference is allowable as a deduction from that assessable income.
Consideration of a nil amount
(5) For the purposes of subsection (4),
if no consideration is received or receivable by the taxpayer in respect of the
disposal, cancellation or redemption, then consideration of a nil amount is
taken to have been so received or receivable.
(5A) Subdivisions 165‑C, 166‑C
and 175‑C of the Income Tax Assessment Act 1997 apply to an
allowable deduction under this section in respect of the whole or part of a
debt that is extinguished, in the same way as they apply to a debt (or part of
a debt) that is written off as bad.
Meaning of arrangement
(6) In this section:
arrangement means any agreement, arrangement,
understanding, promise, undertaking or scheme, whether express or implied, and
whether or not enforceable, or intended to be enforceable, by legal
proceedings.
63F
Limit on deductions where debt write offs and debt/equity swaps occur
Situations where limit is to be applied
(1) If:
(a) apart from this section, a
deduction (the current deduction) would be allowable to a
taxpayer:
(i) under section 8‑1
or 25‑35 of the Income Tax Assessment Act 1997 in respect of the
writing off of the whole or part of a debt as bad; or
(ii) under section 63E
of this Act in respect of a debt/equity swap relating to the whole or part of a
debt; and
(b) a deduction (a previous
deduction) was allowed or allowable to the taxpayer under any of those
sections, under former section 51 of this Act or under section 63 in
respect of any number of occurrences of either or both of the following:
(i) a previous writing off
as bad of the whole or part of a debt (a previous debt) that was
the same as, or included, the debt mentioned in subparagraph (a)(i) or
(ii);
(ii) a previous debt/equity
swap relating to a part of a debt (a previous debt) that was the
same as, or included, the debt mentioned in subparagraph (a)(i) or (ii);
and
(c) the current deduction or at least
one previous deduction is a deduction allowable under section 63E of this
Act in respect of a debt/equity swap;
then the current deduction is only allowable to the extent
that it does not exceed the limit worked out under subsection (2).
Calculation of limit
(2) The limit is worked out as follows:
|
Step 1:
|
Take the amount
of the previous debt in respect of the earliest or only writing off or
debt/equity swap to which paragraph (1)(b) applies.
|
|
Step 2:
|
Reduce the
amount by the previous deduction in respect of that writing off or
debt/equity swap.
|
|
Step 3:
|
If one or more
of the following events occur after the writing off or debt/equity swap,
progressively reduce the balance of the amount in the way set out below and
in the order in which the events occur:
|
|
|
Event
|
How balance
reduced
|
|
|
A writing off or
debt/equity swap in respect of which there is a previous deduction.
|
Reduce the
balance by the amount of that previous deduction. If the reduced balance is
higher than the level of the debt owing after the event, further reduce the
balance to that lower level.
|
|
|
Any other event
(e.g. a repayment) that reduces the amount of debt owing, being an event
that occurs before the writing off or debt/equity swap in respect of the
current deduction.
|
If the balance
at the time of the event is higher than the level of the debt owing after
the event occurs, reduce the balance to that lower level
|
|
The limit is the resulting
balance.
|
63G
Bad debts etc. of trust not allowable in certain circumstances
If:
(a) a deduction is allowable from a
trust’s assessable income of any year of income:
(i) under former section 51
of this Act, under section 63 of this Act or under section 8‑1
or 25‑35 of the Income Tax Assessment Act 1997 in respect of the
writing off of the whole or part of a debt as bad; or
(ii) under subsection
63E(3) or (4) in respect of the extinguishment of the whole or part of a debt;
and
(b) the debt was incurred as well as
written off or extinguished on the last day of the year of income;
the deduction is not allowable.
Schedule 2F may also prevent a taxpayer deducting an
amount in respect of a debt in other circumstances.
65
Payments to associated persons and relatives
(1B) Where, by virtue of section 26‑35
(Reduction of deduction for amounts paid to related entities) of the Income
Tax Assessment Act 1997, an amount is not allowable as a deduction in
calculating in accordance with section 90 of this Act the net income, or a
partnership loss, of a partnership in which a company, being a private company
in relation to the year of income of the company to which the individual
interest of the company in the net income of the partnership or in the
partnership loss relates, is a partner:
(a) the company shall, for the
purposes of this Act other than Division 11A, be deemed to have paid, on
the last day of that year of income, a dividend of an amount ascertained in
accordance with subsection (1C); and
(b) subsection 26‑35(4) of the Income
Tax Assessment Act 1997 does not apply in relation to so much of the amount
that is not so allowable as a deduction as is equal to the amount of the
dividend that the company is to be so deemed to have paid.
(1C) For the purposes of subsection (1B),
the amount of the dividend that the company is to be deemed to have paid is:
(a) where the effect of the
disallowance of the deduction has been to increase the net income of the
partnership—an amount equal to the difference between the amount of the
individual interest of the company in the net income of the partnership and the
amount that would have been the individual interest of the company in the net
income of the partnership if the deduction had been allowed;
(b) where the effect of the
disallowance of the deduction has been to reduce the partnership loss—an amount
equal to the difference between the amount of the individual interest of the company
in the partnership loss and the amount that would have been the individual
interest of the company in the partnership loss if the deduction had been
allowed;
(c) where there is net income of the
partnership and the amount of the deduction that was disallowed is equal to
that net income—an amount equal to the individual interest of the company in
the net income of the partnership;
(d) where there is net income of the
partnership and, but for the disallowance of the deduction, there would have
been a partnership loss—an amount equal to the sum of the amount of the
individual interest of the company in the net income of the partnership and the
amount that would have been the individual interest of the company in the
partnership loss if the deduction had been allowed; and
(e) where there is no net income of
the partnership and, but for the disallowance of the deduction, there would
have been a partnership loss—an amount equal to the amount that would have been
the individual interest of the company in the partnership loss if the deduction
had been allowed.
70B
Deduction for loss on disposal or redemption of traditional securities
(1) Expressions used in this section that are
also used in section 26BB have the same meanings in this section as in
section 26BB.
(2) Where a taxpayer disposes of a
traditional security or a traditional security of a taxpayer is redeemed, the
amount of any loss on the disposal or redemption is allowable as a deduction
from the assessable income of the taxpayer of the year of income in which the
disposal or redemption takes place.
(2A) A deduction is not allowable under subsection (2)
for a loss on the disposal or redemption of traditional securities that are:
(a) segregated exempt assets (for the
purposes of the Income Tax Assessment Act 1997) of a life assurance
company; or
(b) segregated current pension assets
(as defined in the Income Tax Assessment Act 1997) of a complying
superannuation fund.
(2B) A deduction is not allowable under subsection (2)
for a loss on the disposal or redemption of a traditional security if:
(a) the disposal or redemption occurs
because the traditional security is converted into ordinary shares in a company
that is:
(i) the issuer of the
traditional security; or
(ii) a connected entity of
the issuer of the traditional security; and
(b) the traditional security was
issued on the basis that it will or may convert into ordinary shares in:
(i) the issuer of the
traditional security; or
(ii) the connected entity.
(2C) A deduction is not allowable under subsection (2)
for a loss on the disposal or redemption of a traditional security if:
(a) the disposal or redemption is in
exchange for ordinary shares in a company that is neither:
(i) the issuer of the
traditional security; nor
(ii) a connected entity of
the issuer of the traditional security; and
(b) in
the case of a disposal—the disposal is to:
(i) the issuer of the
traditional security; or
(ii) a connected entity of
the issuer of the traditional security; and
(c) the traditional security was
issued on the basis that it will or may be:
(i) disposed of to the
issuer of the traditional security or to the connected entity; or
(ii) redeemed;
in exchange for ordinary shares
in the company.
(3) Where the Commissioner, having regard to
any connection between the parties to the transaction by which the taxpayer
disposed of the traditional security or by which it was redeemed, or by which
the taxpayer acquired the traditional security, is satisfied that the parties
were not dealing with each other at arm’s length in relation to the
transaction, then, for the purposes of determining under subsection (2)
the amount of any loss on the disposal or redemption, the consideration for the
transaction shall be taken to be:
(a) the amount that might reasonably
be expected for the transaction if the parties were independent parties dealing
at arm’s length with each other; or
(b) where, for any reason it is not
possible or practicable for the Commissioner to ascertain that amount—such
amount as the Commissioner determines.
(4) If:
(a) a taxpayer disposes of a
traditional security or a traditional security of a taxpayer is redeemed; and
(b) there is a loss on the disposal or
redemption; and
(c) in the case of a disposal or
redemption of a marketable security:
(i) the taxpayer did not
acquire the security in the ordinary course of trading on a securities market;
and
(ii) at the time the
taxpayer acquired the security, it was not open to the taxpayer to acquire an
identical security in the ordinary course of trading on a securities market;
and
(d) in the case of a disposal of a
marketable security—the disposal did not take place in the ordinary course of
trading on a securities market; and
(e) having regard to:
(i) the financial position
of the issuer of the security; and
(ii) perceptions of the
financial position of the issuer of the security; and
(iii) other relevant
matters;
it would be concluded that the
disposal or redemption took place for the reason, or for reasons that included
the reason, that there was an apprehension or belief that the issuer was, or
would be likely to be, unable or unwilling to discharge all liability to pay
amounts under the security;
a deduction is not allowable to the taxpayer under this
section in respect of so much of the amount of the loss as is a loss of capital
or a loss of a capital nature.
(5) A reference in this section to the
disposal by a taxpayer of a security, or to the redemption of a security of a
taxpayer, does not include a reference to the waiver or release by the taxpayer
of:
(a) the whole or a part of the debt
the subject of the security; or
(b) any other right of the taxpayer
under the security.
(6) Subsection (5) does not, by
implication, affect the meaning of an expression used in:
(a) a provision of this Act other than
this section; or
(b) any other law of the Commonwealth.
(7) In this section:
issuer, in relation to a security at a
particular time, means the person who, if the amount or amounts payable under
the security were due and payable at that time, would be liable to pay the
amount or amounts.
marketable security means a traditional
security that is covered by paragraph (a) of the definition of
security in subsection 159GP(1).
securities market means a market, exchange or
other place at which, or a facility by means of which, offers to sell, purchase
or exchange marketable securities are regularly made or accepted.
73A
Expenditure on scientific research
(1A) This section has effect subject to Division 245
of Schedule 2C.
(1) The following payments made, and
expenditure incurred, during the year of income (other than any amount which is
allowable as a deduction under any other section of this Act) by a person
carrying on a business for the purpose of gaining or producing assessable income
shall be allowable deductions:
(a) Payments to:
(i) an approved research
institute for scientific research related to that business; or
(ii) an approved research
institute, the object of which is the undertaking of scientific research
related to the class of business to which that business belongs; and
(b) Expenditure of a capital nature on
scientific research related to that business (except to the extent that it is
expenditure on plant, machinery, land or buildings or on alterations, additions
or extensions to buildings or in the acquisition of rights in or arising out of
scientific research).
(2) Where, on or after the first day of the
year of income ending on 30 June 1946, a taxpayer carrying on a business
for the purpose of gaining or producing assessable income incurs expenditure of
a capital nature in the construction or acquisition of a building, or part of a
building, or in making any alteration or addition to a building, in which
scientific research related to that business is to be carried on by him or on
his behalf, and the building, part of a building, alteration or addition, as
the case may be, is of use for scientific research purposes only, an amount
equal to one‑third of that expenditure shall be an allowable deduction:
(a) from the assessable income of the
year of income in which the building, part of a building, alteration or
addition is first used by or on behalf of the taxpayer for such scientific
research; and
(b) from the assessable income of each
of the 2 years of income next succeeding that year of income, if he continues
to carry on that business during the year in which that assessable income was
derived.
(2A) Subsection (2) does not apply to
expenditure incurred by a taxpayer in the construction of a building or part of
a building, in the making of an alteration or addition to a building or in the
acquisition of a building or part of a building unless:
(a) either of the following
subparagraphs applies:
(i) that construction or
making commenced, or that acquisition occurred, before 21 November 1987;
(ii) any contract in
respect of that construction, making or acquisition was entered into before 21 November 1987; and
(b) if the expenditure was incurred
after 20 November 1987—the taxpayer intended, on 20 November 1987, that:
(i) scientific research,
being research related to a business carried on by the taxpayer for the purpose
of gaining or producing assessable income, would be carried on by or on behalf
of the taxpayer in the building; and
(ii) the building, part of
the building, alteration or addition, as the case may be, would be of use for
scientific research purposes only.
(3) Where any expenditure or payment to which
this section refers is incurred or made outside Australia and the business in
relation to which it is so incurred or made is carried on partly in and partly
out of Australia, the deduction allowable under this section shall be such part
of the amount which would otherwise be allowable as the Commissioner considers
reasonable in the circumstances.
(4) Where any expenditure has been allowed or
is allowable as a deduction under subsection (2) and:
(a) the taxpayer sells, transfers or
otherwise disposes of the building or any part thereof; or
(b) the building or any part thereof
is destroyed;
the termination value of the building or part shall, to
the extent of the expenditure so allowed or allowable as a deduction, be
included in the assessable income of the year of income in which the disposal
or destruction occurs:
Provided that where the
Commissioner is of opinion that part only, or no part, of that termination
value relates to the disposal or destruction of any property which was acquired
or created by that expenditure, that part only, or no part, as the case may be,
of the termination value shall be taken into account for the purposes of this
subsection.
(4A) If:
(a) a person has purchased from
another person a building, or part of a building, where the vendor had incurred
capital expenditure of a kind in respect of which deductions are or have been
allowable under subsection (2); and
(b) it would be concluded that, having
regard to any connection between the vendor and the purchaser or to any other
relevant circumstances, those persons were not dealing with each other at arm’s
length; and
(c) the purchase price is greater or
lesser than the market value of the building, or the part of the building, at
the time of the purchase;
the purchase price is, for all purposes of the application
of this Act in relation to the vendor, taken to have been the amount of the
market value of the property at the time of the purchase.
(5) If the purchase of the building is a
creditable acquisition by the vendor, references in subsection (4A) to the
purchase price are taken to be references to that price reduced by the amount
of the net input tax credit to which the purchaser is entitled for the
acquisition.
(6) In this
section:
an approved research institute means the
Commonwealth Scientific and Industrial Research Organization, or any
university, college, institute, association or organization which is approved
in writing for the purposes of this section by that Organization, by the Chief
Executive Officer of the NHMRC or by the Research Secretary, as an institution,
association or organization for undertaking scientific research which is or may
prove to be of value to Australia.
NHMRC means the National Health and Medical
Research Council established by section 5B of the National Health and
Medical Research Council Act 1992.
Research Secretary means the Secretary of the
Department that administers the Australian Research Council Act 2001.
scientific research means any activities in
the fields of natural or applied science for the extension of knowledge.
termination value has the meaning given by
subsection 995‑1(1) of the Income Tax Assessment Act 1997.
(7) An approval for the purposes of subsection (6)
may:
(a) operate as from a date, whether
before or after the date of the approval, specified in the instrument of
approval; and
(b) be withdrawn at any time.
(8) In this section, any reference to
scientific research related to a business or class of business shall be read as
including a reference to:
(i) any scientific research which may
lead to or facilitate an extension, or an improvement in the technical efficiency,
of that business, or, as the case may be, of businesses of that class; and
(ii) any scientific research of a
medical nature which is of special relation to the welfare of workers employed
in that business or, as the case may be, in businesses of that class.
(9) This section does not apply in relation
to payments made, or expenditure incurred, after 30 June 1995.
73AA
Section 73A roll‑over relief in the case of certain CGT roll‑overs
Roll‑over relief where CGT roll‑over relief
allowed
(1) This section applies to the disposal of a
building, or part of a building, by a taxpayer (in this section called the transferor)
to another taxpayer (in this section called the transferee) if:
(b) subject to subsection (7),
deductions have been allowed or are allowable under subsection 73A(2) to the
transferor in respect of the building or the part of the building; and
(c) the disposal involves a CGT event;
and
(d) the conditions in an item in the
table are satisfied.
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CGT roll‑overs
that qualify transferor for relief
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Item
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Type of CGT roll‑over
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Conditions
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1
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Disposal of asset to wholly‑owned company
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There is a roll‑over under Subdivision 122‑A
of the Income Tax Assessment Act 1997 for the CGT event.
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2
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Disposal of asset by partnership to wholly‑owned
company
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The transferor is a partnership, the building or part is
partnership property, and there is a roll‑over under Subdivision 122‑B
of the Income Tax Assessment Act 1997 for the disposal by the partners
of the CGT assets consisting of their interests in the building or part.
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3
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Marriage or relationship breakdown
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There is a roll‑over under Subdivision 126‑A
of the Income Tax Assessment Act 1997 for the CGT event.
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4
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Disposal of asset to another member of the same wholly‑owned
group
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There is a roll‑over under Subdivision 126‑B
of the Income Tax Assessment Act 1997 for the CGT event.
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No balancing charges
(2) Subsection 73A(4) (which deals with
balancing charges) does not apply to the disposal of the building or the part
of the building by the transferor.
Transferee to inherit certain characteristics from
transferor
(3) Section 73A applies as if:
(a) the transferee had acquired the
building or the part of the building for a consideration equal to the cost of
the building or the part of the building to the transferor; and
(b) deductions were not allowable to
the transferee under subsection 73A(2) in respect of:
(i) so much of the cost of
the building or the part of the building to the transferor as was allowed or
allowable as a deduction to the transferor under that subsection in respect of
the building or the part of the building; or
(ii) if there have been 2
or more prior successive applications of this section—so much of the cost of
the building or the part of the building to the transferor as was allowed or
allowable as a deduction to the prior successive transferors under that
subsection in respect of the building or the part of the building; and
(c) deductions were not allowable to
the transferor under subsection 73A(2) in respect of the building or the part of
the building for the year of income in which the disposal took place or for a
subsequent year of income.
Subsection 73A(2A)—special rules
(4) If subsection 73A(2A) applies to the
transferor and in relation to the building or the part of the building, that
subsection applies in relation to the transferee and in relation to the
building or the part of the building.
Disposal by transferee where no roll‑over
relief—inheritance of deductions
(5) If:
(a) after the disposal of the building
or the part of the building to the transferee, the building or the part of the
building is lost or destroyed or the transferee disposes of the building or the
part of the building; and
(b) in the case of a disposal by the
transferee—this section does not apply to the disposal;
then, for the purposes of the application of subsection
73A(4) in relation to the loss, destruction or disposal, the total of:
(c) the deductions allowed or
allowable to the transferor under subsection 73A(2) in relation to the building
or the part of the building; and
(d) if there have been 2 or more prior
successive applications of this section—the deductions allowed or allowable to
the prior successive transferors under subsection 73A(2) in relation to the
building or the part of the building;
are taken to have been deductions allowed or allowable to
the transferee under subsection 73A(2) in relation to the building or the part
of the building.
Meaning of cost
(6) A reference in this section to the cost
of a building or of a part of a building to the transferor is a reference to
expenditure of a capital nature incurred by the transferor in the construction
or acquisition of the building or the part of the building, or in making any
alteration or addition to the building or to the part of the building.
Second or subsequent application of section—paragraph (1)(b)
does not apply
(7) If, apart from this subsection, this
section has applied to the disposal of the building or the part of the building
to the transferee, then, in working out whether this section applies to a
subsequent disposal of the building or the part of the building by:
(a) the transferee; or
(b) one or more subsequent successive
transferees;
this section has effect as if paragraph (1)(b) (which
deals with deductions) had not been enacted.
73B
Certain expenditure on research and development activities
Object of this section
(1AAA) The object of this section is to provide a tax
incentive, in the form of a deduction, to encourage research and development
activities in Australia and make eligible companies more internationally
competitive by:
(a) encouraging the development by
eligible companies of innovative products, processes and services; and
(b) increasing investment by eligible
companies in defined research and development activities; and
(c) promoting the technological
advancement of eligible companies through a focus on innovation or high
technical risk in defined research and development activities; and
(d) encouraging the use by eligible
companies of strategic research and development planning; and
(e) creating an environment that is
conducive to increased commercialisation of new processes and product
technologies developed by eligible companies.
The benefits of the tax incentive are targeted by being
limited to particular expenditure on certain defined activities.
Relationship with sections 73C and 73CA
(1AA) This section has effect subject to sections 73C
and 73CA.
What is core technology
(1AB) For the
purposes of this section, technology is core technology in relation to
particular research and development activities if:
(a) the purpose of the activities was
or is:
(i) to obtain new
knowledge based on that technology; or
(ii) to create new or
improved materials, products, devices, processes, techniques or services to be
based on that technology; or
(b) the activities were or are an
extension, continuation, development or completion of the activities that
produced that technology.
Definitions
(1) In this section, unless the contrary
intention appears:
accelerated expenditure, in relation to an
eligible company, means:
(a) contracted expenditure of the
company; or
(b) expenditure incurred by the
company in respect of research and development activities comprised or included
in a project in relation to which the company and another company or companies
are jointly registered under section 39P of the Industry Research and
Development Act 1986.
advance R and D expenditure means research
and development expenditure that is contracted expenditure in respect of which
the following conditions are satisfied:
(a) the expenditure is incurred after 20 November 1987 under an agreement (whenever entered into);
(b) the eligible service period in
relation to the expenditure ends more than 13 months after the day on which the
expenditure is incurred;
(c) the amount of the expenditure is
equal to or greater than $1,000; and
(d) the expenditure is not expenditure
that is required to be incurred by a law, or by an order of a court, of the
Commonwealth, a State or a Territory.
aggregate research and
development amount, in relation to an eligible company in relation to a
year of income, means the sum of:
(a) the
research and development expenditure incurred by the company during the year of
income; and
(aa) the deductions allowed for core
technology expenditure under subsections (12) and (12A) in the company’s
assessment in respect of income of the year of income; and
(b) one‑third of the total
qualifying plant expenditure of the company in relation to the year of income,
where that expenditure was incurred in respect of plant:
(i) acquired, or
constructed, under a contract entered into at or before 12 pm, by legal time in
the Australian Capital Territory, on 29 January 2001; or
(ii) that the company
commenced to construct at or before 12 pm, by legal time in the Australian
Capital Territory, on 29 January 2001; and
(ba) four‑fifths of the
deductible amount, or of the sum of the deductible amounts, of qualifying
expenditure in relation to the company in respect of a unit or units of post‑23 July
1996 pilot plant in relation to the year of income, where:
(i) the unit or units were
acquired, or constructed, under a contract or contracts entered into by the
company at or before 12 pm, by legal time in the Australian Capital Territory,
on 29 January 2001; or
(ii) the company commenced
to construct the unit or units at or before 12 pm, by legal time in the Australian
Capital Territory, on 29 January 2001; and
(baa) the amount of any notional Division 40
deduction (as defined in section 73BC) taken into account in working out a
deduction allowed or allowable to the company under section 73BA in
respect of the year of income, or that would have been so allowed or allowable
if the company had not chosen a tax offset under section 73BI; and
(bb) the amount of any notional
Division 42 deduction (as defined in section 73BJ) taken into account
in working out a deduction allowed or allowable to the company under section 73BH
in respect of the year of income; and
(d) the amount of any deduction that
has been allowed, or is allowable, under Division 43 of the Income Tax
Assessment Act 1997, in the assessment of the company in respect of income
of the year of income because of the use by the company of a building for the
purpose of carrying on research and development activities; and
(e) interest expenditure;
but does not include expenditure on overseas research and
development activities that is not certified expenditure.
agreement means any agreement, arrangement,
understanding or scheme, whether formal or informal, whether express or implied
and whether or not enforceable, or intended to be enforceable, by legal
proceedings.
annual leave means leave covered by section 83‑10
of the Income Tax Assessment Act 1997 (see subsection (1) of that
section).
approved research institute has the same
meaning as in section 73A.
associate has the same meaning as in section 318.
Australian‑centred research and development
activities means:
(a) Australian research and
development activities that are covered by paragraph (a) of the definition
of research and development activities; or
(b) Australian research and
development activities covered by all of the following:
(i) the activities are not
covered by paragraph (a) of the definition of research and
development activities;
(ii) the activities are
carried on for a purpose directly related to the carrying on of other
Australian research and development activities that are of the kind referred to
in paragraph (a) of that definition;
(iii) that purpose is the
sole or dominant purpose for which the activities are carried on.
Australian research and development activities
means research and development activities that are carried on in Australia or
in an external Territory.
Board means Innovation Australia, established
by the Industry Research and Development Act 1986.
building includes a part of a building.
certified expenditure means expenditure that
was incurred by an eligible company on overseas research and development
activities in respect of which the Board gave a provisional certificate under
section 39ED of the Industry Research and Development Act 1986 before
the expenditure was incurred.
consideration receivable means termination
value within the meaning of section 40‑300 of the Income Tax
Assessment Act 1997 as if that definition applied to property rather than
plant.
contracted expenditure means expenditure
incurred by an eligible company:
(a) on or after 1 July 1985—to the Coal Research Trust Account;
(b) during the period commencing on 1 July 1985 and ending on 30 June 1988—to an approved research institute; or
(c) on or after 20 November
1987—to a body (not being an associate of the eligible company) that was, or is
taken to have been, registered under section 39F of the Industry
Research and Development Act 1986 when the expenditure was incurred as a
research agency in respect of the class of research and development activities
on which the expenditure was incurred;
in consideration for that Trust Account funding the
performance of, or that institute or agency performing, on or after the date
concerned, or during the period concerned, as the case may be, research and
development activities on behalf of the company.
contributions to superannuation funds, in
relation to an eligible company, means expenditure that would, apart from subsection (20),
be allowable as a deduction to the company under section 290‑60 of
the Income Tax Assessment Act 1997.
core technology, in relation to research and
development activities, means technology that is core technology in relation to
those activities as provided by subsection (1AB).
core technology adjustment amount, in
relation to an eligible company in relation to a year of income in which the
company disposed of particular core technology, means the total amount of core
technology expenditure incurred by the company before or during the year of
income in respect of that core technology, reduced by the sum of the deductions
that have been allowed to the company under subsection (12A) in previous
years of income in relation to that expenditure.
core technology expenditure, in relation to
an eligible company, means expenditure incurred by the company after 7 September 1989 in acquiring, or in acquiring the right to use, technology for the
purposes of research and development activities carried on by or on behalf of
the company, being technology that is core technology in relation to those
activities.
eligible company means a body corporate
incorporated under a law of the Commonwealth or of a State or Territory.
eligible feedstock expenditure has the
meaning given by subsection (1A).
eligible service period, in relation to an
amount of expenditure under an agreement, means so much of the service period
in relation to the expenditure as occurs after the expenditure is incurred.
excluded plant expenditure means:
(a) expenditure incurred by an
eligible company in:
(i) the acquisition, or
the construction, under a contract entered into at or before 12 pm, by legal
time in the Australian Capital Territory, on 29 January 2001; or
(ii) the construction by
the company, being construction that commenced at or before 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001;
of a unit of plant or pilot
plant; and
(b) any other expenditure incurred by
an eligible company in the acquisition or construction, or that otherwise forms
part of the cost, of a section 73BA depreciating asset (as defined by
section 73BB) or a unit of section 73BH plant (as defined by section 73BI).
expenditure on foreign owned R&D by an eligible
company for a year of income has the meaning given by subsections (14C)
and (14D).
feedstock expenditure, in relation to an
eligible company, means expenditure incurred by the company in acquiring or
producing materials or goods to be the subject of processing or transformation
by the company in research and development activities, and includes expenditure
incurred by the company on any energy input directly into the processing or
transformation.
feedstock input, in relation to an eligible
company in relation to a year of income, means the company’s feedstock
expenditure in respect of materials or goods that were the subject of
processing or transformation by the company in research and development
activities during the year of income.
feedstock output, in relation to an eligible
company in relation to a year of income, means the sum of the amounts worked
out under paragraphs (a) and (b) in relation to any products that were
obtained by the company during the year of income from the processing or transformation
of materials or goods the acquisition or production of which was feedstock
expenditure of the company:
(a) if any of those products were sold
by the company during the year of income by a transaction or transactions
entered into at arm’s length with the buyer or buyers—the amount or amounts
received or receivable by the company from the sale or sales;
(b) if any of those products were not
sold by the company during the year of income or were sold by the company
otherwise than by a transaction or transactions entered into at arm’s length
with the buyer or buyers—the amount or amounts (if any) that would have been
received by the company by selling those products at the end of the year of
income by a transaction or transactions entered into at arm’s length with the
buyer or buyers.
foreign company means a body corporate that:
(a) is incorporated under a law of a
foreign country; and
(b) is a resident of a foreign country
for the purposes of a double tax agreement (as defined in Part X) that
relates to that foreign country.
ineligible pilot plant amount, in relation to
a unit of pilot plant to which subsection (6) applies, means the
difference between the amount that would, apart from the operation of subsection (6),
be the cost of the unit and $10,000,000.
interest expenditure, in relation to an
eligible company in relation to a year of income, means interest, or an amount
in the nature of interest, incurred by the company during the year of income in
the financing of research and development activities.
knowledge means any knowledge or other
information, whether or not the possessor of the knowledge or information has
legally enforceable rights in relation to it.
long service leave means leave covered by
Subdivision 83‑B of the Income Tax Assessment Act 1997 (see
section 83‑70 of that Act).
non‑associate, in relation to an
eligible company, means a person who is not an associate of the company.
overseas research and development activities
means research and development activities that are carried on outside Australia
and the external Territories.
pilot plant means an experimental model of
other plant for use in research and development activities or for use in
commercial production, being a model that is not for use in commercial
production but that has the intended essential characteristics of the other
plant of which it is a model.
plant means:
(a) things
that are plant within the meaning of section 45‑40 of the Income
Tax Assessment Act 1997; or
(b) things to which section 45‑40
of that Act would apply if the carrying on of research and development
activities were the carrying on of a business for the purpose of producing
assessable income; or
(c) pilot plant other than post‑23 July
1996 pilot plant.
plant expenditure, in relation to an eligible
company, means expenditure incurred by the company in:
(a) the acquisition, or the
construction, under a contract entered into on or after 1 July 1985, of a
unit of plant other than post‑23 July 1996 pilot plant; or
(b) the construction by the company, being
construction that commenced on or after 1 July 1985, of a unit of plant
other than post‑23 July 1996 pilot plant;
being a unit of plant for use by the company exclusively
for the purpose of the carrying on by or on behalf of the company of research and
development activities at least for an initial period.
post‑23 July 1996 pilot plant
means pilot plant referred to in subsection (4C).
research and development activities means:
(a) systematic, investigative and
experimental activities that involve innovation or high levels of technical
risk and are carried on for the purpose of:
(i) acquiring new
knowledge (whether or not that knowledge will have a specific practical
application); or
(ii) creating new or
improved materials, products, devices, processes or services; or
(b) other activities that are carried
on for a purpose directly related to the carrying on of activities of the kind
referred to in paragraph (a).
research and development expenditure, in
relation to an eligible company in relation to a year of income, means
expenditure (other than core technology expenditure, interest expenditure,
feedstock expenditure, excluded plant expenditure or expenditure incurred in
the acquisition or construction of a building or of an extension, alteration or
improvement to a building) incurred by the company during the year of income,
being:
(a) contracted expenditure of the
company;
(b) salary expenditure of the company,
being expenditure incurred on or after 1 July 1985; or
(c) other expenditure incurred on or
after 1 July 1985 directly in respect of research and development
activities carried on by or on behalf of the company on or after 1 July 1985;
and includes any eligible feedstock expenditure that the
company has in respect of the year of income in respect of related research and
development activities.
residual feedstock expenditure, in relation
to an eligible company in relation to a year of income in relation to related
research and development activities, means the lesser of:
(a) the company’s feedstock input in
respect of the year of income in relation to those activities; or
(b) the company’s feedstock output in
respect of the year of income in relation to those activities.
salary expenditure,
in relation to an eligible company in relation to a year of income, means the
sum of:
(a) the expenditure, not being
expenditure referred to in paragraph (b), incurred by the company during
the year of income by way of salaries, wages, allowances, bonuses, overtime
payments or penalty rate payments for officers or employees of the company,
being expenditure incurred directly in respect of research and development
activities carried on by or on behalf of the company on or after 1 July
1985;
(b) in relation to each officer or
employee of the company who was engaged at any time during the year of income
in research and development activities carried on by or on behalf of the
company—so much of the expenditure incurred by the company during the year of
income in respect of annual leave, sick leave or long service leave for that
officer or employee or contributions to superannuation funds in respect of that
officer or employee as bears to that amount the same proportion as the
proportion of the year of income during which that officer or employee was
engaged in research and development activities carried on by or on behalf of
the company bears to the proportion of the year of income during which that
officer or employee was engaged in any activities carried on by or on behalf of
the company; and
(c) so much of the expenditure
incurred by the company during the year of income on pay‑roll tax and
premiums for workers’ compensation insurance as the Commissioner considers
reasonable having regard to:
(i) the amount of the
expenditure incurred by the company during the year of income to which paragraph (a)
or (b) applies;
(ii) the total expenditure
incurred by the company during the year of income in respect of salaries,
wages, allowances, bonuses, overtime payments, penalty rate payments, annual
leave, sick leave and long service leave in respect of all officers and
employees of the company; and
(iii) such other matters as
the Commissioner considers relevant.
service period, in relation to an amount of
expenditure under an agreement, means the period during which the thing done
under the agreement in return for the amount of expenditure is done.
sick leave means any period of leave in
excess of 14 consecutive days, being leave, however described, granted by an
employer (whether voluntarily, by agreement or in accordance with a law) to an
employee in respect of the physical or mental incapacity of the employee.
technology means knowledge or anything
produced by the application of knowledge.
written‑down value has the meaning
given by subsections (4A) and (4B).
What is eligible feedstock expenditure
(1A) For the purposes of this section, an
eligible company has eligible feedstock expenditure in respect of a year of
income in relation to related research and development activities if the
company’s feedstock input in respect of the year of income in relation to those
activities exceeded the company’s feedstock output in respect of the year of
income in relation to those activities, and the amount of the excess
constitutes the company’s eligible feedstock expenditure in respect of the year
of income in relation to those activities.
Limit on what is contracted expenditure
(1B) Expenditure referred to in paragraph (c)
of the definition of contracted expenditure in subsection (1)
does not constitute contracted expenditure for the purposes of this section
unless, when the expenditure was incurred, the eligible company that incurred
the expenditure was capable of utilising, or had formulated a plan to utilise,
any results of the research and development activities directly in connection
with a business that that company carried on or proposed to carry on.
(1BA) Subsection (1B) does not apply to
expenditure covered by subsection (14C) (ignoring paragraphs (14C)(f)
and (g)).
What use of plant counts for definition of plant
expenditure
(1C) For the purposes of the application of the
definition of plant expenditure in subsection (1), or for
the purposes of the application of paragraph (31)(a), in relation to an
eligible company, a unit of plant is not to be taken not to be for use by the
company exclusively for the purpose of the carrying on by or on behalf of the
company of research and development activities merely because the company has,
on or after 21 November 1987, entered into an agreement with another
person (whether or not an eligible company) for that person to use the unit of
plant exclusively for the purpose of the carrying on by or on behalf of that
person of research and development activities (whether or not the same as the
first‑mentioned activities).
Disregarding transfer of property connected with
security
(2) For the purpose of this section,
disregard an acquisition or disposal of property by way of the transfer of the
property for the provision or redemption of a security. Consequently this
section applies as if the person who was the owner of the property before the
transfer continues to be the owner after the transfer.
Limits on what are research and development activities
(2A) For the purposes of the definition of research
and development activities in subsection (1), activities carried
on by or on behalf of an eligible company by way of the development of computer
software shall not be taken to be systematic, investigative and experimental
activities unless the computer software is developed for the purpose, or for
purposes that include the purpose, of sale, rent, licence, hire or lease to 2
or more non‑associates of the company (counting a non‑associate of
the company and the associates of such a non‑associate together as one
person).
(2B) For the purposes of the definition of research
and development activities in subsection (1):
(a) activities are not taken to
involve innovation unless they involve an appreciable element of novelty; and
(b) activities are not taken to
involve high levels of technical risk unless:
(i) the probability of
obtaining the technical or scientific outcome of the activities cannot be known
or determined in advance on the basis of current knowledge or experience; and
(ii) the uncertainty of
obtaining the outcome can be removed only through a program of systematic,
investigative and experimental activities in which scientific method has been
applied, in a systematic progression of work (based on principles of physical,
biological, chemical, medical, engineering or computer sciences) from
hypothesis to experiment, observation and evaluation, followed by logical
conclusions.
(2BA) Activities are not covered by the definition
of research and development activities in subsection (1)
unless they are carried on in accordance with a plan that complies with any
guidelines formulated by the Board under section 39KA of the Industry
Research and Development Act 1986 that are in force at the time.
(2C) For the purposes of this section, the
following activities are taken not to be systematic, investigative and
experimental activities:
(a) market research, market testing or
market development, or sales promotion (including consumer surveys);
(b) quality control;
(c) prospecting, exploring or drilling
for minerals or natural gas for the purpose of discovering deposits,
determining more precisely the location of deposits or determining the size or
quality of deposits;
(d) the making of cosmetic
modifications or stylistic changes to products, processes or production
methods;
(e) management studies or efficiency
surveys;
(f) research in social sciences, arts
or humanities;
(g) the making of donations;
(h) pre‑production activities
such as demonstration of commercial viability, tooling‑up and trial runs;
(i) routine collection of
information, except as part of the research and development process;
(j) preparation for teaching;
(k) commercial, legal and
administrative aspects of patenting, licensing or other activities;
(l) activities associated with
complying with statutory requirements or standards, such as the maintenance of
national standards, the calibration of secondary standards and routine testing
and analysis of materials, components, products, processes, soils, atmospheres
and other things;
(m) specialised routine medical care;
(n) any activity related to the
reproduction of a commercial product or process by a physical examination of an
existing system or from plans, blueprints, detailed specifications or
publically available information.
Expenditure by eligible company as trustee not counted
(3) A reference in this section to the
incurring of expenditure by an eligible company does not include a reference to
expenditure incurred by the company in the capacity of a trustee or nominee
other than expenditure incurred by the company on or after 1 July 1988 in
the capacity of a trustee of a public trading trust for the purposes of
Division 6C in relation to the year of income in which the expenditure was
incurred.
Partnerships
(3A) Where expenditure (whether incurred wholly,
or only partly, on research and development activities) has, on or after 21 November 1987, been incurred by a partnership in which, when the expenditure was
incurred:
(a) at least one partner was an
eligible company; and
(b) either:
(i) each other partner
was:
(A) an eligible
company; or
(B) a body
corporate that was, or is taken to have been, registered under section 39F
of the Industry Research and Development Act 1986 as a research agency
in respect of the class of research and development activities on which the expenditure
was incurred; or
(ii) the partnership was
designated as a Co‑operative Research Centre under the program known as
the Co‑operative Research Centres Program;
the following paragraphs have effect:
(c) each partner is to be taken for
the purposes of this section, sections 73C and 73CA of this Act, and
Subdivision 20‑A of the Income Tax Assessment Act 1997, to
have incurred so much (if any) of the expenditure as was incurred out of money
contributed by the partner (otherwise than by way of loan), whether in the year
of income in which the expenditure was incurred or a previous year of income;
(d) if the partnership has, whether
before or after the commencement of this subsection, received, or become
entitled to receive, a recoupment of, or a grant in respect of, the whole or
any part of the expenditure, each partner is to be taken for the purposes of
this section, sections 73C and 73CA of this Act, and Subdivision 20‑A
of the Income Tax Assessment Act 1997, to have received, or become
entitled to receive, so much (if any) of the recoupment or grant as is
calculated in accordance with the formula:
where:
partner’s contribution
means the total contribution made (otherwise than by way of loan) by the
partner to the funds of the partnership as at the time when the recoupment or
grant was received or the entitlement to the recoupment or grant arose, as the
case may be.
total contribution
means the total of the contributions made (otherwise than by way of loan) by
all the partners to the funds of the partnership as at the time when the
recoupment or grant was received or the entitlement to the recoupment or grant
arose, as the case may be.
(da) if the partnership is not
designated as a Co‑operative Research Centre under the program known as
the Co‑operative Research Centres Program—subsection 73CA(2A) does not
apply in relation to the expenditure that a partner is so taken to have
incurred;
(e) any expenditure that a partner is
to be so taken to have incurred, and any recoupment or grant that a partner is
to be so taken to have received or become entitled to receive, is not to be
taken into account in determining the net income of the partnership or any
partnership loss, as the case may be, of the year of income; and
(f) subject to paragraphs (c), (d),
(da) and (e), this section, sections 73C and 73CA of this Act, and
Subdivision 20‑A of the Income Tax Assessment Act 1997,
apply in relation to each such partner that is an eligible company as if that
partner, and not the partnership, were, or had been, carrying on the relevant
project and activities, but so apply with such modifications to those sections
as are appropriate having regard to the partner’s interest in the partnership.
(3B) In determining whether a relationship
between persons for the purpose of engaging in research and development
activities constitutes a partnership for the purposes of this Act, the engaging
by those persons in those activities is to be taken to constitute carrying on a
business with a view to profit.
Definition of qualifying plant expenditure
(4) Subject to
subsection (5), if, during a year of income:
(a) an
eligible company commences to use a unit of plant exclusively for the purpose
of the carrying on by or on behalf of the company of research and development
activities; and
(b) the eligible company has incurred
an amount of plant expenditure in respect of the unit;
that amount is, in relation to the unit, taken to be an
amount of qualifying plant expenditure in relation to the company in relation
to the year of income and each of the 2 succeeding years of income.
Definitions of written‑down value
(4A) The written‑down value
of a unit of plant other than post‑23 July 1996 pilot plant:
(a) that is owned by a company; and
(b) in relation to which a deduction
has been allowed under this section from the company’s assessable income;
is the amount worked out using the formula:
where:
cost means the cost of the unit.
number of deductible years means the number
of years of income in respect of which a deduction has been allowed from the
company’s assessable income under this section in relation to the unit.
(4B) The written‑down value
of a unit of post‑23 July 1996 pilot plant:
(a) that is owned by a company; and
(b) in relation to which a deduction
has been allowed under this section from the company’s assessable income;
is the amount worked out using the formula:
where:
qualifying expenditure means the amount of
the qualifying pilot plant expenditure in relation to the company in respect of
the unit.
notional deductions means the total amount of
the deductions (if any) that would have been allowed or allowable under this
section from the company’s assessable income of any year of income in respect
of the unit if, in calculating the amount of any such deduction, any provision
for an amount to be multiplied by a number greater than one had not been
included.
Definition of qualifying pilot plant expenditure
(4C) If:
(a) an eligible company incurs
expenditure in the acquisition, or the construction, under a contract entered
into after 5 pm, by legal time in the Australian Capital Territory, on 23 July
1996, of a unit of pilot plant; and
(b) the unit of pilot plant was
acquired or constructed for use by the company exclusively for the purpose of
the carrying on by or on behalf of the company of research and development
activities;
the expenditure is qualifying pilot plant expenditure in
relation to the company in respect of the unit of pilot plant.
Deductible amount of qualifying expenditure on post‑23 July
1996 pilot plant
(4D) If the amount that, apart from paragraph (ba)
of the definition of aggregate research and development amount in
subsection 73B(1), would be the aggregate research and development amount in
relation to an eligible company in relation to a year of income does not exceed
$20,000, the deductible amount of qualifying expenditure in relation to the
company in respect of a unit of post‑23 July 1996 pilot plant in
respect of the year of income is the annual deduction percentage of the
qualifying pilot plant expenditure in relation to the company in respect of the
unit of pilot plant.
(4E) If the amount that, apart from paragraph (ba)
of the definition of aggregate research and development amount in
subsection 73B(1), would be the aggregate research and development amount in
relation to an eligible company in relation to a year of income exceeds
$20,000, the deductible amount of qualifying expenditure in relation to the
company in respect of a unit of post‑23 July 1996 pilot plant in
respect of the year of income is the annual deduction percentage of the
qualifying pilot plant expenditure in relation to the company in respect of the
unit of pilot plant, multiplied by 1.25.
(4F) The annual deduction percentage for a unit
of post‑23 July 1996 pilot plant is worked out in relation to a
company under subsection (4G) or (4H), as the case requires.
(4G) If:
(a) the qualifying pilot plant
expenditure in relation to an eligible company in respect of a unit of post‑23 July
1996 pilot plant does not exceed $300 or such higher amount as is prescribed;
or
(b) the useful life of the unit of
post‑23 July 1996 pilot plant is less than 3 years;
the annual deduction percentage for the unit is 100%.
(4H) If subsection (4G) does not apply in
respect of a unit of post‑23 July 1996 pilot plant, the annual
deduction percentage for the unit is two‑thirds of the percentage worked
out using the following table:
|
Table of percentages
|
|
Item
|
Years in useful life
|
Percentage
|
|
1
|
3 to fewer than 5
|
60%
|
|
2
|
5 to fewer than 62/3
|
40%
|
|
3
|
62/3 to fewer than 10
|
30%
|
|
4
|
10 to fewer than 13
|
25%
|
|
5
|
13 to fewer than 30
|
20%
|
|
6
|
30 or more
|
10%
|
(4J) The useful life of a unit of post‑23 July
1996 pilot plant owned by an eligible company (the relevant unit)
is the period that would be the effective life of the relevant unit under
Subdivision 40‑B of the Income Tax Assessment Act 1997 if:
(a) the company could deduct amounts
for the decline in value of the relevant unit under Division 40 of that
Act; and
(b) any reference in Division 40
of that Act to using an asset for a taxable purpose included a reference to the
use of the relevant unit by or on behalf of the company exclusively for
carrying on research and development activities.
Limit on qualifying plant expenditure
(5) If:
(a) apart from this subsection, there
would be an amount of qualifying plant expenditure in relation to a unit of
plant owned by an eligible company in relation to a year of income; and
(b) at any time during the year of
income, the company ceases to use that unit of plant exclusively for the
purpose of the carrying on by or on behalf of the company of research and
development activities;
there is no amount of qualifying plant expenditure in
relation to that unit of plant in relation to the year of income or any
succeeding year of income.
(5AA) Subject to subsection (5AB), an eligible
company is not to be taken for the purposes of paragraph (5)(b) to have
ceased during a year of income to use a unit of plant exclusively for the
purpose of the carrying on by or on behalf of the company of research and
development activities merely because on or after 21 November 1987 and
during the whole or a part of the year of income another person (whether or not
an eligible company) used the unit of plant, with the consent of the company,
exclusively for the purpose of the carrying on by or on behalf of that other
person of research and development activities (whether or not the same as the
activities for which the unit of plant has been used by the company).
(5AB) Subsection (5AA) does not apply in
relation to a unit of plant owned by an eligible company in relation to a year
of income unless the only reason for any failure of the company to use the unit
of plant during the whole or a part of the year of income for the purpose of
the carrying on by or on behalf of the company of research and development
activities was the use made of the unit of plant during the year of income by
another person as mentioned in that subsection.
Expenditure on building does not count for this section
(5A) This section does not apply to expenditure
incurred by an eligible company in the acquisition or construction of a
building or of an extension, alteration or improvement to a building.
Cost of plant before 19 August 1992
(6) If:
(a) the cost of a unit of pilot plant
to an eligible company exceeds $10 million; and
(b) any of the following applies:
(i) the unit was acquired
by the eligible company under a contract entered into before 19 August 1992;
(ii) the construction of
the unit commenced before 19 August 1992;
(iii) a contract for the
construction of the unit was entered into before 19 August 1992;
the cost of the unit of plant is taken, for the purposes
of this section, to be $10 million.
No deduction for expenditure on activities for another
person
(9) A deduction is not allowable under this
section (except subsection (14C)) in respect of expenditure incurred by an
eligible company for the purpose of carrying on research and development
activities on behalf of any other person, and expenditure of that kind shall be
disregarded for the purposes of the application of this section (except
subsections (14C) and (14D)) to the company.
(9A) Subsection (9) does not apply in
relation to expenditure incurred on or after 21 November 1987 on behalf of
a partnership by a partner in the partnership in that partner’s capacity as
such a partner.
No deduction for unregistered company
(10) A deduction is not allowable under this
section to an eligible company for a year of income in respect of expenditure
in relation to research and development activities unless:
(a) the company is registered, in
relation to the year of income and in relation to those activities, under
section 39J of the Industry Research and Development Act 1986; or
(b) the company is registered, in relation
to the year of income and in relation to a project comprising or including
those activities, under section 39P of that Act.
Advance R and D expenditure
(11) For the purposes of this section:
(a) subject to paragraph (b),
advance R and D expenditure of an eligible company shall be taken to be
incurred in equal proportions throughout its eligible service period; and
(b) where advance R and D expenditure
of an eligible company is accelerated expenditure and its eligible service
period occurs in 2 or more years of income—any part of that expenditure that
would otherwise be taken by paragraph (a) to be incurred in the second or
a later year of income shall instead be taken to be incurred in equal
proportions throughout the part of the eligible service period occurring in the
year of income preceding that second or later year of income.
Deductions for core technology expenditure
(12) Subject to this section, where an eligible
company incurs core technology expenditure during a year of income under a contract
entered into before 5 pm, by legal time in the Australian Capital Territory, on
23 July 1996, the amount of that expenditure is allowable as a deduction
from the assessable income of the company of the year of income.
(12A) Subject to
this section, if:
(a) an
eligible company has, before or during the year of income, incurred core
technology expenditure in respect of particular core technology (the relevant
core technology) under a contract entered into at or after the time
referred to in subsection (12); and
(b) during the year of income the
company incurs research and development expenditure that is related to the
relevant core technology;
there is allowable as a deduction from the company’s
assessable income of the year of income so much of the amount worked out using
the formula in subsection (12B) in respect of that core technology
expenditure as does not exceed one‑third of the amount of that related
research and development expenditure.
(12B) The formula for the purposes of subsection (12A)
is:
where:
undeducted expenditure means so much of the
core technology expenditure incurred by the company during the current year or
previous years of income in relation to the relevant core technology under
contracts entered into at or after the time referred to in subsection (12)
as has not been allowed as a deduction from the company’s assessable income of
any of those previous years of income.
current year core technology adjustment amount,
in relation to a company in relation to a year of income in which:
(a) an amount or amounts are included
in the company’s assessable income under subsection (27A) because the
company received or was entitled to receive an amount or amounts from the
disposal of the relevant core technology; or
(b) an amount or amounts would be so
included apart from the operation of paragraph 73B(27C)(c);
means:
(c) the core technology adjustment
amount in relation to the company in relation to that year of income in respect
of the relevant core technology; or
(d) the amount or the sum of the
amounts referred to in paragraph (b);
whichever is the less.
(12C) A deduction in respect of core technology
expenditure is not allowable from a taxpayer’s assessable income of any year of
income under any provision of this Act other than this section.
Deduction for contracted expenditure
(13) Subject to this section, where an eligible
company incurs contracted expenditure during a year of income, the amount of
that expenditure multiplied by 1.25 is an allowable deduction to the company
for the year of income.
Deduction for research and development expenditure
(14) Subject to this section, where:
(a) an eligible company incurs
research and development expenditure (other than contracted expenditure) during
a year of income; and
(b) the aggregate research and
development amount in relation to the company in relation to the year of income
is greater than $20,000;
the amount of that expenditure multiplied by 1.25 is
allowable as a deduction from the assessable income of the company of the year
of income.
Reduced rate of deduction under subsection (13) or
(14)
(14AA) A part of an eligible company’s deduction for
a year of income under subsection (13) or (14) in respect of a particular
amount of research and development expenditure (the R&D amount)
is worked out by multiplying the R&D amount by 1 rather than 1.25 if subsection (14AB)
applies to the R&D amount.
(14AB) This subsection applies to an R&D amount
of an eligible company for a year of income if:
(a) any other person (within the
meaning of section 73H) incurred expenditure during that year of income or
an earlier one in respect of all or a part of the things for which the R&D
amount was for; and
(b) the other person was grouped with
the eligible company as mentioned in section 73L at the time the
expenditure was incurred by the other person.
(14AC) The part of the eligible company’s R&D
amount for the year of income that is multiplied by 1.25 under subsection (13)
or (14) is:
where:
total group markup is:
(a) the sum of the amounts derived by
persons during the year of income for goods or services in respect of all or a
part of the things for which the R&D amount was for while those persons
were grouped with the eligible company as mentioned in section 73L; less
(b) the actual cost to those persons
of providing those goods or services.
(14AD) The part of the eligible company’s R&D
amount for the year of income that is multiplied by 1 rather than 1.25 is the
part of the R&D amount representing the total group markup.
Deduction for interest expenditure
(14A) Subject to this section, if an eligible
company incurs interest expenditure during a year of income, the amount of that
expenditure is allowable as a deduction from the company’s assessable income of
the year of income.
Deduction for residual feedstock expenditure
(14B) Subject to this section, if an eligible
company has any residual feedstock expenditure in respect of a year of income
in relation to related research and development activities, the amount of that
expenditure is allowable as a deduction from the company’s assessable income of
the year of income.
Deduction for expenditure on foreign owned R&D
(14C) An eligible company may deduct for a year
of income the amount (the expenditure on foreign owned R&D by
the eligible company for the year of income) worked out under
subsection (14D) if:
(a) the eligible company incurs
expenditure in the year of income at a time when the eligible company is
grouped under section 73L with a foreign company; and
(b) the expenditure is for the purpose
of the carrying on of Australian‑centred research and development
activities; and
(c) the activities are, are to be or
were carried on wholly or primarily on behalf of the foreign company; and
(d) the activities are, are to be or
were carried on directly or indirectly under a written agreement between the
eligible company and the foreign company and no other parties for the
activities to be performed:
(i) by the eligible
company; or
(ii) by another person
directly or indirectly under another agreement to which the eligible company
is, or will become, a party; and
(e) the expenditure is not incurred in
connection with an agreement that:
(i) is between the
eligible company and another eligible company that is grouped under
section 73L with the eligible company when the expenditure is incurred;
and
(ii) is an agreement for
the activities to be performed either by the eligible company or by a person
who is not a party to the agreement and is to perform the activities directly
or indirectly under another agreement to which the eligible company is, or will
become, a party; and
(f) the expenditure on foreign owned
R&D by the eligible company for the year of income is greater than $20,000;
and
(g) the eligible company, and each
other eligible company (if any) that is grouped under section 73L with
that company at any time in the year of income, is registered under
section 39J of the Industry Research and Development Act 1986 in
relation to the year of income and all activities that meet both the following
conditions:
(i) the activities are
ones that, if subsection (2BA) had not been enacted, would be Australian‑centred
research and development activities carried on wholly or primarily on behalf of
a foreign company (whether or not the activities would be such Australian‑centred
research and development activities taking account of that subsection);
(ii) the activities are
ones in relation to which the eligible company or the other eligible company
(as appropriate) incurred expenditure during the year of income.
Note 1: An example of the carrying on or performance of
activities indirectly under an agreement that is a contract is the carrying on
or performance of the activities under a subcontract, or one of a chain of
subcontracts, under the agreement.
Note 2: One effect of paragraph (14C)(e) is that,
even if the eligible company has an agreement with the foreign company for the
carrying on of Australian‑centred research and development activities
wholly or primarily on behalf of the foreign company, the eligible company
cannot deduct its expenditure:
(a) for performing the activities as a
subcontractor under a subcontract with another eligible company grouped under
section 73L with the eligible company; or
(b) if the eligible company is a subcontractor to
another eligible company grouped under section 73L with the eligible
company, for further subcontracting the performance of the activities.
Note 3: The eligible company may get an extra deduction
under section 73QB if its expenditure on foreign owned R&D for the
year of income is greater than the average of the amounts that would be the
expenditure on foreign owned R&D by the eligible company for the 3 previous
years of income if subsection (2BA) of this section had not been enacted.
(14D) The expenditure on foreign owned
R&D by the eligible company for the year of income is the amount
that would be the eligible company’s incremental expenditure under
section 73P for the year of income if:
(a) the Australian‑centred
research and development activities covered by subsection (14C) (ignoring
paragraphs (14C)(f) and (g)) of this section were carried on on behalf of
the eligible company (and not on behalf of the foreign company mentioned in
paragraph (14C)(c)); and
(b) the only expenditure incurred by
the eligible company in the year of income in relation to research and
development activities had been the expenditure covered by
subsection (14C) (ignoring paragraphs (14C)(f) and (g)) of this
section; and
(c) the total group markup (if any) of
the eligible company for the year of income were the amount (if any) that would
be worked out under subsection (14AC) of this section if the company were
working out the amount of a deduction under subsection (13) or (14) of
this section on the basis described in paragraphs (a) and (b) of this
subsection.
Note 1: Paragraphs (14D)(a) and (b) affect what
would be the eligible company’s incremental expenditure by affecting
expenditure described in definitions of terms (e.g. contracted
expenditure and salary expenditure) used in the
definition of research and development expenditure, on which
incremental expenditure is based.
Note 2: Subsection 73P(5) excludes a company’s total
group markup (worked out under subsection (14AC) of this section) from the
company’s incremental expenditure. The markup is worked out to affect a
deduction by the company under subsection (13) or (14) of this section for
an amount of research and development expenditure to which
subsection (14AB) of this section applies.
Deduction for qualifying plant expenditure
(15) Subject to this section, where, in the
year of income during which an eligible company commences to use a unit of
plant exclusively for the purpose of the carrying on by or on behalf of the
company of research and development activities or in either of the 2 succeeding
years of income, there is an amount of qualifying plant expenditure in relation
to the company in relation to the unit of plant:
(a) in a case where the aggregate
research and development amount in relation to the company in relation to the
year of income is greater than $20,000—one‑third of the amount of that
qualifying plant expenditure multiplied by 1.25; or
(b) in any other case—one‑third
of the amount of that qualifying plant expenditure;
is allowable as a deduction from the assessable income of
the company of the year of income.
(15AAA) Subsection (15) does not apply to a unit
of plant:
(a) acquired, or constructed, under a
contract entered into by the company after 12 pm, by legal time in the
Australian Capital Territory, on 29 January 2001; or
(b) that the company commenced to
construct after 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001.
Deduction for qualifying expenditure on post‑23 July
1996 pilot plant
(15AA) Subject to this section, if in a year of
income an eligible company uses a unit of post‑23 July 1996 pilot
plant exclusively for the purpose of the carrying on by or on behalf of the
company of research and development activities, the deductible amount of
qualifying expenditure in relation to the company in respect of the unit is an
allowable deduction from the company’s assessable income of the year of income.
Note: If Division 250 of the Income Tax
Assessment Act 1997 applies to you and an asset:
(a) if section 250‑150 of that Act
applies—you are taken to have qualifying expenditure in relation to the use of
the asset to the extent specified in a determination made under subsection 250‑150(3)
of that Act; or
(b) otherwise—you are taken not to have such
expenditure.
(15AAAA) Subsection (15AA) does not apply to a unit
of post‑23 July 1996 pilot plant:
(a) acquired, or constructed, under a
contract entered into by the company after 12 pm, by legal time in the
Australian Capital Territory, on 29 January 2001; or
(b) that the company commenced to
construct after 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001.
(15AB) The sum of the deductions that, apart from
this subsection, would be allowable to a company under subsection (15AA)
in respect of a unit of post‑23 July 1996 pilot plant must not
exceed the qualifying pilot plant expenditure in relation to the company in
respect of the unit multiplied by 1.25.
Reduction of deduction under subsection (15)
(15A) Where an eligible company has, whether before
or after the commencement of this subsection, received, or become entitled to
receive, any consideration in respect of the use, by another person, as
mentioned in subsection (5AA), of a unit of plant, one‑half of the
total amount or value of that consideration shall be applied in the reduction
of any deduction or deductions that has or have been allowed, or would but for
this subsection be allowable, under subsection (15) from the assessable
income of the company of any year of income in respect of that unit of plant.
Limit on deduction for expenditure on overseas research
and development activities
(17A) An amount is not allowable as a deduction
under subsection (12), (13), (14) or (15) from a company’s assessable
income of a year of income in respect of expenditure on overseas research and
development activities unless the expenditure is certified expenditure.
Choice that this section not apply to plant
(18) An eligible company may elect that this
section shall not apply in relation to a unit of plant to which this section
would otherwise apply and, where an election is so made, this section does not
apply in relation to that unit of plant in relation to the company.
Limit on double deductions
(20) Subject to subsections (21), (21A)
and (22), where the whole or a part of an amount of expenditure incurred by an
eligible company has been allowed or is or may become allowable as a deduction
under this section, that expenditure shall not be an allowable deduction, and
shall not be taken into account in ascertaining the amount of an allowable
deduction, from the assessable income of the company of any year of income
under any other provision of this Act.
(20A) To avoid doubt, subsection (20) applies
despite subsection 290‑10(1) of the Income Tax Assessment Act 1997.
(21) Subsection (20) does not prevent a
deduction for depreciation being allowed to an eligible company in respect of a
unit of plant (other than post‑23 July 1996 pilot plant) where the
company has, before the end of the second year of income (in this subsection
referred to as the relevant year of income) after the year of
income in which the company first used the unit of plant exclusively for the
purpose of the carrying on by or on behalf of the company of research and
development activities, ceased to use the unit of plant exclusively for that
purpose, and where, by reason of the subsequent use of the unit of plant for
another purpose, such a deduction becomes allowable, the unit of plant shall be
deemed to have been acquired by the company:
(a) at a cost equal to the written‑down
value of the unit of plant; and
(b) on:
(i) in a case where the
unit of plant was used by the company exclusively for that first‑mentioned
purpose on the first day of the relevant year of income—that day; or
(ii) in any other case—the
day on which the unit of plant was first used by the company for that first‑mentioned
purpose.
(21A) Subsection (20) does not prevent a
deduction for depreciation being allowed to an eligible company in respect of a
unit of post‑23 July 1996 pilot plant if the company has ceased to
use the unit of plant exclusively for the purpose of the carrying on by or on
behalf of the company of research and development activities, and if, because
of a later use of the unit for another purpose, such a deduction becomes
allowable, the unit is taken to have been acquired by the company:
(a) at a cost equal to the written‑down
value of the unit; and
(b) on the day on which the unit was
first used by the company for the other purpose.
(22) Where deductions have been allowed to an
eligible company under subsection (15) in respect of expenditure incurred
by the company in the acquisition or construction of a unit of plant to which subsection (6)
applies in respect of 3 years of income, subsection (20) does not prevent
a deduction for depreciation being allowed to the company in respect of the
unit of plant in respect of a later year of income, and where such a deduction
becomes allowable, the unit shall be deemed to have been acquired by the
company immediately after the end of the last year of income in respect of
which a deduction was allowed to the company under this section in respect of
that expenditure at a cost equal to the written‑down value of the unit of
plant.
Balancing adjustments
(23) Where:
(a) a deduction has been allowed or is
allowable to an eligible company under subsection (15) in respect of
expenditure incurred in the acquisition or construction of a unit of plant
(other than a unit of pilot plant to which subsection (6) applies);
(b) during a year of income, the unit
of plant is disposed of, lost or destroyed;
(c) the company had used the unit of
plant before it was disposed of, lost or destroyed exclusively for the purpose
of the carrying on by or on behalf of the company of research and development
activities; and
(d) no deduction has been allowed or
is allowable to the company under former section 54 of this Act or the
former Division 42 (Depreciation) or Subdivision 40‑B (Capital
allowances) of the Income Tax Assessment Act 1997 in respect of the unit
of plant;
then:
(e) in a case where the consideration
receivable in respect of the disposal, loss or destruction is less than the
written‑down value of the unit of plant:
(i) if the aggregate
research and development amount in relation to the company in relation to the
year of income is greater than $20,000—the amount ascertained by multiplying
the amount by which that written‑down value exceeds that consideration
receivable by 1.25; or
(ii) if the aggregate
research and development amount in relation to the company in relation to the
year of income is less than or equal to $20,000—the amount by which that
written‑down value exceeds that consideration receivable;
is allowable as a deduction from
the assessable income of the company of the year of income; or
(f) in a case where the consideration
receivable in respect of the disposal, loss or destruction is greater than the
written‑down value of the unit of plant—so much of the excess as does not
exceed the difference between the cost of the unit of plant and the written‑down
value of the unit of plant shall be included in the assessable income of the
company of the year of income.
Note: This subsection does not apply to an asset
whose tax cost is set under Division 701 of the Income Tax Assessment
Act 1997: see section 73BAG of this Act.
(24) Where:
(a) a deduction has been allowed or is
allowable to an eligible company under subsection (15) in respect of
expenditure incurred in the acquisition or construction of a unit of pilot plant
to which subsection (6) applies;
(b) during a year of income, the unit
of plant is disposed of, lost or destroyed;
(c) the company had used the unit of
plant before it was disposed of, lost or destroyed exclusively for the purpose
of the carrying on by or on behalf of the company of research and development
activities; and
(d) no deduction has been allowed or
is allowable to the company under former section 54 of this Act or the
former Division 42 (Depreciation) or Subdivision 40‑B (Capital
allowances) of the Income Tax Assessment Act 1997 in respect of the unit
of plant;
then:
(e) in a case where the consideration
receivable in respect of the disposal, loss or destruction is less than the
written‑down value of the unit of plant but greater than the ineligible
pilot plant amount in relation to the unit of plant—the amount ascertained by
multiplying the amount by which that written‑down value exceeds that
consideration receivable by 1.5 is allowable as a deduction from the assessable
income of the company of the year of income;
(f) in a case where the consideration
receivable in respect of the disposal, loss or destruction is less than the
ineligible pilot plant amount in relation to the unit of plant—the amount
ascertained in accordance with the formula $5,000,000 A + B, where:
A is 3 reduced by
the number of years of income in respect of which a deduction has been allowed
under this section to the company in respect of the unit of plant; and
B is the amount by
which that ineligible pilot plant amount exceeds that consideration receivable;
is allowable as a deduction from
the assessable income of the company of the year of income; or
(g) in a case where the consideration
receivable in respect of the disposal, loss or destruction is greater than the
written‑down value of the unit of plant—so much of the excess as does not
exceed the difference between the amount that would, apart from the operation
of subsection (6), be the cost of the unit of plant and that written‑down
value shall be included in the assessable income of the company of the year of
income.
(24A) For the purposes of paragraph (23)(c)
or (24)(c), a company is not to be taken not to have used a unit of plant
before it was disposed of, lost or destroyed exclusively for the purpose of the
carrying on by or on behalf of the company of research and development
activities merely because of either or both of the following:
(a) another person used the unit of
plant as mentioned in subsection (5AA);
(b) the company failed to use the unit
of plant for the reason mentioned in subsection (5AB).
(24B) Where:
(a) a deduction has been allowed or is
allowable to an eligible company under subsection (15AA) in respect of
expenditure incurred in the acquisition or construction of a unit of post‑23 July
1996 pilot plant; and
(b) during a year of income, the unit
of post‑23 July 1996 pilot plant is disposed of, lost or destroyed;
and
(c) the company had used the unit of
post‑23 July 1996 pilot plant before it was disposed of, lost or
destroyed exclusively for the purpose of the carrying on by or on behalf of the
company of research and development activities; and
(d) no deduction has been allowed or
is allowable to the company under former section 54 in respect of the unit
of post‑23 July 1996 pilot plant;
then:
(e) in a case where the consideration
receivable in respect of the disposal, loss or destruction is less than the
written‑down value of the unit of post‑23 July 1996 pilot
plant:
(i) if the aggregate
research and development amount in relation to the company in relation to the
year of income is greater than $20,000—the amount ascertained by multiplying
the amount by which that written‑down value exceeds that consideration
receivable by 1.25; or
(ii) if the aggregate
research and development amount in relation to the company in relation to the
year of income is less than or equal to $20,000—the amount by which that
written‑down value exceeds that consideration receivable;
is allowable as a deduction from
the assessable income of the company of the year of income; or
(f) in a case where the consideration
receivable in respect of the disposal, loss or destruction is greater than the
written‑down value of the unit of post‑23 July 1996 pilot
plant—so much of the excess as does not exceed the difference between the cost
of the unit of post‑23 July 1996 pilot plant and the written‑down
value of the unit of post‑23 July 1996 pilot plant shall be included
in the assessable income of the company of the year of income.
Note: This subsection does not apply to an asset
whose tax cost is set under Division 701 of the Income Tax Assessment
Act 1997: see section 73BAG of this Act.
Amounts included in assessable income
(27) Where:
(a) deductions have been allowed from
the assessable income of an eligible company under former subsection (17)
in respect of expenditure incurred by the company in the acquisition or
construction of a building or an extension, alteration or improvement to a
building; and
(b) the company sells or otherwise
disposes of the building, extension, alteration or improvement more than 5
years after the day on which it began to use the building, extension,
alteration or improvement exclusively for the purpose of the carrying on by or
on behalf of the company of research and development activities;
the assessable income of the company of the year of income
in which the sale or other disposal occurred shall include:
(c) in a case where deductions would,
apart from this section, have been allowed or allowable from the assessable
income of the company under former Division 10D of this Part, or under
Division 43 of the Income Tax Assessment Act 1997, in respect of
the expenditure referred to in paragraph (a)—the amount ascertained by
deducting from so much of the consideration receivable in respect of the sale
or other disposal as does not exceed the amount of the expenditure referred to
in paragraph (a) the sum of the deductions that would, apart from this
section, have been allowed or allowable from the assessable income of the
company under former Division 10D of this Part, or under Division 43
of the Income Tax Assessment Act 1997, in respect of that expenditure;
or
(d) in any other case—so much of the
consideration receivable in respect of the sale or other disposal as does not
exceed the amount of the expenditure referred to in paragraph (a).
(27A) Subject to subsections (27B) and (27C),
where an eligible company that has incurred any expenditure on research and
development activities in respect of which:
(a) a deduction under this section has
been allowed or is allowable to the company; or
(b) in the case of a company whose
income was exempt from tax when the expenditure was incurred—a deduction under
this section would have been allowable if the company’s income had not been so
exempt from tax;
receives or is entitled to receive:
(c) an amount in respect of the
results of any of the activities; or
(d) an amount attributable to the
company having incurred the expenditure, including an amount that it is
entitled to receive irrespective of the results of the activities;
the assessable income of the company of the year of income
in which the company received or became entitled to receive that amount
includes that amount.
(27B) The reference in subsection (27A) to a
company receiving or being entitled to receive an amount in respect of the
results of any research and development activities includes a reference to:
(a) the company receiving or being
entitled to receive an amount from the grant of access to, or the grant of a
right to use, any of those results; and
(b) the company receiving or being
entitled to receive an amount from the disposal of, or of an interest in, any
plant (including pilot plant) or from the grant of a right to use any plant
(including pilot plant) where, as a result of the disposal or grant, another
person has acquired a right of access to, or a right to use, any of those
results; and and
(c) the company receiving or being
entitled to receive an amount from the disposal of, or of an interest in, or
from the grant of a right to occupy or use, a building where, as a result of
the disposal or grant, another person has acquired a right of access to, or a
right to use, any of those results; and
(d) the company receiving or being
entitled to receive an amount from the disposal of core technology;
but does not include a reference to the company receiving
or being entitled to receive an amount in consequence of the use by the company
of any of those results.
(27C) Where a company receives or is entitled to
receive an amount as mentioned in paragraph (27B)(b), (c) or (d), the
amount to be included in the company’s assessable income by virtue of subsection (27A)
is:
(a) in a case to which paragraph (27B)(b)
applies—only so much (if any) of the amount referred to in that paragraph as
exceeds the cost to the company of acquiring or constructing the plant or pilot
plant concerned; or
(b) in a case to which paragraph (27B)(c)
applies—only so much (if any) of the amount referred to in that paragraph as
exceeds the sum of the deductions that have been allowed or are allowable to
the company under subsection (17) in relation to the building concerned;
or
(c) if paragraph 27B(d) applies—only
so much (if any) of the amount referred to in that paragraph as exceeds the
core technology adjustment amount in relation to the core technology concerned.
Amounts worked out on arm’s length basis
(31) Where:
(a) an eligible company has:
(i) incurred an amount of
research and development expenditure; or
(ii) incurred an amount of
core technology expenditure; or
(iii) incurred an amount of
expenditure covered by subsection (14C) (ignoring paragraphs (14C)(f)
and (g)); or
(iv) incurred an amount of
expenditure in the acquisition or construction of plant for use by the company
exclusively for the purpose of the carrying on by or on behalf of the company
of research and development activities; and
(b) the Commissioner is satisfied
that:
(i) having regard to any
connection between the company and the person to whom the expenditure was
incurred and to any other relevant circumstances, the company and that other
person were not dealing with each other at arm’s length in relation to the
incurring of that expenditure; and
(ii) the amount of that
expenditure would have been less if the company and that other person had dealt
with each other at arm’s length in relation to the incurring of that
expenditure;
so much only of that expenditure as the Commissioner
considers reasonable having regard to:
(c) the connection between the company
and that other person;
(d) the amount of the expenditure that
would, in the opinion of the Commissioner, have been incurred by the company if
the company and that other person had dealt with each other at arm’s length in
relation to the incurring of that expenditure; and
(e) such other matters as the
Commissioner considers relevant;
shall be taken into account for the purposes of this
section.
(32) Where:
(a) an eligible company has sold or
otherwise disposed of a unit of plant or a building or an extension, alteration
or improvement to a building to another person; and
(b) the Commissioner is satisfied
that:
(i) having regard to any
connection between the company and that other person and to any other relevant
circumstances, the company and that other person were not dealing with each
other at arm’s length in relation to the sale or disposal; and
(ii) the consideration
receivable by the company in respect of the sale or disposal was less than the
market value of the unit of plant or the building or the extension, alteration
or improvement, as the case may be, immediately before the sale or disposal;
the consideration receivable by the company in respect of
the sale or disposal shall, for the purposes of this section, be deemed to be
the market value of the unit of plant or the building or the extension,
alteration or improvement, as the case may be, immediately before the sale or
disposal.
Deductions denied if Board gives certificates
(33) Subject to subsection (33C), if the
Board gives to the Commissioner a certificate under section 39M or 39MA of
the Industry Research and Development Act 1986 in respect of particular
activities in respect of which expenditure has been incurred by a company, a
deduction is not allowable, and shall be deemed never to have been allowable, under
this section in respect of expenditure incurred by that company in respect of
those activities.
(33A) Subject to subsection (33C), if the
Board gives to the Commissioner a certificate stating that a company has failed
to comply with a notice under section 39N of the Industry Research and
Development Act 1986 in respect of particular activities, a deduction is
not allowable, and shall be deemed never to have been allowable, under this
section in respect of expenditure incurred by that company in respect of those
activities.
(33B) Subject to subsection (33C), if the
Board gives to the Commissioner a certificate in relation to a company or
companies under subsection 39P(4) of the Industry Research and Development
Act 1986, a deduction is not allowable under this section in respect of
expenditure in relation to research and development activities referred to in
the certificate that is incurred by that company or any of those companies
after the day on which notice was given to the company concerned under paragraph
39P(5)(a).
(33BA) Subject to subsections (33BB) and (33C),
if the Board gives the Commissioner a certificate in relation to a company or
companies under subsection 39PB(6) of the Industry Research and Development
Act 1986, a deduction is not allowable under this section in respect of
expenditure in relation to research and development activities referred to in
the certificate that is incurred by that company or any of those companies
after the day stated in the certificate.
(33BB) Subsection (33BA) does not apply to
expenditure in relation to research and development activities in respect of
which a company is registered under section 39J of the Industry
Research and Development Act 1986.
(33C) If a certificate referred to in subsection (33),
(33A), (33B) or (33BA) is revoked, this section applies, and shall be deemed to
have applied, as if the certificate had not been given.
Certificates from Board bind Commissioner
(34) If the Board gives to the Commissioner:
(a) a certificate that:
(i) is given under
section 39L of the Industry Research and Development Act 1986; and
(ii) states whether
particular activities were research and development activities; and
(iii) relates to activities
that were carried on by or on behalf of an eligible company; or
(b) a certificate that:
(i) is given under
section 39LAAA of the Industry Research and Development Act 1986;
and
(ii) states whether
particular activities were Australian‑centred research and development
activities; and
(iii) relates to activities
in relation to which an eligible company incurred expenditure;
the certificate is binding on the Commissioner for the
purpose of making an assessment of the eligible company’s taxable income of any
year of income in which those activities were carried on.
(34AA) If the Board gives to the Commissioner a
certificate that:
(a) is given under section 39LAAB
of the Industry Research and Development Act 1986; and
(b) states whether particular
activities were activities that would have been Australian‑centred research
and development activities if subsection (2BA) of this section had not
been enacted; and
(c) relates to activities in relation
to which an eligible company incurred expenditure;
the certificate is binding on the Commissioner for the
purpose of making an assessment of the eligible company’s taxable income of any
year of income in which those activities were carried on and any later year of
income.
(34A) If the Board gives to the Commissioner a
certificate stating whether particular activities that have been or are being
carried on by or on behalf of an eligible company in respect of a project are
the overseas research and development activities described in the provisional
certificate given by the Board to the company under section 39ED of the Industry
Research and Development Act 1986, the certificate is binding on the
Commissioner for the purpose of making an assessment of the company’s taxable
income of any year of income in which any research and development activities
included in the project were carried on.
(35) If the Board gives to the Commissioner a
certificate stating whether particular technology that a specified eligible
company has acquired, or has acquired the right to use, for the purpose of
particular research and development activities that have been or are being
carried on by or on behalf of the company is core technology in relation to
those activities, that certificate is binding on the Commissioner for the
purpose of making an assessment of the company’s taxable income of any year of
income in which the company incurred expenditure in acquiring that technology
or the right to use that technology.
Apportioning insurance receipts etc.
(36) Where:
(a) an amount is receivable by a
company under a policy of insurance or otherwise in respect of the destruction
of property; and
(b) it is required to be determined
for the purposes of this section how much of the amount receivable is
receivable in respect of part of the property referred to in paragraph (a);
so much of the amount referred to in paragraph (a)
as, in the opinion of the Commissioner, relates to the part of the property
referred to in paragraph (b) shall be taken to be receivable by the
company in respect of the part of the property referred to in paragraph (b).
73BAA
Effect of consolidation
The purpose of sections 73BAB to
73BAF is to ensure that the research and development concession interacts
properly with the consolidation regime in Part 3‑90 of the Income
Tax Assessment Act 1997.
73BAB
Head company treated as registered
Sections 73B to 73Z (inclusive) of
this Act apply to the head company of a consolidated group or MEC group as if
the head company:
(a) were an eligible company; and
(b) were registered under section 39J
of the Industry Research and Development Act 1986 in relation to
particular activities in respect of a year of income;
during any period that a subsidiary member of the group is
an eligible company and registered under section 39J of that Act in
relation to those activities in respect of that year of income.
73BABA
History for purposes of eligibility for tax offset: joining entity
If:
(a) a company becomes a subsidiary
member of a consolidated group or MEC group; and
(b) things happening in relation to
the company before it became a subsidiary member are, because of section 701‑5
(the entry history rule) of the Income Tax Assessment Act 1997, taken
into account as things happening in relation to the head company of the group
in applying paragraph 73J(1)(c) or (d) of this Act to determine for the
head company core purposes whether the head company is eligible to choose a tax
offset;
the things happening are not taken into account as
mentioned in paragraph (b).
73BAC
Expenditure history for purposes of sections 73P to 73Z: joining entity
(1) For the purposes of sections 73P to
73Z (inclusive), where a company (the joining company) becomes a
member of a consolidated group or MEC group, those provisions have effect after
the joining company became a member as if:
(a) any expenditure incurred by the
joining company before it became a member had been incurred by the head company
of the group; and
(b) any amounts the joining company
has deducted or can deduct for that expenditure had been deducted by the head
company; and
(c) the head company of the group had
received any recoupments of, or grants in respect of, that expenditure that the
joining company or a person grouped with it under section 73L received, or
became entitled to receive, before the joining company became a member of the
group.
(2) Subsection (1) has effect after any
application of subsection 73R(3) or (4) (exceptions to R&D membership
period rules).
Note: This provision overrides section 701‑5
of the Income Tax Assessment Act 1997 (the consolidation entry history
rule) for the purposes of sections 73P to 73Z (inclusive) of this Act.
73BACA
History for purposes of eligibility for tax offset: leaving entity
If:
(a) a company ceases to be a
subsidiary member of a consolidated group or MEC group; and
(b) while the company was a subsidiary
member, things happened in relation to an entity with which, if section 701‑1
(the single entity rule) of the Income Tax Assessment Act 1997 were
disregarded, the company would have been grouped (within the meaning of section 73L
of this Act); and
(c) those things would, if section 701‑1
of the Income Tax Assessment Act 1997 were disregarded, have been taken
into account in applying paragraph 73J(1)(c) or (d) of this Act to
determine whether the company is eligible to choose a tax offset; and
(d) the things are not also things
that, because of section 701‑40 (the exit history rule) of the Income
Tax Assessment Act 1997, are taken into account as things happening in
relation to an eligible asset etc. (within the meaning of that section) of the
company in applying paragraph 73J(1)(c) or (d) of this Act to determine
for the entity core purposes whether the company is eligible to choose a tax
offset;
the things are taken into account in applying paragraph
73J(1)(c) or (d) of this Act to determine whether the company is
eligible to choose a tax offset.
73BAD
Expenditure for purposes of sections 73P to 73Z history: leaving entity
(1) For the purposes of sections 73P to
73Z (inclusive), where a company (the leaving company) ceases to
be a member of a consolidated group or MEC group, those provisions have effect
after the leaving company ceased to be a member as if:
(a) any expenditure actually incurred
by the leaving company while it was a member of the group had been incurred by
it rather than by any other member of the group; and
(b) any amounts the head company of
the group has deducted or can deduct for that expenditure had been deducted by
the leaving company.
(2) Subsection (1) has effect before any
application of subsection 73R(3) or (4) (exceptions to R&D membership
period rules).
Note: This provision overrides section 701‑40
of the Income Tax Assessment Act 1997 (the consolidation exit history
rule) for the purposes of sections 73P to 73Z (inclusive) of this Act.
73BAE
Recoupment where entity leaves group
(1) All or part of an amount that would,
apart from this subsection, be allowable as a deduction to the head company of
a consolidated group or MEC group under section 73B or 73BA for a year of
income is not allowable as such a deduction if:
(a) the expenditure that would have
given rise to the deduction was incurred by another company that was a
subsidiary member of the group; and
(b) the other company ceased, during
or after that year of income, to be a subsidiary member of the group; and
(c) the other company would have been
denied a deduction for all or that part of the amount for that year of income
because it received a recoupment or grant to which section 73C would apply
if the other company had never been a subsidiary member of the group.
(2) The other company must, within 60 days
after the end of the financial year in which it received or became entitled to
receive the recoupment or grant, give the head company details in the approved
form of the part of the initial clawback amount for the recoupment or grant
(see section 73C) to be applied by the head company in determining the
reduction in the amount referred to in subsection (1).
73BAF
Preventing double deductions
(1) This section applies to the head company
of a consolidated group or MEC group if, after the tax cost is set for a
depreciating asset, the company can deduct an amount (the reduction
amount) for expenditure in relation to the asset under section 73B
for a year of income.
(2) The company’s deduction for the decline
in value of the asset under Division 40 of the Income Tax Assessment
Act 1997, and its notional Division 40 deduction under section 73BC
of this Act, for the year of income are reduced (but not below nil) by the
reduction amount.
(3) Any part of the reduction amount
remaining after that reduction is applied to reduce the company’s deductions
for the decline in value of the asset under Division 40 of the Income
Tax Assessment Act 1997, and its notional Division 40 deduction under
section 73BC of this Act, for later years of income.
73BAG
Balancing adjustments for certain assets of consolidated groups
(1) Subsections 73B(23) and (24B) do not
apply to an asset held by the head company of a consolidated group or MEC group
where the tax cost of the asset is set under Division 701 of the Income
Tax Assessment Act 1997. Instead, any balancing adjustment for the asset is
worked out under section 73BF of this Act or section 40‑292 of
the Income Tax Assessment Act 1997.
(2) In working out the amount of a balancing
adjustment under section 73BF of this Act or section 40‑292 of
the Income Tax Assessment Act 1997 for the asset, the asset’s adjustable
value (see section 40‑85 of that Act) is reduced by so much of a
reduction amount (see section 73BAF of this Act) for the asset that has
not been applied in reducing a notional Division 40 deduction for the head
company.
73BA
Deduction for certain assets etc. used for the purpose of carrying on research
and development activities
Object
(1) The object of this section is to provide
a tax incentive, in the form of a deduction, to make eligible companies more
internationally competitive by:
(a) encouraging the development by
eligible companies of innovative products, processes and services; and
(b) increasing investment by eligible companies
in defined research and development activities; and
(c) promoting the technological
advancement of eligible companies through a focus on innovation and high
technical risk in defined research and development activities; and
(d) encouraging the use by eligible
companies of strategic research and development planning; and
(e) creating an environment that is
conducive to increased commercialisation of new processes and product
technologies developed by eligible companies.
The benefits of the tax incentive are targeted by being
limited to particular expenditure on certain defined activities.
Entitlement to deduction
(2) If an eligible company has a notional
Division 40 deduction for a section 73BA depreciating asset for a
year of income, the company is entitled to a deduction under this section for
the asset for the year of income.
Amount of deduction
(3) If the eligible company’s aggregate
research and development amount for the year of income is more than $20,000,
the deduction is equal to the notional Division 40 deduction multiplied by
1.25. If not, it equals the notional Division 40 deduction.
No deduction if earlier small business or Division 40
low‑value pool deductions allowable
(4) An eligible company is not entitled to a
deduction under this section for a section 73BA depreciating asset for any
period if the company was entitled to:
(a) a deduction for the asset for any
earlier period under Subdivision 328‑D (about small business
entities) of the Income Tax Assessment Act 1997; or
(b) a deduction for the asset for any
earlier period under Division 40 of that Act, in a case to which section 40‑440
(about low‑value pools) of that Act applied.
Expenditure deductible etc. under this section not
deductible under other provisions
(7) If the whole or a part of an amount of
expenditure incurred by an eligible company:
(a) has been allowed or is or may
become allowable as a deduction under this section; or
(b) would have been so allowed or
become so allowable if the company had not chosen a tax offset under section 73I;
that whole or part is not an allowable deduction, and is
not to be taken into account in working out the amount of an allowable
deduction, from the assessable income of the company of any year of income
under any other provision of this Act.
Definitions
(8) In this section:
aggregate research and development amount has
the same meaning as in section 73B.
eligible company has the same meaning as in
section 73B.
notional Division 40 deduction has the
meaning given by section 73BC.
research and development activities has the
same meaning as in section 73B.
section 73BA depreciating asset has the
meaning given by section 73BB.
73BB
Meaning of section 73BA depreciating asset
(1) A section 73BA depreciating
asset of an eligible company is an asset for which the eligible company
could (ignoring section 73BA) deduct an amount under section 40‑25
of the Income Tax Assessment Act 1997 if the following assumptions were
made:
(b) contrary to paragraph 40‑30(1)(c)
and subsection 40‑30(2) of that Act, all intangible assets were excluded
from the definition of depreciating asset in section 40‑30
of that Act;
(c) subsection 40‑45(2) of that
Act did not, except in the case of buildings, prevent that Division from
applying to capital works to which Division 43 of the Income Tax
Assessment Act 1997 applies, or to which that Division would apply but for
expenditure being incurred, or capital works being started, before a particular
day;
(d) the eligible company satisfied any
relevant requirement for deductibility under that Division.
(2) In this section:
eligible company has the same meaning as in
section 73B.
73BC
Meaning of notional Division 40 deduction
(1) An eligible company has a notional
Division 40 deduction for a section 73BA depreciating asset
for a year of income if it would be entitled to a deduction under section 40‑25
of the Income Tax Assessment Act 1997 for the asset for the year of
income assuming the changes set out in this section were made.
First change: replacement of references to use or
installation ready for use for purpose of producing assessable income or for
taxable purpose
(2) The first change is that references in
Division 40 of the Income Tax Assessment Act 1997 (other than for
the purposes of sections 40‑100, 40‑105 and 40‑110) to
using the asset, or having it installed ready for use:
(a) for the purpose of producing
assessable income; or
(b) for a taxable purpose;
are instead references to using the asset for the purpose
of the carrying on by or on behalf of the eligible company of research and
development activities.
Note 1: Section 73BG modifies sections 40‑100,
40‑105 and 40‑110 (about effective life) so that a reference to the
research and development purpose is added to the existing references, rather
than replacing them.
Note 2: If Division 250 of the Income Tax
Assessment Act 1997 applies to you and an asset:
(a) if section 250‑150 of that Act
applies—the asset is taken to be used, or installed ready for use, for the
purpose of carrying on, by or on behalf of an eligible company, research or
development activities to the extent specified in a determination made under
subsection 250‑150(3) of that Act; or
(b) otherwise—the asset is taken not to be used, or
installed ready for use, for such a purpose.
Second change: method for working out decline in value
where previous Division 40 deduction
(3) The second change is that, if the
eligible company was actually entitled to a deduction under Division 40 of
the Income Tax Assessment Act 1997 for the section 73BA depreciating
asset for any period before the start of the first period for which the company
will be entitled to a deduction for the asset under this subsection, the same
method for working out the decline in value as the company was using for the
asset for the earlier period is used.
Third change: treatment of expenditure to which section 73BD
or 73BE applies
(4) The third change is that, in working out
the cost of the section 73BA depreciating asset, any amount of expenditure
(section 73BA depreciating asset expenditure) that would
otherwise form part of that cost is to be ignored or treated in some other way
if section 73BD or 73BE so provides for the purposes of this section.
Fourth change: certain provisions to be ignored
(5) The fourth change is that Division 40
of the Income Tax Assessment Act 1997 applies as if section 73BA of
this Act, and section 40‑425 and Subdivision 328‑D of
that Act, had not been enacted.
(6) In this section:
eligible company has the same meaning as in
section 73B.
research and development activities has the
same meaning as in section 73B.
section 73BA depreciating asset has the
meaning given by section 73BB.
73BD
Treatment of certain expenditure for the purposes of section 73BC etc.
Requirement for registration under Industry Research
and Development Act
(1) Section 73BA depreciating asset
expenditure incurred by an eligible company in a year of income in relation to
research and development activities is ignored for the purposes of section 73BC
unless:
(a) the company is registered, in
relation to the year of income and in relation to those activities, under
section 39J of the Industry Research and Development Act 1986; or
(b) the company is registered, in
relation to the year of income and in relation to a project comprising or
including those activities, under section 39P of that Act.
Non‑arm’s length expenditure
(2) If:
(a) an eligible company has incurred
an amount of section 73BA depreciating asset expenditure; and
(b) the Commissioner is satisfied
that:
(i) having regard to any
connection between the company and the person to whom the expenditure was
incurred and to any other relevant circumstances, the company and that other
person were not dealing with each other at arm’s length in relation to the
incurring of that expenditure; and
(ii) the amount of that
expenditure would have been less if the company and that other person had dealt
with each other at arm’s length in relation to the incurring of that
expenditure;
so much only of that expenditure is to be taken into account
for the purposes of section 73BC as the Commissioner considers reasonable
having regard to:
(c) the connection between the company
and that other person; and
(d) the amount of the expenditure that
would, in the opinion of the Commissioner, have been incurred by the company if
the company and that other person had dealt with each other at arm’s length in
relation to the incurring of that expenditure; and
(e) such other matters as the
Commissioner considers relevant.
Effect of certificate under section 39M or 39MA of
Industry Research and Development Act
(3) Subject to subsection (8), if the
Board gives to the Commissioner a certificate under section 39M or 39MA of
the Industry Research and Development Act 1986 in respect of particular
activities in respect of which section 73BA depreciating asset expenditure
has been incurred by an eligible company, the expenditure is ignored for the
purposes of section 73BC.
Effect of certificate under section 39N of
Industry Research and Development Act
(4) Subject to subsection (8), if the
Board gives to the Commissioner a certificate stating that a company has failed
to comply with a notice under section 39N of the Industry Research and
Development Act 1986 in respect of particular activities in respect of
which section 73BA depreciating asset expenditure has been incurred by an
eligible company, the expenditure is ignored for the purposes of section 73BC.
Effect of certificate under subsection 39P(4) of
Industry Research and Development Act
(5) Subject to subsection (8), if the
Board gives to the Commissioner a certificate in relation to a company or
companies under subsection 39P(4) of the Industry Research and Development
Act 1986, section 73BA depreciating asset expenditure in relation to
research and development activities referred to in the certificate that is
incurred by that company or any of those companies after the day on which
notice was given to the company concerned under paragraph 39P(5)(a) is ignored
for the purposes of section 73BC.
Effect of certificate under subsection 39PB(6) of
Industry Research and Development Act
(6) Subject to subsections (7) and (8),
if the Board gives to the Commissioner a certificate in relation to a company
or companies under subsection 39PB(6) of the Industry Research and
Development Act 1986, section 73BA depreciating asset expenditure in
relation to research and development activities referred to in the certificate
that is incurred by that company or any of those companies after the day stated
in the certificate is ignored for the purposes of section 73BC.
(7) Subsection (6) of this section does
not apply to section 73BA depreciating asset expenditure in relation to
research and development activities in respect of which a company is registered
under section 39J of the Industry Research and Development Act 1986.
Effect of revocation of certificates mentioned above
(8) If a certificate mentioned in subsection (3),
(4), (5) or (6) is revoked, this section applies, and is taken to have applied,
as if the certificate had not been given.
Expenditure on overseas research and development
activities
(9) Section 73BA depreciating asset
expenditure incurred by an eligible company on overseas research and
development activities is ignored for the purposes of section 73BC unless
the Board gave a provisional certificate in respect of the expenditure under
section 39ED of the Industry Research and Development Act 1986
before the expenditure was incurred.
Expenditure incurred on behalf of another person
(10) Section 73BA depreciating asset
expenditure incurred by an eligible company for the purpose of carrying on
research and development activities on behalf of any other person is ignored
for the purposes of section 73BC to the company.
(11) Subsection (10) does not apply in
relation to expenditure incurred on behalf of a partnership by a partner in the
partnership in that partner’s capacity as such a partner.
Definitions
(12) In this section:
Board means Innovation Australia, established
by the Industry Research and Development Act 1986.
eligible company has the same meaning as in
section 73B.
research and development activities has the
same meaning as in section 73B.
section 73BA depreciating asset has the
meaning given by section 73BB.
section 73BA depreciating asset expenditure
has the meaning given by subsection 73BC(4).
73BE
Treatment of certain partnership expenditure for the purposes of section 73BC
etc.
When section applies
(1) If section 73BA depreciating asset
expenditure has been incurred by a partnership in which, when the expenditure
was incurred:
(a) at least one partner was an
eligible company; and
(b) either:
(i) each other partner was
an eligible company or was a body corporate that was, or is taken to have been,
registered under section 39F of the Industry Research and Development
Act 1986 as a research agency in respect of the class of research and
development activities on which the expenditure was incurred; or
(ii) the partnership was
designated as a Co‑operative Research Centre under the program known as
the Co‑operative Research Centres Program;
the following provisions have effect.
Contributions by partners
(2) Each partner is taken, for the purposes
of sections 73BC, 73C and 73CA of this Act, and Subdivision 20‑A
of the Income Tax Assessment Act 1997, to have incurred so much (if any)
of the expenditure as was incurred out of money contributed by the partner
(otherwise than by way of loan), whether in the year of income in which the
expenditure was incurred or a previous year of income.
Recoupments or grants
(3) If the partnership has, whether before or
after the commencement of this subsection, received, or become entitled to
receive, a recoupment of, or a grant in respect of, the whole or any part of
the expenditure, each partner is to be taken, for the purposes of sections 73BC,
73C and 73CA of this Act, and Subdivision 20‑A of the Income Tax
Assessment Act 1997, to have received, or become entitled to receive, so
much (if any) of the recoupment or grant as is worked out in accordance with
the formula:
where:
partner’s contribution means the total
contribution made (otherwise than by way of loan) by the partner to the funds
of the partnership as at the time when the recoupment or grant was received or
the entitlement to the recoupment or grant arose, as the case may be.
total contribution means the total of the
contributions made (otherwise than by way of loan) by all the partners to the
funds of the partnership as at the time when the recoupment or grant was
received or the entitlement to the recoupment or grant arose, as the case may
be.
Exception to subsections (2) and (3)
(4) If the partnership is not designated as a
Co‑operative Research Centre under the program known as the Co‑operative
Research Centres Program, subsection 73C(2A) does not apply in relation to the
expenditure that a partner is taken to have incurred by subsection (2) or
(3) of this section.
Effect on net income and partnership loss calculation
(5) Any expenditure that a partner is taken
to have incurred by subsection (2) or (3) of this subsection, and any
recoupment or grant that a partner is taken to have received or become entitled
to receive, is not to be taken into account in determining the net income of
the partnership or any partnership loss, as the case may be, of the year of
income.
Provisions to apply to each partner, not partnership
(6) Subject to subsections (2) to (5) of
this section, sections 73BC, 73C and 73CA of this Act, and Subdivision 20‑A
of the Income Tax Assessment Act 1997, apply in relation to each such
partner that is an eligible company as if that partner, and not the
partnership, were, or had been, carrying on the relevant project and
activities, but so apply with such modifications to those sections as are
appropriate having regard to the partner’s interest in the partnership.
Definitions
(7) In this section:
Board means Innovation Australia, established
by the Industry Research and Development Act 1986.
eligible company has the same meaning as in
section 73B.
research and development activities has the
same meaning as in section 73B.
section 73BA depreciating asset has the
meaning given by section 73BB.
section 73BA depreciating asset expenditure
has the meaning given by subsection 73BC(4).
73BF
Balancing adjustments: section 73BA depreciating assets
(1) If:
(a) a balancing adjustment event
(within the meaning of section 40‑295 of the Income Tax
Assessment Act 1997) happens in relation to a section 73BA
depreciating asset of an eligible company; and
(b) one or more deductions have been
allowed or are allowable to the eligible company under section 73BA or
73BH for the asset for a year or years of income, or would have been so allowed
or allowable if:
(i) the company had not
chosen a tax offset under section 73I; or
(ii) section 73BAF had
not been enacted; and
(c) no deduction:
(i) is allowable to the
eligible company under section 40‑25 of the Income Tax Assessment
Act 1997 for the asset for any year of income; or
(ii) was allowable to the
eligible company under section 42‑15 of the Income Tax Assessment
Act 1997, as in force before its repeal by the New Business Tax
System (Capital Allowances) Act 2001, for the asset for any year of
income; and
(d) a deduction would be allowable to
the eligible company, or an amount would be included in the eligible company’s
assessable income, in respect of the balancing adjustment event under
Subdivision 40‑D of that Act if:
(i) the changes set out in
section 73BC were made; and
(ii) section 40‑292
of the Income Tax Assessment Act 1997 and this section (other than this
paragraph) had not been enacted;
then the deduction mentioned in paragraph (d) is
allowable to the eligible company, or the amount mentioned in paragraph (d)
is included in the eligible company’s assessable income, under this section for
the year of income in which the balancing adjustment event occurs.
Note 1: If deductions have been allowed etc. under both
section 73BA or 73BH of this Act and section 40‑25 of the Income
Tax Assessment Act 1997 for a section 73BA depreciating asset, the
balancing adjustment provisions of Division 40 of that Act apply in a
modified way: see section 40‑292 of that Act.
Note 2: An asset whose tax cost is set under Division 701
of the Income Tax Assessment Act 1997 may have its adjustable value
reduced in applying this section: see section 73BAG of this Act.
Increase in deduction or assessable amount where
section 73BA deductions allowable at 1.25 rate
(2) However, if at least one of the
deductions mentioned in paragraph (1)(b) was worked out by multiplying a
notional Division 40 deduction or a notional Division 42 deduction by
1.25 (or would have been so worked out had section 73BAF not been
enacted), subsection (3) applies.
(3) Any amount (the subsection (1)
amount) allowable as a deduction to, or included in the assessable
income of, the eligible company under subsection (1) of this section for
the section 73BA depreciating asset is increased by the amount worked out
using the formula:
where:
adjusted subsection (1) amount means:
(a) if the subsection (1) amount
is a deduction—the amount of the deduction; or
(b) if the subsection (1) amount
is an amount included in the eligible company’s assessable income—so much of
the subsection (1) amount as does not exceed the formula component total
decline in value.
sum of all 1.25 rate notional Division 40/42
deductions means the sum of all notional Division 40 deductions or
notional Division 42 deductions that were multiplied by 1.25 in working
out the deductions mentioned in paragraph (1)(b) for the section 73BA
depreciating asset.
total decline in value means the cost of the
section 73BA depreciating asset, less its adjustable value, just before
the balancing adjustment event, where that cost and adjustable value are the
amounts taken into account in applying Subdivision 40‑D of the Income
Tax Assessment Act 1997 in accordance with paragraph (1)(d) for the
purpose of working out the subsection (1) amount.
(3A) Subsection (3B)
has effect if:
(a) the head company of a consolidated
group or MEC group can deduct an amount under subsection (1) for a
section 73BA depreciating asset for a year of income; and
(b) the head company’s aggregate
research and development amount for the year of income exceeds $20,000; and
(c) the asset was used exclusively for
research and development activities since its tax cost was set under Division 701
of the Income Tax Assessment Act 1997.
(3B) The numerator in the formula in subsection (3)
is increased by any expenditure on the asset that the head company can deduct
under section 73B after the asset’s tax cost was set.
Assessability of amounts received in respect of results
etc. of research and development activities
(4) Subject to subsections (5) and (6),
if:
(a) an eligible company has incurred
any expenditure in respect of which:
(i) a deduction under
section 73BA or 73BH has been allowed or is allowable to the company, or
would have been so allowed or allowable if the company had not chosen a tax
offset under section 73I; or
(ii) in the case of a
company whose income was exempt from tax when the expenditure was incurred—a
deduction under section 73BA or 73BH would have been allowable if the
company’s income had not been so exempt from tax; and
(b) the eligible company receives or
is entitled to receive:
(i) an amount in respect
of the results of any of the research and development activities in relation to
which the expenditure was incurred; or
(ii) an amount attributable
to the company having incurred the expenditure, including an amount that it is
entitled to receive irrespective of the results of the activities;
that amount is included in the company’s assessable income
of the year of income in which the company received or became entitled to
receive it.
(5) The reference in subsection (4) to a
company receiving or being entitled to receive an amount in respect of the
results of any research and development activities includes a reference to:
(a) the company receiving or being
entitled to receive an amount from the grant of access to, or the grant of a
right to use, any of those results; and
(b) the company receiving or being
entitled to receive an amount from the disposal of, or of an interest in, any
section 73BA depreciating asset or from the grant of a right to use any
section 73BA depreciating asset where, as a result of the disposal or
grant, another person has acquired a right of access to, or a right to use, any
of those results;
but does not include a reference to the company receiving
or being entitled to receive an amount in consequence of the use by the company
of any of those results.
(6) If a company receives or is entitled to
receive an amount as mentioned in paragraph (5)(b), the amount to be
included in the company’s assessable income under subsection (4) is only
so much (if any) of the amount mentioned in that paragraph as exceeds the cost
to the company of acquiring or constructing the section 73BA depreciating
asset concerned.
Definitions
(7) In this section:
aggregate research and development amount has
the same meaning as in section 73B.
eligible company has the same meaning as in
section 73B.
notional Division 40 deduction has the
meaning given by section 73BC.
notional Division 42 deduction has the
meaning given by section 73BJ.
research and development activities has the
same meaning as in section 73B.
section 73BA depreciating asset has the
meaning given by section 73BB.
73BG
Effective life calculation under Division 40 of Income Tax Assessment
Act 1997 to take into account use for purpose of carrying on research and
development activities
(1) This section has effect for the purposes
of working out, under sections 40‑100, 40‑105 and 40‑110
of the Income Tax Assessment Act 1997 (whether in their application for
the purposes of section 73BA of this Act or otherwise), the effective life
of a depreciating asset of an eligible company.
(2) If, at the time at which the effective
life is worked out, it is reasonably likely that the depreciating asset will be
used at some time by any eligible company for the purpose of the carrying on by
or on behalf of the eligible company of research and development activities:
(a) the references in:
(i) item 1.1 of the
table in section 40‑10 of the Income Tax Assessment Act 1997
to the period the asset can be used to produce income; and
(ii) sections 40‑100,
40‑105 and 40‑110 of that Act to the period the asset can be used
by any entity for a taxable purpose or for the purpose of producing exempt
income;
include a reference to the
period the asset can be used by any eligible company for the purpose of the
carrying on by or on behalf of the eligible company of research and development
activities; and
(b) in applying paragraph 40‑100(4)(c)
and subsection 40‑105(2) of the Income Tax Assessment Act 1997, it
is to be concluded that no eligible company that can use the asset for the
purpose of the carrying on by or on behalf of the eligible company of research
and development activities will scrap the asset, will sell it for scrap value
or less or will abandon it, for reasons attributable to technical risk in the
carrying on of those activities.
(3) In this section:
depreciating asset has the same meaning as in
Division 40 of the Income Tax Assessment Act 1997.
eligible company has the same meaning as in
section 73B.
research and development activities has the
same meaning as in section 73B of this Act.
73BH
Deduction for plant etc. used for purpose of carrying on research and
development activities
Entitlement to deduction
(1) If an eligible company has a notional
Division 42 deduction for a unit of section 73BH plant for a year of
income, the company is entitled to a deduction under this section for the plant
for the year of income.
Amount of deduction
(2) If the eligible company’s aggregate
research and development amount for the year of income is more than $20,000,
the deduction is equal to the notional Division 42 deduction multiplied by
1.25. If not, it equals the notional Division 42 deduction.
No deduction if earlier Division 42 pooling or low‑value
pool deductions allowable
(3) An eligible company is not entitled to a
deduction under this section for a unit of section 73BH plant for any
period if the company was entitled to a deduction for the unit for any earlier
period under Division 42 of the Income Tax Assessment Act 1997, in
a case to which Subdivision 42‑L or 42‑M (about pooling and
low‑value pools) of that Division applied.
Expenditure deductible under this section not
deductible under other provisions
(6) If the whole or a part of an amount of
expenditure incurred by an eligible company has been allowed or is or may
become allowable as a deduction under this section, that whole or part is not
an allowable deduction, and is not to be taken into account in working out the
amount of an allowable deduction, from the assessable income of the company of
any year of income under any other provision of this Act.
Definitions
(7) In this section:
aggregate research and development amount has
the same meaning as in section 73B.
eligible company has the same meaning as in
section 73B.
notional Division 42 deduction has the
meaning given by section 73BJ.
section 73BH plant has the meaning given
by section 73BI.
73BI
Meaning of section 73BH plant
(1) A unit of section 73BH plant
of an eligible company is a thing for which the eligible company could
(ignoring section 73BH) deduct an amount under section 42‑15 of
the Income Tax Assessment Act 1997 if the following assumptions were
made:
(b) the definition of plant
in section 42‑18 of that Act included capital works (other than
buildings) to which Division 43 of the Income Tax Assessment Act 1997 applies,
or to which that Division would apply but for expenditure being incurred, or
capital works being started, before a particular day;
(c) the eligible company satisfied any
relevant requirement for deductibility under that Division.
(2) However, subsection (1) does not
apply to a thing:
(a) acquired, or constructed, under a
contract entered into by the company at or before 12 pm, by legal time in the
Australian Capital Territory, on 29 January 2001; or
(b) that the company commenced to construct
at or before 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001.
(3) In this section:
eligible company has the same meaning as in
section 73B.
73BJ
Meaning of notional Division 42 deduction
Notional Division 42 deduction
(1) An eligible company has a notional
Division 42 deduction for a year of income for a unit of section 73BH
plant if it would be entitled to a deduction for the plant under section 42‑15
of the Income Tax Assessment Act 1997 for the year of income assuming
the changes set out in this section were made.
First change: replacement of references to use or
installation ready for use for purpose of producing assessable income
(2) The first change is that references in
Division 42 of the Income Tax Assessment Act 1997 to using the
unit, or having it installed ready for use, for the purpose of producing
assessable income are instead references to using the unit for the purpose of
the carrying on by or on behalf of the eligible company of research and
development activities.
Second change: method for calculating deduction where
previous Division 42 deduction
(3) The second change is that, if the
eligible company was actually entitled to a deduction under Division 42 of
the Income Tax Assessment Act 1997 for the unit of section 73BH
plant for any period before the start of the first period for which the company
will be entitled to a deduction for the plant under this subsection, the same
method for calculating the deduction as the company was using for the unit for the
earlier period is used.
Third change: treatment of expenditure to which section 73BK
or 73BL applies
(4) The third change is that, in working out
the cost of the unit of section 73BH plant, any amount of expenditure (section 73BH
plant expenditure) that would otherwise form part of that cost is to be
ignored or treated in some other way if section 73BK or 73BL so provides
for the purposes of this section.
Fourth change: certain provisions to be ignored
(5) The fourth change is that Division 42
of the Income Tax Assessment Act 1997 applies as if section 73BH of
this Act and Subdivisions 42‑L and 42‑M of that Act had not
been enacted.
Definition
(6) In this section:
section 73BH plant has the meaning given
by section 73BI.
73BK
Treatment of certain expenditure for the purposes of section 73BJ etc.
Requirement for registration under Industry Research
and Development Act
(1) Section 73BH plant expenditure
incurred by an eligible company in a year of income in relation to research and
development activities is ignored for the purposes of section 73BJ unless:
(a) the company is registered, in
relation to the year of income and in relation to those activities, under
section 39J of the Industry Research and Development Act 1986; or
(b) the company is registered, in
relation to the year of income and in relation to a project comprising or
including those activities, under section 39P of that Act.
Non‑arm’s length expenditure
(2) If:
(a) an eligible company has incurred
an amount of section 73BH plant expenditure; and
(b) the Commissioner is satisfied
that:
(i) having regard to any
connection between the company and the person to whom the expenditure was
incurred and to any other relevant circumstances, the company and that other
person were not dealing with each other at arm’s length in relation to the
incurring of that expenditure; and
(ii) the amount of that
expenditure would have been less if the company and that other person had dealt
with each other at arm’s length in relation to the incurring of that
expenditure;
so much only of that expenditure is to be taken into
account for the purposes of section 73BJ as the Commissioner considers
reasonable having regard to:
(c) the connection between the company
and that other person; and
(d) the amount of the expenditure that
would, in the opinion of the Commissioner, have been incurred by the company if
the company and that other person had dealt with each other at arm’s length in
relation to the incurring of that expenditure; and
(e) such other matters as the
Commissioner considers relevant.
Effect of certificate under section 39M or 39MA of
Industry Research and Development Act
(3) Subject to subsection (8), if the
Board gives to the Commissioner a certificate under section 39M or 39MA of
the Industry Research and Development Act 1986 in respect of particular
activities in respect of which section 73BH plant expenditure has been
incurred by an eligible company, the expenditure is ignored for the purposes of
section 73BJ.
Effect of certificate under section 39N of
Industry Research and Development Act
(4) Subject to subsection (8), if the
Board gives to the Commissioner a certificate stating that a company has failed
to comply with a notice under section 39N of the Industry Research and
Development Act 1986 in respect of particular activities in respect of
which section 73BH plant expenditure has been incurred by an eligible
company, the expenditure is ignored for the purposes of section 73BJ.
Effect of certificate under subsection 39P(4) of
Industry Research and Development Act
(5) Subject to subsection (8), if the
Board gives to the Commissioner a certificate in relation to a company or
companies under subsection 39P(4) of the Industry Research and Development
Act 1986, section 73BH plant expenditure in relation to research and
development activities referred to in the certificate that is incurred by that
company or any of those companies after the day on which notice was given to
the company concerned under paragraph 39P(5)(a) is ignored for the purposes of
section 73BJ.
Effect of certificate under subsection 39PB(6) of
Industry Research and Development Act
(6) Subject to subsections (7) and (8),
if the Board gives to the Commissioner a certificate in relation to a company
or companies under subsection 39PB(6) of the Industry Research and
Development Act 1986, section 73BH plant expenditure in relation to
research and development activities referred to in the certificate that is
incurred by that company or any of those companies after the day stated in the
certificate is ignored for the purposes of section 73BJ.
(7) Subsection (6) of this section does
not apply to section 73BH plant expenditure in relation to research and
development activities in respect of which a company is registered under
section 39J of the Industry Research and Development Act 1986.
Effect of revocation of certificates mentioned above
(8) If a certificate mentioned in subsection (3),
(4), (5) or (6) is revoked, this section applies, and is taken to have applied,
as if the certificate had not been given.
Expenditure on overseas research and development
activities
(9) Section 73BH plant expenditure
incurred by an eligible company on overseas research and development activities
is ignored for the purposes of section 73BJ unless the Board gave a
provisional certificate in respect of the expenditure under section 39ED
of the Industry Research and Development Act 1986 before the expenditure
was incurred.
Expenditure incurred on behalf of another person
(10) Section 73BH plant expenditure incurred
by an eligible company for the purpose of carrying on research and development
activities on behalf of any other person is ignored for the purposes of section 73BJ.
(11) Subsection (10) does not apply in
relation to expenditure incurred on behalf of a partnership by a partner in the
partnership in that partner’s capacity as such a partner.
Definitions
(12) In this section:
Board means Innovation Australia, established
by the Industry Research and Development Act 1986.
eligible company has the same meaning as in
section 73B.
research and development activities has the
same meaning as in section 73B.
section 73BH plant has the meaning given
by section 73BI.
section 73BH plant expenditure
has the meaning given by subsection 73BJ(4).
73BL
Treatment of certain partnership expenditure for the purposes of section 73BJ
etc.
When section applies
(1) If section 73BH plant expenditure
has been incurred by a partnership in which, when the expenditure was incurred:
(a) at least one partner was an
eligible company; and
(b) either:
(i) each other partner was
an eligible company or was a body corporate that was, or is taken to have been,
registered under section 39F of the Industry Research and Development
Act 1986 as a research agency in respect of the class of research and
development activities on which the expenditure was incurred; or
(ii) the partnership was
designated as a Co‑operative Research Centre under the program known as
the Co‑operative Research Centres Program;
the following provisions have effect.
Contributions by partners
(2) Each partner is taken, for the purposes
of sections 73BJ, 73C and 73CA of this Act, and Subdivision 20‑A
of the Income Tax Assessment Act 1997, to have incurred so much (if any)
of the expenditure as was incurred out of money contributed by the partner
(otherwise than by way of loan), whether in the year of income in which the
expenditure was incurred or a previous year of income.
Recoupments or grants
(3) If the partnership has, whether before or
after the commencement of this subsection, received, or become entitled to
receive, a recoupment of, or a grant in respect of, the whole or any part of
the expenditure, each partner is to be taken, for the purposes of sections 73BJ,
73C and 73CA of this Act, and Subdivision 20‑A of the Income Tax
Assessment Act 1997, to have received, or become entitled to receive, so
much (if any) of the recoupment or grant as is worked out in accordance with
the formula:
where:
partner’s contribution means the total
contribution made (otherwise than by way of loan) by the partner to the funds
of the partnership as at the time when the recoupment or grant was received or
the entitlement to the recoupment or grant arose, as the case may be.
total contribution means the total of the
contributions made (otherwise than by way of loan) by all the partners to the
funds of the partnership as at the time when the recoupment or grant was
received or the entitlement to the recoupment or grant arose, as the case may
be.
Exception to subsections (2) and (3)
(4) If the partnership is not designated as a
Co‑operative Research Centre under the program known as the Co‑operative
Research Centres Program, subsection 73C(2A) does not apply in relation to the
expenditure that a partner is taken to have incurred by subsection (2) or
(3) of this section.
Effect on net income and partnership loss calculation
(5) Any expenditure that a partner is taken
to have incurred by subsection (2) or (3) of this subsection, and any
recoupment or grant that a partner is taken to have received or become entitled
to receive, is not to be taken into account in determining the net income of
the partnership or any partnership loss, as the case may be, of the year of
income.
Provisions to apply to each partner, not partnership
(6) Subject to subsections (2) to (5) of
this section, sections 73BJ, 73C and 73CA of this Act, and Subdivision 20‑A
of the Income Tax Assessment Act 1997, apply in relation to each such
partner that is an eligible company as if that partner, and not the
partnership, were, or had been, carrying on the relevant project and
activities, but so apply with such modifications to those sections as are
appropriate having regard to the partner’s interest in the partnership.
Definitions
(7) In this section:
Board means Innovation Australia, established
by the Industry Research and Development Act 1986.
eligible company has the same meaning as in
section 73B.
research and development activities has the
same meaning as in section 73B.
section 73BH plant has the meaning given
by section 73BI.
section 73BH plant expenditure
has the meaning given by subsection 73BJ(4).
73BM
Balancing adjustments: section 73BH plant
(1) If:
(a) a balancing adjustment event
(within the meaning of subsection 42‑30(3) of the Income Tax
Assessment Act 1997) happens in relation to a unit of section 73BH
plant of an eligible company; and
(b) one or more deductions have been
allowed or are allowable to the eligible company under section 73BH for
the unit for a year or years of income; and
(c) no deduction was allowable to the
eligible company under section 42‑15 of the Income Tax Assessment
Act 1997 for the unit for any year of income; and
(d) a deduction would be allowable to
the eligible company, or an amount would be included in the eligible company’s
assessable income, in respect of the balancing adjustment event under
Subdivision 42‑F of that Act as so in force, if:
(i) the changes set out in
section 73BJ were made; and
(ii) section 42‑220A
of the Income Tax Assessment Act 1997 and this section (other than this
paragraph) had not been enacted;
then the deduction mentioned in paragraph (d) is
allowable to the eligible company, or the amount mentioned in paragraph (d)
is included in the eligible company’s assessable income, under this section for
the year of income in which the balancing adjustment event occurs.
Note: If deductions have been allowable under both
section 73BH of this Act and section 42‑15 of the Income Tax
Assessment Act 1997 for a unit of section 73BH plant, the balancing
adjustment provisions of Division 42 of that Act apply in a modified way:
see section 42‑220A of that Act.
Increase in deduction or assessable amount where
section 73BH deductions allowable at 1.25 rate
(2) However, if at least one of the
deductions mentioned in paragraph (1)(b) was worked out by multiplying a
notional Division 42 deduction by 1.25, subsection (3) applies.
(3) Any amount
(the eligible subsection (1) amount):
(a) allowable as a deduction to the
eligible company under subsection (1) of this section for the unit of
section 73BH plant; or
(b) included in the assessable income
of the eligible company under subsection (1) of this section for the unit
of section 73BH plant, where that amount is so included as a result of the
application of section 42‑190 of the Income Tax Assessment Act
1997 in accordance with paragraph (1)(d) of this section;
is increased by the amount worked out using the formula:
where:
sum of all 1.25 rate notional Division 42
deductions means the sum of all notional Division 42 deductions
that were multiplied by 1.25 in working out the deductions mentioned in paragraph (1)(b)
for the unit of section 73BH plant.
total decline in value means the cost of the
unit of section 73BH plant, less its undeducted cost, just before the
balancing adjustment event, where that cost and undeducted cost are the amounts
taken into account in applying Subdivision 42‑F of the Income Tax
Assessment Act 1997 in accordance with paragraph (1)(d) for the
purpose of working out the deduction allowable to the eligible company, or the
amount included in the eligible company’s assessable income, under subsection (1)
for the unit.
Assessability of amounts received in respect of results
etc. of research and development activities
(4) Subject to subsections (5) and (6),
if:
(a) an eligible company has incurred
any expenditure in respect of which:
(i) a deduction under
section 73BH has been allowed or is allowable to the company; or
(ii) in the case of a
company whose income was exempt from tax when the expenditure was incurred—a
deduction under section 73BH would have been allowable if the company’s
income had not been so exempt from tax; and
(b) the eligible company receives or
is entitled to receive:
(i) an amount in respect
of the results of any of the research and development activities in relation to
which the expenditure was incurred; or
(ii) an amount attributable
to the company having incurred the expenditure, including an amount that it is
entitled to receive irrespective of the results of the activities;
that amount is included in the company’s assessable income
of the year of income in which the company received or became entitled to
receive it.
(5) The reference in subsection (4) to a
company receiving or being entitled to receive an amount in respect of the
results of any research and development activities includes a reference to:
(a) the company receiving or being
entitled to receive an amount from the grant of access to, or the grant of a
right to use, any of those results; and
(b) the company receiving or being
entitled to receive an amount from the disposal of, or of an interest in, any
section 73BH plant or from the grant of a right to use any section 73BH
plant where, as a result of the disposal or grant, another person has acquired
a right of access to, or a right to use, any of those results;
but does not include a reference to the company receiving
or being entitled to receive an amount in consequence of the use by the company
of any of those results.
(6) If a company receives or is entitled to
receive an amount as mentioned in paragraph (5)(b), the amount to be
included in the company’s assessable income under subsection (4) is only
so much (if any) of the amount mentioned in that paragraph as exceeds the cost
to the company of acquiring or constructing the section 73BH plant
concerned.
Definitions
(7) In this section:
eligible company has the same meaning as in
section 73B.
notional Division 42 deduction has the
meaning given by section 73BJ.
research and development activities has the
same meaning as in section 73B.
section 73BH plant has the meaning given
by section 73BI.
73BN
Effective life calculation under Division 42 of Income Tax Assessment
Act 1997 to take into account use for purpose of carrying on research and
development activities
(1) This section has effect for the purposes
of working out, under sections 42‑105, 42‑110 and 42‑112
of the Income Tax Assessment Act 1997 (whether in their application for
the purposes of section 73BH of this Act or otherwise), the effective life
of a unit of plant of an eligible company:
(a) that was acquired, or constructed,
under a contract entered into by the company after 12 pm, by legal time in the
Australian Capital Territory, on 29 January 2001; or
(b) that the company commenced to
construct after 12 pm, by legal time in the Australian Capital Territory, on 29 January
2001.
(2) If, at the time at which the effective
life is worked out, it is reasonably likely that the plant will be used at some
time by any eligible company for the purpose of the carrying on by or on behalf
of the eligible company of research and development activities:
(a) references in sections 42‑105,
42‑110 and 42‑112 of the Income Tax Assessment Act 1997 to
the period the unit can be used by any entity for income producing purposes
include references to the period the unit can be used by any eligible company
for the purpose of the carrying on by or on behalf of the eligible company of
research and development activities; and
(b) for the purposes of subsection 42‑105(3)
and paragraph 42‑112(5)(c) of that Act, it is to be concluded that no
eligible company that can use the unit for the purpose of the carrying on by or
on behalf of the eligible company of research and development activities will
scrap the unit, will sell it for scrap value or less or will abandon it, for
reasons attributable to technical risk in carrying on those activities.
(3) In this section:
eligible company has the same meaning as in
section 73B.
plant has the same meaning as in Division 42
of the Income Tax Assessment Act 1997.
research and development activities has the
same meaning as in section 73B of this Act.
73C
Recouped expenditure on research and development activities
(1) For the purposes of interpretation, this
section is to be read and construed as if it were part of section 73B.
(2) This section applies where:
(a) an eligible company has, at any
time on or after 1 July 1985, incurred expenditure (in this section called
the relevant expenditure) on research and development activities
that formed or form part of a particular project carried on by or on behalf of
the company; and
(b) the company has, whether before or
after the commencement of this section, received, or become entitled to
receive, a recoupment of, or a grant in respect of, the whole or any part of
the relevant expenditure by or from the Commonwealth, a State or a Territory,
an STB (within the meaning of Division 1AB) or an authority constituted by
or under a law of the Commonwealth, of a State or of a Territory, or another
person has received or become entitled to receive such a recoupment or grant
where the other person is, at the time of receipt or entitlement, grouped with
the first‑mentioned company as mentioned in section 73L.
(2A) A reference in this section to a recoupment
of, or a grant in respect of, the whole or any part of expenditure incurred by
an eligible company on research and development activities that formed or form
part of a particular project carried on by or on behalf of the company does not
include a reference to a recoupment or grant where the recoupment or grant is
made:
(a) by or from the Commonwealth; and
(b) under the program known as the Co‑operative
Research Centres Program.
(3) Where this section applies to a company
in respect of relevant expenditure in relation to a particular project:
(a) the relevant expenditure is
subject to the application of clawback in accordance with this section; and
(b) for the purposes of this section
the initial clawback amount in relation to the relevant expenditure is an
amount equal to twice the amount, or twice the total of the amounts, as the
case may be, that the company or the grouped person (see paragraph (2)(b))
has received, or become entitled to receive, as a recoupment of, or as a grant
in respect of, any of the relevant expenditure as mentioned in paragraph (2)(b).
(4) A deduction is not allowable, and is to
be taken never to have been allowable, under section 73B in respect of any
relevant expenditure that was incurred before 21 November 1987 and in respect
of which this section applies to the company, and that expenditure is, subject
to the provisions of this section relating to clawback, to be disregarded for
the purposes of the application of section 73B to the company.
(5) The following subsections apply only if
the relevant expenditure includes, or consists wholly of, expenditure incurred
on or after 21 November 1987.
(6) Where the relevant expenditure includes
both expenditure incurred before 21 November 1987 and expenditure incurred
on or after that date:
(a) if the initial clawback amount is
equal to or less than the relevant expenditure that was incurred before that
date, clawback applies to so much of the relevant expenditure that was incurred
before that date as does not exceed the initial clawback amount; or
(b) if the initial clawback amount
exceeds the relevant expenditure that was incurred before that date, the
following provisions have effect:
(i) clawback applies to so
much of the relevant expenditure as was incurred before that date;
(ii) if the excess (in the
following subparagraphs called the excess clawback amount) is
equal to or greater than so much of the relevant expenditure as was or is
incurred on or after that date (in this subsection called the deductible
relevant expenditure)—clawback applies to the whole of the deductible
relevant expenditure;
(iii) if the excess clawback
amount is less than the deductible relevant expenditure—clawback applies to so
much of the deductible relevant expenditure as does not exceed the excess clawback
amount;
(iv) for the purpose of
applying clawback to deductible relevant expenditure as mentioned in subparagraph (iii):
(A) regard
is to be had first to the earliest year of income of the company in which any
deductible relevant expenditure was incurred and then, if necessary, in
chronological order to each later year of income; and
(B) to the
extent that clawback is applied to deductible relevant expenditure incurred in
a year of income of the company, the excess clawback amount to be applied to
such expenditure incurred in a later year of income is reduced accordingly; and
(C) if the
part of the excess clawback amount that is applicable to deductible relevant
expenditure incurred in a year of income is less than that expenditure and that
expenditure comprises 2 or more kinds of expenditure—that part of the excess
clawback amount is to be apportioned among those kinds of expenditure in such
manner as the Commissioner determines, being an apportionment that will
minimise any reduction in the deduction allowable to the company under section 73B,
73BA or 73BH in respect of that expenditure.
(7) Where the relevant expenditure consists
wholly of expenditure incurred on or after 21 November 1987 the following provisions have effect:
(a) if the initial clawback amount is
equal to or greater than the relevant expenditure—clawback applies to the whole
of that expenditure;
(b) if the initial clawback amount is
less than the relevant expenditure—clawback applies to so much of the relevant
expenditure as does not exceed the initial clawback amount;
(c) for the purpose of applying
clawback to relevant expenditure as mentioned in paragraph (b):
(i) subject to subparagraph (ii),
regard is to be had to the years of income of the company in the following order:
(A) the year
of income, or, in chronological order, each year of income, in which the
company or the grouped person (see paragraph (2)(b)) received, or became
entitled to receive, an amount that is taken into account in ascertaining the
initial clawback amount;
(B) in
reverse chronological order, each year of income before the year, or the
earliest year, of income referred to in sub-subparagraph (A);
(C) in
chronological order, each year of income to which regard has not been had under
sub-subparagraph (A) or (B); and
(ii) if the company or the
grouped person did not receive, or become entitled to receive, any part of the
initial clawback amount until after the last year of income in which any of the
relevant expenditure was incurred, regard is to be had first to the latest year
of income in respect of which a deduction was allowed, or is allowable, under
section 73B, 73BA or 73BH in respect of any of that expenditure or would
have been allowable under that section if the company or the grouped person had
not chosen a tax offset under section 73I and then, in reverse
chronological order, to each of the earlier years of income; and
(iii) to the extent that
clawback is applied to relevant expenditure incurred in a year of income of the
company, the initial clawback amount to be applied to such expenditure incurred
in another year of income is reduced accordingly; and
(iv) if the part of the
initial clawback amount that is applicable to relevant expenditure incurred in
a year of income is less than that expenditure and that expenditure comprises 2
or more kinds of expenditure—that part of the initial clawback amount is to be
apportioned among those kinds of expenditure in such manner as the Commissioner
determines, being an apportionment that will minimise any reduction in the
deduction allowable to the company under section 73B, 73BA or 73BH in
respect of that expenditure.
(8) Where clawback applies to contracted
expenditure incurred on or after 21 November 1987, subsection 73B(13) has
effect in relation to that expenditure as if there were omitted from that
subsection multiplied by 1.25.
(9) If clawback applies to expenditure (other
than contracted expenditure) incurred on or after 21 November 1987, subsections 73B(4E) and (14), paragraph 73B(15)(a), paragraph 73B(15)(a) and
subsections 73BA(3) and 73BH(2) have effect as if multiplied by 1.25
were omitted from those subsections and that paragraph.
(10) Except as provided by subsections (8)
and (9), the application of clawback to any expenditure does not have any
effect for the purposes of section 73B, 73BA or 73BH.
73CA
Guaranteed returns to investors
(1) For the purposes of interpretation, this
section is to be read and construed as if it were part of section 73B.
(2) Where:
(a) an amount or amounts would, but
for this section, be allowable as a deduction or deductions under section 73B,
73BA or 73BH, as affected by section 73C to an eligible company in respect
of expenditure incurred in a year of income; and
(b) that amount or the sum of those
amounts exceeds the amount of the expenditure; and
(c) the Commissioner is satisfied
that, when the expenditure was incurred, the company was not at risk in respect
of the whole or a part of the expenditure;
the following provisions of this section have effect.
(3) If the Commissioner is so satisfied in
respect of the whole of the expenditure, the amount, or the sum of the amounts,
referred to in paragraph (2)(a) is taken to be reduced by the amount of
the excess referred to in paragraph (2)(b).
(4) If the Commissioner is so satisfied in
respect of part of the expenditure, the amount, or the sum of the amounts,
referred to in paragraph (2)(a) is taken to be reduced by an amount
ascertained in accordance with the formula:
where:
Excess means the amount of the excess
referred to in paragraph (2)(b).
Part of expenditure not at risk means the
part of the expenditure in respect of which the Commissioner is satisfied that
the company was not at risk when the expenditure was incurred.
(5) 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 at the time when the expenditure was incurred
in respect of so much of the expenditure as does not exceed any consideration
that, in the opinion of the Commissioner, 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;
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.
(6) 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.
expenditure does not include core technology
expenditure.
73CB
Expenditure incurred to tax‑exempt bodies
(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
(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,
73BA or 73BH 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.
73E
Section 73B roll‑over relief on disposal of unit of plant to another
member of same wholly‑owned group
(1A) This section does not apply in respect of a
disposal in respect of which Subdivision 170‑D of the Income Tax
Assessment Act 1997 applies.
Roll‑over relief where CGT roll‑over relief
allowed
(1) This section applies to the disposal of a
unit of plant by an eligible company (in this section called the transferor)
to another eligible company (in this section called the transferee)
if:
(a) the disposal involves a CGT event
for which there is a roll‑over under Subdivision 126‑B of the Income
Tax Assessment Act 1997, as in force before the amendments made to that
Subdivision by the New Business Tax System (Consolidation) Act (No. 1)
2002 (or would be, disregarding the exemption in section 118‑5
of that Act, so far as it relates to a car, motor cycle or similar vehicle, or
to an interest in one); and
(b) subject to subsection (11), a
deduction or deductions have been allowed or are allowable under subsection
73B(15) to the transferor in respect of the unit; and
(c) no deduction has been allowed or
is allowable under the former section 54 of this Act or the former
Division 42 (Depreciation) or Subdivision 40‑B (Capital
allowances) of the Income Tax Assessment Act 1997 to the transferor in
respect of the unit.
No balancing charges
(2) Subsection 73B(23) or (24), as the case
requires, does not apply in respect of the disposal of the unit by the
transferor.
No deduction for decline in value for transferor in
year of disposal
(3) A deduction under the former Division 42
(Depreciation) or Subdivision 40‑B (Capital allowances) of the Income
Tax Assessment Act 1997 is not allowable to the transferor in respect of
the unit in relation to the year of income in which the disposal took place.
Subsection 73B(4) definition of qualifying plant
expenditure not applicable to transferee
(4) Subsection 73B(4) does not apply to the
transferee in relation to the unit.
Transferee to inherit transferor’s qualifying plant
expenditure
(5) If:
(a) immediately after the disposal
took place, the transferee commences to use the unit exclusively for the
purpose of the carrying on by or on behalf of the transferee of research and
development activities; and
(b) apart from the disposal, there
would have been an amount of qualifying plant expenditure in relation to the
transferor in relation to:
(i) the year of income of
the transferor in which the disposal took place; or
(ii) the first subsequent
year of income of the transferor;
then:
(c) subject to subsection 73B(5),
section 73B and this section have effect as if an amount equal to that
amount were taken:
(i) to have been incurred
by the transferee in the acquisition of the unit; and
(ii) to be an amount of
qualifying plant expenditure in relation to the transferee in relation to:
(A) if subparagraph (b)(i)
applies—the year of income of the transferee in which the disposal took place;
and
(B) if subparagraph (b)(ii)
applies—the first subsequent year of income of the transferee; and
(d) a reference in subsection 73B(21)
to the end of the second year of income after the year of income in which the
transferee first used the unit exclusively for the purpose of the carrying on
by or on behalf of the transferee of research and development activities is to
be read as a reference to the end of the 3‑year period commencing at the
beginning of:
(i) the year of income in
which the transferor first used the unit exclusively for the purpose of the
carrying on by or on behalf of the transferor of research and development
activities; or
(ii) if there have been 2
or more prior successive applications of this section—the earliest year of
income in which a prior successive transferor first used the unit exclusively
for the purpose of the carrying on by or on behalf of the prior successive
transferor of research and development activities; and
(e) the reference in subsection
73B(22) to deductions having been allowed to the transferee under subsection
73B(15) in relation to the unit in respect of 3 years of income is to be read
as a reference to deductions having been allowed to the transferee under
subsection 73B(15) in relation to the unit in respect of 3 years of income,
reduced by one year for each year of income for which a deduction was allowed
or allowable under subsection 73B(15) to:
(i) the transferor in
respect of the unit; or
(ii) if there have been 2
or more prior successive applications of this section—any of the prior
successive transferors in respect of the unit.
Modification of capital allowance provisions applicable
to transferee
(6) If a deduction is or becomes allowable to
the transferee for the decline in value of the unit, the provisions of Division 40
(Capital allowances) of the Income Tax Assessment Act 1997 apply as if:
(a) the transferee had acquired the
unit for a cost equal to the modified written‑down value of the unit; and
(b) subsections 73B(21) and (22) had
effect as if a reference in those subsections to the written‑down value
of the unit were a reference to the modified written‑down value of the
unit; and
(c) in relation to the year of income
of the transferee in which the disposal took place, the component “days held”
in the formula in section 40‑70 or 40‑75 of the Income Tax
Assessment Act 1997 included the number of days in that year when the
transferor both:
(i) held the unit within
the meaning of Division 40 of the Income Tax Assessment Act 1997;
and
(ii) used it for a taxable
purpose within the meaning of that Division or had it installed ready for use
for that purpose.
Disposal by transferee where no roll‑over relief—inheritance
of transferor’s cost and deductions
(7) If:
(a) after the disposal of the unit to
the transferee, the unit is lost or destroyed or the transferee disposes of the
unit; and
(b) in
the case of a disposal by the transferee—this section does not apply to the
disposal;
then, for the purposes of the application of subsection
73B(23) or (24), as the case may be, in relation to the loss, destruction or
disposal, those subsections have effect as if:
(c) a reference in those subsections
to the written‑down value of the unit were a reference to the modified
written‑down value of the unit; and
(d) a reference in those subsections,
and in the definition of ineligible pilot plant amount in
subsection 73B(1), to the cost of the unit were a reference to:
(i) the cost of the unit
to the transferor (worked out as if subsection 73B(6) had not been enacted); or
(ii) if there have been 2
or more prior successive applications of this section—the cost of the unit to
the earliest prior successive transferor (worked out as if subsection 73B(6)
had not been enacted); and
(e) a reference in paragraph
73B(24)(f) to a year of income in respect of which a deduction has been allowed
under section 73B to the transferee in respect of the unit were worked out
on the basis that whichever of the following is applicable:
(i) the deductions allowed
or allowable to the transferor under section 73B in respect of one or more
years of income in relation to the unit;
(ii) if there have been 2
or more prior successive applications of this section—the deductions allowed or
allowable to the prior successive transferors under section 73B in respect
of one or more years of income in relation to the unit;
had been deductions allowed or
allowable to the transferee under section 73B in respect of the years of
income in relation to the unit.
Meaning of modified written‑down value
(8) For the purposes of the application of subsections (6)
and (7) to the transferee, the modified written‑down value of the unit is
the amount that would have been the written‑down value if:
(a) whichever of the following is
applicable:
(i) the deductions allowed
or allowable to the transferor under section 73B in respect of one or more
years of income in relation to the unit;
(ii) if there have been 2
or more prior successive applications of this section—the deductions allowed or
allowable to the prior successive transferors under section 73B in respect
of one or more years of income in relation to the unit;
had been deductions allowed or
allowable to the transferee under section 73B in respect of the years of
income in relation to the unit; and
(b) whichever
of the following is applicable:
(i) the
cost of the unit to the transferor (worked out as if subsection 73B(6) had not
been enacted);
(ii) if there have been 2
or more prior successive applications of this section—the cost of the unit to
the earliest prior successive transferor (worked out as if subsection 73B(6)
had not been enacted);
had been the cost of the unit to
the transferee.
Pilot plant covered by subsection 73B(6)
(9) If subsection 73B(6) applied to the unit
in relation to the transferor, section 73B and this section have effect as
if subsection 73B(6) applies to the unit in relation to the transferee.
Recoupment of expenditure—consequential amendment of
assessments
(10) Section 170 does not prevent the
amendment at any time of an assessment of the transferee where section 73C
or 73CB has applied to:
(a) the transferor in respect of the
unit; or
(b) if there have been 2 or more prior
successive applications of this section—any of the prior successive transferors
in respect of the unit.
Second or subsequent application of section—paragraph (1)(b)
does not apply
(11) If, apart from this subsection, this
section has applied to the disposal of the unit to the transferee, then, in
working out whether this section applies to a subsequent disposal of the unit
by:
(a) the transferee; or
(b) one or more subsequent successive
transferees;
this section has effect as if paragraph (1)(b) (which
deals with deductions) had not been enacted.
Interpretation
(13) For the purposes of interpretation, this
section is to be construed as if it were part of section 73B.
Definition
(14) In this section:
modified written‑down value has the
meaning given by subsection (8).
73EA
Section 73BF roll‑over relief on disposal of asset to another member
of wholly‑owned group
Roll‑over relief where CGT roll‑over relief
allowed
(1) This section applies to the disposal of a
section 73BA depreciating asset by an eligible company (the transferor)
to another eligible company (the transferee) if:
(a) the disposal involves a CGT event
for which there is a roll‑over under Subdivision 126‑B of the Income
Tax Assessment Act 1997, as in force before the amendments made to that
Subdivision by the New Business Tax System (Consolidation) Act (No. 1)
2002 (or would be, disregarding the exemption in section 118‑5
of that Act, so far as it relates to a car, motor cycle or similar vehicle, or
to an interest in one); and
(b) Subdivision 170‑D of
the Income Tax Assessment Act 1997 does not apply to the disposal; and
(c) subject to subsection (5), a
deduction or deductions have been allowed or are allowable to the transferor in
respect of the asset under section 73BA or 73BH, or would have been so
allowed or allowable if the company had not chosen a tax offset under section 73I;
and
(d) no deduction has been allowed or
is allowable to the transferor in respect of the asset under:
(i) Division 40
(capital allowances) of the Income Tax Assessment Act 1997; or
(ii) Division 42
(depreciation of plant) of that Act as in force before its repeal by the New
Business Tax System (Capital Allowances) Act 2001.
No balancing charges for transferor
(2) Section 73BF does not apply in
respect of the disposal of the asset by the transferor.
Effect on transferee
(3) The transferee is entitled to a deduction
under section 73BA worked out using the same effective life and method for
working out decline in value as the transferor was using in respect of the asset
under that section.
Additional consequences
(4) For the purposes of Division 45 of
the Income Tax Assessment Act 1997:
(a) if the transferor, or a
partnership of which the transferor was a member, leased the asset to another
entity for most of the time when the transferor or partnership held the
asset—the transferee is taken also to have done so; and
(b) if the transferor, or a
partnership of which the transferor was a member, leased the asset to another
entity—the transferee is taken also to have done so; and
(c) if the main business of the
transferor, or a partnership of which the transferor was a member, was to lease
assets of that kind—the main business of the transferee is taken also to have
been to lease assets of that kind.
Subsequent applications of roll‑over
relief—relief available even if no deduction for subsequent transferor
(5) If, apart from this subsection, this
section has applied to the disposal of the section 73BA depreciating asset
to the transferee, then, in working out whether it applies to a subsequent
disposal of the asset by:
(a) the transferee; or
(b) one or more subsequent successive
transferees;
this section has effect as if paragraph (1)(c) (which
deals with deductions) were ignored.
Notice to allow transferee to work out how this section
applies
(6) The transferor must give the transferee a
notice containing enough information about the transferor’s holding of the
asset for the transferee to work out how this section applies to the
transferee’s holding of it.
(7) The transferor must give the notice
within 6 months after the end of the transferee’s year of income in which the
disposal mentioned in subsection (1) occurred, or within a longer period
allowed by the Commissioner.
(8) The transferee must keep the notice until
the end of 5 years after the earlier of these events:
(a) the transferee disposes of the
asset;
(b) the asset is lost or destroyed.
Penalty: 30 penalty units.
(9) The Criminal Code applies to the
offence in subsection (8).
73EB
Section 73BM roll‑over relief on disposal of plant to another member
of wholly‑owned group
Roll‑over relief where CGT roll‑over relief
allowed
(1) This section applies to the disposal of a
unit of section 73BH plant by an eligible company (the transferor)
to another eligible company (the transferee) if:
(a) the disposal involves a CGT event
for which there is a roll‑over under Subdivision 126‑B of the Income
Tax Assessment Act 1997, as in force before the amendments made to that
Subdivision by the New Business Tax System (Consolidation) Act (No. 1)
2002 (or would be, disregarding the exemption in section 118‑5
of that Act, so far as it relates to a car, motor cycle or similar vehicle, or
to an interest in one); and
(b) Subdivision 170‑D of
the Income Tax Assessment Act 1997 does not apply to the disposal; and
(c) subject to subsection (5), a
deduction or deductions have been allowed or are allowable to the transferor in
respect of the unit of plant under section 73BH; and
(d) no deduction has been allowed or
is allowable to the transferor in respect of the unit of plant under Division 42
(Depreciation) of the Income Tax Assessment Act 1997.
No balancing charges for transferor
(2) Section 73BM does not apply in
respect of the disposal of the unit by the transferor.
Effect on transferee
(3) The transferee is entitled to a deduction
under section 73BH worked out using the same effective life and method for
working out deductions as the transferor was using in respect of the plant
under that section.
Additional consequences
(4) For the
purposes of Division 45 of the Income Tax Assessment Act 1997:
(a) if the transferor, or a
partnership of which the transferor was a member, leased the unit of plant to
another entity for most of the time when the transferor or partnership held the
unit—the transferee is taken also to have done so; and
(b) if the transferor, or a
partnership of which the transferor was a member, leased the unit to another
entity—the transferee is taken also to have done so; and
(c) if the main business of the transferor,
or a partnership of which the transferor was a member, was to lease units of
plant of that kind—the main business of the transferee is taken also to have
been to lease units of plant of that kind.
Subsequent applications of roll‑over
relief—relief available even if no deduction for subsequent transferor
(5) If, apart from this subsection, this
section has applied to the disposal of the unit of section 73BH plant to
the transferee, then, in working out whether it applies to a subsequent
disposal of the unit of plant by:
(a) the transferee; or
(b) one or more subsequent successive
transferees;
this section has effect as if paragraph (1)(c) (which
deals with deductions) were ignored.
Notice to allow transferee to work out how this section
applies
(6) The transferor must give the transferee a
notice containing enough information about the transferor’s holding of the unit
of plant for the transferee to work out how this section applies to the
transferee’s holding of it.
(7) The transferor must give the notice
within 6 months after the end of the transferee’s year of income in which the
disposal mentioned in subsection (1) occurred, or within a longer period
allowed by the Commissioner.
(8) The
transferee must keep the notice until the end of 5 years after the earlier of
these events:
(a) the transferee disposes of the
unit;
(b) the unit is lost or destroyed.
Penalty: 30 penalty units.
(9) The Criminal Code applies to the
offence in subsection (8).
73G
Section 73B roll‑over relief on disposal of item of intellectual
property to another member of same wholly‑owned group
Roll‑over relief where CGT roll‑over relief
allowed
(1) This section applies to the disposal of
an item of intellectual property (as defined by subsection 995‑1(1) of
the Income Tax Assessment Act 1997) by an eligible company (the transferor)
to another eligible company (the transferee) if:
(a) the disposal involves a CGT event
for which there is a roll‑over under Subdivision 126‑B of the Income
Tax Assessment Act 1997, as in force before the amendments made to that
Subdivision by the New Business Tax System (Consolidation) Act (No. 1)
2002; and
(b) subject to subsection (5),
apart from this section, an amount would be included in the transferor’s
assessable income under subsection 73B(27A) in respect of the disposal.
Transferor not assessable under subsection 73B(27A) on
disposal
(2) Subsection 73B(27A) does not apply in
respect of the disposal of the item by the transferor.
No deduction for transferee’s acquisition expenditure
(3) No part of the expenditure (if any)
incurred by the transferee in the acquisition of the item is an allowable
deduction to the transferee under any provision of this Act.
Disposal by transferee where no roll‑over
relief—proceeds of disposal assessable to transferee
(4) If:
(a) after the disposal of the item to
the transferee, the transferee disposes of the item; and
(b) this section does not apply to the
disposal by the transferee;
the transferee’s assessable income of the year of income
in which the disposal by the transferee took place includes the consideration
receivable in respect of the disposal.
Subsequent application of section—paragraph (1)(b)
does not apply
(5) If, apart from this subsection, this
section has applied to the disposal of the item to the transferee, then, in
working out whether this section applies to a subsequent disposal of the item
by:
(a) the transferee; or
(b) one or more subsequent successive
transferees;
this section has effect as if paragraph (1)(b) (which
deals with assessability under subsection 73B(27A)) had not been enacted.
Interpretation
(6) For the purposes of interpretation, this
section is to be construed as if it were part of section 73B.
73H
Interpretation
(1) For the purposes of interpretation,
sections 73I, 73J, 73K, 73L and 73M are to be read and construed as if
they were part of sections 73B, 73BA and 73BH.
(2) In sections 73I, 73J, 73K, 73L and
73M:
affiliate has the meaning given by section 73M.
fixed trust estate: a trust estate is a fixed
trust estate if persons have fixed entitlements to all of the income
and capital of the trust estate.
gambling supply has the meaning given by
section 195‑1 of the GST Act.
global GST amount has the meaning given by
section 195‑1 of the GST Act.
person includes (as well as a company):
(a) a body politic; and
(b) a partnership; and
(c) any other unincorporated
association or body of persons; and
(d) a trust estate; and
(e) a superannuation fund.
R&D group turnover has the meaning given
by section 73K.
taxable supply includes a supply made in the
course of carrying on research and development activities.
tax offset has the meaning given by
subsection 995‑1(1) of the Income Tax Assessment Act 1997.
value of the supplies: the value of the
supplies a taxpayer makes in a year of income is:
(a) for taxable supplies (if any) the
taxpayer made during the year in the course of carrying on a business or in the
course of carrying on research and development activities—the value (as defined
by section 9‑75 of the GST Act) of the supplies; and
(b) for other supplies the taxpayer
made during the year in the course of carrying on a business or in the course
of carrying on research and development activities—the prices (as defined by
section 9‑75 of the GST Act) of the supplies.
73I
Tax offset instead of deduction under section 73B, 73BA, 73BH or 73QA
(1) An eligible company can choose a tax
offset instead of a deduction under section 73B (except subsection
73B(14C)), 73BA, 73BH or 73QA for a year of income (the tax offset year)
if it is eligible to make that choice (see section 73J).
(2) The choice must be made:
(a) in the company’s return of income
for the tax offset year; or
(b) by notice in writing given to the
Commissioner:
(i) for a year of income
starting before the commencement of this subsection—before the end of the
period that the Commissioner could amend an assessment for the company assuming
such an assessment were made at that commencement; or
(ii) otherwise—before the
end of the period that the Commissioner could amend an assessment for the
company for the tax offset year.
(3) The eligible company’s tax offset for the
tax offset year is 30 cents for each dollar that the company could, apart from subsection (4),
deduct for that year under section 73B (except subsection 73B(14C)), 73BA,
73BH or 73QA.
(4) An eligible company cannot deduct any
amount under section 73B (except subsection 73B(14C)), 73BA, 73BH or 73QA
for the tax offset year if it chooses the tax offset for that year.
Note: The tax offset is subject to the refundable
tax offset rules: see section 67‑25 of the Income Tax Assessment
Act 1997.
73IA
Objections
(1) The Commissioner may give an eligible
company a written notice specifying the amount of a tax offset allowable to the
company under section 73I. The notice must specify that it was issued
under this subsection and may contain such other information as the
Commissioner thinks fit.
(2) If an eligible company is dissatisfied
with the notice, the company may object in the manner set out in Part IVC
of the Taxation Administration Act 1953.
73J
Eligibility for tax offset
(1) An eligible company is eligible to choose
the tax offset for the tax offset year if:
(a) it could, apart from subsection
73I(4), deduct an amount under section 73B (except subsection 73B(14C)),
73BA, 73BH or 73QA for that year; and
(b) either:
(i) all or part of the
amount that the company could, apart from subsection 73I(4), have deducted is
contracted expenditure; or
(ii) its aggregate research
and development amount for the tax offset year exceeds $20,000; and
(c) the aggregate research and
development amount for the tax offset year of the company and of persons with
which it is grouped (while they are grouped in that year) is not more than
$1,000,000; and
(d) the R&D group turnover of the
company for that year is less than $5,000,000.
Note: Section 73L sets out the persons with
which the company is grouped.
Exception
(2) An eligible company is not eligible to
choose the tax offset for the tax offset year if an exempt entity, the
affiliates of an exempt entity, an exempt entity together with its affiliates,
or 2 or more exempt entities, at any time during the tax offset year, legally
or beneficially own, or have the right to acquire, the legal or beneficial
ownership of:
(a) interests in the company that
carry between them the right to exercise, or control the exercise of, at least
25% of the voting power in the company; or
(b) interests in the company that
carry between them the right to receive at least 25% of any distribution of
income or capital by the company.
73K
Meaning of R&D group turnover
(1) The R&D group turnover
of an eligible company for a year of income is the sum of:
(a) the value of the supplies the
company made in the year of income; and
(b) the value of the supplies made in
the year of income by other persons while they were grouped with the company;
reduced by:
(c) the value of the supplies the
company made in the year of income to persons grouped with it while they were
grouped with it; and
(d) the value of the supplies persons
grouped with the company made in the year of income to the company while the
company was grouped with them; and
(e) the value of the supplies another
person made in the year of income to a third person while the other person and
the third person were grouped with the company.
(2) To the extent that the taxable supplies a
person makes in a year of income includes gambling supplies, use an amount
equal to 11 times the person’s global GST amount for those supplies rather than
the value of the supplies in working out the person’s R&D group turnover.
(3) In working out the value of the supplies
made by a person, disregard:
(a) any supply made to the extent that
the consideration for the supply is a payment or a supply by an insurer in
settlement of a claim under an insurance policy; and
(b) to the extent that a supply is
constituted by a loan—any repayment of principal, and any obligation to repay
principal.
73L
Grouped taxpayers
(1) A person is grouped with another person
at a time in a year of income if, at that time:
(a) either person controls the other
person in the way described in this section; or
(b) both persons are controlled in
that way by the same third person; or
(c) the persons are affiliates of each
other.
(2) This section applies to a person that
directly controls a second person as if the first person also controlled any
other person that is directly, or indirectly by any other application or
applications of this section, controlled by the second person.
Individuals, companies and fixed trusts
(3) A person controls another person if the
first person, its affiliates or the first person together with the first
person’s affiliates:
(a) legally or beneficially own, or
have the right to acquire the legal or beneficial ownership of, interests in
the other person that carry between them the right to receive more than 50% of
any distribution of income or capital by the other person; or
(b) if the other person is a
company—legally or beneficially own, or have the right to acquire the legal or
beneficial ownership of, interests in the company that carry between them the
right to exercise, or control the exercise of, more than 50% of the voting
power in the company.
Non‑fixed trust estates
(4) A person controls a trust estate that is
not a fixed trust estate if:
(a) the trustee has made a
distribution, in any of the last 4 years of income (except the tax offset year)
of $100,000 or more to the person, the person’s affiliates or the person
together with the person’s affiliates; or
(b) the person, the person’s
affiliates or the person together with the person’s affiliates:
(i) have the power,
directly or indirectly, to obtain the beneficial enjoyment of any of the
capital or income of the trust estate; or
(ii) are capable of gaining
that enjoyment under an agreement; or
(c) a trustee of the trust estate is
accustomed or under an obligation (whether formal or informal), or might
reasonably be expected, to act in accordance with the directions, instructions
or wishes of the person, the person’s affiliates or the person together with
the person’s affiliates.
Partnerships
(5) A person controls a partnership if the
person, the person’s affiliates or the person together with the person’s
affiliates have the right to more than 50% of the partnership net income, or
have more than a 50% interest in assets used in the partnership business
(except assets that are leased to the partnership).
(6) A partnership (the controller)
controls another person if a partner in the controller, or 2 or more partners
in the controller, have the right to receive more than 50% of the partnership
net income, or have more than a 50% interest in assets used in the partnership
business, and:
(a) if the other person is a
company—the same partner, or the same 2 or more partners, have the right to
receive more than 50% of any distribution of income or capital by the company,
or to exercise, or to control the exercise of, more than 50% of the voting
power in the company; or
(b) if the other person is a fixed
trust estate—the same partner, or the same 2 or more partners, have the right
to receive more than 50% of any distribution of income or capital by the
trustee; or
(c) if the other person is a trust
estate that is not a fixed trust estate—a condition in a paragraph of subsection (4)
is satisfied for the same partner, or the same 2 or more partners in relation
to the trust estate; or
(d) if the other person is a
partnership—the same partner, or the same 2 or more partners, have the right to
receive more than 50% of the partnership net income, or have more than a 50%
interest in assets used in the partnership business, of the partnership.
73M
Meaning of affiliate
(1) A person is an affiliate of
another person if the person acts, or could reasonably be expected to act, in
accordance with the other person’s directions or wishes, or in concert with the
other person, in relation to the affairs of the person’s business or research
and development expenditure.
(2) Another partner in a partnership in which
a person is a partner is not the person’s affiliate only because
the partner acts, or could reasonably be expected to act, in concert with the
person in relation to the affairs of the partnership.
73P
Interpretation
(1) For the purposes of interpretation, this
section and sections 73QA to 73Z (inclusive) are to be read and construed
as if they were part of sections 73B, 73BA and 73BH.
(1A) Subsection (1) of this section and
subsection 73B(9) do not prevent a deduction under section 73QA or 73QB
merely because those sections require account to be taken of expenditure
incurred by an eligible company in relation to activities carried on wholly or
primarily on behalf of a foreign company.
(1B) Subsection (1) of this section does
not cause any of section 73CA to apply in relation to expenditure in
respect of which deductions are available under both subsection 73B(14C) and
section 73QB.
(2) In sections 73QA to 73Z (inclusive):
AA0 means a group’s adjustment
amount for the Y0 year of income.
AA‑1 means a group’s adjustment
amount for the Y‑1 year of income.
adjustment amount has the meaning given by
section 73T.
adjustment balance has the meaning given by
section 73V.
commercial ready grant means a subsidy or
grant that:
(a) is paid to an eligible company
under the program known as the Commercial Ready program; and
(b) includes a component for
activities of the company that are research and development activities, or
would be, apart from subsection 73B(2BA); and
(c) is for a year of income in
relation to which the company is not registered as mentioned in subsection
73B(10).
group member means a primary group member or
a secondary group member.
group membership period of an eligible
company has the meaning given by section 73R.
incremental expenditure means expenditure
that:
(a) is research and development
expenditure except:
(i) expenditure to lease
or hire plant; and
(ii) expenditure under a
contract to the extent that it is, in substance, for the acquisition of plant
and not for the receipt of services; and
(b) can be taken into account in
working out the amount of a deduction under subsection 73B(13) or (14) or could
be taken into account in working out the amount of a deduction under subsection
73B(14) apart from paragraph 73B(14)(b).
Note: The effects of paragraph (b) of the
definition of incremental expenditure include preventing a
company from counting as incremental expenditure:
(a) expenditure that the company is required by
subsection 73B(9) to disregard because it was incurred by the company for the purpose
of carrying on research and development activities on behalf of another person;
and
(b) expenditure on overseas research and
development activities that is not certified expenditure and so is expenditure
for which subsection 73B(17A) denies a deduction under subsection 73B(13) or
(14).
person has the same meaning as in section 73H.
primary group member has the meaning given by
section 73R.
R&D spend of an eligible company and its
group members for a year of income means the sum of:
(a) the amounts worked out for the
year of income under steps 1, 2 and 3 of the method statement in subsection
73RA(1) as the reduced expenditure on Australian owned R&D by each eligible
company in its group membership period for the year of income; and
(b) the amounts worked out for the
year of income under steps 4, 5 and 6 of the method statement in subsection
73RB(1) as the reduced notional expenditure on foreign owned R&D by each
eligible company in its group membership period for the year of income.
RA‑1 (short for Running
Average for the Y‑1 year of income) means half the sum of the
R&D spend of the eligible company and its group members for the Y‑2
and Y‑3 years of income.
secondary group member has the meaning given
by section 73R.
start grant
means a subsidy or grant paid to an eligible company:
(a) under
an agreement between the company and the Board entered into under the program
known as the R&D Start Program; and
(b) in respect of a year of income in
relation to which the company is not registered as mentioned in subsection
73B(10).
viable business has the meaning given by
section 73R.
(3) For the purposes of the definition of incremental
expenditure in subsection (2), where expenditure under a contract
is both for the acquisition of plant and for the provision of services, the
expenditure must be apportioned on a reasonable basis between them.
(4) None of the expenditure referred to in subsection (3)
can be incremental expenditure if a reasonable apportionment is
not possible.
(5) A company’s incremental expenditure
for a year of income excludes the total group markup of the company for that
expenditure (as worked out under subsection 73B(14AC)).
(6) In this section and in sections 73QA,
73QB, 73R, 73RA, 73RB, 73T and 73V, particular years of income are identified
by the letter “Y” with a further identifier. Under that system:
(a) Y0 is the
year of income for which an eligible company is working out its assessable
income and deductions; and
(b) Y‑1
means the year of income before the Y0 year of income;
and
(c) Y‑2
means the year of income 2 years before the Y0 year of
income; and
(d) Y‑3
means the year of income 3 years before the Y0 year of
income.
73QA
Extra deduction for increase in expenditure on Australian owned research and
development
Prerequisites for deduction
(1) An eligible company may deduct an amount
for the Y0 year of income if:
(a) the company can deduct an amount
for that year under subsection 73B(13) or (14) for incremental expenditure
incurred in the company’s group membership period; and
(b) for each of the Y‑1,
Y‑2 and Y‑3 years of income, any of the
following conditions is met:
(i) the eligible company
could deduct for the year of income an amount under subsection 73B(13) or (14)
for expenditure incurred in its group membership period;
(ii) one of the eligible
company’s other group members could deduct for the year of income an amount
under subsection 73B(13) or (14) for expenditure incurred in its group
membership period;
(iii) the eligible company
received a start grant or commercial ready grant in respect of the year of
income;
(iv) one of the eligible
company’s other group members received a start grant or commercial ready grant
in respect of the year of income;
(whether or not the same
condition is met for 2 or more of those years, and whether or not a condition
is met by the same company for 2 or more of those years); and
(c) the amount (the eligible
company’s share of the Australian owned part of the adjusted increase in
expenditure on R&D by the group) worked out under subsection (3)
is more than zero.
Amount of deduction
(2) The amount of the eligible company’s
deduction for the Y0 year of income is 50% of the eligible company’s
share of the Australian owned part of the adjusted increase in expenditure on
R&D by the group.
(3) The eligible company’s share of the
Australian owned part of the adjusted increase in expenditure on R&D by the
group is the amount worked out using the formula:
where:
adjusted increase in expenditure on R&D by the
group means the amount worked out under section 73RE.
increase in expenditure on Australian owned R&D
by the eligible company means the amount worked out under subsection
73RA(1).
net increase in expenditure on Australian owned
R&D by the group means the amount worked out under section 73RC.
net increase in expenditure on foreign owned R&D
by the group means the amount worked out under section 73RD.
total increase in expenditure on Australian owned
R&D by the eligible companies in the group means the amount worked
out under subsection 73RA(2).
Note: The amount worked out using the formula will
not be more than zero if at least one of the following is zero:
(a) the increase in expenditure on Australian owned
R&D by the eligible company;
(b) the net increase in expenditure on Australian
owned R&D by the group;
(c) the adjusted increase in expenditure on R&D
by the group.
Solitary company may be able to deduct under
subsection (1)
(4) To avoid doubt, an eligible company for
which there are no other group members may be able to deduct an amount under
subsection (1).
Note: For an eligible company for which there are no
other group members, the values of the following components of the formula in
subsection (3) will all be the same:
(a) the increase in expenditure on Australian owned
R&D by the eligible company;
(b) the total increase in expenditure on Australian
owned R&D by the eligible companies in the group;
(c) the net increase in expenditure on Australian
owned R&D by the group.
73QB
Extra deduction for increase in expenditure on foreign owned research and
development
Prerequisites for deduction
(1) An eligible company may deduct an amount
for the Y0 year of income if:
(a) the company can deduct an amount
for that year under subsection 73B(14C) for expenditure incurred in the
company’s group membership period; and
(b) for each of the Y‑1,
Y‑2 and Y‑3 years of income, any of the
following conditions is met:
(i) the eligible company
could deduct for the year of income an amount under subsection 73B(14C) for
expenditure in its group membership period;
(ii) one of the eligible
company’s other group members could deduct for the year of income an amount
under subsection 73B(14C) for expenditure in its group membership period;
(iii) the year of income is
one (a nil expenditure year) for which both the conditions in
subsection (2) are met;
(whether or not the same
condition in this paragraph is met for 2 or more of those years, and whether or
not such a condition is met by the same company for 2 or more of those years);
and
(c) the amount (the eligible
company’s share of the foreign owned part of the adjusted increase in
expenditure on R&D by the group) worked out under
subsection (4) is more than zero.
(2) For the purposes of
subparagraph (1)(b)(iii), the conditions for a nil expenditure year are as
follows:
(a) neither the eligible company nor
any other group member (determined under section 73R) of the eligible
company existed at any time in the nil expenditure year or the 10 immediately
preceding years of income;
(b) at no time in the nil expenditure
year or the 10 immediately preceding years of income did any of the following
carry on business in Australia:
(i) a foreign company that
was grouped under section 73L with the eligible company at any time in the
Y0, Y‑1, Y‑2 or Y‑3
year of income;
(ii) a foreign company that
was grouped under section 73L with another group member (under
section 73R) of the eligible company at any time during the other group
member’s group membership period (under section 73R);
(iii) a person who was
grouped under section 73L with a foreign company described in
subparagraph (i) or (ii) at any time in the nil expenditure year or the 10
immediately preceding years of income.
Note: Section 73R provides for:
(a) primary group members to be determined on the
basis of the relationship between companies at the end of the Y0
year of income; and
(b) secondary group members to be determined on the
basis of the relationship between a company and a primary group member during
the primary group member’s group membership period (which ends at the end of
the Y0 year of income and starts at or after the start of the Y‑3
year of income).
Amount of deduction
(3) The eligible company may deduct an amount
for the Y0 year of income equal to 75% of the eligible company’s
share of the foreign owned part of the adjusted increase in expenditure on
R&D by the group.
(4) The eligible company’s share of the
foreign owned part of the adjusted increase in expenditure on R&D by the
group is the amount worked out using the formula:
where:
adjusted increase in expenditure on R&D by the
group means the amount worked out under section 73RE.
increase in expenditure on foreign owned R&D by
the eligible company means the amount worked out under subsection
73RB(1).
net increase in expenditure on Australian owned
R&D by the group means the amount worked out under
section 73RC.
net increase in expenditure on foreign owned R&D
by the group means the amount worked out under section 73RD.
total increase in expenditure on foreign owned
R&D by the eligible companies in the group means the amount worked
out under subsection 73RB(2).
Note: The amount worked out using the formula will
not be more than zero if at least one of the following is zero:
(a) the increase in expenditure on foreign owned
R&D by the eligible company;
(b) the net increase in expenditure on foreign
owned R&D by the group;
(c) the adjusted increase in expenditure on R&D
by the group.
Solitary company may be able to deduct under
subsection (1)
(5) To avoid doubt, an eligible company for which
there are no other group members may be able to deduct an amount under
subsection (1).
Note: For an eligible company for which there are no
other group members, the values of the following components of the formula in
subsection (4) will all be the same:
(a) the increase in expenditure on foreign owned
R&D by the eligible company;
(b) the total increase in expenditure on foreign
owned R&D by the eligible companies in the group;
(c) the net increase in expenditure on foreign
owned R&D by the group.
73R Group
members
(1) This section sets out rules for
determining which eligible companies that have deducted or can deduct an amount
under subsection 73B(13), (14) or (14C), or that received a start grant or
commercial ready grant, are group members. In applying this section, use
section 73L to determine whether companies are grouped.
(2) Work out
the group members of the eligible company and their group
membership periods in this way:
Method
statement
Step 1. Work out, as at the
last day of the Y0 year of income, which companies are grouped with
the eligible company. The eligible company and these grouped companies are the primary
group members.
Step 2. Work
out the day before the last day of the Y0 year of income, or the
first day of the Y‑3 year of income, whichever is the later,
when a company that is a primary group member:
(a) was
controlled, as mentioned in section 73L, by a person other than a person
who controlled it as at the last day of the Y0 year of income; or
(b) acted, or
could be expected to act, in accordance with the directions or wishes of a
person other than a person in accordance with whose directions or wishes it
acted, or could be expected to act, as at the last day of the Y0
year of income.
The
period between this day and the last day of the Y0 year of income is
that company’s group membership period.
Step 3. Any other company that
was grouped with a primary group member at a time during the member’s group
membership period is a secondary group member.
Step 4. Work out the day before
the last day of the Y0 year of income when a secondary group member
became grouped with the primary group member as mentioned in step 3, or the
first day of the Y‑3 year of income, whichever is the later.
Step 5. Work
out the day before the last day of the Y0 year of income when the
secondary group member was not so grouped with the primary group member. The
period between that day and the day worked out under step 4 is the secondary
group member’s group membership period.
Exception: secondary member leaving with a viable
business
(3) The period that would be a secondary
group member’s group membership period is treated as never having existed if,
at the end of that period when the secondary group member stops being grouped
with a primary group member, the secondary group member has a viable business.
Exception: extending group membership period
(4) The group membership period of a group
member of a particular group (the current group) is extended to
include its history period with its former group (see subsection (5)) if,
when the company became a group member of the current group, it did so with a
viable business.
Viable business
(5) A company stops being or starts being a
group member of a group with a viable business if:
(a) sufficient assets (including
assets that have been used in carrying on research and development activities)
are transferred under the transactions involved in the change of control to
allow the continued operation of a business; and
(b) the person or persons that
disposed of control of the company agree in writing with the person or persons
that gain control that this subsection should apply; and
(c) the person or persons that
disposed of control of the company provide written details of the following
needed to enable the making of calculations required by sections 73QA,
73QB, 73RA, 73RB, 73RC, 73RD, 73RE, 73T and 73V:
(i) expenditure incurred
by the company during the period (its history period) it was a
group member of its former group;
(ii) receipts of grants and
recoupments relating to that expenditure;
(iii) entitlements to
receive grants and recoupments relating to that expenditure.
Note: The definition of person
includes trusts, partnerships and other entities as well as companies: see
section 73H.
(6) The written agreement referred to in paragraph (5)(b)
must be made, and the written details referred to in paragraph (5)(c) must
be provided:
(a) for a change of control occurring
before 1 July 2002—by 30 June 2002; or
(b) otherwise—by the end of the year
of income in which the change of control occurs; or
(c) within a further time allowed by
the Commissioner.
73RA
Increases in expenditure on Australian owned R&D by eligible companies
(1) For the purposes of section 73QA,
work out the increase in expenditure on Australian owned R&D by the
eligible company as follows:
Method statement
Step 1. For each of the Y0,
Y‑1, Y‑2 and Y‑3 years of
income, work out the eligible company’s incremental expenditure incurred in its
group membership period.
Step 2. For each of the Y0,
Y‑1, Y‑2 and Y‑3 years of
income, work out how much (if any) of the initial clawback amount (if any)
under section 73C relating to expenditure incurred by the eligible company
is attributable to incremental expenditure incurred in the eligible company’s
group membership period.
Step 3. For
each of those years of income, reduce (but not below zero) the result of step 1
for the year of income by the result of step 2 for the year of income. The
result is the reduced expenditure on Australian owned R&D by
the eligible company in its group membership period for the year of income.
Step 4. Add up:
(a) the reduced
expenditure on Australian owned R&D by the eligible company in its group
membership period for the Y‑1 year of income; and
(b) the reduced
expenditure on Australian owned R&D by the eligible company in its group
membership period for the Y‑2 year of income; and
(c) the reduced
expenditure on Australian owned R&D by the eligible company in its group
membership period for the Y‑3 year of income.
Step 5. Divide the result of
step 4 by 3.
Step 6. Subtract the result of
step 5 from the reduced expenditure on Australian owned R&D by the eligible
company in its group membership period for the Y0 year of income
(see step 3). The result is the change in expenditure on Australian owned
R&D by the eligible company.
Note: The
change in expenditure on Australian owned R&D by the eligible company may
be a positive or negative number or zero.
Step 7. The increase in
expenditure on Australian owned R&D by the eligible company is:
(a) the change
in expenditure on Australian owned R&D by the eligible company; or
(b) zero, if the
change in expenditure on Australian owned R&D by the eligible company is a
negative number.
(2) For the purposes of section 73QA,
work out the total increase in expenditure on Australian owned R&D by
the eligible companies in the group as follows:
Method statement
Step 1. For each group member
that is an eligible company, work out the increase in expenditure on Australian
owned R&D by the eligible company under subsection (1) of this
section.
Step 2. Total the results of
step 1.
73RB
Increases in expenditure on foreign owned R&D by eligible companies
(1) For the purposes of section 73QB,
work out the increase in expenditure on foreign owned R&D by the
eligible company as follows:
Method statement
Step 1. For the Y0
year of income, work out the amount of the expenditure on foreign owned R&D
by the eligible company for the year of income (see subsections 73B(14C) and
(14D)) that was incurred by the company in its group membership period. The
result is the expenditure on foreign owned R&D by the
eligible company in its group membership period for the year of income.
Step 2. For the Y0
year of income, work out how much (if any) of the initial clawback amount (if
any) under section 73C relating to expenditure incurred by the eligible
company is attributable to the expenditure on foreign owned R&D by the
eligible company in its group membership period for the year of income.
Step 3. Reduce
(but not below zero) the result of step 1 for the year of income by the result
of step 2 for the year of income. The result is the reduced expenditure
on foreign owned R&D by the eligible company in its group
membership period for the Y0 year of income.
Step 4. For each of the Y‑1,
Y‑2 and Y‑3 years of income, work out the
amount (the notional expenditure on foreign owned R&D by the
eligible company in its group membership period for the year of income) of
expenditure that:
(a) was incurred
by the company in its group membership period; and
(b) would have
been expenditure on foreign owned R&D by the eligible company for the year
of income (see subsections 73B(14C) and (14D)) if subsection 73B(2BA) had not
been enacted.
Note 1: This
requires counting of expenditure relating to all activities that would have
been research and development activities had they been carried on in accordance
with a plan described in subsection 73B(2BA) (whether or not they were carried
on in that way).
Note 2: If
all relevant activities were carried on in accordance with such a plan, and the
eligible company’s group membership period includes the whole of the year of
income, the notional expenditure on foreign owned R&D by the eligible
company in its group membership period for the year of income is the same as
the expenditure on foreign owned R&D by the company for the year of income.
Step 5. For each of the Y‑1,
Y‑2 and Y‑3 years of income, work out what
would have been the amount of the eligible company’s initial clawback amount
(if any) under section 73C attributable to the notional expenditure on
foreign owned R&D by the eligible company in its group membership period
for the year of income if subsection 73B(2BA) had not been enacted.
Note: This
requires counting of grants and recoupments described in section 73C
relating to expenditure on projects involving activities that would have been
research and development activities had they been carried on in accordance with
a plan described in subsection 73B(2BA) (whether or not they were carried on in
that way).
Step 6. For each of the Y‑1,
Y‑2 and Y‑3 years of income, reduce (but not
below zero) the result of step 4 for the year of income by the result of step 5
for the year of income. The result is the reduced notional expenditure on
foreign owned R&D by the eligible company in its group membership
period for the year of income.
Step 7. Add up:
(a) the reduced
notional expenditure on foreign owned R&D by the eligible company in its
group membership period for the Y‑1 year of income; and
(b) the reduced
notional expenditure on foreign owned R&D by the eligible company in its
group membership period for the Y‑2 year of income; and
(c) the reduced
notional expenditure on foreign owned R&D by the eligible company in its
group membership period for the Y‑3 year of income.
Step 8. Divide the result of
step 7 by 3.
Step 9. Subtract the result of
step 8 from the reduced expenditure on foreign owned R&D by the eligible
company for the Y0 year of income (see step 3). The result is the change
in expenditure on foreign owned R&D by the eligible company.
Note: The
change in expenditure on foreign owned R&D by the eligible company may be a
positive or negative number or zero.
Step 10. The
increase in expenditure on foreign owned R&D by the eligible company
is:
(a) the change
in expenditure on foreign owned R&D by the eligible company; or
(b) zero, if the
change in expenditure on foreign owned R&D by the eligible company is a
negative number.
(2) For the purposes of section 73QB,
work out the total increase in expenditure on foreign owned R&D by
the eligible companies in the group as follows:
Method statement
Step 1. For each group member
that is an eligible company, work out the increase in expenditure on foreign
owned R&D by the eligible company under subsection (1) of this
section.
Step 2. Total the results of
step 1.
73RC
Net increase in expenditure on Australian owned R&D by the group
For the purposes of sections 73QA
and 73QB, work out the net increase in expenditure on Australian owned
R&D by the group as follows:
Method statement
Step 1. For each eligible
company that was a group member, work out under steps 1 to 6 (inclusive) of the
method statement in subsection 73RA(1) the change in expenditure on Australian
owned R&D by the eligible company.
Step 2. Total the results of
step 1. If the result is a negative number, the net increase in
expenditure on Australian owned R&D by the group is zero instead.
73RD
Net increase in expenditure on foreign owned R&D by the group
For the purposes of sections 73QA and
73QB, work out the net increase in expenditure on foreign owned R&D
by the group as follows:
Method statement
Step 1. For each eligible
company that was a group member, work out under steps 1 to 9 (inclusive) of the
method statement in subsection 73RB(1) the change in expenditure on foreign
owned R&D by the eligible company.
Step 2. Total the results of
step 1. If the result is a negative number, the net increase in
expenditure on foreign owned R&D by the group is zero instead.
73RE
Adjusted increase in expenditure on R&D by the group
Work out the adjusted increase in
expenditure on R&D by the group as follows:
Method statement
Step 1. For each eligible
company that was a group member, work out under steps 1 to 6 (inclusive) of the
method statement in subsection 73RA(1) the change in expenditure on Australian
owned R&D by the eligible company.
Step 2. For
each eligible company that was a group member, work out under steps 1 to 9
(inclusive) of the method statement in subsection 73RB(1) the change in expenditure
on foreign owned R&D by the eligible company.
Step 3. Add up all the results
of steps 1 and 2.
Note: If
the sum is a negative number, the adjusted increase in expenditure on R&D
by the group will be zero.
Step 4. Subtract the adjustment
balance worked out under section 73V from the result of step 3. If the
result is a negative number, the adjusted increase in expenditure on
R&D by the group is zero instead.
73S
Calculating the amounts relevant to the additional deduction
If a negative result is obtained from a
calculation in section 73T or 73V, that result is taken to be zero.
73T
Adjustment amounts
(1) The adjustment amount for
an eligible company and its group members for the Y0 year of income
is:
(2) The adjustment amount for
an eligible company and its group members for the Y‑1 year of
income is:
Exceptions
(3) AA0 is zero if:
(a) the eligible company or any of its
group members could deduct an amount under section 73QA or 73QB for the Y‑1
year of income; and
(b) there has been no change in the
control of the eligible company or any of its group members for the Y0
year of income resulting in:
(i) a company entering or
leaving the group with a viable business; and
(ii) a change to the
R&D spend of the eligible company for the Y‑1, Y‑2
or Y‑3 year of income.
(4) AA‑1
is zero if:
(a) the eligible company or any of its
group members could deduct an amount under section 73QA or 73QB for the Y‑2
year of income; and
(b) there has been no change in the
control of the eligible company or any of its group members for the Y0
or Y‑1 year of income resulting in:
(i) a company entering or
leaving the group with a viable business; and
(ii) a change to the
R&D spend of the eligible company for the Y‑1, Y‑2
or Y‑3 year of income.
73V
Adjustment balance
(1) The adjustment balance is,
if the R&D spend of the eligible company for the Y‑1 year
of income is less than or equal to RA‑1:
(2) Otherwise, the adjustment balance
is:
reduced by the R&D spend of the eligible company for
the Y‑1 year of income.
(3) The adjustment balance is
zero if:
(a) the eligible company or any of its
group members met the conditions either in paragraphs 73QA(1)(a) and (b) or in
paragraphs 73QB(1)(a) and (b) for the Y‑1 year of income; and
(b) there has been no change in the
control of the eligible company or any of its group members for the Y0
year of income resulting in:
(i) a company entering or
leaving the group with a viable business; and
(ii) a change to the
R&D spend of the eligible company for the Y‑1, Y‑2
or Y‑3 year of income.
73Z
Anti‑avoidance
(1) This section applies to a company if:
(a) the company requests an amendment
to an assessment for a year of income to reduce the amount of its research and
development expenditure for a year of income; and
(b) the Commissioner is of the opinion
that the purpose of the proposed amendment is to increase the company’s
entitlement to a deduction under section 73QA or 73QB for any year of
income.
(2) The amount of that reduction is ignored
in working out the company’s incremental expenditure for any year of income or
the notional expenditure on foreign owned R&D by the eligible company in
its group membership period for any year of income (see step 4 of the method
statement in subsection 73RB(1)).
78A
Certain gifts not to be allowable deductions
(1) In this section:
agreement includes any agreement, arrangement
or understanding, whether formal or informal or express or implied, and whether
or not enforceable by legal proceedings (whether or not the agreement, arrangement
or understanding was intended to be so enforceable).
associate, in relation to the donor of a
gift, means:
(a) in the case of a donor being a
natural person:
(i) a relative of the
donor;
(ii) a partner of the
donor;
(iii) if a partner of the donor
is a natural person—the spouse of that partner;
(iv) a trustee of a trust
estate where the donor or a person who is an associate of the donor by virtue
of subparagraph (i), (ii), (iii) or (v) benefits or is capable (whether by
the exercise of a power of appointment or otherwise) of benefiting under the
trust, either directly or through any interposed companies, partnerships or
trusts; or
(v) a
company where:
(A) the
company is, or its directors are, accustomed or under an obligation, whether
formal or informal, to act in accordance with the directions, instructions or
wishes of the donor, of a person who is an associate of the donor by virtue of subparagraph (i),
(ii), (iii) or (iv) or of a company that is an associate of the donor by virtue
of another application of this subparagraph; or
(B) the
donor is, the persons who are associates of the donor by virtue of subparagraphs (i),
(ii), (iii) and (iv) are, or the donor and the persons who are associates of
the donor by virtue of those paragraphs are, in a position to cast, or control
the casting of, more than 50% of the maximum number of votes that might be cast
at a general meeting of the company; or
(b) in the case of a donor being a
company:
(i) a partner of the donor
company;
(ii) if a partner of the
donor company is a natural person—the spouse of that partner;
(iii) another person where:
(A) the
donor company is, or its directors are, accustomed or under an obligation,
whether formal or informal, to act in accordance with the directions, instructions
or wishes of that person, whether those directions, instructions or wishes are
communicated directly to the donor company or its directors, or through any
interposed companies; or
(B) that
person is, or that person and the persons who, if that person were the donor,
would be associates of that person by virtue of paragraph (a) or by virtue
of another subparagraph of this paragraph are, in a position to cast, or
control the casting of, more than 50% of the maximum number of votes that might
be cast at a general meeting of the donor company;
(iv) a trustee of a trust
estate where the donor company or a person who is an associate of the donor
company by virtue of subparagraph (i), (ii), (iii), (v) or (vi) benefits,
or is capable (whether by the exercise of a power of appointment or otherwise)
of benefiting under the trust, either directly or through any interposed
companies, partnerships or trusts;
(v) another company where:
(A) the
other company is, or its directors are, accustomed or under an obligation,
whether formal or informal, to act in accordance with the directions,
instructions or wishes of the donor company, of a person who is an associate of
the donor company by virtue of subparagraph (i), (ii), (iii), (iv) or (vi)
or of a company that is an associate of the donor company by virtue of another
application of this subparagraph; or
(B) the
donor company is, the persons who are associates of the donor company by virtue
of subparagraphs (i), (ii), (iii), (iv) and (vi) are, or the donor company
and the persons who are associates of the donor company by virtue of those
subparagraphs are, in a position to cast, or control the casting of, more than
50% of the maximum number of votes that might be cast at a general meeting of
the other company; or
(vi) another person who, if
a third person who is an associate of the donor company by virtue of subparagraph (iii)
were the donor, would be an associate of that third person by virtue of paragraph (a)
or by virtue of another subparagraph of this paragraph.
(2) Subject to this section, a gift of money,
or of property other than money, made by a person (in this section referred to
as the donor) to a fund, authority, institution or person is not
an allowable deduction under Division 30 of the Income Tax Assessment
Act 1997 where:
(a) by reason of any act, transaction
or circumstance that has occurred, will occur, or may reasonably be expected to
occur, being an act, transaction or circumstance occurring as part of, in
connexion with or as a result of:
(i) the making or receipt
of the gift; or
(ii) any agreement or
scheme entered into in association with the making or receipt of the gift;
the amount or value of the
benefit derived by the fund, authority, institution or person as a consequence
of the gift is, will be, or may reasonably be expected to be, less than the
amount or value at the time when the gift was made of the property comprising
the gift;
(b) by reason of any act, transaction
or circumstance of a kind referred to in paragraph (a), any fund, authority,
institution or person other than the fund, authority, institution or person to
which the gift was made, makes, becomes liable to make, or may reasonably be
expected to make or to become liable to make, a payment, or transfers, becomes
liable to transfer, or may reasonably be expected to transfer or to become
liable to transfer, any property, to any person or incurs, becomes liable to
incur, or may reasonably be expected to incur or to become liable to incur, any
other detriment, disadvantage, liability or obligation;
(c) by reason of any act, transaction
or circumstance of a kind referred to in paragraph (a), the donor or an
associate of the donor has obtained, will obtain or may reasonably be expected
to obtain any benefit, advantage, right or privilege other than the benefit of
any deduction that, but for this section, would be allowable from the
assessable income of the donor under Division 30 of the Income Tax
Assessment Act 1997; or
(d) by reason of any agreement or
scheme entered into as part of or in association with the making of the gift,
any property, other than property comprising the gift, has been acquired or
will be acquired, whether directly or indirectly, from the donor or an
associate of the donor by that fund, authority, institution or person or by
another fund, authority, institution or person.
(3) Without limiting the application of subsection (2),
where the terms and conditions on which a gift of property other than money is
made are such that the fund, authority, institution or person to which the gift
is made does not receive immediate custody and control of the property, does
not have the unconditional right to retain custody and control of the property
in perpetuity to the exclusion of the donor or an associate of the donor or
does not obtain an immediate, indefeasible and unencumbered legal and equitable
title to the property, paragraph (2)(c) shall be deemed to apply in
relation to that gift.
(4) Paragraph (2)(a) does not prevent a
deduction under Division 30 of the Income Tax Assessment Act 1997
from being allowed from the assessable income of the donor where the amount or
value of the benefit derived by the fund, authority, institution or person as a
consequence of the gift is, will be, or may reasonably be expected to be, less
than the amount or value at the time when the gift was made of the property
comprising the gift by reason only that the fund, authority, institution or
person has incurred, will incur, or may reasonably be expected to incur,
expenses for the purpose of obtaining or soliciting the gift, being expenses
that, in the opinion of the Commissioner, are reasonable in relation to the
value of the gift.
(5) This section does not prevent a deduction
under section 30‑15 of the Income Tax Assessment Act 1997 (because
of item 4, 5 or 6 of the table in that section) from being allowed from
the assessable income of the donor in respect of a gift of property other than
money by reason only that the terms and conditions on which the gift was made
are such, or the effect of any arrangement (within the meaning of that Act)
entered into in association with the making or receipt of the gift is such,
that the value of the gift may be reduced in accordance with section 30‑220
of that Act.