Taxation Laws Amendment Act (No. 2) 1993

No. 18 of 1993

TABLE OF PROVISIONS

PART 1—PRELIMINARY

TABLE OF PROVISIONS—continued

TABLE OF PROVISIONS—continued

TABLE OF PROVISIONS—continued

TABLE OF PROVISIONS—continued

Taxation Laws Amendment Act (No. 2) 1993

No. 18 of 1993

An Act to amend the law relating to taxation

[Assented to 9 June 1993]

The Parliament of Australia enacts:

PART 1—PRELIMINARY

Short title

1. This Act may be cited as the Taxation Laws Amendment Act (No. 2) 1993.

Commencement

2.(1) Subject to this section, this Act commences on the day on which it receives the Royal Assent.

(2) Divisions 1 and 7 of Part 3, and Part 4, are taken to have commenced immediately after the commencement of the Income Tax Assessment Amendment (Foreign Investment) Act 1992.

PART 2—AMENDMENT OF THE FRINGE BENEFITS TAX ASSESSMENT ACT 1986

Division 1—Principal Act

Principal Act

3. In this Part, “Principal Act” means the Fringe Benefits Tax Assessment Act 19861.

Division 2—Amendment relating to child care access

Exempt residual benefits

4. Section 47 of the Principal Act is amended by omitting subsection (8) and substituting the following subsection:

“(8) If:

(ii) family day care; or

(iii) care outside school hours; or

(iv) care in school vacations; and

the residual benefit is an exempt benefit.”.

Application

5. The amendment made by this Division applies to residual benefits provided on or after 1 July 1993.

Transitional (change of program name)

6. Subsection 47(8) of the Principal Act (as in force immediately before the commencement of the amendment made by this Division) applies to residual benefits provided on or after 1 July 1992 and before 1 July 1993 as if the reference in paragraph (b) of that subsection to the program known as Services for Families with Children were instead a reference to the Children’s Services Program.

PART 3—AMENDMENT OF THE INCOME TAX ASSESSMENT ACT 1936

Division 1—Principal Act

Principal Act

7. In this Part, “Principal Act” means the Income Tax Assessment Act 19362.

Division 2—Amendments to improve the readability of section 78 of the Principal Act (which deals with deductions for gifts, pensions etc.)

Subdivision A—New section 78

8. Section 78 of the Principal Act is repealed and the following section is substituted:

Deduction for gifts, pensions etc.

Objects

“78.(1) The object of this section is to provide for the deductibility of certain gifts, contributions, pensions, gratuities and retiring allowances.

Outline

“(2) The following table sets out an outline of this section:

Index

“(3) The following is an index to this section:

Deductions for gifts—listed funds, authorities and institutions

“(4) A gift by a taxpayer to a fund, authority or institution mentioned in any of the following tables is an allowable deduction for the year of income in which the gift was made if:

(a)     the fund, authority or institution is in Australia; and

(b)     the gift is:

(i) money; or

(c)     the value of the gift is $2 or more; and

(d)     the gift is not a testamentary gift; and

Each item is independent of every other item.

TABLE 1—HEALTH

TABLE 1—HEALTH—continued

TABLE 2—EDUCATION

TABLE 2—EDUCATION—continued

TABLE 2—EDUCATION—continued

TABLE 3—RESEARCH

TABLE 4—WELFARE AND RIGHTS

TABLE 4—WELFARE AND RIGHTS—continued

TABLE 5—DEFENCE

TABLE 6—THE ENVIRONMENT

TABLE 6—THE ENVIRONMENT—continued

TABLE 7—INDUSTRY, TRADE AND DESIGN

TABLE 8—THE FAMILY

TABLE 9—INTERNATIONAL AFFAIRS

TABLE 10—SPORTS AND RECREATION

TABLE 11—PHILANTHROPIC TRUSTS

TABLE 12—CULTURAL ORGANISATIONS

Deductions for gifts—ancillary funds

“(5) A gift by a taxpayer to a fund is an allowable deduction for the year of income in which the gift was made if:

(ii) not applied for the purposes of the fund;

may not be invested by the trustee otherwise than in a manner in which trustees are permitted by an Act, a State Act or a law of a Territory to invest trust money without special authorisation; and

(c) the gift is:

(i) money; or

(d)     the value of the gift is $2 or more; and

(e)     the gift is not a testamentary gift; and

Deductions for gifts of property—Australiana Fund, libraries, museums and art galleries

“(6) A gift by a taxpayer to:

(a)     The Australiana Fund; or

(b)     a public library in Australia; or

(c)     a public museum in Australia; or

(d)     a public art gallery in Australia; or

is an allowable deduction for the year of income in which the gift was made if:

(g)     the value of the gift is $2 or more; and

(i) the gift is not a testamentary gift; and

Deductions for gifts of property—Artbank

“(7) A gift by a taxpayer to the Commonwealth is an allowable deduction for the year of income in which the gift was made if:

(c)     the gift is not a testamentary gift; and

Deductions for gifts of heritage properties—National Trust

“(8) A gift by a taxpayer to:

(a)     the National Trust of Australia (New South Wales); or

(b)     the National Trust of Australia (Victoria); or

(c)     The National Trust of Queensland; or

(d)     The National Trust of South Australia; or

(e)     The National Trust of Australia (W.A.); or

(f)      the National Trust of Australia (Tasmania); or

(g)     The National Trust of Australia (Northern Territory); or

(h) the National Trust of Australia (A.C.T.); or

(i) the Australian Council of National Trusts;

is an allowable deduction for the year of income in which the gift was made if:

(j) the gift is property; and

(k) the value of the gift is $2 or more; and

(o) the gift is not a testamentary gift; and

Deductions for contributions to political parties

“(9) A contribution by a taxpayer to a registered political party (within the meaning of the Commonwealth Electoral Act 1918) is an allowable deduction for the year of income in which the contribution was made if:

(a) the contribution is:

(i) money; or

(b)     the value of the contribution is $2 or more; and

(c)     the taxpayer is not a company; and

(d)     the contribution is not a testamentary contribution.

$100 annual limit for deductions for contributions to political parties

“(10) The total deductions allowable to a taxpayer under subsection (9) in respect of a year of income must not exceed $100.

Deductions for pensions, gratuities or retiring allowances to ex-employees etc.

“(11) An amount paid by a taxpayer as a pension, gratuity or retiring allowance to a person who is or was an employee or a dependant of an employee is an allowable deduction for the year of income in which it was paid. However:

Value of property for the purposes of subsections (4) and (5)

“(12) For the purposes of subsections (4) and (5), the value of a gift of property is:

(a) if:

the value of the property that is, because of subsection 36(1), included in the taxpayer’s assessable income; or

(b) in any other case—whichever is the lesser of:

(ii) the amount paid by the taxpayer for the property.

Gifts of property covered by subsections (6), (7) and (8)—special valuation conditions

“(13) For the purposes of subsections (6), (7) and (8), a taxpayer complies with the special valuation conditions in relation to a gift of property if:

(a) both:

(b) all of the following conditions are satisfied:

(iii) the written valuations are given to the Commissioner:

(C)     within such further period as the Commissioner allows.

Value of gift—subsections (6), (7) and (8)

“(14) Subject to subsection (15) (which deals with conditional gifts), for the purposes of subsections (6), (7) and (8), the value of a gift of property is as follows:

(a) if both:

(b) if paragraph (a) does not apply and the taxpayer:

(C)     a body mentioned in subsection (8);

the value of the gift is whichever is the lesser of:

(iii) the amount (if any) paid by the taxpayer for the property; or

Value of conditional gift—subsections (6), (7) and (8)

“(15) For the purposes of subsections (6), (7) and (8), if:

(i) receive immediate custody and control of the property; or

the value of the gift is the value worked out under subsection (14), reduced by such amount as the Commissioner considers reasonable having regard to the effect on the value of the gift of those terms and conditions or of that eligible agreement.

Apportionment of deduction under subsection (6), (7) or (8)—joint ownership

“(16) If:

(b)     the owners make a gift of the property; and

(c)     assuming that:

(i) the property had been owned by the first taxpayer alone; and

(ii) the gift had been made by the first taxpayer;

the gift would have been an allowable deduction under subsection (6), (7) or (8);

the first taxpayer is entitled to an allowable deduction of so much of the amount of the deduction that would have been allowable as mentioned in paragraph (c) as the Commissioner considers reasonable having regard to the interest of the taxpayer in the property.

Value of property for the purposes of subsection (9)

“(17) For the purposes of subsection (9), the value of a contribution of property is whichever is the lesser of:

(a)     the value of the property at the time of the contribution; or

(b)     the amount paid by the taxpayer for the property.

Approval of valuer

“(18) The Secretary to the Department of the Arts and Administrative Services may, by signed instrument, approve a person as a valuer in relation to a particular kind of property. In deciding whether to give an approval, the Secretary to that Department must have regard to:

(c)     the person’s standing in the professional community; and

Approval of organisations for the purposes of eligible funds declaration

“(19) The Minister for Foreign Affairs may, by signed instrument, approve an organisation as an approved organisation for the purposes of subsection (21).

Certification of country for the purposes of eligible funds declaration

“(20) The Minister for Foreign Affairs may, by signed instrument, certify a country to be a developing country for the purposes of subsection (21).

Declaration of eligible funds

“(21) If the Treasurer is satisfied that a fund:

the Treasurer may, by notice in the Gazette, declare it to be an eligible fund for the purposes of item 9.1.1 of table 9 in subsection (4).

Eligible funds declaration—effective date

“(22) A notice under subsection (21) must specify the date on which the notice has effect. The date must not be earlier than the date on which the notice is published in the Gazette.

Revocation of eligible funds declaration

“(23) The Treasurer may, by notice in the Gazette, revoke a declaration under subsection (21). The notice of revocation must specify the date on which it has effect. The date of effect must not be earlier than the date on which the notice of revocation is published in the Gazette.

Approval of marriage guidance organisations

“(24) If the Attorney-General is satisfied that:

the Attorney-General may, by signed instrument, approve the organisation, branch or section, as the case may be, for the purposes of item 8.1.1 of table 8 in subsection (4).

Special conditions applicable to gifts made to certain environmental bodies

“(25) The following are the special conditions mentioned in various items in table 6 in subsection (4):

Definitions

“(26) In this section:

‘approved organisation’ means an organisation approved under subsection (19);

‘approved valuer’, in relation to a particular kind of property, means a person in respect of whom there is in force under subsection (18) an approval of the person as a valuer in relation to that kind of property;

‘certified country’ means a country certified under subsection (20) to be a developing country for the purposes of this section;

‘certified facilities’, in relation to a college or institution, means facilities (including residential accommodation) in respect of which the Minister for Employment, Education and Training has certified, by signed instrument, that he or she is satisfied are, or are to be, used wholly or principally for certified purposes of the college or institution;

‘certified purposes’, in relation to a college or institution, means purposes of the college or institution that have been certified by the Minister for Employment, Education and Training, by signed instrument, to relate exclusively to tertiary education;

‘eligible agreement’ means an agreement, arrangement or understanding:

(a)     whether formal or informal; and

(b)     whether express or implied; and

‘eligible rural school hostel building’ means a building where:

(i) primary or secondary education courses; or

(ii) special education programs for children with disabilities;

at a school or schools in the same locality as the residential accommodation; and

(c)     the residential accommodation is provided by:

(i) the Commonwealth, a State or a Territory; or

(ii) a public authority; or

(iii) a company that:

‘property’ does not include money;

‘value’, in relation to money, means the amount of money.”.

Subdivision B—Consequential amendments

Interpretation

9. Section 6 of the Principal Act is amended:

Certain gifts not to be allowable deductions

10. Section 78A of the Principal Act is amended:

(b)     by omitting from subsection (5) “78(6F)” and substituting “78(15)”.

Non-resident family trusts

11. Section 102AAH of the Principal Act is amended by omitting from subsection (5) “paragraph 78(1)(a)” and substituting “subsection 78(4) or (5)”.

Non-resident family trusts

12. Section 328 of the Principal Act is amended by omitting from subsection (5) “paragraph 78(1)(a)” and substituting “subsection 78(4) or (5)”.

Subdivision C—Application of amendments

Application

13.(1) The amendments made by this Division (other than the amendments of sections 102AAH and 328 of the Principal Act) apply in relation to:

(a)     gifts and contributions made on or after 1 July 1993; and

(2) The amendments of sections 102AAH and 328 of the Principal Act made by this Division apply in relation to the characterisation of a trust as at a time on or after 1 July 1993.

Transitional—approvals and declarations etc.

14. An approval, declaration or other instrument in force immediately before the commencement of this section for the purposes of a provision of section 78 of the Principal Act has effect, after that commencement, as if it had been made for the purposes of the corresponding provision of section 78 of the Principal Act as amended by this Division.

Division 3—Amendment relating to migration information

Officers to observe secrecy

15. Section 16 of the Principal Act is amended by inserting after paragraph (4)(hc) the following paragraph:

Division 4—Amendments relating to service with UN forces and other bodies

Income of certain persons serving with an armed force under the control of the United Nations

16. Section 23AB of the Principal Act is amended:

(a) by inserting after subsection (6) the following subsection:

“(6A) For the purposes of subsection (6), United Nations service does not include any period of service in respect of which an exemption from income tax applies under section 23ADA.”;

(b)     by inserting in subsection (7) “, (8A)” after “subsections (8)”;

(d)     by inserting after subsection (8) the following subsection:

“(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 23ADA.”.

Exemption of pay and allowances of members of Defence Force serving in operational areas

17. Section 23AC of the Principal Act is amended:

(a) by inserting after paragraph (2)(cb) the following paragraphs:

(i) the operation called Operation Restore Hope; or

(b)     by inserting in subsection (2A) “, (cc) or (cd)” after “(2)(cb)”;

(f)      by inserting after subsection (3) the following subsection:

“(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:

(b) is taken to have ended at the earliest of:

(h) by inserting after subsection (6B) the following subsections:

“(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.”;

“ ‘termination date’ means:

18. After section 23AC of the Principal Act the following sections are inserted:

Exemption of pay and allowances of Defence Force members performing certain overseas duty

[Requirements for exemption]

“23AD.(1) The pay and allowances earned by a person serving as a member of the Defence Force are exempt from tax if:

[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:

(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

[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 disallowable instrument]

“(6) A certificate of revocation referred to in subparagraph (3)(b)(ii) is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901.

Exemption of pay and allowances of AFP members serving with the United Nations Transitional Authority in Cambodia

[Requirements for exemption]

“23ADA.(1) The pay and allowances earned by a person serving as a member of the Australian Federal Police are exempt from income tax if they are earned while there is in force a certificate in writing issued by the Commissioner of Police of the Australian Federal Police to the effect that the person is on duty with the group called the United Nations Transitional Authority in Cambodia (‘UNTAC’).

[When subsection (1) certificate in force]

“(2) A certificate under subsection (1):

(a) comes into force at the later of:

(b) subject to paragraph (c), continues in force until the earliest of:

(i) the time of the person’s departure from Cambodia; and

[Review of subsection (1) certificate]

“(3) An application may be made to the Tribunal for review of a decision of the Commissioner of Police under subsection (1).

[Delegation of subsection (1) power]

“(4) The Commissioner of Police may, by signed instrument, delegate to a member of the Australian Federal Police the power to issue a certificate under subsection (1).

[Revocation certificate is disallowable instrument]

“(5) A certificate of revocation referred to in subparagraph (2)(b)(ii) is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901.”.

Rebates for members of Defence Force serving overseas

19. Section 79B of the Principal Act is amended by omitting from subsection (3A) “operational service of the taxpayer for the purposes of section 23AC” and substituting “service of the taxpayer in respect of which an exemption from income tax applies under section 23AC or 23AD”.

Division 5—Development allowance

Subdivision not to apply to certain other property

20. Section 82AF of the Principal Act is amended by inserting in subparagraph (2)(a)(i) “, other than panel vans or utility trucks designed to carry loads of 1 tonne or more” after “vehicles”.

Assets to which Part applies

21. Section 160A of the Principal Act is amended by omitting “mentioned in” and substituting “covered by”.

Application

22.(1) The amendment made by section 20 applies to expenditure incurred by a taxpayer:

(2) The amendment made by section 20 applies in relation to assets acquired after 26 May 1993. For that purpose, subparagraph 82AF(2)(a)(i) of the Principal Act is taken always to have been as amended by section 20.

Division 6—General investment allowance

Subdivision A—Insertion of new Subdivision

23. After Subdivision B of Division 3 of Part III of the Principal Act the following Subdivision is inserted:

“Subdivision BA—General investment allowance

Object

[Object to provide tax incentive]

“82AR.(1) The object of this Subdivision is to provide a tax incentive for investment in plant or articles before 1 July 1994.

[Incentive called general investment allowance]

“(2) The tax incentive takes the form of an allowable deduction, which may be referred to as general investment allowance.

How to work out entitlement etc. to general investment allowance

“82AS. The entitlement to general investment allowance, and other features of the new tax incentive, are worked out by applying the provisions of Subdivision B with some changes, which are set out below.

Change to main deduction provision

“82AT. The most important change is that, for the purposes of this Subdivision, subsection 82AB(1) (which is the main deduction provision) is to be replaced by the following:

‘(1) Subject to this Subdivision, if:

(b)     the expenditure was $3,000 or more; and

(c)     the expenditure was incurred:

(d) the unit of property was first used or installed ready for use before 1 July 1995;

a deduction equal to 10% of the expenditure is allowable to the taxpayer for the first year of income during which that unit was either used for the purpose of producing assessable income or installed ready for use for that purpose.’.

Changes to dates

[2 dates to be changed]

“82AU.(1) For the purposes of this Subdivision, references in provisions of Subdivision B to dates must also be changed as follows:

[Location of 26 February 1992 references]

“(2) The references to 26 February 1992 are in paragraphs 82AHA(3)(a), (4)(a), (5)(d) and (6)(d).

[Location of 27 February 1992 references]

“(3) The references to 27 February 1992 are in the following provisions:

(a)     paragraph 82AA(1)(b);

(b)     paragraph 82AB(7)(d);

(c)     subsection 82AB(8);

(d)     subsection 82AF(4);

(e)     paragraphs 82AL(1)(a) and (2)(a).

Change to section 82AC (limitation of deduction in case of leased property)

“82AV.(1) Paragraph 82AC(a) refers to ‘deductions allowable under this Subdivision or Subdivision BA’.

“(2) For the purposes of this Subdivision, the paragraph must be taken to refer to deductions allowable under either Subdivision B or Subdivision BA.

Changes to section 82AD (transfer of deductions)

[Section sets out changes to s. 82AD]

“82AW.(1) Section 82AD allows a lessor to transfer the benefit of a deduction to a lessee by lodging a declaration and statement with the Commissioner. The section is to be changed as follows for the purposes of this Subdivision.

[Declaration to be lodged with lessee instead of Commissioner]

“(2) The declaration and statement must be lodged with the lessee instead of with the Commissioner.

[Different paragraph 82AD(2)(a) date]

“(3) For the purpose of working out under section 82AD the prescribed date before which the declaration and statement must be lodged, paragraph 82AD(2)(a) is to be replaced by the following:

Subdivision B object not applicable

“82AX. Section 82AAAA (which states the object of Subdivision B) does not apply for the purposes of this Subdivision.”.

Subdivision B—Consequential amendments

Calculation of taxable income

24. Section 50C of the Principal Act is amended by inserting in subparagraph (3)(d)(ii) “or BA” after “Subdivision B”.

Full-year deductions and partnership deductions

25. Section 50F of the Principal Act is amended by inserting in paragraph (1)(b) “or BA” after “Subdivision B”.

Calculation of depreciation

26. Section 56 of the Principal Act is amended by inserting in subsection (3) “or BA” after “Subdivision B”.

Limitation of deduction in case of leased property

27. Section 82AC of the Principal Act is amended by inserting in paragraph (a) “or Subdivision BA” after “this Subdivision”.

Effect of application of Division on certain deductions etc.

28. Section 159GJ of the Principal Act is amended:

(a)     by inserting in subparagraph (1)(a)(i) “or BA” after “Subdivision B”;

Amendment of assessments

29. Section 170 of the Principal Act is amended by inserting in subsection (10) “or BA” before “of Division 3 of Part III”.

Division 7—Amendments relating to foreign investment

Subdivision A—Overriding subsection 96A(1)

Certain provisions not to apply in respect of interests in non-resident trust estates to which Part XI applies

30. Section 96A of the Principal Act is amended by inserting after subsection (1) the following subsection:

“(1A) The amount that, because of subsection (1), is not included under section 97 in assessable income is nevertheless taken to have been so included for the purposes of applying sections 99, 99A and 102AAU.”.

Subdivision B—Capital gains tax references to section 23AK

Capital gains and capital losses

31. Section 160Z of the Principal Act is amended by omitting “or 23AJ” from the definition of “eligible exempt income” in subsection (10) and substituting “, 23AJ or 23AK”.

Subdivision C—FIF attribution account payments and CFCs

Interpretation

32. Section 317 of the Principal Act is amended:

“ ‘grossed-up amount’:

(b) by inserting the following definitions:

“ ‘FIF attribution account entity’ has the meaning given by section 601;

‘FIF attribution account payment’ has the meaning given by section 603;

‘FIF attribution debit’ has the meaning given by section 606;”.

Additional notional exempt income—unlisted or listed country CFC

33. Section 402 of the Principal Act is amended by adding at the end the following subsection:

“(4) If:

so much (if any) of the whole or the part of the FIF attribution account payment as does not exceed the grossed-up amount of the FIF attribution debit is notional exempt income of the eligible CFC for the eligible period.”.

34. After section 607 of the Principal Act the following section is inserted in Division 19 of Part XI:

Grossed-up amount of a FIF attribution debit

“607A. The grossed-up amount in relation to a FIF attribution debit is:

Subdivision D—Trading stock

Definitions

35. Section 470 of the Principal Act is amended by omitting the definition of “trading stock”.

Notional deductions—expenditure in acquiring trading stock

36. Section 568 of the Principal Act is amended by inserting “(not being securities within the meaning of the Corporations Law)” after “stock”.

Subdivision E—Exclusion of dual residents

Taxpayers to whose interests in FIFs and FLPs this Part applies

37. Section 485 of the Principal Act is amended:

Subdivision F—Net income of partnerships and trusts

Taxpayers to whose interests in FIFs and FLPs this Part applies

38. Section 485 of the Principal Act is amended by adding at the end of subsection (1) the following sentence:

“Section 485A also has effect when the operative provision is applied to work out the net income of a partnership or trust estate.”.

39. After section 485 of the Principal Act the following section is inserted:

Applying operative provision in working out net income of partnership or trust estate

“485A.(1) For the purpose of working out the net income of a partnership or of a trust estate, the operative provision applies as mentioned in section 485, subject to the following provisions.

“(2) The requirement in the definition of ‘net income’ in sections 90 and 95 for assessable income to be calculated as if the partnership or trust estate concerned were a taxpayer who is a resident is, in applying the operative provision, to be taken to be a requirement to calculate that assessable income as if the taxpayer were a Part XI Australian resident.

“(3) The operative provision does not apply in calculating the net income of a foreign trust estate that is named:

(a)     in regulations made for the purpose of section 513; or

(b)     until regulations are so made—in Schedule 6.”.

Subdivision G—Exempt non-portfolio dividends received by CFC

Reduction of foreign investment fund income because of interim dividend or interim distribution of trust income

40. Section 530 of the Principal Act is amended by omitting paragraph (1)(d) and substituting the following paragraph:

“(d) is a non-portfolio dividend (as defined in section 317) that is:

(i) exempt from income tax under section 23AJ; or

Subdivision H— Calculation method elections

Methods applicable in relation to a FIF

41. Section 535 of the Principal Act is amended:

(b) by omitting subsection (4) and substituting the following subsection:

“(4) The taxpayer is not entitled to make an election under subsection (3) in relation to a FIF in relation to a notional accounting period (‘the current notional accounting period’) if:

Procedure to be followed

42. Section 580 of the Principal Act is amended by inserting after subsection (4) the following subsection:

“(4A) If:

then, for the purposes of this section:

Procedure to be followed

43. Section 582 of the Principal Act is amended by inserting after subsection (7) the following subsection:

“(7A) If:

then, for the purposes of this section:

Subdivision I—Certain foreign investment fund amount amendments

Step 1—calculation of foreign investment fund amount

44. Section 538 of the Principal Act is amended by omitting paragraphs (2)(b) to (e) (inclusive) and substituting the following paragraphs:

Step 1—calculation of foreign investment fund amount

45. Section 596 of the Principal Act is amended by omitting paragraph (2)(d) and substituting the following paragraph:

Subdivision J—Foreign currency gains and losses

Step 1—calculation of foreign investment fund amount

46. Section 538 of the Principal Act is amended:

(b)     by adding at the end the following subsections:

“(4) The taxpayer may elect that each amount required to be calculated under any paragraph of subsection (2) is to be expressed in Australian currency at the exchange rate applicable:

“(5) If the taxpayer makes the election:

(b)     it is irrevocable.”.

Step 2—calculation of foreign investment fund income

47. Section 542 of the Principal Act is amended by omitting from subsection (3) “The” and substituting “If no election is made under subsection 538(4) in relation to the FIF, the”.

Subdivision K—Redemption price

How market value is ascertained

48. Section 539 of the Principal Act is amended:

(a)     by inserting in paragraph (3)(a) “company or” before “trust”;

(d)     by inserting in subparagraph (3)(c)(ii) “company or” before “trust”;

the market value of the interest on the relevant day is the average of the 2 market values that would be applicable under paragraph (d) on the reporting days referred to in subparagraphs (d)(i) and (ii).”.

Subdivision L—Recalculation of notional deduction for certain prescribed classes of property

Notional deductions—amortisation of expenditure in acquiring property

49. Section 570 of the Principal Act is amended:

(b)    by inserting after subsection (1) the following subsection:

“(1A) If:

then subsection (1) must be applied, in relation to each notional accounting period that is appropriate, as if the accounts had amortised the expenditure in relation to the class or the category on the basis of the prescribed annual amortisation percentage.”.

Subdivision M—Reduction of FIF attribution debits

FIF attribution debit

50. Section 606 of the Principal Act is amended by omitting paragraph (2)(b) and substituting the following paragraph:

“(b) whichever of the following is applicable:

reduced by any attribution debit that arises under section 372 for the entity in relation to the taxpayer as a result of the making of the payment.”.

Subdivision N—Correction of sundry errors

Foreign tax if CFC has interest in FIF

51. Section 160AFCK of the Principal Act is amended by omitting from paragraph (2)(b) “notional”.

Exemption

52. Section 509 of the Principal Act is amended by omitting “subparagraph (a)(i)” and substituting “paragraph (a)”.

Exemption

53. Section 523 of the Principal Act is amended by omitting paragraph (c) and substituting the following:

then the taxpayer’s interest is disregarded for the purposes of the application of the operative provision to the taxpayer in relation to the foreign company in respect of the notional accounting period.”.

Subdivision A—Insertion of new Division

Insertion of new Division

54. After Division 1B of Part VI of the Principal Act the following Division is inserted:

“Division 1C—Payment of instalments by companies and certain trustees

“Subdivision A—Interpretation

Interpretation

“221AZH. In this Division, unless the contrary intention appears:

‘amount’, in relation to an estimate, includes a nil amount;

‘current year’ means the year of income for which instalments are being calculated;

‘due date’, in relation to a particular instalment, means the due date specified in Table 1 in section 221AZK, whether or not the taxpayer is actually required to pay that instalment;

‘estimate’ means an estimate under section 221AZO;

‘final instalment’ means:

(b) for any other taxpayer—the 4th instalment specified in that table;

‘instalment’ means an instalment under section 221AZK;

‘instalment taxpayer’ means a taxpayer specified in subsection 221AZK(1);

‘large taxpayer’ means a taxpayer who is classified as large in accordance with Table 1 in section 221AZK;

‘likely tax’ means the likely tax calculated under Subdivision C;

‘medium taxpayer’ means a taxpayer who is classified as medium in accordance with Table 1 in section 221AZK;

‘small taxpayer’ means a taxpayer who is classified as small in accordance with Table 1 in section 221AZK;

‘taxable income’, in relation to a taxpayer in the capacity of trustee of a fund or trust, means the taxable income or net income, as appropriate, of the fund or trust.

References to tax payable modified for years in which taxpayer had net capital gain

“221AZI.(1) This section applies if:

(i) calculating the likely tax for the current year;

(c) the taxpayer is:

(i) a company; or

“(2) References in this Division to the tax assessed or payable for the gain year are to be read as references to that tax, as recalculated in accordance with this section. The recalculated amount applies only for the purposes mentioned in paragraph (1)(b).

“(3) If the taxpayer is a life assurance company or registered organisation, the tax is to be recalculated as the sum of:

(a)     the tax on the CS/RA component of the taxable income; and

“(4) In all other cases, the tax is to be recalculated on the basis that the assessable income did not include any net capital gain.

“(5) In this section:

‘CS/RA component’ has the same meaning as in Division 8 or 8A of Part III, as the case requires;

‘life assurance company’ has the same meaning as in Division 8 of Part III;

‘net capital gain’ means a net capital gain within the meaning of Part IIIA;

‘registered organisation’ has the same meaning as in Division 8A of Part III.

“Subdivision B—General rules for payment of instalments

Object of Division

“221AZJ. The object of this Division is to ensure the efficient collection of tax payable by instalment taxpayers.

Liability to pay instalments

“221AZK.(1) The following taxpayers are instalment taxpayers in relation to a year of income (‘the current year’):

(a)     a company;

“(2) An instalment taxpayer is liable to pay instalments for the current year in accordance with the following table:

Table 1: Instalments

“(3) For the purposes of Table 1:

(b) months are reckoned from the start of the current year;

[For example, if the current year starts on 1 July 1995 then month 12 will be June 1996 and month 15 will be September 1996.]